THE WORLD IN 2OO6

99

The world in figures:

Industries

(Brazil, Colombia and others) roll out

initiatives such as coffee kiosks to give

domestic markets a kick.
Fishing and farming communities will

continue to suffer the effects of the

Indian Ocean tsunami of December

2004. As much as 40% of the 40,000

hectares of farmland flooded in Sumatra

may be unusable for agriculture for

years to come—if ever—because of

salt-water contamination.

To watch: Self-milking cows. The
twice-daily chore of milking herds
could be a thing of the past. The state
government of New South Wales,
Australia, is investing in research into a
device that would use feed to lure cows
into personalised milking pens, where
suction cups automatically latch on to
their udders.

AUTOMOTIVE

The global car market will inch up

by 2.2% in 2006, primarily thanks

to roaring growth in the developing

world. At the start of this decade Asia

accounted for only 9% of the world’s

car registrations. By the end of it one

in five cars will be travelling down

Asian highways. In the developed

world, meanwhile, it will be more of the

same—stagnant growth, overcapacity

and fierce price-cutting.
The big American and European

carmakers, hammered by pension

liabilities, health costs and price

wars, will continue to have a tough

time. To make matters worse, high oil

prices will damage sales of American

carmakers’ highest-margin car—the

ubiquitous SUV. Japanese firms, with

their relentless focus on efficiency,

cost-cutting and new-model launches,

will thrive. Toyota is likely to surpass GM

as the world’s largest carmaker within

three years.
The bun fight in China will continue—

GM is investing $3bn to expand

operations with its joint-venture

partners. It aims to raise production

in China from around 500,000 to 1.3m

vehicles a year by 2007. Given a 20%

growth rate in car sales in 2006 and

14% in 2007, China will replace Japan

as the world’s second-largest car market

by 2007. Not surprisingly, homegrown

talent is now looking outside China’s

borders. State-owned Chery Automotive,

for example, aims to export its cars to

countries such as Egypt and Syria, as

well as America and Europe, from 2007.
India is coming up fast behind China as

incomes rise, the aspiration to own a car

spreads and it becomes easier to find

finance. A car loan that once took two

weeks to approve can now be cleared

in two or three days. Interest rates on

car loans have fallen from around 19%

five years ago to about 10%. The market

should continue to expand by double-

digits for the next five years.

To watch: Hard drivers. Mazda is
developing a USB (universal serial bus)
drive to replace the car key. The drive will
let owners programme and load files on
to the car’s hard drive, such as maps and
videos for in-car entertainment.

CONSUMER GOODS

Global retail-sales growth did better

than expected in 2005—up by

3.1%—but will fall back to 2.1% in

2006 and 1.6% in 2007. But worldwide

consumer expenditure—which includes

spending on health, leisure, education

and services as well as food and

clothing—will jump 5.8% in 2006 and

7.7% in 2007. Consumers, it seems, are

going for the experience.
Expect more department-store closures

in 2006 as high-street shoppers

increasingly turn to niche outlets which

offer more than just wide variety.

BUSINESS ENVIRONMENT

The Economist Intelligence Unit

forecasts global GDP growth (on a PPP

basis) of 4% in 2006, down from 4.3%

in 2005. Although the world economy

has clearly lost momentum, the rate of

growth will be similar to the pace set

during much of the 1990s.
But risks abound and threaten to make

the slowdown worse. Oil prices will

remain high: the only real beneficiaries

will be the OPEC suppliers. Many rich

countries face high private- and public-

sector debt. Europe still needs to build

clarity and confidence in its market

structures. The knock-on effects of

America’s festering current-account

deficit is still the chief worry.
A declining dollar will affect the

country’s bond market and long-term

interest rates. Domestic prospects will

dim and key trade partners will suffer.

A tightening of international capital

flows will make it harder for emerging

markets, especially in Latin America, to

raise funds to finance growth.
Global trade should stabilise in 2006,

growing at close to 7%, after sluggish

demand in OECD countries prompted

deceleration in 2005 from double-digit

gains in 2004. Emerging Asia and east-

central Europe should enjoy the fastest

rates of export growth. That said, the

challenge of integrating booming China

and India into the world economy in

a sustainable way could result in new

trade restrictions.

Agriculture

99

Automotive

99

Consumer goods

99

Defence

100

E-commerce

100

Energy

100

Entertainment

100

Financial services

101

Food and drink

101

Health care

101

Information

technology

101

Media

102

Raw materials

102

Telecoms

102

Travel and tourism

102

AGRICULTURE

More than 3bn people will rely on rice

for up to 80% of their diet in 2006.

Production needs to rise by 30%

over the next 20 years if the world’s

population is to be fed. The recent

mapping of the entire rice genome

sequence promises superior crops. The

UN’s Food and Agriculture Organisation

(FAO) expects the rice trade to hold

steady in calendar year 2006, at about

415m tonnes in milled terms.
After a bumper year, the FAO expects

the global cereal crop to fall in the

production year ending in 2006, with

coarse grains down 5.2% to 969m

tonnes and wheat output down 2.5%

to 612m tonnes. More cereals will be

consumed in 2006 than in 2005, causing

a drawdown of stocks for the sixth

year running. However, the inventories

of major exporters are set to rise and

provide a buffer against shocks.
With 18% of its workforce employed

in farming—compared with 2% in

Germany, which has a similar area of

land under cultivation—Poland will

be spotlighted at BioFach 2006, the

World Organic Trade Fair in Nuremberg.

The amount of land devoted to organic

farming in Poland will exceed 200,000

hectares (494,000 acres) by the end of

2006, up from 83,000 hectares in 2004.
Lower prices and more normal yields

will send world cotton production

tumbling by 10% to 107m bales for

2006, says the US Department of

Agriculture. Assuming that trade bodies

stick to the removal of textile quotas,

cotton consumption should rise by 3%

to 111.5m bales. Extra consumption in

China’s mills will come at the expense

of textile-makers in America and the

Mediterranean rim. Likewise, some wool

mills will move to eastern Europe and

China.
The International Coffee Organisation

expects world bean production of

around 106m bags. High stocks

in importing countries—which

account for three-quarters of global

consumption—will see key exporters

Automotive

Passenger car registrations
% growth

9.4

3.7

1.1

0.2

-1.6

Asia and Australasia (excl. Japan)

Latin America

Western Europe

North America

Japan

DROP SHADOW
Effect — Stylise — Drop shadow
Opacity 50
x 0.3
y 0.3
Blur 0.3
Dark 30

Business environment

2003

2004

2005

2006

3.9

5.5

5.1

10.7

6.6

4.3

6.8

4.0

2006 forecasts unless otherwise indicated.
World totals based on 51 countries
accounting for over 95% of world GDP.
Source:
[e-mail]

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THE WORLD IN 2OO6

reckon China’s real spending on defence

is three times greater than its leaders

say. The country has posted double-digit

increases in military spending nearly

every year for the past decade.
Reflecting concerns in Tokyo about

North Korea and deteriorating relations

with China, Japan’s defence agency has

asked for a budget increase of 1.2%

to ¥4.9trn ($42.8bn) for the year to

March 2007, the first rise in four years.

Israel may buck the global trend and

cut its defence spending in favour of

social welfare schemes, but will receive

American military aid worth $2.28bn.

To watch: UN peacekeeping. This will
cost at least $3.2bn in fiscal 2005-06. The
focus will be on discipline within units,
including reforms to tackle sexual abuse
by UN forces.

E-COMMERCE

The boom is back—or is it the bubble?

Even if eBay’s $4.1bn purchase of

Luxembourg-based Skype Technologies,

a purveyor of voice-over-internet

software, proves folly, M&A activity

will overshadow IPOs. The battle for

dominance of the internet among the

big five—MSN, Yahoo!, eBay, Google

and AOL—will be fought in this way.
The prize is great: the global internet

population is set to hit 1.21bn in 2006,

up from 1.07bn in 2005, according to

Computer Industry Almanac. Better

data-security standards, flexible

payment and delivery systems

and clever customer-relationship

management will encourage more and

more people to buy online.
Forrester Research expects web-based

retail sales in America—including

online auctions—to grow by 14%

annually through to 2010, to $329bn,

or 7% of all retail sales. According to

Gartner, by 2010 “microcommerce”—

sales of goods costing less than $5—will

reach $30bn, spurred by new micro-

payment infrastructures which don’t

charge commissions on each transaction.
As companies integrate the internet into

their multichannel sales and marketing

strategies they will get better at

measuring website traffic and the return

on investment of an online presence.

IDC says the market for so-called web

analytics software will be worth $400m

by 2008.
Shanghai-based iResearch expects the

value of all e-commerce transactions in

China to rise to 1.74trn yuan ($215bn)

Retailers in emerging markets,

particularly India and China, will benefit

from strong underlying expansion in

demand. In mature markets the major

global retailers will depend more

on electronically gathered customer

feedback to improve profit. This

will involve greater use of customer

databases that hold information culled

from the use of loyalty cards and online

purchasing. Taking a page from e-tailers

such as Amazon, bricks-and-mortar

retailers will start to contact customers

with individually tailored promotions

and invitations.
In Japan, where retail sales growth

has been stuck at around 1% for years,

American giant Wal-Mart will start

opening discount stores in 2006 in co-

operation with the struggling domestic

retailer Seiyu.

To watch: Concierge medical service.
MyMD is trying a programme in the
United States which allows participants
to photograph their medical problems
and send the images via the internet to
doctors who are available on a 24-hour
basis, using Apple’s iBook laptops and
iSight cameras. Patients then chat with
the doctor online about the diagnosis
and treatment.

DEFENCE

America’s defence spending will

continue its upward march in 2006,

rising by 5% to $419.3bn. This figure

doesn’t include some $49.1bn for

operations in Iraq and Afghanistan or

$41.1bn for homeland security.
But the world’s biggest military power

is in a state of flux. Over the next decade

up to 70,000 military personnel will

be called home, as America reduces its

presence overseas from 850 sites to

550. Base realignment and closures will

be matched by more flexible military

hardware, such as reconfigurable

warships and unmanned vehicles.

The much-vaunted Star Wars scheme,

already hit by technical glitches and

shifting priorities, will suffer further in

2006 when spending on missile defence

is cut by 10%, to $8.8bn.
Russia, still one of the world’s biggest

spenders on arms, has budgeted

668.3bn roubles ($24bn) for defence

in 2006, a rise of 22%. The air force and

anti-aircraft systems will benefit most.
Amid growing social unrest, China

will strengthen its new anti-terror

squads in 36 large cities and focus on

modernisation of the army. Analysts

by 2007, a massive jump from 324bn

yuan in 2005, assuming a helpful

regulatory environment and the

continued spread of credit cards.

To watch: The “Outernet”. Dutch start-

up Opalio is developing physical flags

which show streaming media. These

flags can display changing digital

graphics—such as product news or

prices—delivered via the internet. More

flexible than traditional LCD displays,

the technology could revolutionise

marketing, especially outdoors.

ENERGY

Oil prices will stay above $55 a barrel

for Brent crude. For the primary driver,

look no further than China, now the

second-biggest oil consumer in the

world, guzzling about a third as much

oil as America.
With Russian production starting to

plateau and a paucity of investment

in OPEC in recent years, supply will

remain tight in 2006. Oil markets will

stay extremely jittery—any threat of a

supply disruption or sign that demand

is ticking up could prompt a sharp rise

in prices. Though investment activity is

now picking up, significant new capacity

won’t start to kick in until 2007.

By the end of 2007 Saudi Aramco will

have completed three fields, adding

500,000 b/d of output, and over the

following two to three years it will bring

a further 1.5m-2m b/d onstream. An

extra 2m b/d is expected to come from

the UAE, Kuwait, Algeria and Libya.
Total world energy demand will grow

by 3.2% in 2006. The outlook for coal

is bright, particularly in the non-oil-

producing developing world. Liquefied

natural gas (LNG) will also gain in

favour in 2006 as China opens its first

LNG receiving terminal.

To watch: Gas-to-liquids (GTL). Whereas
LNG involves the transformation of gas
to liquid and back to gas again, GTL
technology uses a chemical reaction that
turns gas into pure gasoline and diesel.
Qatar is taking a pioneering role in GTL,
with Nigeria, Algeria and Australia all
considering investments.

ENTERTAINMENT

In 2006 the Hollywood studios will

shoot as much as 75% of films in digital

format. Screen Digest expects Ireland

will be the first country to convert all of

its 600 screens. Digital films are cheaper

to shoot, distribute and play in cinemas,

which should boost the independent

and art-house sectors.

At the same time, the studios are keen

to quash illegal file-sharing on peer-to-

peer networks. With an eye on Apple’s

successful iPod music model, Sony

Pictures wants to create a legitimate

download service—a kind of iTunes for

movies—by putting digitised films on

to flash memory for mobile phones.
Bollywood will make more than 900

films in 2006. Since 2001 only one in

12 Indian films has made money, but a

more professional approach to financing

should see industry revenue double

to 143bn rupees ($3.3bn) by 2010.

American box-office revenues will pass

$10bn in 2006, a record. However, the

gains will mostly come from higher

ticket prices, not increased attendance,

with DVD sales now outstripping box-

office receipts in the United States.
Couch potatoes will face a critical choice

with the arrival of new long-playing

DVDs that store more than three times

as much data as current DVDs. DVD

players based on technology from two

rival groups, Blu-ray (led by Sony)

and HD-DVD (led by Toshiba), will be

launched by the spring.

Not only do the

Japanese electronics titans face a costly

battle to find a victor, but also at stake is

e-commerce

Internet users
per 100 people

71.4

76.3

51.5

22.3

8.0

13.7

5.8

19.1

North America 3,079

Japan 577

Western

Europe 1,615

Transition

economies 1,172

Asia 2,738

Latin America 562

Middle East & Africa 364

Energy

Energy consumption
m tonnes oil equivalent

10,107

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The world in figures

Industries

101

the future of DVDs themselves. A lengthy

format war could turn consumers to

other means of buying and storing

films. For example, on-demand TV and

films are becoming more popular as

broadband takes off.
Three much-anticipated video-game

consoles will go head-to-head:

Nintendo’s Revolution, Microsoft’s Xbox

360, and Sony’s PlayStation 3. These toys

won’t come cheap, with launch retail

costs nudging $400.

To watch: In-flight entertainment. Asian
long-haul carriers will lead the way
with broadband internet links to the
ground via satellite. Traditional on-board
communications and entertainment
facilities will be replaced by a new
generation of entertainment systems and
satellite TV. The killer application will be
AVCO, for audio, video and connectivity
on demand.

FINANCIAL SERVICES

With the economic outlook gradually

deteriorating and monetary tightening

taking hold—notably in America—life

is going to get tougher for the financial-

services sector. A flattening yield curve

in America is likely to hit profitability,

prompting a search for better returns,

with investors looking to riskier assets

to help increase earnings.
Fortunately, the business of investing in

emerging markets is improving. Many

emerging markets started pre-funding

their 2006 commitments in 2005. At the

same time, margins in the corporate-

loan market have been squeezed, as

firms turn to the capital markets or their

own resources to fund investment. As

a result, fee income is likely to become

more important as a source of revenue

for banks.

Bank lending—both corporate and

personal—will remain healthy.

Overall, total lending by the global

financial industry will grow by 6.4% in

2006 to $74.1trn. Credit risk will rise,

particularly in the area of unsecured

debt, given the weaker economic picture

in some key markets.

To watch: Digital finger-prints. Card-
cloning, PIN theft at cash machines
and high-profile attacks on customer
databases are all undermining confidence
in secure banking. In response, banks are
working on biometric technologies such
as digital fingerprinting.

FOOD AND DRINK

Growth in world consumption of food,

drinks and tobacco will slow somewhat

in 2006, to 4.4%, for a total of $4.3trn.

Big Food will remain on the defensive

as the rich world blames food producers

and fast-food outlets for the prevalence

of obesity, diabetes and heart disease.

Food-makers will find their more

calorific products subject to shackles

akin to the early restraints on the

tobacco industry: mandatory warnings

and stiffer labelling rules, as well as

outright bans in schools.
As fast as you can say tofu, however,

the food business is changing. Every

major manufacturer will stress lower-

calorie products—and not just for

the developed world. The Swiss giant

Nestlé will be rolling out sweets with

low lactose and sugar content in Latin

America, for example, aimed at older

consumers. In richer markets chilled,

ready-made food will enjoy strong

growth at the expense of frozen food,

leading to closures and mergers of

frozen-food plants.
The organic end of the market will

maintain double-digit growth, even in

emerging markets. Whole Food Markets,

a Texas-based organic food retailer, will

top $5bn in sales in 2006 and is aiming

for $10bn by the end of the decade.

Subway, an American restaurant chain

which trades on its healthy, low-fat

menu offerings, is now the fastest-

growing American franchise worldwide,

with more than 24,000 outlets in 83

countries. At its current rate of growth,

it should be operating more stores than

McDonald’s by the end of the decade.

In the drinks sector, the big brands are

rushing into juices, sports drinks and

bottled water, all of which will continue

to outgrow fizzy drinks in 2006.

To watch: Fake steak. Scientists at the
University of Maryland have cultured
small amounts of muscle fibre from
single animal cells. According to the
researchers, larger quantities could be

grown in thin sheets and then stacked up
to create thickness. Of course, getting it
to taste like prime rib may be the biggest
challenge.

HEALTH CARE

With governments eager to keep a

lid on spending and the continued

rise of generic producers, the global

pharmaceutical industry will remain

under pressure in 2006. But the main

focus for cost control will begin to shift

away from pharmaceuticals towards

other expenses, such as doctors’ salaries

and fees.
The world’s biggest drug companies

are already competing with Indian

generic producers, which are rapidly

emerging as major players. Chinese drug

companies are coming up close behind,

as are Brazilian competitors. Given

their lower cost, generic drugs—as

opposed to more costly proprietary

versions—will become increasingly

appealing. Industry objections, such as

the need for patent protection to fund

drugs development, will not count for

much, given government budgetary

pressures.
The effects, however, will not fully kick

in until 2007. Pharmaceutical sales

will rise 6% in 2006 to $469bn, before

slowing markedly in 2007 to 4.4%.

Considering that growth for 2003 and

2004 was 10% and 9.2% respectively,

this slowdown will take its toll on the

industry, with the likely result being

more mergers and acquisitions, and job

cuts. Given the strong profitability of

the sector, however, bankruptcies are

not likely.
As drug costs are only about 20% of

overall health-care spending, policies

to control non-pharmaceutical costs

will also be important. Central health

authorities are likely to move away from

reimbursing hospitals on a patient-

night basis, and start paying according

to diagnosis-related groups. This means

that more hospitals will be paid a fixed

amount for treating a particular disease,

rather than being paid according to the

number of patients processed, or the

amount of time they spend in hospital.

There will also be moves to reduce

the market power of health-service

professionals. In Germany, for example,

the role of doctors’ organisations in

negotiating fees will be reduced.

To watch: Smart drugs. Specialists at
Britain’s University of East Anglia have
discovered that certain genes are “turned
off” in patients with breast cancer, while
others are switched on. These genes could
be targets for the development of drugs
tailored to treat individuals’ tumours.

INFORMATION TECHNOLOGY

The humble PC will remain a world

bestseller in 2006, with growth of 8-

9%, buoyed by strong demand in the

developing world and the rich world’s

lust for whizzy portables. Overall, IT

spending will increase by a robust

7.8% in 2006 to $1.1trn, with software

sales leading the charge, followed by IT

services and hardware.
The globalised nature of the technology

industry—in terms of design,

manufacture and sales—will yield

economies of scale which will allow

manufacturers to drive down prices

while maintaining quality. Although

lower prices will help to stoke demand,

only the very leanest of manufacturers

will be able to make a profit.
Mighty Microsoft will begin to see some

of its core business nibbled away by

growing sales of open-source Linux-

based systems, which offer customers

more flexibility and the ability to move

away from expensive Unix servers

and high-cost proprietary software.

Governments, in particular, will begin to

be significant buyers of Linux systems.
Semiconductors, the workhorse of

the sector, will grow by a healthy 8%

worldwide in 2006. This will be primarily

North America 2,036

Japan 869

Western

Europe 2,284

Transition

economies 181

Asia 830

Latin America

Middle East & Africa

Finance

High-net-worth individuals
‘000 (over $1m in assets)

Health Care

Pharmaceutical sales growth
% change

2005

2006

2007

2008

$442.5bn

$469.3bn

$490.0bn

$513.3bn

7.3%

6.0%

4.4%

4.8%

Information technology

Information Technology

Personal computers
per 1,000 people

2005

2006

2007

2008

479

497

513

530

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Industries

The world in figures

THE WORLD IN 2OO6

an open press will remain stalled, as the
government cracks down on journalists,
bloggers and foreign investment. Expect
smaller fish to follow the example of
Microsoft, which has already agreed to
ban the word “democracy” from parts of
its MSN website.

RAw MATERIALS

Global steel markets will continue

to be oversupplied, despite efforts

by steelmakers to prop up prices by

cutting output. MEPS International, a

consultancy, believes global steel prices

might improve in mid-2006 if Chinese

authorities redouble their efforts to

limit output and cut export rebates.
The Economist Intelligence Unit’s price

index for industrial raw materials is

likely to fall by at least 6% in 2006, as

slowing growth in the global economy

dampens demand for hard commodities.

Base metals will feel the trend most

acutely.
Fortunes in the sector inevitably are

highly cyclical, and global players will

look to vertical integration to secure

long-term supplies of the materials

they need. China’s Yunnan Tin, for one,

plans to invest $60m over five years,

including a new refinery in Singapore.

Increasingly, miners will seek security in

long-term contracts with customers.
Much depends on China. It will drive

global aluminium demand: consumption

should grow by 10% in 2006. China

is also the world’s largest market for

tin. Production of that metal will rise

by 3.1% in 2006, fed by the efforts of

miners in Indonesia and smelters in

Malaysia, while consumption will grow

by 2.2% to 359,400 tonnes. Global

demand for copper will slow, especially

Raw materials

Industrial Raw Materials Index*
World Commodity Index**
% change

*An index of nine hard commodities (metals has a 65% weighting,
fibres 27% and rubber 8%)
**An index of 24 hard and soft commodities

-10

-5

25

due to restocking of inventories before a

stronger rebound in 2007 and 2008.

To watch: Brain chips. Scientists at the
Centre for Neural Engineering at the
University of Southern California are
creating a silicon-chip implant that
mimics the hippocampus, an area of the
brain which creates memories. Eventually,
this could enable people who suffer from
memory disorders to regain the ability to
store new memories.

MEDIA

Global advertising expenditure across

the major media—newspapers,

magazines, television, radio, cinema,

posters and the internet—will rise

by 6.5% in 2006 to $416bn, according

to ZenithOptimedia. Television’s share

of the ad market has been rising for

decades but will peak in 2006 at 37.9%.
Advertisers will divert more and more

of their budgets to the internet, which

will capture 4.4% of the global ad spend

by 2007. Ad spending in the traditional

media will keep growing too, at 6.2%

in 2006, up 1.1% on 2005, although the

revenue shares earned by print, radio

and display advertising will merely hold

steady or drop slightly in most markets.

News Corp’s chairman, Rupert Murdoch,

has made the web a priority and plans

to spend up to $2bn on acquisitions. The

New York Times will merge its print and

online newsrooms in 2007, and London-

based publisher Reed Elsevier reckons

its online revenues might overtake

those from print in 2008.
Reflecting the spiralling cost of sports

rights, broadcasters will pay more than


900m ($1.08bn) to show the football

World Cup finals in Germany, says Screen

Digest. The Winter Olympics in Turin

will boost advertising activity too. But

pirates beware: fines of up to 100,000

await those who violate the Olympic

trademark in Italy.

To watch: China’s media. After progress
towards deregulation, the prospects for

North America

Europe

Asia/Pacific

Africa/Middle East/Rest of world

Latin America

185.5

103.9

85.8

18.1

23.2

Media

Advertising expenditure
2006 $bn

Source: ZenithOptimedia

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in America, where vehicle manufacture

is in decline and plastics offer new

alternatives in plumbing. Even so, the

outlook is for consumption growth of

3.2% in 2006 to 17.65m tonnes, with

demand strong in the run-up to the

Beijing Olympics.

To watch: Uranium reserves. Plans to
unlock more than 1m tonnes of uranium,

primarily used for power generation,
from Australia’s uranium reserves—the
world’s largest—will be tested. The
country’s miner-friendly government has
taken over licensing responsibilities from
the Northern Territory, which for two
decades had refused to issue new permits
on environmental grounds.

TELECOMS

From the poorest countries to the

richest, sales of mobile phones show

little sign of slowing down. India is

adding around 2.5m new subscribers

each month. In 2006 mobile subscribers

in western Europe will reach a

staggering penetration rate of 96.4%.

Still, sales will grow because last year’s

mobile is, well, so last year. Worldwide,

sales in 2006 will increase by 9.7%,

more than twice the rate of GDP growth.

The penetration rate in the transition

economies of eastern Europe (66.4%)

will surpass that of North America

(64.4%).
Web-connected 3G phones will account

for 18% of the global mobile-phone

market by 2006 and 25% by the

following year. In certain markets, such

as Japan, 3G phones will account for

90% of the market within three years.
The mobile does have a rival, however,

known as internet telephony or Voice

Over Internet Protocol (VOIP). The

business of making phone calls from PCs

will become commonplace in 2006.

To watch: Mobile betting. According to
Mintel International Group, a market-
research company, gambling via mobile
phones will generate $3bn in revenue in
the United States by 2008, about 4% of
the projected $71bn in casino gambling
in that year.

TRAVEL AND TOURISM

Despite the drag of higher oil prices,

the number of people hitting the road

in 2006 will expand, with international

tourist arrivals up by around 4.1%.

Those who leave home will do so with

their wallets open. Worldwide spending

on hotels and restaurants in 2006 will

bounce upwards by 6.2%.
Indeed, optimism in the hotel industry

is at its highest level for nearly five

years. The leisure sector is growing for a

number of reasons. Prime among these is

the wish of the newly wealthy in China,

eastern Europe and India to sample the

delights of hotels, spas and resorts. At

the same time, the growth of low-cost

carriers (LCCs) continues to encourage

travel in the developed markets of North

America and western Europe. In America,

where the no-frills model originated,

LCCs will account for as much as 40% of

all airline trips in 2006.

The World Tourism Organisation predicts

that China will become the world’s

top tourist attraction by 2020. By

then, China will be the fourth-biggest

source of tourists globally. This is

excellent news for Europe’s luxury brand

manufacturers. Because of high Chinese

import tariffs, luxuries are among the

few things that are cheaper abroad.

To watch: Leaving Las Vegas. After
deregulation in 2002, casino winnings
in Macau have rocketed and will shortly
surpass those of Las Vegas. Over the next
five years at least $12bn-worth of new
hotels, facilities and attractions are set to
pour into the Chinese-controlled city.

0

10 20 30 40 50 60 70 80 90 100

Telecoms

Western Europe

Japan

Transition economies

North America

Latin America

Rest of world

Middle East & Africa

Asia (excl. Japan)

Mobile-phone subscribers
per 100 people

64.4

79.5

96.4

66.4

21.7

39.5

21.9

37.5

Travel

Expenditure by incoming visitors
$bn

93.3

32.5

339.1

40.8

100.4

20.1

17.9

CLOUDY

FAIR SUNNY

CLOUDY

FAIR SUNNY