Global Scotland: trade and investment strategy 2016-2021

Chapter 3: Global Opportunities and challenges and Our Strategic Response to Global Change

Global flows of goods, services, information, people and capital are rising dramatically and Global Value Chains and new business and investment models are disrupting markets and rapidly changing the nature of international trade and investment. Furthermore, a number of other dynamic trends are shaping society and the global economy:

Changing consumer demand: Demographic shifts and increased affluence, particularly in new growth economies, are unlocking new opportunities for premium goods and services, with substantial growth in consumption of high quality food and drink products and increasing demand for higher education and tourism. With the global urban population growing by 65 million a year and nearly half of global GDP growth to 2025 expected to come from cities in new economies , these changes are being driven by a growing consumer base in mega-cities like Shanghai and Mumbai and regional corridors such as Hong Kong-Shenzhen-Guangzhou. Furthermore, the digitally connected, young demographic of many countries is driving demand for particular products and services and for a more responsible approach to business.

Technology: Driven by innovation in areas such as information and communications, energy, biological and material science, technological advances are transforming manufacturing and services industries - bringing new market and investment opportunities. For instance, in the ‘connected living’ market, a trillion globally connected devices now form part of the ‘Internet of Things’, unlocking new opportunities and new ways to do business. There is also considerable growth in areas such as high value manufacturing and advanced materials, with growing global demand for synthetic polymers and new advanced composites.

Healthcare and wellbeing: With an ageing global population and increased emphasis on health and wellbeing, spend in this area is rising faster than per capita income. There is increased emphasis on prediction, diagnosis and monitoring; opportunities in areas such as genomics, gene therapy and assisted living; as well as wearable technologies, remote patient alarms and smart apps.

Low carbon and clean-tech solutions: With global population set to grow to nine billion by 2030, resource demands will increase significantly, requiring cleaner, smarter and more secure infrastructure systems. Innovation will drive the response, along with growing demand and spend on zero emission technologies, circular economy business models and carbon-neutral cities.

Responsible business: Driven by the demands of consumers, employees and NGOs - companies, Governments and international institutions are placing increasing emphasis on the local and global economic, social and environmental impacts of business, trade and investment. Sustainability and ethics are becoming increasingly important and business models such as social enterprise are becoming more common.

Building on Scotland’s strengths and assets, this Strategy responds to and seeks to maximise the trade and investment opportunities these global trends present.

Our Strategic Response to Global Change

Scotland’s businesses need to move quickly and flexibly to respond to these changes and the opportunities and challenges they present. The Scottish Government and its enterprise agencies, working with partners through a One Scotland approach, must be equally global in outlook and agile in response.

We need to build on the strength of Scotland’s existing trading successes in areas such as Oil and Gas, Chemicals and Financial and Business Services and to help businesses realise high value, niche opportunities. On Oil and Gas, for example, international supply chain sales in 2013-14 were £11.2 billion, an increase of 12% over 2012, and just over half (50.3%) of total supply chain sales compared with around a third in 2001 ^[15] . We also need to learn from successful sector-based approaches to internationalisation such as the Food and Drink Export Plan - where, through partnership working and by bringing together market and sector expertise, there are ambitious targets and actions to export a broader range of products to a broader range of markets.

The Scottish Government and its agencies will therefore focus on priority sectors and markets where there are realistic opportunities for Scottish companies to sell their products and services and to attract foreign investment into Scotland’s growth sectors, companies and assets. Alive to the dynamic nature of global markets, our focus will be on:

Premium consumer products and services

Focusing particularly on major emerging markets with growing affluence and increasing the number of international visitors to Scotland, we will build Scotland’s strengths in premium, high value consumer products with trusted provenance such as whisky, seafood and textiles and services in the leisure, business, sporting and cultural events sectors.

Digital, technology and high value manufacturing

We will exploit the full commercial potential of Scotland’s innovation acumen and competitiveness in areas such as informatics, sensors, subsea technology and Fintech. In particular, we will work with public and private partners and with academia to deliver more ‘cross-sector’ opportunities, focusing on Scotland’s strengths to build integrated propositions that deliver greater business benefits.

Skills, knowledge and innovation

We will strengthen the role of Scotland’s skills, knowledge and innovation and universities, colleges and research Institutes in trade and investment; emphasising Scotland’s research capacity and capability; stimulating flows of international talent to and from Scotland; and building networks, reach and reputation. The development of Scotland’s Innovation Centres will help provide solutions to global challenges and needs across a range of sectors and markets, providing compelling and internationally attractive Scottish trade and investment propositions.

Healthcare and wellbeing

We will test and scale up new propositions in niche areas such as digital health, precision medicine and industrial biotech to realise trade and investment opportunities from increased global spend on healthcare and wellbeing

Low carbon

We will build on Scotland’s global reputation and ability to innovate and offer low carbon solutions in areas such as renewable energy, clean-tech and smart cities.

Responsible business

We will develop a reputation for responsible business - demonstrating that improving competitiveness and reducing inequality go hand in hand; using trade to support development and promote human rights; and internationalising Scotland’s world leading approach to social enterprise.

Markets

Working through a One Scotland approach, the Scottish Government and its agencies will focus on markets and sub-markets where there are significant and specific trade and/or investment opportunities which play to Scotland’s strengths and capabilities. Whilst there will be a strong focus on particularly geographies we will be opportunity driven. So, as well as taking advantage of established market opportunities in Europe and North America, we will, for example, capitalise on the growing demand for technical and vocational education and training in Malaysia and oil and gas opportunities in the newly opened market of Iran.

Our approach also recognises the importance of the rest of the UK to Scottish companies - especially sales from the services sector - and how trade with the rest of the UK can be a useful springboard into international markets. The role of London as a global centre for trade and investment is particularly important in this respect and our London Innovation and Investment Hub will provide a platform for accessing both trade and investment opportunities.

The European Union and Single Market

It is essential that Scotland remains within the EU and that Scottish businesses can continue to take advantage of the Single Market and the diverse and distinctive markets within it. Despite a slow economic recovery, the EU, with a population of over 500 million and over 25 million active enterprises ^[16] , is Scotland’s most important international export market. Over the last 10 years (2005-14), Scotland’s businesses have exported over £106 billion of goods and services to the EU – more than 45% of all international exports ^[17] . Furthermore, the Single Market makes trading across the EU easier and plans to widen and deepen it across key service sectors such as construction and business services, to create a Digital Single Market and to create a Capital Markets Union will provide further trade and investment opportunities. The Single Market is also a key factor in attracting inward investment to Scotland.

North America

North America’s economic scale, relative ease of market access, particularly for early-stage exporters, and role in inward and capital investment make it a key part in Scotland trade and investment future. North America is Scotland’s main international export market outwith the EU. Over the last 10 years (2005-14), Scotland’s businesses have exported nearly £36 billion of goods and services to North America – more than 15% of all international exports. Furthermore, over the last decade the U.S has accounted for around 40% of all inward investment projects to Scotland. Trade agreements between the EU and Canada and between the EU and the US are being finalised and negotiated and there are untapped opportunities to attract U.S investment to Scottish businesses with high growth potential, especially in the tech sector.

Asia

Working especially with businesses already exporting and considering expansion into new markets, we will step-up our focus on Asia. As well as taking advantage of well-developed markets such as Singapore and Japan, we will work with UKTI and bodies such as the China British Business Council and UK India Business Council and through digital channels to realise opportunities in the relatively untapped markets of China and India where, over the last 5-10 years, Scottish export growth has been relatively slow. We will also focus on diversifying Scotland’s investment base through attracting increased investment from Asia.

Networks and Global Platforms

We will maximise the trade and investment benefits of Scotland’s place on the world stage – taking advantage of events like the Edinburgh festivals and international conferences in Scotland; of strong economic and cultural ties with particular countries and cities; and of Scotland’s themed years, such as the 2016 Year of Innovation, Architecture and Design, to lever opportunities. We will also use ‘Global Platforms’ outwith Scotland such as Expo 2017 – Future Energy (Kazakhstan); the European Sports Championship 2018 in Glasgow and Berlin; the 2018 (Gold Coast) and 2022 (Durban) Commonwealth Games; the 2020 World Expo in Dubai; and the Kai Tak Sports Development in Hong Kong to support our ambition.