The global market has become fractious and divided, and the Ukraine war has only accelerated this. Futurist and geopolitical expert Abishur Prakash, co-founder of the Toronto-based Center for Innovating the Future, tells fDi that the “vertical world is forming right before our eyes” as countries erect both physical and intangible barriers, and corporations pick sides. 

Q: What is “vertical integration”? 

A: Instead of being open, as it has been for decades, the world now is full of barriers, many of which are technology-based, so the world has become, in a sense, vertical.

Look at talent. There’s this big fight for advanced talent, especially in the technology fields — and one of the most sought out types of talent is around semiconductors. In semiconductors, Taiwan is arguably the most important country in the world. 

The Taiwanese government has passed a very radical law that bans local semiconductor companies from posting jobs in mainland China. But it has also ruled that if a worker is involved in certain technology sectors, including semiconductors, they can’t even visit mainland China. So that’s a type of barrier.

And look at what the EU is doing with cloud computing. The EU is building a platform called Gaia-X, which they want to use to build their own cloud computing ecosystem that doesn’t rely on the US or China. And so, the EU is encouraging local firms to build the servers and the platforms that can store local data. 

But it’s not just technology that’s driving this verticality. Because of the Russia–Ukraine war, there is really a reconfiguration by countries as to how they want to connect with different nations. 

For example, the ‘northern corridor’ that connects Europe and Asia, as part of China’s Belt and Road Initiative, passes through Russia and Belarus. Now, because of the war, Kazakhstan has proposed a ‘middle corridor’ that passes through Turkey and Bulgaria.

Another example of the vertical world is the configuration of multilateral groups. These groups have traditionally been global — the UN, World Trade Organization and Swift — although most of them were championed by the US. 

As we enter the vertical world, countries are taking a more tribal approach where new groups are exclusive. The UK has proposed D-10, a platform for 10 democracies to set the rules on 5G. Similarly, the US has proposed Chip 4 between the US, South Korea, Taiwan and Japan to build a new semiconductor ecosystem. 

As we enter the vertical world, countries are taking a more tribal approach

Abishur Prakash, co-founder,  Center for Innovating the Future

So, even when it comes to international relations and diplomacy, it’s no longer about involving everybody; now, countries want to work with like-minded countries who are similar in ideology, culture or geography. 

Q: How is this affecting the way companies invest and trade across borders? 

A: Think of sustainability, which has become a ‘North Star’ for many corporations. Even in the sustainability circle, we are seeing the rise of the vertical world.

For example, a few years ago the Indian government said that they want to sell mostly electric cars in the country by 2030. Tesla, because of the scale of the Indian market, then announced they would be making an entrance. After this, a skirmish between India and China breaks out along the Himalayan border, leading the Indian transport minister to ask Tesla not to sell vehicles made in China in the local market. India seems willing to change its sustainability objectives because of geopolitics.

There are several countries that are taking vertical steps, including the UAE and Saudi Arabia. Saudi Arabia has redesigned its economy around technology. It has announced a project called ‘Programme HQ’, which aims to attract thousands of companies. Saudi Arabia is [reportedly] in talks with about 7000 companies around the world to attract them and build the next Dubai in Saudi Arabia. 

Saudi Arabia has even gone a step further, saying said that as of January 1 2024, if a company wants to do business with the Saudi government, or Saudi state-backed companies, it must base its regional headquarters in Saudi Arabia. 

This is the vertical world forming right before our eyes. The time when investors would invest in Doha, Dubai and Riyadh, are gone. Now, the Saudis are saying to anyone willing to do business with them that they must position themselves within the country first.

And I can see this kind of “pick who you’re with” situation emerging around the world. It’s really going to put a lot of Western investors, as the main source of global capital, in the hot seat as to who they will align with in the future.  

Mr Abishur Prakhs shared his thoughts on the future of free zones in episode #23 of NextFDI. Click here to watch the full interview.