A global view from the Alps

Daily News Egypt
5 Min Read

SCHLOSS ELMAU: In one of the most picturesque corners of Europe a discreet but high level group of global executives expressed concern about the state of play in the West, but offered their relentless enthusiasm for the expansion in the East — from the Middle East to Far East Asia.

Schloss Elmau is a castle, transformed into a luxury resort in a Bavarian village near the border of Austria. Austria’s former Chancellor Wolfgang Schussel urged 125 mainly European business executives “not to panic.”

“Look at the real figures. We should be rational about a post-crisis environment.” Schussel said German industry can leverage its famed engineering prowess to expand market share in green technologies and high end manufacturing.

While not an outright panic, executives did express ongoing concerns for the medium term. In a poll conducted at the Stern Stewart Institute annual gathering, they predicted growth of only 1.9 percent in Europe and the US for the next five years. The world they all agreed would be propped up by the East, with China sustaining baseline growth of seven and a half percent in the same timeframe.

The former chief executive of German retailing giant Metro, Hans-Joachim Korber said we all need to recognize the shift of both economic and political power to the East. He made his first move into China two decades ago spending two full weeks on a tour from the top to the bottom of the vast land.

The demographics support his position which was echoed by scores of others. Mumtaz Khan the chief executive of a Singapore based investment group talked of “fundamental change” driven by population growth and the desire by governments, companies and citizens to boost the wealth of their nations and per capita incomes. They shared figures indicating that China, India and Indonesia will be home to more than 3.3 billion people by 2050 from roughly 2.6 billion today.

The Middle East region is in the mix of countries with fast growing populations and intense spending plans by governments to build out infrastructure. Saudi Arabia and Abu Dhabi have earmarked $700 billion over the next five years for such activity. This by the way matches efforts by China, which has a current population of 1.2 billion — four times the size of the entire Middle East.

Marios Maratheftis the Dubai based economist for Standard Chartered Bank told the gathering that governments within the Gulf States are quickly re-directing their spending away from real estate projects after the 2008-09 crises. “Human capital tends to be neglected” said Maratheftis pointing to the property sector in the UAE making up 70 percent of all activity in the pre-crash environment. Leaders in the region have recognized the need to speed up job creation and per capita income for a wider swath of their populations. Recent unrest in Bahrain by the Shia majority only served to underscore his points.

Beyond their concerns about sluggish domestic growth, they listed the threat of conflict in Iran as the number one risk to global security and the global economy, with surging energy prices due to high demand in the East straining supplies over the medium term.

During a plenary session on the link between economic and military power, the highly respected former ambassador for Germany in the US and UK did not hold out a great deal of hope for the latest round of Middle East peace talks and said we should look for innovations beyond the current framework. Wolfgang Ischinger said this strategy should be built around a regional security pact initiated by Washington and supported by others.

Such a pact would remove the long standing risk premium put on the region by investors and give these executives yet one more reason to be bullish on the East.

John Defterios is CNN’s anchor for Marketplace Middle East. Tune in Fridays at 11:15 and Saturdays at 9:15. For more information go to www.cnn.com/mme.


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