This article was authored by Joseph Waring, and was originally posted on telecomasia.net.
BT Global Services’ Kevin Taylor highlighted three key mega trends at BT’s Leadership Summit earlier this week: the power of the individual, instant globalization and the end of limitless resources.
Taylor, president of AMEA and global logistics, noted that all three represent huge opportunities and risks for businesses.
Looking specifically at Hong Kong, he questioned whether businesses here can take advantage of the huge growth in Africa and the Middle East or is Hong Kong too focused on China and is missing other opportunities?
Nicholas Kwan from HKTDC, speaking on the theme of “In search of the new normal”, said the world has experienced a spat of global de-globalization since the economic downturn in 2008.
He asked what will the new world look like? “After a trend of globalization that ran 50 to 100 years, the last five years has been a very different period.”
He said cross-border capital flows peaked in 2007 and fell below half the 2007 level for a few years. They are now moving up, but haven’t returned to the pre-crisis level. Over the last five years, the number of import restrictions has been rising, with more than $650 billion in trade impacted (that’s more than all of France’s exports).
Kwan said we now live in a fragmented world, with more bilateral trade agreements that are more restrictive and discriminatory, which increasingly block trade for those outside the deals.
“Can global growth continue?” He reckoned it will slow over time, pointing to one of the mega trends mentioned by BT’s Taylor — limited resources. “We need a fundamental change in the world order. Need new financial infrastructure to adapt to rising economic powers to keep balance, and it will take time to go through the process.”
KPMG global chairman Michael Andrew, giving a whirlwind tour of almost every major economy in just 20 minutes, said the world now has a new mix of growth centers.
“China effectively wants to transition from a low-cost, high-export, high polluting economy into a strong domestic consumer economy. To do that it needs to do a number of things. It has to cure its environmental problems, it has to cure its service capacity that exists in so many provinces, and it has to deal with the issue around corruption, shadow banking, industry structure and demographics.”
Despite these, he said the country can hit its growth target – in the short term – but the real questions will come in two to three years as whether publically and socially the reforms are sufficient to convince people that the economic reform process is something worth investing in. He sees little risk in the shadow banking issue, which he thinks is overstated.
Corruption is the big issue and he is seeing a big push. “The biggest issue in my work is putting in codes of conduct, putting in risk management frameworks, whistle-lower regimes, and the sentiment and culture that have changed in terms of the attitude toward corruption are incredible. Every state enterprise is driving this.”
The big surprise has been Japan, which “has been asleep for 20 years”. With the 20% drop in the yen, he said Japan has become competitive very quickly. India disparately needs reform while Korea is “an economy that has hit the wall” and is stagnating except for the top five companies, which are dominating the world.
Meanwhile with cheaper energy from fracking, “we’re seeing a re-industrialization of the US.”
Echoing Kwan’s global trade view, Andrew said there will be no world trade agreements, but lots of regional deals, which will have a major impact on trade flows in the future.
Regarding QE trapping, he raised the question of if the easing will be on the US schedule or the world’s schedule. If on US terms, there will be major issues.
Finally, he said the global tax structure has to be reworked.
Alfred Shang, partner at Bain & Co, pointed to surveys that show only 10% of companies have sustainable profit growth. He emphasized that there’s not just one formula for sustained growth.
Shang noted that many of the barriers to growth and profitability are internal – such as inefficiencies and the inability to focus.
He said at great companies there is little distance between leaders and the front line (customer). The leadership understands demand and customer needs. As firms mature, internal structures are built that tend to increase this distance.
In what he called the “doom loop”, business complexity creates organization and process complexity. “Complexity is a silent killer of growth.”
Referring to the “delivery gap”, the different between what a company thinks it provides to customers and what its customers think of the company provides, is as high as 80% vs 8%, according to recent surveys.
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