Davos witnessing shift in global order

Anyone at the World Economic Forum who wants a break from talking about what is wrong with the world can wander over to a Davos nightclub where the DJ Megha Kawale will be spinning Bollywood tunes into the wee hours, compliments of an Indian business group.

But it would be a mistake to think the Indians are just bringing a bouncy soundtrack to the Davos convocation of the world’s financial elite. Representatives from India and other emerging nations come with more claim than ever to steer the debate.
Developing countries now account for nearly half of global output, compared to little more than one-third in 1990. The Group of 20 leading economic powers, which includes nations like China, Argentina and South Africa, as well as the United States and other wealthy countries, has emerged as the dominant forum for economic diplomacy.

Companies like Huawei, a maker of telecommunications equipment that has its headquarters in Shenzhen, China, and Wipro, the outsourcing company based in Bangalore that is helping sponsor the late-night Bollywood revelry, are now as visible as the European companies that have long dominated the annual winter conference in the Swiss mountains.

From the rising powers of the world like China, India and Brazil, “you didn’t used to have these large, global corporations, and that changes the dialogue,” said Tidjane Thiam, group chief executive of Prudential, which is based in London but is the largest life insurer in Indonesia and other emerging countries.

Other things have changed as well. Global financial crises, like the Asian financial crisis of the late 1990s or Latin America’s perennial debt disasters, used to emanate from vulnerable corners of the developing world.

But the most recent crisis, the worst since World War II, sprang from the banks in the US and Europe. And this time, it looks as if China and other developing countries are leading the way out of recession, rather than following.

“It’s quite clear that there’s been a significant shift in the global order,” said Robert M Kimmitt, a Davos participant who is a former deputy secretary of the US treasury department. “Asia will lead the global recovery. I think everybody agrees with that.”
With the western economic model under attack and the US and Europe weakened by the crisis, people attending Davos from emerging nations may well be pushier this year in discussions about subjects like free trade and financial regulation.
“One of the striking effects of the crisis has been a new confidence and willingness of people from emerging markets to assert what they think the agenda for reform should be,” said Barry Eichengreen, a professor of economics and political science at the University of California, Berkeley, who will be at Davos. “The days are past when the US and Europeans would make all the proposals.”

Participation
The number people attending the WEF just from the so-called BRIC countries — Brazil, Russia, India and China — has more than doubled since 2005, to 237, or about 10 per cent of the total. Prominent politicians from emerging-market countries who are scheduled to attend the Forum include President Jacob Zuma of South Africa; President Luiz Inacio Lula da Silva of Brazil and Li Keqiang, executive vice-premier of China.

Davos will serve as an informal G-20 meeting, conducted in wool sweaters and snowproof footwear. While not a place to forge formal accords, it does let leaders discuss issues face to face without their usual retinues.

“It’s an efficient meeting place, mostly,” said Tarun Khanna, a professor at Harvard Business School who specialises in emerging markets. “Davos generates a million ideas. If 10 get picked up, that probably pays for it.”

One of the things participants will be talking about is a rise in protectionist sentiment in developed countries. Free trade is not a tough sell at Davos, but participants will discuss how to deal with growing populism. One idea, said Khanna, who helped develop the agenda, is to push governments for better economic data, which he said he believed would better show the benefits of globalisation.

The agenda also includes discussions on topics like how companies can help build electricity networks and other infrastructure in countries where they operate, bypassing ineffective governments. Other panels will feature debate on the G-20 agenda, ways to increase growth in Africa and the US-China relationship.
Representatives from developing nations have been present in Davos for decades, but until recently they were often treated as aid recipients rather than partners in the global economy.

As more developing countries stand tall, the notion that the world outside the major industrial powers is mostly in need of help is fading. Bono, the front man for the rock band U2 and a committed aid activist, will not be at Davos this year, but as a serious advocate for poor countries, he would be welcome, said Klaus Schwab, chairman, WEF.

But Schwab has made an effort to discourage attendance by celebrities like the actresses Sharon Stone and Angelina Jolie. “The media overplayed the presence of those people, so we don’t invite them anymore,” he said, without mentioning any names.

Schwab long ago recognised the shift to the developing world and has begun staging spinoff events in Dubai, Rio de Janeiro and elsewhere. In September, the WEF held the third annual ‘Summer Davos’ in Dalian, China.

Some people even predict that the Chinese Davos could eventually overshadow the event that takes place in Switzerland.

Khanna of Harvard, for one, plans to take a pass on Switzerland this year, even though he played a major role in composing the agenda.

“I’m Indian; it’s too cold,” Khanna joked. Considering that Khanna cut short a telephone interview a few minutes later to go skiing, his excuse probably should not be taken too literally.

The more important reason is that Khanna, author of a coming book on emerging markets, now prefers to attend the forum in China.“Growth has shifted to the developing world,” Khanna said. Meeting in China “makes more sense than sitting in the snow.”