Cautious optimism on economy after Davos

2011-01-31 15:57
Davos - Cautiously optimistic about the rebounding global economy, top business and government leaders have wrapped up their annual meeting with calls for economic growth to help the world's poor and jobless who have taken to the streets in protest.

The five-day World Economic Forum met as Tunisia and Egypt were roiled by protests fuelled by a lack of jobs and political inclusion, putting the issue of poverty and the implications of increasing insecurity high on the agenda.

"It is just imperative for all of us as companies and as countries to focus on saying that 'I'm making our growth more inclusive'," said Chanda Kochhar on Sunday, chief executive of ICICI Bank Limited, the largest private bank in India.

"Gone are the days (when) it's just enough to say that some people will earn theirs, and then they will distribute," she said at a closing panel on the Global Agenda in 2011. "I think the model has to shift to the grass roots to say, 'can we create enough basic stability plus employment generation opportunities for each and every of the small individuals ... to participate in growth'."

The rising cost of food could also eventually force up the cost of other commodities and lead to politically risky inflation around the world, experts said. Higher prices are seen alongside unemployment as one of the reasons for anti-government protests in Asia last year and more recently in the Arab world.

While prospects and risks for the world economy dominated Davos discussions, there was also a growing focus on the impact of globalisation and the interconnectedness of the world via the internet.

Obstacles on the road to recovery

The lessons of WikiLeaks, the secret-spilling site, generated hot debate but no agreement on what governments, business and the internet should do, and whether there should be any regulations.

When more than 2 500 of the best and brightest in business, government, academia and civic life met this week, there was broad agreement that things are looking up from 2010 but also concerns about obstacles on the road to recovery.

"The mood is much better here, but I'm cautious," said Zhu Min, former deputy governor of the Bank of China who is now special adviser to International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn.

"We should not be over-optimistic because we're not out of the woods yet," he warned in an AP interview.

While the IMF is forecasting another year of strong global economic growth - 4.4% in 2011 compared to 5% last year - he said there is still "a lot of risk" to deal with including the European debt crisis, capital flows, and income inequality.

"I call myself cautiously optimistic," echoed Jacob Wallenberg, chairperson of Swedish-based Investor AB, the largest industrial holding company in the Nordic region.

Jobs about location

He cited risks from the Euro, the currency used by 17 EU countries, the US debt issue, economic growth in Japan, and whether China's fast-growing economy will be hit by a real estate bubble.

Paul Bulcke, CEO of Nestle SA argued that business and world leaders have to rethink how to promote growth that also includes employment.

"Worldwide, there are many, many jobs created," Bulcke said. "The problem is if you live in Western Europe, you say it's the wrong place."

In the economic sweepstakes, the spotlight remained on Asia's two fastest-growing economies, China and India which brought a huge delegation of government officials and business leaders to Davos and sponsored several glitzy events including Saturday night's closing soiree featuring Indian pop and traditional music to spotlight its rising economic star.

Zhu predicted China's economy would grow by about 9% this year, and Kochhar said India's would increase by "upwards of 8.5%".

But, China Ocean Shipping's CEO Wei Jiafu warned that food price rises could eventually force up the cost of other commodities.

Agriculture critical

Ellen Kullman, chairperson and CEO of Dupont which has a large portion of its business in agriculture, told Sunday's panel that the farming community is critical to ramping up production for a growing global population.

She said 17 companies have partnered with the World Economic Forum on "a new vision for agriculture" aimed at making farming an economically viable and sustainable business so poor farmers can send their children to school and live better.

"It's a long-term issue," Kullman said, "and we can't forget that we have to continue to make that progress every year on productivity so that that volatility (in food prices) dampens over time, and you get more into a balanced time."

Sweden's Wallenberg, also a member of the Coca-Cola Company board, said the soft drink manufacturer is pouring resources into ensuring safe water supplies throughout the world.

Coca-Cola has in the past been accused of exploiting wells for its soft drinks production at the expense of the local population.

Davos is often criticised as a great gabfest without tangible results.

Wallenberg said he was struck that British Prime Minister David Cameron at Davos and President Barack Obama in his State of The Union address both said the West needs to be more competitive and spend more on research and development to promote innovation.

But he said Cameron and former US President Bill Clinton, also at Davos, went a step further saying it's time to "stop talking, start delivering".

"I think this is key for all of us in the West," he said. "I think it is key for economic growth that we get our act together."

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