15/02/2014 Talking Business with Linda Yueh

be evacuated. Now want BBC News it is time for

Talking Business. Once the darling of investors, the

shine is coming off a emerging markets. Businesses are looking to

developed economies. We hear from global CEOs from where best to put

your money. In Singapore, I am Linda Yueh and we are Talking Business.

It wasn't very long ago that emerging economies excited

investors. Their growth rate outpaced that of developed

economies. In fact, they still do. Developing countries are expected to

grow at 5%. That is more than twice as fast as developed economies at

2.2%. Asia is expected to grow even more quickly, at 6%. China has 7%,

this is the US at 3%. So why are so investors leaving emerging markets?

There is a downside risk to that growth. Some economies have grown

accustomed to plentiful cash and have large external deficits. After

all, the Fed has been injecting cash for five years stop but now, it is

winding down. That is why some countries have raised rates to

attract investors with higher returns. It increases gross, but if

they do not last, they risk a crisis if the cash dries up.

It is not all down to the Fed. Emerging economies have huge

potential. Look at their large populations. But they are economic

league and politically violent -- volatile. Only 17 countries have

grown large enough to be rich. That is why it is even riskier to invest

in them. With the recovery, investors are reconsidering where to

invest their cash. Here, I will be debating the merits

of putting your money in developed searches -- versus emerging markets.

But first, I sat down with Dennis Nally who told me that CEOs are more

confident about investing this year than the five years of the global

crisis. Investment is up this year. A couple

of points about that. When we ask CEOs about the local economy for

2014, a high percentage see that the economy will continue to improve,

which is a major change from when we were last year. A big change in

thinking about global economic growth, which is really good news.

Then we ask them how they felt about the prospects of their own company

and their growth for 2014. Again, confidence levels are up. Some

encouraging news, not to say that there are not issues and challenges,

but people are feeling a lot better than where they were 12 months ago.

Other countries or regions that CEOs are interested in?

It is interesting. A year ago, it was about developing markets, people

feeling good about China. When you talk about the developed markets,

things were not looking as good. Interestingly this year, the exact

opposite. People talking about opportunities in Germany, the UK,

the US for investment. Things with China are still very good, not

surprising. But in other areas, confidence levels are down. In

Brazil, in Russia, in India, confidence levels are strong, but

not as high as they were last year, which I think points to how

interconnected the global economy really is at this point.

What a chief executive is most worried about?

Interestingly, it has all been about the economy. Is the recovery is

going to stay in the right direction? Where do we stand with

interest? This year, the number one issue is regulation. This has always

been one of the topics that this CEOs, but this is the first time

that it has been the number one issue. I think what CEOs are saying,

post-financial crisis, there are new rules and regulations to deal with

the aftermath of the financial crisis. Increasing complexity, more

difficult to do business. That's number one. The second issue which

is interesting is fiscal deficit. Many CEOs are concerned about the

magnitude of the fiscal deficit. 92% of the CEOs said that this was the

issue there were most concerned about. The only way that you can

solve these deficit issues is to cut spending or raise taxes. Without

that clarity, there is a cloud that overhangs the confidence. So

interesting that the top two issues are those for 2014.

That was Dennis Nally. With me to discuss the merits of the emerging

and advanced Commies are Anthony Bartolo, senior vice president of

Tata Communications, David Mann, regional head of research for Asia

at the Standard Chartered bank, and the manager of extension strategy. I

will start with you David. -- Ascension tragedy.

I think you have to take a long-term perspective and BS -- be aware that

people have been in turbulence for many years. Markets have been beaten

up. I would say that emerging markets rather than developed, but

having a diverse portfolio is important.

I think that we have seen growth in all the major economies, from the

US, China, Japan, Germany and the eurozone and stop I think that this

is about those companies that are working across the globe that are

based in the US and Europe and operating in emerging markets and

those who are in developed markets. So it is about an and model.

Where do you stand? I think that the emerging economies

are there to stay. They are vibrant economies. But in Europe, it has

bottomed out. There has been a reluctance recovery. They are very

strong economies. They are old favourites. I can imagine that they

will be tough economies to ignore going forward.

Let me start with you with emerging markets. You said that they have

good prospects in the longer term. But what about the shorter term? Is

that where you are going to put your grandmother's pension?

Letters look at the US, in 2007. We have been in perma-crisis mode and

into what was going on in Europe, which you can treat like an emerging

economy. I think that Greece is now an emerging economy. You look at the

sort of comments coming from the private equity, they are seeing

distressed opportunities. It is not mean that there are not

opportunities. The US is probably the best of any economy in the world

of helping new industries go through that creative destruction process

and come out of it stronger. And the discrimination that you have to have

between emerging markets. I would not want to generalise. I would want

to go into the markets were you see the long-term growth prospects still

being strong and I would even include China in this, seeing that

people seem to be worried that there is not enough transparent in the

process of dealing with a bad alone situation there. But when people

mention shadow banking, they are wrong to think that it is the same

as in the West. The lack of transparency worries people right

now. In the long-term, still growing at 7% means that you will double in

size every ten years. But the indiscriminate money, you will need

to see much more process in policymakers to encourage money to

come in and those economies that was suffering from being a victim of the

success of the commodities are still suffering to some degree. They need

to find ways of moving up the chain. That money that is coming in is

stopping and it is leaving a lot of these countries?

Yes, that is true in some of the economies. There are serial

devaluations in Argentina. It is amazing that people think that means

all emerging markets need to be tarnished with the same brush. I

would say that there has been a blurring of the lines between the

two economies, and you need to distinguish between all of them.

Prior to the crisis in 2007, you would have said that developed

markets were crisis free, they had low levels of debt and there were

less questions about the quality of policy-making. You would have said

the opposite of the others. I think the US is a born-again

emerging country. I think if you look at the things going on in the

last five years, you have cleaner balance sheet, financial prudence,

cheaper supply. I think that CEOs and companies will be forced into

deciding what to do with the balance sheets. I think they know that on

the horizon the interest rate will not be as low as they are. In the

next couple of years, there will be years of acquisitions and

consolidations. I figured will be a fantastic time.

On the issue of crisis in emerging economy, is that one of the reasons

why emerging markets are looking better for businesses? Or do you

think that other reasons behind the renewed interest in developed

markets? I think positive sentiment in the

developed and emerging markets is a great environment to be operating

in. It gives companies the chance to drive back to top line growth. I

think whether you are driving that topline growth or the emerging

market is actually irrelevant. It is more about the markets and specific

segments that you are targeting. I think there are three things that

industries will really focus on. I think there will focus on

innovation. One of the top agenda items will be innovation. New topics

and services. The clients are looking at these around the world to

drive in crime until revenue. The second thing will be around digital.

It will be about using digital to get into understanding markets. And

the third area will be around talent and talent as we move back to

growth, talent will become the hot topic, the war for talent will be

back. And companies that succeed with these three areas will be

successful. I think it is exciting. If these companies are looking at a

country that could suffer a run in terms of currency, what kind of

strategy would you need to have two cup with that possibility. -- to

cope with. The answer is the first. Many large companies in the world

have put Prince across multiple countries and markets. That creates

a stabilising effect. That means that your money and investments are

not at risk in one area because organisations have learnt to be much

more agile and to be able to sense and respond and react quickly to

shocks. Whether financial or geopolitical. This point about

crisis, it probably is not the right word to be using. There is a feeling

that we are overdue a crisis in the emerging markets because somehow it

is their turn. But looking at vulnerability measures, there is

nothing compared to what there was previously especially in Asia. And

if you think about what happened in this serious crisis time, this is

night and day. The main difference is that currencies are allowed to

adjust. It is a pressure valve. And it is healthy to see inflows as well

as outflows. That was starting to creep in in many markets and there

was a knock on effect from policies in the West. We need to get back to

the positive sentiment that is out there. Risk is just part of

business. We have got much more comfortable in operating in

permanent volatility. Risk is just part of business. The best companies

manage that risk. So I think it is getting back to positive sentiments.

I often substitute the word ambiguity for risk. Companies manage

ambiguity. When you participate in particular segments or countries

there is a level of ambiguity that occurs. Your management capacity is

to deal with that. The thing to watch for is if we are going to be

pulled close to the cliff, could be from political disruption in

Europe? It is not a risk for now or the next six months, but for the

next ten years. Get used to the risk and watch the cliff! Thank you very

much. I caught up with which lesser of the Boston consulting group to

find out how he assesses the prospect of market recovery. We

expect and have had healthy growth in the developed markets. But I

think emerging markets will be higher still. The global

challenges, emerging markets are looking to globalise. Plus companies

see these markets as key to their continued success. So I expect to

see strong growth in both markets. Are you to pessimistic about

emerging economies? I think they tend to react to short-term

challenges. China has undergone very strong reform. But the short-term to

get their is tricky. Will this year be the best for China? Probably not.

But it will position to be a strong economy in the years ahead. For the

rest of the emerging markets there are many positive things. South East

Asia continues to be strong. Latin America. In a number of places how

they embrace the key agenda on how to spur investment and make

companies want to come and invest is key. With elections coming up in

many countries, how those elections turnout and what the agenda will be

of the new leadership will be important. But overall we are more

optimistic than pessimistic. Our the American companies as global as

before? I think they are trying very hard to be global. In particular

with an emerging market focus. Many of them see Europe with some

scepticism. But when they looked towards Asia or the South they see

enormous potential for growth in the years ahead. And they are working

really hard and increasingly recognised the need to establish a

business model for those markets. That will be a major focus for

investment in the years ahead. When an economy grows, people feel better

and apparently, drink more. I spoke to the CEO of one of the world

doesn't exist or worse, Alan Clark of SABMiller. He explained why

Europe is a tough market. If we look at the world was not geographies and

average them out, for us Europe has been the most difficult environment.

You start with relatively high levels of consumption so the

economic downturn, people tend to save their money. There is more

retail consolidation. So competition in retail channel and is -- retail

channels was prevalent. So you have declining volumes and to add to that

the inability to change prices. And the same for the UK. In our business

we operate a small business in the UK. We are a niche business. The

brand is Pirelli. We have seen some growth in that sector. What is the

relationship between the consumption of year and the economy? I think the

reality is that beer is quite price elastic. Around 70% of our business

is in emerging markets. But also in developed markets consumers can be

affected by economic downturns. Today in the US there is pressure on

the core beer market because of levels of unemployment and economic

recession. A lot of businesses find it difficult to operate in Africa

because institutions are not well developed. What are the strategies

for growth in Africa? There are multiple. One of the most effective

strategies is the fact that we have operated there for a long time. Our

company was founded in 1895 in South Africa. And we have operated in

southern Africa for many decades. And we have expanded into East

Africa and west Africa and beyond. So familiarity and the fact that our

managing teams are used to those environments is significant. And

second I think is the way we work with local governments. We are

strongly entrenched in local communities and have strong

relationships built up with local governments. In many countries we

are the largest business and we are important within these economies. So

we do get support from governments. And that does ease the burden of

some of the infrastructure problems we have. What is the most exciting

new market for beer? It is difficult. For us it would be

Nigeria which is new for us. Over the medium term I think China,

clearly. It is the largest beer market by volume of Eddie. --

already. It has rapid economic growth and growth in consumerism. A

massive growth in the middle-class. It is a very exciting place to be.

We have been on the ground in China with joint venture partners for 20

years. But there is a significant longer term growth ahead. Nigeria is

exciting for us. But it absolutely must be China. Alan Clark. US is

still where consumers spend the most dollars. For people looking for

love, 54% of Americans celebrate Valentine's day this year. But the

average spend is slightly higher at $133 per person. Still making for an

impressive total. Men spent just over $100 and give. Twice as high as

what women spend on their special someone. No comment from the! The

American consumer still concentrate the biggest market in the world. The

US and other developed markets are recovering. The contrast the

structural problems of some emerging economies are becoming apparent as

the era of cheap money comes to an end. But they have a lot going for

them in the longer term. That is all we have time for this week. Do check

out the website and Twitter. And join us next week for more.

Good evening. It is not a miracle I