Future shock: the third wave

What will be the third wave of globalisation? Most probably, it will feature the emergence of new competitors in currently emerging nations, such as sovereign funds, and local companies and brands that will strive to become global. After the eras of "deflation" and "inflation", the world will enter the era of "competition and tension".

The governments of emerging nations will enjoy an unprecedented economic power base. These nations are stacking up foreign currency reserves at an impressive rate: No 1 is China with US$1.65 trillion (Bt53 trillion), followed by Japan with $1.008 trillion, and Russia with $502 billion.

Sovereign funds are managing substantial amounts of money. The strategy of these funds will be threefold: financially participating in large industrial and financial institutions, acquiring smaller industrial entities and allocating some assets to national objectives, such as improving the financing of their national pension scheme.

New companies and local brands are being created at an unprecedented rate. In many cases, they have benefited from partnership with large global companies that have brought in technology and management techniques.

A middle class also generates entrepreneurs. Of the four wealthiest people in the world, two  - Carlos Slim of Mexico and Mukesh Ambani from India - are from emerging nations.

Although the third wave has already begun, it is not yet pervasive. The biggest obstacle to this stage's completion is the lack of management competencies. Acquiring foreign industrial, financial or energy assets is one thing, managing these quite another.

In the first phase, which is already underway, emerging nations will probably focus on taking minority financial participations in blue chip companies to obtain a seat on the board. Once they have enough experience and acquired management knowledge, the third wave will move into "full acquisition" mode. When this happens, the balance of world power will shift dramatically. Emerging nations will demand more  decision-making power in international organisations. This will be a time of increased political and economic tension. The formerly called industrialised nations will have to fight harder to maintain their standards of living and influence on world affairs.

We are not yet there - but it is coming fast.

This is the final part of "The New Waves in Globalisation and Compe-titiveness" by Stephane Garelli, director of IMD's World Competitiveness Centre. Text has been edited for size. Part one was published on Wednesday.