Five takeaways from Davos

The issues of trust, stalling economies, cheap oil, climate change and technology that emerged at the World Economic Forum are likely to shape developments in the months ahead and impact the world.
The issues of trust, stalling economies, cheap oil, climate change and technology that emerged at the World Economic Forum are likely to shape developments in the months ahead and impact the world.PHOTO: AGENCE FRANCE-PRESSE

China's Premier Li Keqiang went hiking in the Swiss Alps around Davos just before addressing delegates at the World Economic Forum (WEF) held here last week.

"Peaceful and tranquil" was how he described the view from the scenic ski resort.

But Davos during the week when the WEF comes to town for its annual global forum is anything but peaceful and tranquil.

Thousands of business, political and civic-society leaders, as well as their staff and the media, take over the entire town, spilling over into the neighbouring ski village of Klosters as well.

The entire area comes under a security lockdown with police everywhere, on the ground and on rooftops, as well as in helicopters hovering above.

The delegates attend a bewildering array of lectures, discussions, dinners, parties and nightcap networking sessions, all ostensibly geared towards figuring out the key issues facing the world, and how best to go about addressing them.

What happens on the sidelines is often as interesting, and perhaps more important or lucrative, with leaders forging deals or collaborations, and generally taking the measure of each other.

So, what is one to make of all this top-tier hobnobbing? What were the key points to emerge from the hours of discussions? As I head home from Davos, here are my five takeaways:

Trust

This was the most bandied-about word the entire week, with much lamenting on the declining levels of trust, both within and between societies. Stalling economies and mounting income inequalities have led many, especially the young, but also the middle classes, to grow disillusioned about economic and political systems.

This had contributed to a sense that "leaders are failing to lead" but are giving in to populist pressures, as one delegate put it.

Alternative groups pushing nationalist and populist quick fixes are drawing support and posing a threat to mainstream parties, which could prove significant in elections due in several countries this year.

Dr Robin Niblett, director of the British think-tank Chatham House, summed up this view thus: "Governments are being de-legitimised in many parts of the world. They are struggling to keep up."

The best antidote to these political uncertainties is economic growth, as several people, including Brazil's Itau Unibanco chief executive officer Roberto Setubal, have argued.

He said: "To reduce inequality, the best answer is growth."

Agreeing, Ms Winnie Byanyima, executive director of Oxfam International, added: "Growth must touch everybody and lift everybody if it is to be sustainable."

But efforts to build trust will also be needed between states, given growing tensions between Russia and the West, among China, Japan and South Korea, as well as between key players in the Middle East, if historic rivalries are to be tamed.

Recent terrorism-related events, such as the Islamists' attacks in Paris last month, have also brought to the surface long-simmering suspicions, and even hostility, among Muslims, Christians and Jews.

These make efforts to foster trust, understanding and goodwill among different faiths all the more urgent, to defeat those who seek to use age-old divides of race and religion for their own power-grabbing ends.

Stalling economies

The massive bond-buying programme to kick-start Europe's economy out of deflation generated much buzz, both before and after it was announced.

Most agreed that the move was both bold and necessary. It can buy time for countries to press on with much-needed structural reforms. Whether they will do so, however, remains moot.

As German Chancellor Angela Merkel made plain, there is a real risk that the stimulus package might provide an excuse for countries to put off painful reforms, "kicking the can along" once again, in response to electoral pressures.

China's economy also seems to be stalling, with Mr Li declaring this year's slower growth as a "new normal", which made pressing on with reforms all the more critical. The World Bank's president Jim Yong Kim endorsed this view, pointing to the China 2030 report, which the bank helped put together, that gives an indication of Beijing's commitment to remake its economy.

Cheap oil

Economic pressures will also arise from the current low oil prices.

Some economies, such as Singapore, Japan and Indonesia, stand to gain from lower oil prices, given their reliance on imported oil.

Countries which offer heavy subsidies on fuels will get a relief and, more importantly, an opportunity to pare down fuel subsidies, which can be better channelled to other social purposes, such as infrastructure-building or education.

Indonesia's recent move in this regard was widely hailed.

But there will be losers too, from Russia to Venezuela, as oil producers count their losses.

Low oil prices could also tempt companies and countries to use fuel less efficiently, and to take their foot off the pedal in their drive for renewable energy sources. Cheap oil will make alternative energy sources, such as solar and wind, less competitive. So one unfortunate side effect of cheaper oil could be higher carbon dioxide emissions.

Heat on for climate pact

With 2014 declared the hottest year on record, the heat will be on government negotiators to deliver a deal to tackle climate change when they meet in Paris in November. New research on "planetary boundaries" presented by Stockholm University's Professor Johan Rockstrom at the forum show that mankind is pushing dangerously at some critical limits to what the earth can bear before catastrophic effects are felt.

Business leaders at the forum voiced a willingness to take steps to address this issue, but were concerned that governments will be slow to forge a consensus on a global pact. Alliance Trust's chief executive officer Katherine Garrett-Cox said this year is going to be the ultimate test on whether the world's business and political leaders can work together to tackle the climate change challenge.

She added: "What I am taking from this meeting is a huge sense of urgency, especially from the business community."

Boon and bane of technology

New discoveries will continue to improve, and disrupt, our lives.

Jobs will be lost, including among the middle classes, adding to economic insecurities in society. The head honchos from Google, Microsoft and Facebook, who shared a platform in Davos, called for efforts to expand access to low-cost broadband so that more people might benefit from this.

Microsoft's chief executive Satya Nadella noted that smartphone users in parts of the developed world pay higher data costs every day than some people in the developing world.

He argued that some developed countries were not at the forefront of adopting technology, saying: "So, even if nothing new is invented from today onwards, just by them moving to adopt the latest technologies, there will be growth opportunities."

But wider access to technologies will also have its downsides, such as when terrorists use them to organise attacks and spread their message of hatred. It could also provoke an overreaction by states to curb freedoms in the name of protecting their citizens, raising questions about how to strike a balance between freedom from state intrusion and being able to lead a life free from fear of terrorist attacks.

Future events

NO DOUBT, there will be events that will come as a complete surprise to everyone. As one delegate noted, there was hardly any mention at last year's WEF meetings on the possible threat from the Islamic State in Iraq and Syria, or the prospect of US$40 oil.

Yet, barring the emergence of such "unknown unknowns", the five issues above look likely to shape developments in the months ahead, and will have a major impact on the world, including Singapore.

Which is why I could not help but wonder about Singapore's relatively low-key presence at this year's forum.

To be sure, Singapore gets more than its fair share of mentions, with delegates citing it often as a model of good governance. Many also have favourable impressions of the country and happy anecdotes to share, especially about Singapore Airlines and Changi Airport.

But while China, India, Indonesia, Malaysia, South Africa, Brazil, among many others, had high-profile business and government delegations, as well as country-promoting events and pavilions, Singapore's profile was so low-key as to be almost non-existent.

Hopefully, this is not a sign of complacency on our part or, worse, a move to focus inwards, rather than reaching out to engage the world, even as it grows more interdependent, complex and uncertain.

warren@sph.com.sg