Davos Annual Meeting 2011 – The Global Agenda in 2011
Welcome, everybody, to this special CNBC
debate. Now, things are looking up for the global economy.
If you believe the best estimates of the economists, we might see 4% growth in 2011,
but that may not be without some volatility. So, as fears of double-dip
recession recede, what exactly are those other issues that business leaders
need to be worried about? What is going to keep CEOs and political
leaders awake at night? Well, fortunately, for the purposes of our
discussion we have six business leaders on our stage who’ve come from different industries
and different parts of the world. Let me introduce our panel to you. Paul Bulcke is the CEO of Nestlé.
Chanda Kochhar is the CEO and Managing Director of ICICI Bank in India. Yorihiko Kojima
is Chairman of the Board at Mitsubishi Corporation of Japan. Ellen Kullman is Chair
of the Board and CEO of DuPont from the United States. Jacob Wallenberg is the
Chairman of Investor and Captain Wei Jiafu is Group President and CEO of
China Ocean Shipping Group. So, our panel, let’s talk about
the opportunities for growth for 2011. Four percent would be a remarkable recovery
if sustained, but if we’re going to see that kind of number delivered for
the planet as a whole the United States needs to turn up this year.
But as we know from the State of the Union address, there are a number of headwinds
with regard to the US economic growth outlook. So, Ellen, let me start with you, as our panellist from the United States.
How good or otherwise are you feeling about the strength of recovery
in your home market? Geoff, that’s been a topic
of great debate this week. There have been great stories of optimism
and great questions that have come up. From my experience and what we see as we
look at the United States is we’ve seen slow sequential improvement coming out
of 2009 and through 2010 and the fourth quarter I think was a reinforcement
that that improvement continues. There were a lot of questions about whether
the end of 2010 would fall off, there’d be de-stocking or people
lack confidence and would pull back and that did not occur.
So as we take a look at 2011 there’s optimism for the automotive industry
in the United States, it will grow high-single digits.
There’s optimism around new production capability that’s coming in in alternate
energy, and in new technologies where innovation and science are
really changing the game. At the end of the day in the United States
it’s going to come down to jobs and that’ll bring the confidence.
I’m really pleased that you’ve brought up jobs here, because I am confused about
whether there is such a thing as a jobless recovery and whether that can be achieved.
We have 20% youth unemployment in the US, it’s 20% in my home country, the UK, it’s
40%, as we know, in Spain and this is a very serious issue for the globe
going forward. If we are going to get the planet’s economy firing on all cylinders,
then we need to start re-engaging labour. Can I bring in one of my other panellists,
perhaps, to pick up on this point? Paul? Well, first of all, there is optimism
in general. You see the world has been growing 4-5% last year and that’s in quite
a big contrast with the Davos last year and the year before.
You may remember in 2009 it was shockwaves, we were talking in terms
of survival, are we going to survive. Then last year it was about, well, who is
the bad guy then the good guy and we have to regulate.
And this year there’s basically an optimism of saying well, look, we didn’t
fall off the cliff and there is growth worldwide and the emerging markets have
emerged and they’re very much active and worldwide. And if you see it
in perspective, worldwide there are many, many jobs created.
Five percent growth worldwide is an amazing amount of jobs.
The problem is if you live in Western Europe you say it’s the wrong
place, it should be here. And it’s true that the debt crisis in
Western Europe and also in the United States is conditioning the whole discussion
and we are saying how are we going to save ourselves to glory and
that’s maybe the wrong thing. You have to really go for debt and
how you’re going to handle that. We have to start thinking again how are
we going to grow to glory and growth is linked in with employment.
And so I think – Okay, okay, Paul, we know many of those
things are true, so what is Nestlé going to do this year? If I can just
put you on the spot for the moment, what are you going to do in real
terms to add workers back into your operations around the world? Well, around the world again we have
the developing emerging markets and there we’re growing very nicely too, but we’re
also growing in the Western world. In Western Europe we have growth because
there’s so many opportunities. You look at the ageing population related
to what the productivity is and so – I’m listening but I’m not hearing.
What are you going to do at Nestlé this year to put workers back to work? Seeing the opportunities in every part of
the world, in Western Europe and the Western world too.
I know you’re in a closed period and you made that clear to me earlier, so I don’t
want to make this about how the stock’s going to perform, but I’m just naturally
interested in is it an apprenticeship programme, is it a job-skill programme or
is it just filling some spaces that have now become available because
growth has returned? It’s looking for growth, also in Western
Europe. It’s looking for opportunities. It’s looking for more productivity in
our factories and we can do that. We are creating jobs in Europe, we’re
not laying off and we have products, new concepts like Dolce Gusto, which
is bringing big growth for our company in Europe. We have Nespresso, we have so many
ideas. Ageing population is creating an amazing amount of opportunities
also for the Western world. I do believe we have to think about productivity
in Western Europe, so that jobs can be created.
Okay. Jacob? If I could leave the question just for
a second, what impressed me so much about this meeting was Prime Minister Cameron’s
speech, which was the kind of speech I’d love to see more politicians perform.
He very strongly put the case of European growth forward, what he was willing to do
in the UK and what I liked about it was that he put his own neck on the line.
Let’s come back to the UK and let’s come back to Europe in a moment.
Global growth: is the US going to participate? Are we going to see a hard
landing from the emerging world this year? Let’s do the headlines then we’ll
get down into the detail. Well, I think obviously the United States,
we were all hoping that the early signs of economic growth is going to continue, but
on the other side that’s the risk. Is it going to be there or not? Europe,
you have the whole debt issue, the whole market issue.
Are markets comfortable about all the measures that are being taken and here I
think that President Sarkozy and Angela Merkel, their very strong view on the
Euro really put markets at ease, put me at ease.
Yes. And created stability so
we can move forward. Okay, so it’s confidence about a whole load
of issues which is going to help us achieve that growth.
Captain Wei, what role is China going to play in delivering the growth
for the planet this year? Because we’re all starting to worry about
your domestic property market and I think we’re all concerned that the Chinese government
is tightening monetary policy. We’re trying to have a hard
landing this year. I need to say from first, generally speaking,
the world economy is on clear track of a recovery and the trend
will continue in year 2011. And in China, the Chinese government
issued a 12th five-year plan. It is very clear to mention that. We will keep the Chinese economy sustainable
and continuous growth in the next five years and transformation
into economy-growth mode. That’s very good for keep the Chinese
economy growth healthy and sustainable. For example, before we used the three
drivers: investment, exporting and consumer, but two legs are longer.
One leg is short, that is consumer, and according to the 12th five-year plan we
will change the growth mode from focus on growth, then change to transform to focus
on economic development and their work continues to stimulate domestic demand.
That will help the Chinese economy find a new force and also develop a lot
of opportunity for foreign investors to gather in China to share
the Chinese bonus. Thank you very much indeed.
Can I bring you in to talk on the Indian angle to this as well? Is India
going to deliver for the world this year as well on the growth side? Indeed, India is going to deliver for itself
and for the world because India’s going to be one of the economies that
is growing at upwards of 8.5% and that provides opportunity to not just companies
within India, but actually to companies in other countries as well to come and share
in the growing market in India. And there are actually two clear fundamental
factors that are driving India’s growth.
One is the basic domestic consumption, which is a very, very strong driver
of India’s growth, which is coming out of the demographic dividend that we have.
And the second driver of growth is the investment in infrastructure and that is
a driver because India has so far not invested enough in infrastructure
and everything that we now invest in infrastructure is actually coming out of
the genuine need to invest and therefore there is a huge demand for these infrastructure
projects and the services arising from these infrastructure
projects as they come in. So again, India is not pushing investments
just to drive economic growth; India is actually creating viable investments
and these are the two parts that are going to grow.
So very quickly, everybody on the panel thinks that growth will be better
in 2011 than in 2010. Is that right? Is that
a fair assumption? I agree with that. Growth will be positive in 2011.
2010 was a fantastic year for growth, you know, with the world economies.
It’s going to meter down. It will be at 4%, not as great as
it was, but it will be positive. Good. Let’s take this to the audience. Put your hand up if you would like to
get involved in the conversation here. Good. Let me come to you,
sir. What’s your name? My name is Chengal Reddy. I represent
the Indian farmers. My question to the corporates is very
simple. The Western economies are basically an industrial and SME sectors. My own country, India, claims that the
great development is in the service and industrial sectors, but 30,000 farmers
commit suicide in my country and the investment, the growth in my country in
agriculture is not even 1% in the last 20 years and most of the companies where you
are all working – including DuPont and all that – have you taken farmers as a part
of your investment development or do you simply see these small farmers as
simply customers, because without farmers, without their involvement, in our country
where 60% are dependent on agriculture, do you foresee growth and development
without farmers’ involvement? Okay, thank you very much indeed
for the question, sir. Anybody like to take this
on the panel? Yes, Ellen. Yes, I think the farming community
is absolutely critical for feeding the world. With the world population growing from,
you know, seven billion will cross this year to over nine billion in 2050, you know,
17 companies and the World Economic Forum have partnered on a new vision for
agriculture and it is about bio-security. It is about economically driven, farming
as a business, moving farmers from subsistence farming to generating an
income where they can educate their children and save. And it is about doing it in a
sustainable environmental way and there are many projects in India, in Tanzania and we started
one in Vietnam of public-private partnerships really executing and driving
that, but we believe that for food security and for the nutrition needs of
the world, getting a growing and more productive farming economy in India
and sub-Saharan Africa and China is a critically important part of that.
I’ll come back to this because I do want to spend more time talking about
the food-price story, but I don’t want us to get lost in the discussion and this
to end up being like herding cats. So Kojima-san, can I ask you, Japan
has been lost for two decades. We saw a debt downgrade from S&P. Just tell us what Japan, the world’s
second largest, or is it the third largest economy now, is going to add this year. Okay, as far as the Japanese economy
is concerned, I don’t worry so much about, frankly speaking and grade down, it’s a
bit surprising, but as you may know, Japanese government quite recently,
they announced some financial policy to encourage the Japanese economy in terms
of the taxation and so forth. And as you may know, Prime Minister, Mr
Kan, came here and yesterday he made a speech and he announced this new policy.
And this will be very much encouraging for the Japanese economy.
In the meantime, say, we are involved in the business in Japan; we ourselves are
very much optimistic for the Japanese economy.
Okay, great. Let me just finish you there; if
you’re optimistic for the Japanese economy, I’ll take Mitsubishi’s word as
it stands. Thank you very much indeed for that. We need to move this conversation
on; we’re going to pick up on the issue of Eurozone debt and the crisis in Europe
when we come back, stay with us. Welcome back, everybody. Let’s talk
about Europe’s debt crisis now and what potential risks that brings
to the recovery for this year. Let’s talk a little bit about whether it’s
been well managed and whether it will be ultimately successfully resolved in 2011. Jacob, let me start with you, if I might.
You probably know about as much about the intricacies of the banking and sovereign-debt
crisis as anybody here on the panel.
Are you confident from what you’re heard over recent weeks now that Europe’s leaders
are finally speaking with one voice and heading together
in the same direction? Yes. I’m really comfortable with
what’s been coming through here. Greece took a while, Portugal, Ireland
moved quicker, and here in Davos we’ve heard the very strong language of Sarkozy
and Merkel; sort of, I mean, being the two leaders of the Eurozone, having
to take the leadership. Now, having said that, I think the
individual countries and politicians in those countries have shown great courage.
I think they have a Herculean task to take on all these changes in such a rapid fashion,
but they are doing it and I am very comfortable that they
will come through. One of the problems, it seemed to me, while
I’ve been listening to the comments made, is that the political leaders are
very keen to express confidence and they are talking about solutions but I hear
a certain amount of nervousness from the business community about committing investment
to Europe while there still isn’t resolution of this story.
Can I ask someone else to pick up in the panel and just talk about whether they
feel confident putting money to work back in Europe? Surveys at the moment
are suggesting Europe isn’t even on the list of the top five; it starts with
China, it ends with Brazil or India, the USA is in there somewhere as
well, but Europe just doesn’t figure right now. Well, you have two dimensions to this.
First of all is taking the panic out. So that is what basically has been done
now. There’s a real commitment, they want to show leadership, stay cool. Now, that’s the first step.
That’s a necessary step, and now you have to start restructuring certain dimensions.
I think one of the biggest problems in Europe is that you have you have so
many differences in Europe, and financial policies, and also the debt dimension of
Europe is still something that is there. If you live too long above your means,
somewhere, something has to be paid; debt has to be paid. So, you can push it forward, you
can restructure it, you can give it more time dimension, but then you have to do
the restructuring of your financial structure in general.
Your deficit, you have to take it out. How do you take deficits out over time? And not only by reducing cost, which
is already a very difficult thing politically, but also by
creating growth again. Now that debt is just going
to be a burden on growth. So, this is a dilemma that still needs to
be sorted out, and how the governments are going to do that framing in an environment
that allows that investment to flow back. So, there are still many, many issues,
and then the discipline; the political discipline.
Let’s face it; these are long-term dimensions.
Now politics, actually, in our society starts to be the shortest-term thinkers. In four years’ time they have to
be re-elected. To a certain extent, companies are having longer-term views
on things than politicians. How that is going to be orchestrated
again? How are the international institutions who have to govern certain
things? We are speaking about the G20, but then the G20 number could
be okay, what is the agenda? How is it all going to be worked out?
There is still something to be done. But I must say the first condition of
‘we want to’ – some more leadership, political leadership is pronounced.
We saw that reconfirmed his week; very important.
Now we have then, all stakeholders to start working on these issues.
And I think in Europe it is definitely again to give a little bit of a spirit
of positivism and start also on the productivity issue; we have to
be more productive again. Okay, well, let’s run this along the panel.
Yes, Kojima-san, you wanted to pick up on that? I just wanted
to say, Europe market is concerned, we are these days saying
simply, they are not a trading company, they are investment company.
There are so many investment opportunity in Europe these days. And this is mostly in the renewable
energy business. And also consumer business there. And therefore there are so
many business opportunities. Besides, Japanese yen is getting stronger.
It is also good for chance for us to invest. Therefore I do expect, say,
Europe economy’s going up. Well, that’s very encouraging.
You raise a fascinating issue which is the one of the currency.
And we might talk currency wars later on, but just for the moment, what we’ve seen
is a great deal of volatility in the Euro as the markets have responded to each
stop-go segment of this crisis. For you all as business people, currency
volatility makes investment decisions difficult. Captain Wei, I wonder if I could
just bring your perspective in here. From the Chinese point of view, is it any
concern at all that there doesn’t seem to be some kind of stability around
the single currency? About this issue, my opinion’s that the
heavily indebted developed economies will need to reduce the fiscal deficit. Eurozone is still a high risk area
for world economy in year 2011. A massive spread, sovereign-debt crisis
will not be very preferable. The risk of the total debt of Western Europe
will exceed that of Eastern Europe. The austerity and the deficit reduction
will have a negative impact on economic growth. It slightly concerns me to hear you single
out Europe as that great risk issue for this year, but let’s open this discussion
to the panel because I think we could usefully bring in some other points of views
and some other questions related to this. And of course in the UK, where I’m
from, we’re practising this experiment in austerity at the moment, which is obviously
going to have some impact on demand. Sir, your name and your question. Klas Eklund, economist from Sweden.
My question to the panel based exactly on this discussion, you are business people
and I find your optimism encouraging, you look for growth and investments.
But during this week, during all the seminars when that I’ve gone through all
with all the pundits, the professors, the analysts, the economists, etc., they’ve
been more apprehensive, because they talk a lot about debts, including austerity
problems, including the Euro, currency tensions, etc. So my question
to you is, are you or are they too pessimistic or
are you too optimistic? Thank you for that.
Who would like to take this one first? Jacob, yes, come on in. I very much agree with the learned economist
from Sweden. I think maybe in a discussion like this it becomes a little
bit too black and white, black or white. I think Professor Roubini in his opening
statements at the beginning of the World Economic Forum where he pointed to
the question of, is the glass half full or half empty? I think most people agree that we’re on
a nice path, but there are a number of impediments; we don’t know how
they’re going to play out. But of course there are risks, be it Europe,
be it the United States, the debt issue, the Japanese growth, currencies, China.
Is China going to continue to grow or are we going to see a real estate
bubble or are we going to see other problems appearing? So of course
it’s not that black or white. I’d call myself cautiously optimistic,
but still a bit optimistic. Okay. Captain Wei.
I agree with – That’s easy then. Ellen. I don’t think you’d be in the jobs that
we’re in if you’re not naturally optimistic, but you have to be
a realist at the same time. And part of our job is to integrate all
of those uncertainties that Jacob talked about and understand what the best path
is. And so it’s naturally then that we’re on the positive no matter, you know, what
is happening in the world, we have to be the integrator and then establish
then the path. I was fascinated by a survey I saw at the
beginning of this week that suggested that over the course of the year CEOs
are tremendously optimistic. You take the three-year view and suddenly
the line goes flat and it appears that the visibility over a three-year
view is somewhat lacking. But I don’t want to interrupt your answers
to his question, so who would like to comment? Yes, I would say
it’s important for a business leader to look for optimism in
the new opportunities and at the same time be, you know, grounded to reality in terms
of being aware of the challenges. And I think that’s what all
of us are doing here. We are finding the next drivers of growth
in each of our economies and across the world. But at the same time it’s not to
say that we don’t have to be cautious about the challenges.
And in fact I think what we have to realise is that today when the world
is becoming multi-speed, and when the world is becoming even more interconnected,
I think the impact of the challenges is also going to be much larger.
The developed world is going to see other challenges in the form of unemployment,
in the form of sovereign debt, whereas the emerging or the emerged economies are
going to have to tackle inflation, food security and so on.
Over and above that, since the world is interconnected anything that happens
to energy prices in the developed world is going to impact the developing economy.
Anything that’s going to happen to growth in one part of the world is going to
impact capital flows elsewhere. So I think these are realities of life,
but, you know, to come back to your question, as CEOs while we keep these realities
in mind we also see where we can take our organisations and in the
bargain take our countries. Very quickly, Paul.
Yes, very quickly. I do feel politicians, depending from
where they’re coming from, are less optimistic than a businessman.
There is one underlying thing; it depends on your perspective.
Your worldwide company, well, 80% of the world population is going for a better tomorrow,
and what I see is the emerging markets have emerged; they’re
really part of the scene now. And what you see is something positive,
they’re really confident about their own markets, they’re really confident about
their own future, so there’s something fundamentally changed in the world.
The developing countries before us, in my classification of the Western world saying,
we are developed and the rest is developing. And basically developing means
they try to step in our footsteps and they try to catch up.
What we do see now is that the developing markets, the emerging markets, they’re
going about their futures in their own terms. They have 80% of the population
and that has then the uncertainties on food security, pressure on prices, lots
of uncertainties. But definitely there is something underlying, a pride, you
see a pride, you see an independence. They’re really part of the
scene now and that’s good. So that’s something that the rest of the
world then sees totally different and no so optimistic.
So there is optimism, cautiously optimistic I would say, we
are optimistic but we are afraid to be optimistic. Okay. Let’s wrap that just there for
the moment, I’m going to take some more questions from the floor. Thank you, Geoff; Sam Di Piazza. When you
talked about the jobless issue in the US, the jobless recovery, a lot of people would
say that that’s because the US has had extraordinary productivity gains in
the last year, lots of growth but no jobs because of productivity.
Europe, on the other hand, has not had that same productivity growth, and in fact
if you get growth in Europe you may not have jobs for a long time to come.
So really two questions, in the US when will the jobs start coming back,
i.e. productivity being to level off? And in Europe, do we have a long time
to work back to productivity? Thank you very much for the question.
Do I see a hand? Ellen. You know, in the United States, well, in
my experience, the number of recessions in the last 30 years that I’ve experienced
jobs always lag, you know, economic growth. So coming out
of a recession jobs do lag. We have had and been focused on a lot of
productivity in the United States and so I think you’re absolutely correct.
The opportunity in the US around jobs is going to come around transitions
in technology; it’s going to come around transitions to new and alternate energies. It’s going to come around transitions
on what, you know, biotechnology and new sciences can bring to a wide range
of industries. That’s the areas where I believe that you are going to
see an increase in jobs. That’s going to take a different kind of
training, a different kind of education, but the US government’s been focused on
green jobs as in their stimulus package in coming out of the recovery.
You know, Europe is different. Europe has those same opportunities,
there’s been a lot of investment in alternate energy, in photovoltaics and in
wind, and we see the new materials and the new areas of opportunity in growth
and employment will come from these technology transitions. Kojima-san. As you may know, our company has 200 offices
in 90 countries all throughout the world. Therefore we would very much appreciate
the information globally. Therefore we are analysing the global economics,
you know, region by region, and in that sense the United States is now
recovering. It will take some more time. But they announced the so-called infrastructure
business that we are very much privileged to work with the United
States for the infrastructure and the kind of railway, Shinkansen, or, say, nuclear
power plant, or so many other infrastructure business.
This will contribute to the employment, of course, but it may take some more time.
But as I told you, even in the EU, we have so many investment businesses there.
Besides, we have, say, a strategy for the investment in China, India, Brazil and
we are analysing the whole market. Therefore, in that sense, I myself am
rather optimistic of the investment in the global economy.
Okay, good. Let me just dash over here,
we’ve got another question. Let’s give it to you, sir. Hi. Jeff Drazen from the New England
Journal of Medicine. For many economies around the world, the health sector has
been the stone that’s been pulling it back, and in Europe, in the UK, in the
US, we’ve been trying to deal with that. We haven’t really heard from India and
China. How are you going to be dealing with the health sector as your workforce
is going to be beginning to demand healthcare that it hasn’t had in the past? Thank you very much indeed for that. Anybody like
to? Yes. Yes. You know, I think, you know,
from provision of basic facilities like healthcare or primary education or
vocational training, I would say all three are very imperative, at least for a country
like India, to make sure that we provide all these facilities, not just
to take care of the people but, in a way, to actually make our demographic dividend
work, because while on the one hand it’s very good to feel that every year we add
12 million people to the working age group and that’s going to provide the consumption
power, but if these people do not have their basic healthcare, or if
they are not educated, and for that matter, if they are not skilled to start
in employment or get into employment, then clearly there will be no
demographic dividend to reap. So clearly this is something that
we really need to work on. In a way, it is also a huge business opportunity
for the sets of companies that are engaged in this field.
I would think the whole approach here is a multiplicity of approaches.
One is to provide these facilities to those people who cannot afford it through,
you know, government machinery and so on. Second is to make advanced levels of
these facilities available for those who can afford it who can improve their standard
of living in various manners. And the third is not just to rely on
saying either it’s going to be government that is going to provide the basic facilities
or it’s going to be the private sector that’s going to see it as a
business opportunity and move, but clearly create a public-private partnership so
that the entire ecosystem moves in a manner that is able to cope with
the requirements that these countries are actually creating for these
basic facilities. So we have to move on in the conversation,
but we’ll see if we can get time to come back to this, but very briefly, what we’ve
really been talking about in this first half hour is going for growth (which the
United States is still doing, it appears to me) or facing down
the debt crisis, dealing with the deficit and embracing
austerity for our people. My sense from our CEOs – I know it’s a
very crude way of differentiating the policy approaches, but my sense from our
CEOs is that you prefer the going for growth model at this point rather than
the austerity one which is going to leave people perhaps unemployed for longer periods
and investment more challenging and basically your business models a
little compromised in those parts of the market. I don’t want to spend too much
time talking about it, but would that be a fair assessment? Anybody
disagree with how I’ve characterised your views? Yes, I
think the US economy is showing signs of stable recovery. Last December US unemployment rate dropped
to a five-month low, to 9.9%, and the growth rate of US manufacturing industry
has reached a seven-month high. IMF has just adjusted its 2011 global
economic forecast to 4.4%, so IMF forecast for emerging economy growth is 6.5%.
Developed economy growth will reach 2.5%. So according to IMF, US economy will grow
by 3% and the Japanese will grow by 1.6%. These new projections are all higher than
the numbers released from last October. So I say it’s a good opportunity.
Why the CEO always optimist, to use your word? Because we have ability to find problem
then find a solution to reach the goal. So for US jobless, I
give the solution to that. Immediately lift the ban to exporting
the high-technology growth to China and to everywhere. Why this time President Hu
Jintao to head the direction by $25 billion project. Sell more to China. China, to stimulate
the domestic economy, needs to buy more goods, import more goods.
It’s a good opportunity for the US. And for health, China – Can
we just stop you at that? It’s a good opportunity for the United
States. I have a feeling we could have lost the second half of the programme to
you, but thank you so much for that. Okay, we need to take a swift break.
We’ll be back in just a moment. When we come back, there is one tax on growth
we need to talk about and that’s higher commodity prices and, particularly,
where higher food prices are hurting some of the world’s poorer communities.
We’ll be right back. So let’s talk about food-price inflation
and also the rising cost of commodities. Let’s get to our panel.
Let’s just address the broader issue of higher commodity prices at this point.
Okay, from a business perspective there are always issues related to inventories,
to speculative demand in the market place. But we’ve had a consistently strong record
of rising prices now for some years, which perhaps indicates that the trend
will be higher for some time to come. As business people, firstly do you believe
that the prices are responding directly to demand? And secondly, how is it affecting
the decisions that you’re making as CEOs and how will it affect those
decisions in 2011? Paul. Well, look, you have two dimensions to
this. First of all, we see an underlying trend of raw material prices going
up, especially food prices. You have to say that in the context
of history, it went also down a long, long time. So the underlying trend is, in
our eyes, upwards, reasonably upwards. Although, you see then this volatility
and that’s a problem. You have to see it is always linked to the
market. And I don’t believe you have to regulate too much in there but it
is perception. And the perception is linked with, first of all, the underlying supply
gap that you get because the demand is projected to be higher.
80% of the population of the world is eating more and better.
That’s good. If you then have the supply side
not matching up to that. And that is linked in with many, many
other issues not underlying long-term issues, like the agriculture policies,
the free trade is having a burden. You see the whole discussion about bio-fuel
that is totally wrong in the figures. If you just think about how you
talk about 10% of the fuel should be bio-fuel then you have to triple
the agriculture production in the world. All these issues has to be
put in perspective again. And I do believe if we are optimistic,
but cautiously optimistic, that’s one of these dimensions. One of the doubts is, are we
really tackling these underlying issues? We as a company are definitely
linked with that dimension. How do we handle that? Well, you
have to see the underlying trends, you don’t price on the volatility.
You cannot do that. But also you invest yourself, as
a company, upstream with farms. That’s why we are with this new agenda
for agriculture policy in the future, linked with that. We have to have a multi-stakeholder
approach going to these issues. You just think about the fact that 1.5%
of R&D in the world is indicated to agriculture. You just think about agriculture,
per se, it’s the biggest development driver in the world.
The cheapest. It’s the best return on investment
is agriculture. So there is many issues that we really have to put in perspective
again in the world. And that’s going back to the question from
the person from India that agriculture is by far not high enough on the
agenda, I think, of the world. And it has to come back because
so much people is involved. If you think 70-80% of the people working
is in agriculture and that food prices are going up because of, I feel,
supply shortages. Okay, let’s roll along the panel.
Who else would like to come in? You know, Paul is absolutely right about
it comes down to the fact that we make our decisions based on the long-term trends,
not short-term volatility. But we have to have the mechanisms to
deal with the short term volatility. So you know, agriculture cycles,
you know, industry cycles. There are cycles that come into this but
fundamentally with the increasing in the middle class, as he said, with
more people being fed better. There is an input issue into this and that
we are not growing enough grains, we are not growing enough food in the world
to feed that growing population. And agricultural productivity
is absolutely key. It’s going to take investment
in infrastructure. It’s going to take investment in modern agronomic techniques
and traits and in frameworks country by country in accepting of new technology
to get that productivity. And so there is a lot of opportunity there
and there is a lot of work of being done. It is about execution at the end of the
day. We’ve got to stop talking about it and start doing it. Kojima-san.
Talking about this, say, price rise of the commodities or agricultural products
is we have to analyse the reasons. Number one reason is the supply and demand
exchanges. Number two is the availability of money.
Number three is the climate change. That is also very important. Under such circumstances, as already mentioned,
the important thing is the so-called R&D, research and development
in agricultural industries is very, very important. And this is number one.
And also, say, this climate change is the green energy or environmental programmes.
We have to analyse how to, say, analyse this climate change. In talking about the Australia; west coast
is very dry right now, east coast is very heavy rain fall. Everywhere these kinds of things
now happening. This is related to the business costs.
So I seem to be getting a consensus from the panel that prices will continue
to rise through this year. Does anybody have a different view? If not, then I will move
on and I will ask what – I would not say that the prices
are going to rise. They have doubled in certain areas.
That’s the volatility. You see the underlying trends so that’s
what we have to look at, in perspective of it.
So my question then is about what responsibilities you as business leaders
have to communities this year where the percentage of their daily income
is significantly higher going into food than it is in the Western developed world.
And consequently, the impact on those households is significantly greater. Is this something that CEOs don’t have
to worry about because they’re focused on shareholder return, profit for their
investors and so on and so forth? Or is there something that each of you
will intend to do this year where you feel you may be able to make a
difference on this story? Look, this is has to do with some fundamental
question also about companies and society at large.
If you say well we don’t care, we do care. In the sense that we are part of society,
if you have that it doesn’t create a positive environment where companies
can flourish as such. We as a company for example, or as companies,
are putting the right points and the right agenda points.
And we are sitting here discussing these things trying to put these
things on the agenda. If we talk about water and the impact of
water and food, if we talk about no food for fuel and these things, these are just
giving messages, being part of a global societal discussion on certain topics.
Long term, you say today the prices are too high, what do we do there? Well,
there again it’s seeing the underlying trends; we don’t price,
you cannot price your products on the volatility of your
price from the input prices. So you really go about ways of reducing
the impact of these volatilities of these price increases, you really induce and help
to create productivity upfront and so for example we are working with 600,000
farmers, and we’ve many other farmers through our suppliers and we are working
to increase productivity and all. But yet this is one company, but by
the multiplying effect, that’s why we have this new view on agricultural
policy for the future. Many other companies involved,
350 stakeholders were in the base of that document that you can find here, this
is obviously one step but it is a step. Okay, Jacob. I think broadly speaking I’m not personally
involved in the food business but broadly speaking talking about corporate
social responsibility, I mean the responsibility of corporates in the
social context, I think we’ve passed that point and I think we passed
it quite a while ago. We all understand and believe that
we have to be part of that. We have to make intelligent decisions,
we have to participate in the debate, whether it be here in Davos or elsewhere,
because if we don’t at the end of the day I think the judgment by the ultimate consumer
is going to be very clear. They’re going to vote with their feet
and they’re going to go elsewhere, so I think we’ve come to accept that and we want
to engage and we have a responsibility. But we still have no resolution of the
Doha Round. We have a G20 that doesn’t seem to be able to make significant decisions
on a host of things and yet we continue to see food riots around the world.
I understand what you’re saying about CSR – that’s yesterday’s conversation
for the corporate world, I agree with you – but we’re talking about
2011 and what you can do, each of you practically on this issue and whether you
are thinking about them at board level and whether you are thinking about
specific objectives, policies, goals that you intend to roll out through 2011.
That’s what I’m looking for here. I can comment here. Very briefly.
I am on the board of the Coca-Cola company and without dwelling on the individual
details it is so clear from that board work and from the sort of spine of
the company, the attitude, that the engagement in questions of this nature, most importantly
the question of water, throughout the world is hugely
important to the company; they pour a lot of resources
and engagement into that. I can’t give you the numbers but I
can certainly vouch for the seriousness of the effort.
Okay, Ellen. It is, you know, if you have a large portion
of your business in agriculture like we do and we work, agriculture is
a local business, you’re working country by country and our people in each one of
those countries are very active in their communities and really want to make sure
that we’re doing everything we can to advance, not only that sector, the agriculture
sector, but their neighbours and their friends are the ones that are
having the impacts of this and so we see that very clearly because of the local nature
of the agriculture business and we work very closely with social service
agencies around the world in order to do what we can to help.
But it is a long-term issue and we can’t forget that we have to continue to make
that progress every year on productivity so that that volatility dampens over time
so that the supplies meet the demands and you get more into a balanced situation.
One of the questions that’s now on the table I think for us is, are the protests
that we’re seeing in North Africa related to this story or is there something
else unfolding here at a political level? I want to talk about as we come to the end
of our programme known unknowns, the risk issues perhaps for 2011 as a whole here.
I wonder if I could just ask our panellists to comment on what they think
may be unfolding and how we should view it through the prism of the business community.
Who would like to start us off? Captain Wei.
I think the inflation were also spread from the developing nation into
the developed economy. The food price is the top factor of
the inflation. Why? Because due to the abundant liquidity in international market
so the price commodity in year 2011 are estimated to stay high.
So I suggest that all the governments need to control the liquidity; that would be control price. If we let them go printing more money,
the price must go up, so that inflation we see forever there. So you would encourage governments to pursue
sort of pricing policies perhaps to help subsidise
the costs? No. Or how do they address
the inflation problem? If a strong government you need
to consider the whole picture. If the food price goes up fast, all the
commodity price going up, the inflation will become, so take some policy control.
So is this just a thinly veiled way of criticising QE2 in the United States? Okay, but I don’t want to
get bogged down in that. Kojima-san. The important thing is, you know, the
World Economic Forum, the theme this year is shared norms for a new reality. I think this is very good.
Everybody throughout the world should discuss about these agricultural issues
and so many issues and therefore in COP16 held in Cancun the conclusion was not so
clearly made, but I think including the US and China everybody discussed
about these climate things. That kind of thing is very, very important
from now on and therefore the theme of this World Economic Forum was very much
contributing to this kind of programme in the world. So it’s good to have a forum
to talk about these things? That’s right and we ourselves are
involved in the water business. Yes.
Even these days agricultural business throughout the world, therefore everybody
should share the information together, that’s very important.
So what is the known unknown as far as Mitsubishi is concerned this year? What’s the one thing that might happen
that would really cause you to rip up your business plan for 2011 and rewrite it? We established a so-called business
plan already, and this is the investment, and the specific field and the specific
regions. We have already made it. Global information and global economic
situation, global environmental situation is very, very important to analyse
the business chance, next year or the year after.
Okay. Let’s bring you in, Jacob. To me, the most important question
is maybe what President Obama brought forward in his State of the Union address, where
you don’t hear the US President that often talking about the US needing to be
more competitive. He set the stage. We then saw Prime Minister Cameron
basically say the same thing. The Western world needs to focus more,
be more competitive, more R&D, and so on. But, as Cameron pointed to, we have
to go from talking to delivering. We have to stop talking.
Clinton said the same to Young Global Leaders: stop talking, start delivering.
I think this is key for all of us in the West. You pointed to a very
important point here. Politicians today have eleven months
to deliver on the Doha Round. I think it is key for the future of the economic growth
of the world that we actually get our act together here.
So, those are some of the important things.
I would like to add a completely different perspective, very briefly. I went to one presentation
on hyperconnectivity. What does it really mean when we are all connected?
This is the new Medvedev plate. We saw how he brought this forward to
the stage, to show that he was connected, he was modern. You see now how companies are starting
to change organisational patterns. You go from the traditional hierarchical
setup to working in teams, you look at a sort of different way of running your
business, and politicians have a new way of being even more democratic in the sense
of understanding what the broader general public feels about different issues.
This is coming forward very rapidly. We have to understand what it means for
us in business, and how we are going to utilise it.
Chanda, can I come to you? We have seen some protests in India
related to food-price inflation. Whatever the causes of unrest are in North
Africa at this point, this story remains. Is that a key business risk in 2011, or do
you see another known unknown, to borrow that phrase once again? Well, in a way the known unknown here is
how the prices of whether food, energy, or other commodities would rise and
be volatile. I think in that sense that’s a direct known unknown, which is going
to impact the business models of all companies in the coming year. Beyond that, I think the bigger underlying
factor here is to see that, you know, it is imperative for all of us, as companies
and as countries, to focus on saying: are we making our growth more inclusive? Are we making sure that the business models
that we follow allow more and more people to participate in the growth? I
think that’s going to be imperative for other countries as well.
Gone are the days where it is just enough to say that some people will earn wealth
and then they will redistribute. I think the model has to shift to the grassroots to say: can we create enough
basic facilities plus employment generation opportunities for each and
every small individual to be able to be capable of participating in growth, and
get an opportunity to participate in growth, because only when they participate
in growth will the growth be inclusive, and that’s I think the better model
of making growth more sustainable. Ellen, I want to come to you to wrap us up
here. If I can point you in a direction, it’s really leadership again: leadership
in the business community, leadership politically, leadership globally. Right now, I don’t know who really is in
charge, and I think we ought to be finding that out at this point if we are going to
address a lot of the problems that you’ve talked about here in this programme. If we sit here a year from now, I think
the one thing that’s sure is that we will be talking about 2011, and it’s very different
from the way we are thinking about it today.
I think the challenge for leadership, whether it’s in government, or in business,
or in NGOs, or in the academic world, is to be able to really deal
with the challenges in real time. It is a very dynamic and very fast-paced
world, and the connectivity issue creates a momentum in a direction that sometimes
cannot be predicted, and so it is about creating that resiliency, creating that
ability to respond and react, and most important, to make progress.
I think when people see progress made, people get hope. At the end of the day, hope is a very
larger driver of the human race, and I think that making sure that we continue to
be in dialogue, making sure that we are continuing to put the real issues on the
table is a very, very important part of continuing to make that progress. On the question of the coming together of
the world, this phrase G0 has been doing the rounds here.
Last year, we talked about G2, I remember, and before that, we spent a lot of time
talking about G20. G0 doesn’t fill me with hope. I hope you’re right when you say
that next year, we’ll be talking about something completely different, and we
will have got it all wrong, as we sit here and talk about the world for 2011. Is G0 just a cynical way of viewing
what’s going on at the moment? I think it is cynical.
I see, you know, when you have the heads of state in Europe come together and talk
in great alignment about the future of the Euro, I think that there is tremendous
understanding, tremendous communication, and I don’t think that the G0 concept is
one that I see going forward is going to be the reality. Okay, I am afraid we have run out of time
here for our conversation, but I want to thank you all very much indeed for leading
us off in this discussion, and as always, you at home, for watching, and
we’ll see you next time.