25/01/2014

:00:00. > :00:00.with a win over Bournemouth. Now on BBC News it is time for this

:00:00. > :00:07.week's Talking Business, here is Linda Yueh.

:00:08. > :00:10.This quiet ski resort is transformed once a year when it hosts the

:00:11. > :00:18.biggest meeting of top business and world leaders.

:00:19. > :00:19.Here in Davos, Switzerland, at the World Economic Forum, I'm Linda

:00:20. > :00:42.Yueh, and we're Talking Business. A warm welcome to the programme.

:00:43. > :00:47.Davos is known for its mix of CEOs, policymakers and celebrities. We

:00:48. > :00:52.have just such a line-up of newsmakers. They share what they see

:00:53. > :00:57.as the biggest opportunities and challenges facing the global economy

:00:58. > :01:03.and business in 2014. Before we hear from them, let me show you what it's

:01:04. > :01:05.like behind-the-scenes at Davos. It's an unlikely spot for the

:01:06. > :01:09.biggest meeting of business leaders in the world. Yet here in Davos,

:01:10. > :01:16.Switzerland, 2,500 executives and world leaders congregate each year.

:01:17. > :01:22.This year's theme, how to reshape the world. Whether it's by bus,

:01:23. > :01:25.train or even helicopter, it's not just CEOs and finance ministers, but

:01:26. > :01:31.academics and journalists who come here to find answers. When I was a

:01:32. > :01:36.special adviser, I was always asked to propose concrete policy

:01:37. > :01:42.solutions. But first, what does the head of WEF think reshaping the

:01:43. > :01:54.world means? Reshaping means that the world is changing. We... The

:01:55. > :02:00.world in ten years will look very differently from what it looks

:02:01. > :02:02.today. Just look at the technological revolutions, look at

:02:03. > :02:05.the whole question of the cyber world, look at three-dimensional

:02:06. > :02:08.printing. And I could go on and on, where there is tremendous progress

:02:09. > :02:12.made in biology, in medicine and so on. So we will be in a different

:02:13. > :02:15.world, and we have to prepare for this world.

:02:16. > :02:21.Preparations may be nearly finished, but the hard work is yet to begin.

:02:22. > :02:26.There's going to be a lot of sessions talking about what the

:02:27. > :02:29.reshaped world will look like. There are the issues of slow growth, high

:02:30. > :02:33.unemployment, rising inequality and climate change, to name just a few.

:02:34. > :02:36.Maybe there'll be a report, but usually there isn't, and that's why

:02:37. > :02:42.Davos is frequently described as just being a talking shop. But then

:02:43. > :02:46.again, when the talking is by leaders, the networking process can

:02:47. > :02:49.be important. I've been invited to have drinks with a royal, dinner

:02:50. > :02:53.with a billionaire and a fireside chat with a tech entrepreneur. Some

:02:54. > :02:59.would say it's those conversations, rather than any concrete outcomes,

:03:00. > :03:04.that matter to reshape the world. As with all such grand plans, only time

:03:05. > :03:07.will tell. We first hear from Peter Sands, the

:03:08. > :03:11.CEO of Standard Chartered, a British giant that's one of the largest

:03:12. > :03:14.banks in the world with a strong presence in Asia and Africa. He

:03:15. > :03:21.shared with me his views on what 2014 holds. I'd start by saying that

:03:22. > :03:27.I'm looking at 2014 with a pretty positive view. The US is looking

:03:28. > :03:32.pretty strong. China, I think, is go to deliver at least 7% growth. Japan

:03:33. > :03:36.is not looking bad at all. And Europe, well, the least you could

:03:37. > :03:40.say is it is not going backwards. It may not be growing fast, but it is

:03:41. > :03:43.not going backwards, and in that backdrop, actually, I think 2014

:03:44. > :03:49.could be quite a positive year for the world economy. You ask about the

:03:50. > :03:54.challenges. There are a multitude of different challenges. We've got a

:03:55. > :03:57.huge amount of regulatory change going on in the banking industry, a

:03:58. > :04:03.lot of policy, important elections happening across the world in 2014.

:04:04. > :04:08.So there's no shortage of things going on. You mentioned there are a

:04:09. > :04:12.lot of regulatory challenges. Is there a chance that a lot of the

:04:13. > :04:15.regulatory changes in Europe is going to make it less competitive

:04:16. > :04:18.than, say, other parts of the world? There has been a massive amount of

:04:19. > :04:21.regulatory change, and one of the biggest challenges, and this is not

:04:22. > :04:26.unique to Europe, but Europe is part of this, is the degree of

:04:27. > :04:29.fragmentational difference. There was a huge amount of effort, early

:04:30. > :04:32.on after the crisis through the Financial Stability Board, to have a

:04:33. > :04:35.very co-ordinated and organised approach to changing banking

:04:36. > :04:40.regulation, but we seem to have lost some of that coherence. And that

:04:41. > :04:43.does create a danger, because it will drive a kind of deglobalisation

:04:44. > :04:49.of financial markets, which I think will cost everybody. You are a

:04:50. > :04:55.British bank, but you don't have a presence in British retail banking.

:04:56. > :04:58.Would you consider doing that? Our history, our strategy is focused

:04:59. > :05:02.on Asia, Africa and the Middle East. We are based in the UK, it a good

:05:03. > :05:05.place from which to run an international bank, but we have no

:05:06. > :05:11.plans to be involved in domestic business in the UK. Is there a

:05:12. > :05:16.reason for that? I think the Government would be very keen if you

:05:17. > :05:19.might be! We have huge growth opportunities in our markets, we

:05:20. > :05:22.have big and exciting growth plans in China, India, Indonesia. And

:05:23. > :05:24.also, that's where our history is, that's where we have deep

:05:25. > :05:29.relationships, where we have deep knowledge of what's going on. We're

:05:30. > :05:32.playing to our strengths. In terms of the emerging markets, larger

:05:33. > :05:34.economies are now saying that the emerging economies are not so

:05:35. > :05:40.exciting, they are back to thinking about the dull and old economies as

:05:41. > :05:46.being where the money should go. Have they got it wrong? I think

:05:47. > :05:53.economists are... Be very careful, Peter! I know, but economists are as

:05:54. > :05:56.prone to fads as anyone else. And I don't think the realities of the

:05:57. > :05:59.nature of the growth drivers in emerging markets have changed that

:06:00. > :06:04.dramatically over the last 18 months. Maybe they were overhyped

:06:05. > :06:12.before, but now the sort of gloom and doom about them is overdone as

:06:13. > :06:15.well. And you seen that, I mean the number of people who been calling

:06:16. > :06:23.the end to China's growth, and China seems remarkably immune to these

:06:24. > :06:26.kind of predictions. So of course, of course there are challenges,

:06:27. > :06:28.these are economies which are changing very dramatically, there

:06:29. > :06:30.are huge issues around financial deepening, infrastructure,

:06:31. > :06:37.governance, political change and all this stuff. So of course there will

:06:38. > :06:42.be dislocations and bumps and all this sort of stuff. But we see the

:06:43. > :06:45.opportunities in the emerging world, particularly in Asia, Africa and the

:06:46. > :06:50.Middle East, the places we know well, as being very exciting. China,

:06:51. > :06:53.of course, is a very big emerging economy. There's been a bit of

:06:54. > :06:59.concern that the shadow banking system has become, well, somewhat of

:07:00. > :07:04.a risk. You're very active in China, do you think there's a risk that

:07:05. > :07:07.China could have a banking crisis? I think China will and is taking

:07:08. > :07:13.action on the shadow banking sector, and it is a problem. One should

:07:14. > :07:18.expect, if an economy grows that fast, you're going to get sort of

:07:19. > :07:24.bubbles and distortions. It's not possible to do it all in a

:07:25. > :07:27.completely smooth way. But I think what you're seeing, if you look at

:07:28. > :07:29.the actions of the authorities around the shadow banking sector,

:07:30. > :07:33.they're squeezing it and putting pressure on it, and it will change.

:07:34. > :07:37.From our perspective, we have no exposure to it, we're not involved

:07:38. > :07:42.in it, and we still see China as a very significant opportunity for the

:07:43. > :07:45.bank. You mentioned that your areas of expansion, where you are more

:07:46. > :07:53.interested in, are Asia, Africa, the Middle East. Any plans to expand,

:07:54. > :07:59.Latin America, North America? We are very clearly focused on Asia, Africa

:08:00. > :08:02.and the Middle East. We have over 150 years of history in these

:08:03. > :08:03.markets, we really understand them, we have fantastic client

:08:04. > :08:08.relationships, and they offer massive opportunities for growth.

:08:09. > :08:11.Now, we are growing in Europe and the Americas, both Latin America and

:08:12. > :08:13.North America, but what we're doing there is enabling the trade and

:08:14. > :08:22.investment flows between those parts of the world and Asia, Africa and

:08:23. > :08:25.the Middle East. So we're not trying to do domestic business in those

:08:26. > :08:28.parts of the world, but there's an enormous amount of commodity trade

:08:29. > :08:34.and all sorts of types of trade and investment that we are involved in.

:08:35. > :08:39.That was Peter Sands, CEO of Standard Chartered. What does the

:08:40. > :08:42.view look like from one of India's biggest corporations? I asked

:08:43. > :08:50.Infosys CEO SD Shibulal about his latest technology investment in

:08:51. > :08:53.India. I think technology is becoming an

:08:54. > :08:59.enabler today more than anything else in the world. If you look at

:09:00. > :09:02.the history of technology, it started with data, and now it is

:09:03. > :09:05.about insight and intelligence. You are trying to get insight out of

:09:06. > :09:09.your data, your information, using it for your business purposes. So

:09:10. > :09:14.for example, some of the things which we do in India, we have a

:09:15. > :09:16.trading platform called TradeEdge. This platform allows providers,

:09:17. > :09:31.manufacturers, to get insight into their sales in emerging countries.

:09:32. > :09:35.The las- mile sales, for example how many pieces of candy have been sold

:09:36. > :09:38.in India or in China. And then that information can be fed back, and

:09:39. > :09:41.that can create the demand chain that can create insights into how

:09:42. > :09:43.the sales are flowing. We have launched a platform which is meant

:09:44. > :09:48.for financial inclusion for the bottom of the pyramid. These are

:09:49. > :09:53.people who are not part of the banking system. We process income

:09:54. > :09:57.tax returns in India, so we can do quite a lot of that kind of work,

:09:58. > :10:02.where the intelligence being used either creates insight or efficiency

:10:03. > :10:05.and productivity. One of the things about introducing technology to a

:10:06. > :10:11.low income country is, some may say, it isn't that profitable. What would

:10:12. > :10:14.you say to that? I think it's an opportunity and a challenge, because

:10:15. > :10:20.in India, if you want to do something, it has to cost 100th of

:10:21. > :10:25.what it would elsewhere. If you look at ICICI Bank, it uses our platform

:10:26. > :10:29.Finacle, and their cost of a transaction, the size is one tenth

:10:30. > :10:33.of the rest of the world. And the cost of the attraction has to be

:10:34. > :10:37.100th of what it is in the rest of the world to make a profit. So it

:10:38. > :10:42.creates an opportunity for what I call frugal innovation, innovation

:10:43. > :10:47.which is affordable, durable and leaner. See, the world has been

:10:48. > :10:51.doing very difficult things, faster, smarter and expensive, but countries

:10:52. > :10:57.like India need innovation which is affordable, durable, Lena, and that

:10:58. > :11:00.is an opportunity. One of the things about tech companies is that it is

:11:01. > :11:06.hard to stay a head of the game, what is your secret? Innovation is

:11:07. > :11:11.the secret, we always believe we have to be agile, nimble, we show is

:11:12. > :11:15.beat, and you have to be innovative in everything that you do. Whether

:11:16. > :11:20.it is delivering products to our clients, or to employees, or even

:11:21. > :11:25.doing things in India which have been done in the rest of the world

:11:26. > :11:29.but never done in India. You are a global company with a good profit

:11:30. > :11:37.forecast for this year, tell us about how you expect growth to be.

:11:38. > :11:42.11.5-12% is a good increase from last year, approximately 5%, so this

:11:43. > :11:47.is a good increase. We have added a number of clients this quarter, so

:11:48. > :11:51.overall our clients are feeling a bit more confident than in the

:11:52. > :11:55.past. At the same time, there is an apprehension because of the

:11:56. > :11:59.challenges which they went through in the last two or three years. But

:12:00. > :12:04.we are finding that our clients are more confident. A good forecast for

:12:05. > :12:08.your performance this year, still a tough backdrop in India, tell us a

:12:09. > :12:15.little bit about the scope of your business.

:12:16. > :12:20.We need to remember that this is a global market. 97% of our revenue

:12:21. > :12:26.comes from outside of India. Our market is 67% US and 25% the UK and

:12:27. > :12:34.the continent. We are playing in a global market. Who is on to winning

:12:35. > :12:44.the election? Only you can predict that. You worried? Is there any

:12:45. > :12:50.concern? India has had multiple elections over the past 15 years.

:12:51. > :12:58.But as I say, the direction has been the same. The country has been

:12:59. > :13:01.focused on creating, bettering the quality of life for people. I expect

:13:02. > :13:10.that to continue. Regardless of who wins? Yes. Before I bring you more

:13:11. > :13:13.newsmakers, let me show you what a typical day is like here at the

:13:14. > :13:19.World Economic Forum. Everyone stays in a pretty small town. And the way

:13:20. > :13:23.to get around from one venue to another is to get on one of the

:13:24. > :13:34.special shuttle buses. The thing about the buses is that you never

:13:35. > :13:40.know who you might meet on board. I hope the next person we picked up

:13:41. > :13:45.his match Damon -- the next person we pick up is Matt Damon or George

:13:46. > :13:54.Clooney. Or the Central bank president, Mario Draghi. Hello. I am

:13:55. > :14:02.Linda Yueh. I am Tony Hyams. What are you doing here? I am with the

:14:03. > :14:07.Australian Commonwealth superannuation Corporation. I am

:14:08. > :14:13.chairman of that fund. It is a large pension fund in Australia. What do

:14:14. > :14:17.you hope to do at the World Economic Forum? In particular, we are

:14:18. > :14:22.interested in long-term investment and the role of business. And also

:14:23. > :14:28.all sorts of other ideas and different perspectives. Finally,

:14:29. > :14:33.what is the best party you have been invited to? There are a couple this

:14:34. > :14:39.evening and we will see if we can make it. Thank you very much.

:14:40. > :14:43.Meeting people is one of the reasons why a lot of people come to the

:14:44. > :14:46.World Economic Forum. It is almost unique in that you can meet any

:14:47. > :14:53.number of contacts for your business or policy that could be important.

:14:54. > :14:59.It is the reason why 2500 delegates come to this very small ski resort

:15:00. > :15:03.in the Swiss Alps. We have heard the perspective from the business world

:15:04. > :15:08.but what do policymakers think? I caught up with the President of the

:15:09. > :15:14.World Bank, who shared with me what he saw as the key risks of 2014.

:15:15. > :15:22.Looking at it from the perspective of the emerging markets, the biggest

:15:23. > :15:26.risk would be a bumpy ex-it from unconventional monetary is. -- exit.

:15:27. > :15:34.When Benbow 90 made the announcement about the future capering, we saw a

:15:35. > :15:37.bump in interest rates. It is not clear to what extent we have seen

:15:38. > :15:43.these. We think we have seen between a third and a half. As long as it is

:15:44. > :15:49.smooth, we think that emerging markets can respond, but if it

:15:50. > :15:52.doesn't, a lot of capital could stop. That is the biggest risk from

:15:53. > :15:58.what we see. I think in the Eurozone and also in southern Europe, there

:15:59. > :16:01.are high levels of unemployment among young people. So there are

:16:02. > :16:04.still big issues that we have to tackle, not to mention the banking

:16:05. > :16:09.union, which is an issue we are watching closely. As you say, up to

:16:10. > :16:14.half of the capital flow could actually leave emerging economies. I

:16:15. > :16:19.am sure that that would be destabilising. That would be

:16:20. > :16:24.destabilising. And that would be all we could do to respond to that. In

:16:25. > :16:30.talking with the policymakers and leaders in the financial sector,

:16:31. > :16:36.every intention is to taper as smoothly and over as longer period

:16:37. > :16:40.as possible. Here and elsewhere, the talk is about slow growth rising

:16:41. > :16:50.inequality. What can be done about this? The top 85 people in the world

:16:51. > :16:54.control the same amount of wealth as the bottom 3.5 billion. The good

:16:55. > :16:58.news is that many of those top 85 are there and are committed to

:16:59. > :17:02.trying to reduce income inequality. But the good news is that there are

:17:03. > :17:07.a bunch of things we can do right now that will help economies to grow

:17:08. > :17:09.while at the same time being more inclusive. What I don't want to

:17:10. > :17:14.happen is that we sit around nibbling hors d'oeuvres and

:17:15. > :17:18.contemplating inequality. The message we put out is that yes, it

:17:19. > :17:21.is a huge problem and we know that there are things that we can do

:17:22. > :17:29.right now to grow our economy and reduce inequality. That was Jim Yong

:17:30. > :17:32.Kim. We have heard from a top policymaker and Chief Executive is.

:17:33. > :17:37.Now it is time to get the expert economic view on what 2014 holes. I

:17:38. > :17:42.caught up with one of the best-known economists in the world, Nouriel

:17:43. > :17:45.Roubini, a Professor at New York University, and asked him what he

:17:46. > :17:51.thought was the biggest challenge for 2014. The biggest challenge is

:17:52. > :17:57.coming from the fact that the still are a lot of risks in the economy.

:17:58. > :18:02.The Eurozone crisis is not over. The could be political tension in the

:18:03. > :18:10.Eurozone. There are certainly crises in the US. -- crisis mag. -- is

:18:11. > :18:17.there are certainly crises. In China, there is the question of a

:18:18. > :18:24.soft landing. And there is also geopolitical risks, but we will see

:18:25. > :18:29.whether a permanent agreement can be reached with Iran. There are

:18:30. > :18:34.tensions territorially between China and Japan which could eventually

:18:35. > :18:38.lead to a flare-up and military confrontation. Those are some of the

:18:39. > :18:43.main risks. How does the US economy look to you? The US economy is

:18:44. > :18:49.improving and growth is strong. There is less of a fiscal drag.

:18:50. > :18:56.There is shoring up of manufacturing and there is some strong creation of

:18:57. > :19:00.jobs. There are also risks because there is still gridlock in Congress

:19:01. > :19:05.and there will be shut downs on fiscal issues because of the lack of

:19:06. > :19:11.agreement between Democrats and Republicans. Important structural

:19:12. > :19:13.reforms will have to be undertaken, like structural tax reform and

:19:14. > :19:18.reforming entitlements like social security and health care. Unless the

:19:19. > :19:27.US does these things, the potential growth could be constrained. What is

:19:28. > :19:34.your one big prediction for 2014? Probably the commodities super

:19:35. > :19:40.cycle, the boost in commodities, precious metals, that could be over.

:19:41. > :19:47.The commodity price might correct worldwide. China is slowing down and

:19:48. > :19:52.the growth model will be less. For other commodities, there are new

:19:53. > :19:56.suppliers. After years of investment into new capacity. That will

:19:57. > :20:06.dampen, because of shale gas and so on, energy supply. And in the case

:20:07. > :20:14.of gold, the fact that gold prices have been boosted, gold has now been

:20:15. > :20:17.downwardly corrected. That was Nouriel Roubini. As I said earlier,

:20:18. > :20:21.you never know who you will talk to at divorce. I am about to go and

:20:22. > :20:30.talk to Matt Damon and Gary Whyte about their water charity, Bono. --

:20:31. > :20:36.Davos. Good to meet you both. Matt Damon,

:20:37. > :20:40.your day job is that you are an actor. Why have you come to the

:20:41. > :20:45.World Economic Forum? Why did you choose this place to talk about your

:20:46. > :20:50.charity? Well, we felt that it was a good laugh on to talk about what,

:20:51. > :20:56.and the work we are doing with water.org. -- talk about water.

:20:57. > :21:01.Water is on the agenda at a forum like this but they tend to look at

:21:02. > :21:07.water security and scarcity. We want to make sure that universal access

:21:08. > :21:14.to safe water is in the conversation. What do you hope to

:21:15. > :21:19.achieve here? What do you hope to get out of it? First and foremost,

:21:20. > :21:25.to elevate the issue on the agenda. There is water on the agenda here

:21:26. > :21:30.which draws us, but oftentimes it is about this looming water crisis,

:21:31. > :21:34.about water for agriculture or water for industry. And those are

:21:35. > :21:39.important things but the problem is that the 718 all you people get lost

:21:40. > :21:46.in the shuffle. So the crisis for them is now, not looming. -- 780,000

:21:47. > :21:52.people. We want to be the voice of the pure and help them to get to the

:21:53. > :21:55.front of the line, instead of being afraid that the water crisis is so

:21:56. > :21:59.great that we cannot afford water to connect them. There are many

:22:00. > :22:08.charitable causes you could support. Why water? There is limited time,

:22:09. > :22:12.and there are many wonderful causes, but water seemed to underpin all of

:22:13. > :22:22.the problems of poverty. It is so essential to life, and it is

:22:23. > :22:27.something that as I read more about it, and travelled more, I understood

:22:28. > :22:32.the complexity of it, if fascinated me. It is very complex and endlessly

:22:33. > :22:35.interesting. It is our goal to put ourselves out of business but our

:22:36. > :22:39.mission statement is that we envision the day when everyone can

:22:40. > :22:47.access a safe drink of water and adequate sanitation. Who are you

:22:48. > :22:54.most looking for to meeting? Lets see, I have met some wonderful

:22:55. > :22:58.people. I saw Bill Gates earlier. Another Harvard dropout. That was

:22:59. > :23:04.nice. And I saw the president of Hertford, who is a friend. That was

:23:05. > :23:13.nice. -- harboured. Hanging out with bone of was fun. -- Bono. Top

:23:14. > :23:15.business leaders and policymakers are more optimistic about this year

:23:16. > :23:20.than at any time since the global crisis. But there are is still a lot

:23:21. > :23:24.that keeps them awake at night including the causes of slow growth

:23:25. > :23:31.and its consequences. That is all we have time for this week. Check out

:23:32. > :23:33.our website and me on Twitter. And join us next week for more talking

:23:34. > :23:44.business. Today we saw some intense

:23:45. > :23:48.thunderstorms moving south-east across the country. While there is a

:23:49. > :23:52.bit of a lull out there at the moment, there is more severe weather

:23:53. > :23:55.to come. Concentrating on today, you can see that line of blue and

:23:56. > :24:02.green, our thunderstorms cleaving eastwards. Still a scattering of

:24:03. > :24:03.shower the Rumack to the north. But the forecast contains heavy rain,

:24:04. > :24:04.wind and