: Delhi, March 25, 2011
The entire economic world, of late, has been concerned about the magnitude of impact the current crisis situation in Libya and Japan would have in global business and growth. Economist and experts across different boundaries are engaged in debates of severity of risks, solutions and feasibility of various assets for investment. However, even in this crucial time, it can well be assumed and predicted that there would actually be little impact to long term global investments and growth as a whole, in spite of the many risks posed by the global situation.
Japan’s nuclear threat and its massive destruction of life and property will definitely slow down the country’s economy. The Japan crisis has already impacted automobile and air plane industries around the globe and the electronics market is set to be hit long term as well, since as many as 40% of world’s electronic components is produced in Japan. But in spite of such concerns, the hopes of growth are still bright. The recovery stage in Japan, a country boasting of superb technology and adversity to re-rise, will see a increase in demand and hence a positive rise in price. This stage would also create a lot of buying opportunities, especially given the fact that mergers and acquisitions are relatively high in numbers in the Japanese market. With Japan’s economy contributing to 6% of the global economy, there lies ample opportunity for the investors and the market to grow.
Libya, on the other hand, does pose a threat to an increase in oil prices although the country contribute to only a mere 2% of the global oil output. The risk lies in the fact that Libyan revolt can set the fuse of revolution in other oil producing countries of the Arab world and Africa. With the USA and the UK allying to provide military support to the rebels of Libya, the winds of revolution can very well lead to disruptions in oil rich Saudi Arabia, Ogaden of Ethiopia, Yemen, Bahrain, Tunisia, Iraq, etc.Especially an unrest in Saudi Arabia contributing to about 11% of global oil output and a major supplier to U.S can accelerate oil prices throughout the world.
Even with this risk, there should not actually be any big concerns with the overall growth and the maximum damage probably would be investors keeping away from oil and focusing on other entities till the unrest are over. The US who has joined these revolts now with its military support to Libya, is a major market of arms and ammunition in the world. All the revolts in the Arab world and Africa will provide immense growth and opportunities to this arms market of US and provide an easy entrance to the oil fields of these regions too. The only thing US would need to understand is that by sending its troops to the Arab world to join the battles, it is taking a big risk on its military manpower. The human resource of a country after all, the US has to realize, should be treated as bigger assets than potential markets of arms and oil.