Building capacity to help Africa trade better

2010 World Economic Forum in Davos


2010 World Economic Forum in Davos

Paul Kruger, a tralac Researcher, comments on the annual meeting of the World Economic Forum that was held in Davos-Klosters, Switzerland, from 27 – 31 January 2010.

Every year the meeting brings together stakeholders from government, business, the media, science, religion, the arts and civil society to discuss the most pressing issues facing the world. Over 2500 participants converged on Davos for the annual conference where more than 200 official sessions were crammed into the space of 5 days. The sessions ranged from the usual economic topics such as Rethinking Systematic Financial Risk and The Next Global Crisis to off-beat topics such as Lessons from Shakespeare and The Art and Science of Imagination. While the theme in 2009 was “Shaping the Post-crisis world”, the 2010 meeting focussed on the “rethinking, redesigning and rebuilding” efforts to improve the state of the world. This year four main subjects led the discussions at Davos:

The impact of technology

Technology is changing human behaviour, the way we live and how we interact with each other. Technology pioneers were showcased in Davos, those who are leaders in the fields of health, biotech, information technology, new media and clean technologies. Naturally, climate change attracted broad interest, particularly after the Copenhagen conference. Senior officials from the United States and Europe warned that China is winning the race to develop and implement clean green technologies. China poured an estimated US$440 billion into clean energy development in 2009 by investing heavily in renewable energy, nuclear power, and clean coal technologies. Commentators believe that whoever solves the climate change challenge will dominate the next phase of economic development. The renewable energy industry in China has already created 1.12 million jobs (measured in 2008) and is climbing at a pace of 100 000 jobs per year. China has also implemented a renewable fee for all users of electricity to fund the drive towards clean energy.

Social entrepreneurship and aid

Social entrepreneurship celebrated a tenth anniversary at Davos this year. The Forum has been promoting social entrepreneurship as a catalyst for innovation and progress since 2000 and social entrepreneurs are frequently invited to participate at the Forum. This year the highlight was a donation of US$ 10 billion from the Bill and Melinda Gates Foundation to fund the research into new vaccines that can be used to fight diseases in poor developing countries. Relating to the issue of climate change, the IMF announced its plans to launch a US$ 100 billion fund to help countries mitigate the effect of climate change. The conference also provides an environment where social entrepreneurs and aid organisations can connect with big business to finance and implement their efforts more efficiently. Take David Din from Epuramat for example, one of the 2010 Technology Pioneers at Davos. His company promises to revolutionise water treatment with its ‘Extreme Separator’ technology that sucks out solids from different types of wastewater in one treatment step, thereby eliminating the need for membrane or biological filtration. Networking with the influential participants at Davos enabled him to hook up with four business contacts to potentially expand in Africa, Asia, South America and the Middle East. This is proof that connections made in Davos can change the future and fate of your company.

Economic recovery

The state of the global economy and ensuring the recovery remained on track was important talking points in Davos. There was little agreement on the shape and progress of the recovery and also whether the global economy can expect a second downturn (a W-shaped recovery). Other forecasts anticipate a LUV-shaped recovery – a long term low growth recovery shaped like a ‘L’ for countries in Europe; a slow growth recovery in the shape of a ‘U’ for the United States and a V-shaped sharp upturn in emerging economies like China, India and Brazil. What participants nevertheless agreed on was that job creation and free trade must be made a priority of every recovery regardless of its shape.

Regulatory reform in the banking sector

The debate on how to reform the global financial systems dominated the last day of the forum. Discussions focussed on the failings of the financial system and solutions on how to prevent a similar situation from happening again. Bankers and regulators agreed that drastic action is needed to curb the risk of the financial industry but there was no consensus on how to move forward. One controversial idea mentioned during the annual forum was the creation of a fund to contain a further crisis. The banks are to pay a financial levy into the fund which would then be used to finance the next financial bail-out. This would mean that the banks are financing their own bail-outs instead of using taxpayers’ money. Industry experts were however cautious of the fund arguing that such a safety net could cause banks to trade even more recklessly.

Networking opportunities and business meetings aside, the annual conference bringing together the world’s most powerful visionaries ended without any real plans of action or achievements. The conference was characterised by an air of uncertainty which was best described by Zhu Min, Vice Governor of China’s central bank: “We can see the change in Davos is big. Last year, although everyone was depressed, they shared the same, and clear, direction. The government and enterprises were making joint efforts to deal with the financial crisis. Now, however, everything is unclear. Growth is unclear, prospects are unclear, finances are unclear, and employment is unclear. In addition, the East has replaced the West to drive economic growth. During this transformation, there could be a lot of frictions in capital flow and personnel flow. Considering the wide economic fluctuations of 2009, economic growth in 2010 based on last year’s figures, may also see big fluctuations.’



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