Several political leaders were missing at the World Economic Forum (WEF) in Davos, Switzerland, the Mecca of capitalism, including Trump, May, Macron and Xi, all busy with domestic issues.
Thus the WEF, which is a global platform for political and business leaders to discuss problems and find solutions, was found missing quite a few of them.
The year 2019 thus starts with an unclear agenda for the world, several issues of concern, and of a wasted opportunity to address the issues. What are they?
One is a slowdown of global economic growth, in large part due to the uncertainties thrown up by political leaders. Trump insists on renegotiating several things, chief amongst these being the trade deal with China. The question of if or when Britain will leave the EU, and on what terms, is another uncertainty. Then, there is the technological uncertainty such as the fight over the NextGen 5G technology, triggered by the arrest of the CFO (and daughter of the founder) of Chinese Huawei.
5G and innovations
5G telephony will enable a host of innovations, because the speeds allow for real-time usage. Thus, driverless cars will be safer, robotic surgeries with remote human intervention possible, and Internet of Things (IOT) which allows devices to talk to each other will become faster and smoother. Factory machines connected to each other would improve productivity.
Current 4G networks are almost at full capacity. The 5G networks will have 100X capacity at 10X speeds.
The problems arise because the US believes that China may use 5G to monitor its users, and that it is perhaps guilty of IP theft. US has convinced other countries to refrain from using Chinese 5G products and services. China’s Huawei is a global leader in 5G. So, for 5G to work, all sides must discuss and agree on standards so that different technologies can talk to each other. There was none at the WEF.
Stephen Roach, ex-Chairman Morgan Stanley and an economic professor at Yale, is not sure if China has stolen IP technology.
Interestingly, A Paulraj, the head of the government panel on 5G says European 5G networks are as safe or as unsafe as Chinese ones.
Another issue is the ongoing trade war between the two largest economies, the US and China. Trade accounts for 57 per cent of global GDP. The uncertainty of this blow-hot, blow-cold trade war has negative effects. For example, US soya bean farmers have seen a 90 per cent fall in production because China, the largest buyer, has stayed away.
There are similar disruptions in all industries. This will result in low economic growth being forecast by the likes of IMF.
Thus, industry is unable to plan long term.
Then there is the concern of global warming and the lack of attention being paid towards solving it, another thing that could have been discussed in greater detail at the WEF. Europe’s most important river, the Rhine, is running dry due to climate change. Since water is the cheapest form of transport, this has pushed up the cost of transport for BASF by $285 million.
A UN study has forecast India to be the fastest-growing economy in 2019 and 2020. This, of course, will depend on whether India gets a stable government or a coalition of regional parties whose only glue, to keep out one individual, would, obviously, dissipate, if at all it is achieved.
(The writer is India Head — Finance Asia/Haymarket. The views are personal.)