Ceo and Founder of GFK Conseils-Juridis, Romain Gerardin Fresse ( RGF) who is our main front cover image for the Autumn edition of European Business Magazine , talks about globalization and how his firm advises governments and multinational companies globally about strategy. GFK Conseils-Juridis has corporate clients in numerous countries throughout Europe, the US, and the Middle
East, and today is known as a “real solutions maker“.
European Business Magazine (EBM )-Today’s world is changing. Geopolitical developments are complex notions that have shaped the modern world. The last century has brought about a new paradigm; that of globalization, and in particular through a technological advances. You are a pure product of globalization, with a presence on the 4 corners of the globe. What is your take on this?
RGF-You are totally right. The term globalization corresponds to the free movement of goods, capital, services, people, technology and information. So, ye we are a pure product of globalization! But to perfectly understand it, we have we need to do some socioeconomic history. The technological dimension of globalisation is undoubtedly able to demonstrate the impact on the evolution of international affairs throughout history.
Indeed, the emergence of new technologies has constantly influenced international relations and has brought about a new dimension to globalization many times before. And this is fascinating.
The installment of a universal time measure, such as the 1884 Greenwich meridian is a perfect example of this; sailing conventions became uniformized and everyone now referred to their own meridian in universal time.
This is an evolution which is similar to a technological revolution, even though it is rather an intellectual one. A unanimous decision allowed for this revolution to apply to all nation states.In a similar manner, the 1891 trans-border phone call between Paris and London revolutionized the status quo.It was now possible to exchange information in real time even from a distance of 500km, and for example place an order in a different country without sending an emissary ahead of time. It was a major advance in technology, a new great step for the globalization.
Similarly, the facilitation of the movement of people and goods by air saw the light in 1903, with the first successful flight initiated by the Wright brothers, which was followed in 1919 by the democratisation of trans-border air services.
This innovation significantly reduced the time taken for the transport of goods and workers and removed the inertia caused by physical and geographical distance. A major advance?In the same way, the creation of the television in 1927 allowed for a true opening to the world and drove a different perception of geographically removed communities. This is the free circulation of ideas, of information and the discovery of new cultures. Subsequently, the invention of the microchip in 1959 and the ARPANET in 1969 brought about a new era, that of multimedia and digital technology, which in 2004 led to the creation of Facebook.Something that still seemed surreal decades ago, and that played a role in the evolution of civil societies.The technological revolution also touched the healthcare industry.
Indeed, the discovery of penicillin by Alexander Fleming on the 3rd September 1928 transformed the history of medicine.The geopolitical context of England was not favourable at the time, and he left for the United States, where the American laboratories Merck, Pfizer and Squibb began the adventure.
Production on an industrial scale allowed medicine to cure many diseases such as tuberculosis and syphilis, having a worldwide impact. This is also fascinating.More recently, containerization, intermodal freight transport system using containers, started in the 1960s, reinforced globalization. Using containers with standardized dimensions, has considerably contributed to the strengthening of international trade.
Knowing and studying these past examples, learn about the evolution of the globalization allows us to anticipate and orient our current strategies intelligently.
EBM-Take the example of France. GFK Conseils is headquartered there, supports many business leaders, and multinationals wishing to set up there. Would you say that the country is well governed, and remains fully integrated in the process of globalization?
RGF-The World Bank defines governance as “the way in which power is exercised in the management of a country’s economic and social resources for development”. Kemal Dervis, former Minister of Economy in Turkey, administrator of the United Nations Development Program (UNDP) and vice-president of the World Bank, wrote that good governance is essential for the growth of a country, because it “determines whether people deploy their talent in the pursuit of innovation, or in lobbying for political protection”.
The 2019 Doing Business Full Report notes that France carried out certain reforms in 2017 and 2018, and notably cites those relating to the digitization of land and property registration systems.
These are not the only reforms that have been carried out, but are likely to help facilitate procedures, thus attracting foreign investors to the national territory.
The modernization of land and property registration was also the subject of a report submitted on November 12, 2018 by the Commission for Land and Property Registration Reforms.It is explained that “Land registration originates from a simple idea: the acquisition of a right to a building (property, mortgage …) and is effective when it is made public.”
This process must be transparent, making it synonymous with good governance, according the definition by the World Bank, which indicates that it is “the way in which power is exercised in the management of economic and social resources’.With technological globalization, it is unthinkable that such a service would not become accessible online.The lack of modernity of such a service constituted a real obstacle and was not compatible with the modernity imposed by globalizationFor many years, the bureaucracy and inertia of the French system was a real barrier to foreign direct investment (FDI), and greatly dissuaded investors.
These reforms are therefore essential for France to maintain its competitive position in the context of globalization, which depends in part on the “effectiveness of governments and the quality of policy development and the delivery of utilities ” as Kaufmann et al. said.However, the country still has major reforms to carry out in this direction.
Like any crisis which accentuates the difficulties of a country, the Covid-19 crisis revealed what President MACRON himself described as “flaws and inadequacies”, referring directly to the scandal which occurred with the supply of masks, indicating that “lessons would be learned”.
These “loopholes” are partly induced by a hyper-centralization of power from which France has suffered for centuries, which the Decentralization Law of 1981 began to address. Indeed, this law aimed to give more flexibility to local communitiesLikewise, the report I quoted to you above indicates that France has initiated reforms aimed at lowering its taxation.
It is true that the creation of the CICE by the amended Finance Law of 2012 was a real relief for the companies that could benefit from it, and was intended to reduce the labor cost of French companies – very high – compared to foreign companies.This measure was therefore intended to ensure that the public authorities, through a tax reduction, bear the cost of competitiveness while maintaining the social benefits of employees.
Extremely onerous for public policies (its cost is estimated at 100 billion euros in total), the CICE was abolished on January 1, 2019 and replaced by a reduction in social contributions for employers.Since October 1, 2019, the general reduction in employer contributions applies to unemployment insurance contributions.But this measure has its limits.
If it has an impact on low-wage sectors and where the cost price is strongly impacted by labor costs, on the other hand, it is much less effective in high added value sectors.Also, with progressive contributions proportional to salary, employers might be tempted not to increase their employees.There is therefore a limit of these indicators.They only reason in the abstract, and do not take into account the perverse effects that may result.
EBM-GFK Conseils-Juridis has worked with many foreign governments. Could you comment on this particular experience a bit more — how do you approach new clients like these, how do you operate and help them? What are the main challenges for the company when it has to navigate through different politics and international relations challenges?
For the foreign governments in which we intervene, we are developing new governance strategies.
Our greatest pride stems from certain texts that we have helped to draft, in order to bring out innovative entrepreneurial or ecological protection schemes, which had not yet been initiated.I am thinking of a specific example, where we developed a tax system which was submitted to a vote at the National Assembly of the concerned country, to encourage the emergence of infrastructure, and was therefore of great public utility for projects in the country.It’s an accomplishment.
For example, we are also responsible for promoting the creation of a free digital zone in Obock, in the Republic of Djibouti, and we are working with the Prime Minister on the establishment of banking institutions in this country which has joined the OECD.
Generally speaking, a well-applied legal system that establishes and defends property rights, increases the attractiveness of FDI (Foreign Direct Investments). Strong property rights, which offer protection against expropriation, encourage investment.Distributing production factors more efficiently (land, labour, capital and business) as well as financing start-ups and enabling them to enter the market and grow the economy, is our role in the governments we advise.
Maintaining democracy, characterized by the separation of legislative, judiciary and executive powers ensures effective procurement through the rule of law.
EBM-GFK Conseils-Juridis also helps multinational companies with their strategies for international expansion. How do you find the best option for each company and help them enter a new arena? Do they always trust the firm and agree with the prepared strategy?
Dunne and Schmidt said that free trade promotes peace and can create mutually beneficial economic partnerships for all states. And they are right.Transnational cooperation can bring mutual benefits.First of all, we carry out an in-depth audit which is a matter of economic intelligence, to understand the corporate purpose of the company, its sector of activity, and its desire for expansion.
I will not tell you how exactly we assess and estimate the potential threats and opportunities of setting up a business in a given geographic area.But what I can tell you however, is that we pay particular attention to the development of international relations and the orientation of public policies in the states concerned.
States that have far-sighted political strategies and resilient institutions have, as Robinson and Acemoglu point out, better results in managing the forces of globalization. The rise of what has been called the “competitive state”, adapted to meet the demands of globalization, is embodied in countries with open, state-run market economies.
It is the case of Singapore.Take the example of Djibouti, a country that I know well. The governement has undertaken many reforms since 2017, including the establishment of a central office for business start-ups, the reduction of regulatory fees , the supervision of sale and tax administration, as well as easing access to credit, through a broadening the scope of assets which can be used a guarantees in a way that now let it include future assets as an extrinsic guarantee in and of itself.
They are elements which encourage the FDI.An additional element that strengthens confidence in the country’s institutions, is the establishment of a specialized division within the court with the sole purpose of resolving commercial cases. Adopting a new Code of Civil Procedure which regulates voluntary conciliation as well mediation procedures in cases of conflict is something that further strengthens confidence in the institutions.The definition of strict timeframes regarding legal proceedings and the strengthening of accessibility and participation of creditors to resolve conflictual situations is highly valued by entrepreneurs for its added security. It makes the environment more attractive and more favourable for eventual expansion strategies abroad.The companies we advise follow our recommendations, because they know that we integrate all paradigms, including the security of their assets, before giving our “green light” to their international expansion plan.
EBM –Being an effective crisis-management company also means having strong collaborators and partners when it comes to law, taxation, communication, and other important aspects. How do you find the necessary partners in different countries? Also, what is the secret of keeping strong relationships with them?
We have always put the utmost importance on being available and responsive, and we carry out constant monitoring in all of our activity sectors to be able to offer a cutting-edge service.This is the leitmotif that we repeat to each of our collaborators.
General administration, taxation, dispute resolution, handling of day-to-day affairs are all tasks that must be accomplished with speed, efficiency and confidentiality.The collaborators – internal or external – on whom we rely are chosen with care and are part of the added value of our business model which allows us to provide “a high–level legal-financial all–inclusive package”.
The quality of the links created with private banks, large firms, influential groups and investment funds are all assets that strengthen our actions and our credibility.We have been able to diversify, and as you pointed out, do not limit ourselves solely to the legal aspects.In reality, we have become an operational “Swiss Army knife” for our customers.
The recognition of our values and our reputation has enabled us to forge solid links with people in the world of private banking, management funds, and with big names in lobbying.From Monaco to Luxembourg via London, Geneva or Hong Kong, our firm has negotiated partnerships with historic and renowned financial decision-making centers.These partnerships open the way to unprecedented opportunities for our clients, who are assured of benefiting from the best investment, a finely tailored development strategy for their assets, a high level of return and above all, the efficiency that they are looking for.
Ironically, we have even been called by these same banks and investment funds to advise on legal, legislative or strategic aspects. This helps to forge privileged relationships and to maintain the excellence of our services.
EBM-To be the best player in the field, always staying on top of current events and geopolitics is an absolute necessity. How does GFK Conseils-Juridis manage to do that? Do you have certain tactics when it comes to immediate estimation of the new, unexpected situations?
This is a very relevant remark.We carry out an exhaustive watch, we keep ourselves constantly informed, we are in regular contact with influential members in “authorized circles”.Geopolitics is a variable in its own right in our profession. Anticipating and adapting our strategies in real time is an absolute necessity.Decisions, and positions taken by governments, after having been advised to do so by international organizations can shape the world.I will give you a concrete example of transnational cooperation in solving a major problem which has changed the landscape of economic relations
Since May 2000, the World Diamond Council (WDC), the Civil Society Coalition (CSC), the Diamond Development Initiative (DDI) and the African Diamond Producers Association (ADPA), work together to address the issue of conflict diamonds, also called “blood diamonds”.
Rough diamond is arguably one of the highest value-to-weight commodities in the world. For example, the “Lesedi la Rona”, discovered in 2015 in Botswana, weighs 1,109 carats and was sold for 53 million dollars (45 million euros) to a British jeweler.
For nearly 100 years, the extraction of these stones has allowed the rebels present in different conflict zones of Africa to finance their policy of destabilization of the power in place, causing geopolitical repercussions on a global scale, which then leads to political instability, insecurity, famine, and more.
The United Nations has therefore decided to curb this phenomenon by encouraging, the creation of a certification process relating to the origin of rough diamonds, which they called the Kimberley process.
It aims to ban diamonds from conflict zones.
This strategy worked rather well, and in zones where this was previously a major issue such as Sierra Leone, Angola, Liberia and the Democratic Republic of Congo (DRC), things have improved significantly, and the situation has become more controllable. This is particularly truly in Angola, where blood diamonds served as funding for the rebel groups during the civil war. A serious brake was put on the access to funds through this process and helped calm the situation.
Likewise, Sierra Leone has seen its legal exports increase 100-fold since the end of the war in 2002.Like any process, this system has its limits.
The first comes from the fact that there is no way to chemically trace a stone.Control relies on the full contribution of local actors, who are responsible for checking the legality and veracity of the information and documents transmitted, from the mine to the diamonds’ departure for export.Inefficient controls in certain zones mean that some diamonds are still extracted from mines located in conflict zones and are smuggled into neighbouring countries, where a certificate is issued to them, allowing to “whitewash” their origins. Corruption is also an issue, and fragilizes the process in Zimbabwe for example.
When suspicions about compliance with the process in his mines were voiced, Zimbabwe’s President Robert Mugabe threatened to withdraw from the Kimberley process altogether.Ian Similie, who participated in establishing the Kimberley process said himself that the project had in away, failed. He states “ The Congolese government has no idea of the provenance of 40% of its diamonds. They could be coming from Angola, Zimbabwe or even Mars” The limitation of this kind of “common interest” agreement is that it must be respected by all who have adopted it, in order for it to be effective.
For example, if we consider that the United States is the largest importer of diamonds in the world, one could think that it would be enough for them to demand strict compliance with the process, and then follow it up with inspections that would penalize countries that do not respect it.I gave you this example because it covers – like diamonds! – several facets;What was authorized becomes prohibited on the influence of international organizations, which entails a need to adapt its method. But as always, some manage to defy the prohibition by circumventing it. However, penalties for negligence can be significant. We must therefore be vigilant.
In addition, the beneficial effect is the investment opportunity offered by countries that benefit from this new regulation. Finally, be careful, because the process has its limits, and it is necessary to analyze the whole so as not to overreact positively, which could have an opposite effect on the recommended investments.
This is the role of GFK Conseils-Juridis holds: understanding geopolitical developments, to optimize the results and minimize the impact on clients, depending on the situations.
EBM-The outbreak of Covid-19 has impacted nearly every industry out there. What about the consulting and crisis management industries? In your opinion, can this outbreak bring some new, unexpected challenges that the GFK Conseils-Juridis has not faced before?
Émile de Girardin, a 19th century French politician, said that “To govern is to foresee; and to foresee nothing is to run to ruin ”.
Effective crisis management is considerably improved if you anticipate various situations and outcomes ahead of time. This is where constant legal, political and economic monitoring is particularly useful and effective, saving time and efficiency on the long term.
Let’s take the example of certain large groups that we have supported during this crisis: we have been in contact with suppliers in order to temporarily suspend financial obligations under Force Majeure, solved the issues regarding salaries in accordance with relevant legislative texts, and established clear communication pathways for customers.
Simultaneously, we reorganized the structure of work, rethought applicable schemes, whilst also strengthening their cash flow. A crisis can cause major changes if parameters aren’t properly controlled.
The key is to maintain composure and to carefully plan each step of the strategy: secure assets, contain the damage and prepare for the aftermath.Defining the direction of the strategy to be adopted is essential, as is considering the specificities of crisis itself, and of the customer’s profile.I don’t think we will necessarily face different challenges than those we have encountered so far. Crisis management is constantly evolving in the way it addresses problems, but the pattern remains the same; counter the immediate consequences, resolve, repair, and prevent in order to preserve.
But I do think that this crisis will perhaps lead to the emergence of new patterns, driving a different approach to management, production and consumption, which will allow for similar situations in the future to be avoided.
And it is, by the way, absolutely necessary.
The planet cannot support the current modes of production, and an alternative mode must be developed. If at first glance it is a matter of a responsibility towards humanity, an unstoppable financial logic is added to it; There will come a day when producing according to our current methods will become much more expensive than producing with the help or with renewable and clean energy. If even Saudi Arabia, home to one of the world’s largest oil reserves, seeks to produce most of its electricity from renewables and nuclear power by 2040, that’s fine. that the stakes are high and that the argument can prosper.
Émile de Girardin, a 19th century French politician, said that “To govern is to foresee; and to foresee nothing is to run to ruin ”.
Effective crisis management is considerably improved if you anticipate various situations and outcomes ahead of time. This is where constant legal, political and economic monitoring is particularly useful and effective, saving time and efficiency on the long term.
Let’s take the example of certain large groups that we have supported during this crisis: we have been in contact with suppliers in order to temporarily suspend financial obligations under Force Majeure, solved the issues regarding salaries in accordance with relevant legislative texts, and established clear communication pathways for customers.
Simultaneously, we reorganized the structure of work, rethought applicable schemes, whilst also strengthening their cash flow. A crisis can cause major changes if parameters aren’t properly controlled.
The key is to maintain composure and to carefully plan each step of the strategy: secure assets, contain the damage and prepare for the aftermath.Defining the direction of the strategy to be adopted is essential, as is considering the specificities of crisis itself, and of the customer’s profile.
I don’t think we will necessarily face different challenges than those we have encountered so far. Crisis management is constantly evolving in the way it addresses problems, but the pattern remains the same; counter the immediate consequences, resolve, repair, and prevent in order to preserve.But I do think that this crisis will perhaps lead to the emergence of new patterns, driving a different approach to management, production and consumption, which will allow for similar situations in the future to be avoided.And it is, by the way, absolutely necessary.
The planet cannot support the current modes of production, and an alternative mode must be developed. If at first glance it is a matter of a responsibility towards humanity, an unstoppable financial logic is added to it; There will come a day when producing according to our current methods will become much more expensive than producing with the help or with renewable and clean energy. If even Saudi Arabia, home to one of the world’s largest oil reserves, seeks to produce most of its electricity from renewables and nuclear power by 2040, that’s fine. that the stakes are high and that the argument can prosper.
EBM- As an expert in international relations, how do you consider things to have evolved since 1990?
With end of the Cold War, and with the collapse of the Soviet bloc in 1991, ended 46 years of a bipolar world, where the established order was a division into two blocs with the United States on one side and the USSR on the other. Since that period, three economic spaces have gradually been shaped.
The first is a capitalistic and open space, mainly Western. The second is a socialist and closed space, and the last is a “third world economic order”, halfway between the two other precepts. As this change took place, globalization became the major concern of the United States.
This concern was not unfounded. President Bill Clinton had realized that there was a serious connection between market expansion and promoting democracy. Theory stated that globalization would make the world more prosperous, but also more stable, freer and more liberal.
Since then, America’s soft power has grown considerably. In the 2000s, the US was still the most powerful military power in the world and the “American style” was also becoming an increasingly attractive benchmark to reach. However, realists like Christopher Layne were convinced that such homogeneity could only be temporary, and events proved him right.
September 11th, 2001 ended America’s sense of untouchability.Unprecedented in history, and of a psychologically traumatic scale, the terrorist attack led by al-Qaeda ushered a shift in US politics.
With end of the Cold War, and with the collapse of the Soviet bloc in 1991, ended 46 years of a bipolar world, where the established order was a division into two blocs with the United States on one side and the USSR on the other. Since that period, three economic spaces have gradually been shaped.
The first is a capitalistic and open space, mainly Western. The second is a socialist and closed space, and the last is a “third world economic order”, halfway between the two other precepts. As this change took place, globalization became the major concern of the United States.
This concern was not unfounded. President Bill Clinton had realized that there was a serious connection between market expansion and promoting democracy. Theory stated that globalization would make the world more prosperous, but also more stable, freer and more liberal.
Since then, America’s soft power has grown considerably. In the 2000s, the US was still the most powerful military power in the world and the “American style” was also becoming an increasingly attractive benchmark to reach. However, realists like Christopher Layne were convinced that such homogeneity could only be temporary, and events proved him right.
September 11th, 2001 ended America’s sense of untouchability.Unprecedented in history, and of a psychologically traumatic scale, the terrorist attack led by al-Qaeda ushered a shift in US politics. Before him, one year sooner, Mario Vargas Llosa, Nobel Prize for Literature, stated in The Express “‘Nationalism can destroy Europe”.
However, the EU remains of center of the most competitive economies in the world (6 out of the top 10 in the world), and the home of several world-class companies (30 out of the top 100 in the world).
Whilst this is all going on, a new power is rising: China.China has become the second largest economy in the world and is expected to become the largest in terms of GDP at some point in the 21st century.Its method is clear: besides undergoing important economic reforms, it attracts foreign capital while exporting increasing quantities of goods to the enormous markets of the West.
In 2011, the Asian Development Bank predicted that if Asian economies could sustain growth for another 40 years, adapt to the global economic and technological landscape, and continue to create comparative advantage, Asia would not only play a larger role in the global economy, but it would no longer be home to poor countries.
This is fascinating to know that actually, chinese manufacturing workers now earn more than their Brazilian, Argentinian and Mexican colleagues, and have a wage which reaches half that of a Portuguese worker ($ 4.50 / hour).
The Financial Time exposed in 2017 that between 2005 and 2016, the average hourly wage of a Chinese manufacturing worker rose from $1.2 to $3.6, an increase of 300%. However, China must avoid Thucydides’ trap, and is well aware of it.
It is quietly developing important diplomatic relations with many countries in Africa and South America, and is establishing, in its own way, a Chinese soft power.Thus, it can be asked whether the U.S and “the European empire”, do not risk gradually fading away, in favour of Chinese domination.
