A COMPETITIVENESS OUTLOOK FOR 2018, AND BEYOND · 2020. 6. 13. · when you had hair … 0.6%....

STEPHANE GARELLICEO FORUM , 23 NOVEMBER 2017

STEPHANE GARELLI

EMERITUS PROFESSOR AT IMD AND AT THE UNIVERSITY OF LAUSANNE, SWITZERLAND,

FOUNDER WORLD COMPETITIVENESS CENTER

«THE WORLD IN RESET MODE»

A COMPETITIVENESS OUTLOOK FOR 2018, AND BEYOND

DUBLIN

23 NOVEMBER

2017

2018…

CEO FORUM

http://www.aarstiderne.com/upload/2001120413421001-copyright.jpg


+1.6%+3.7%

+2.3%

+0.3%

+0.9% +2.7% -8.8%

A SYNCHRONIZED RECOVERY

+6.8% +1.7%

+6.7%

+5.8%

+5.1%

+3.6%

+4.6%

+3.1%

+2.5%

+2.2%

+3.1%

+1.5%

+1.8%

+2.8%

+1.8%

+0.3%

+3.0%

+1.1%

GDP GROWTH

12 MONTH PERIOD

Q2

Q3+5.8%

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http://images.google.ch/imgres?imgurl=http://www.cityfreight.org/flag-uk.gif&imgrefurl=http://www.cityfreight.org/homepage-uk.html&h=355&w=472&sz=7&tbnid=_P5zOptQLTMJ:&tbnh=94&tbnw=124&start=1&prev=/images?q=flag+uk&hl=fr&lr=


A VERY

“CONFUSING”

GLOBAL ECONOMY


A STRANGE ECONOMY…

HUGE AMOUNT

OF MONEY

BUT

INFLATION

IS FLAT


INFLATION: UP AND DOWN?

2% 2%

1.2%

1.7%

1.3% 1.5%1.8%

2.6%

1.7%

INFLATION IS PAYING

30 EurosFOR A HAIRCUT

WHICH USED TO COST

20 Euros

WHEN YOU HAD HAIR…0.6%




HUGE AMOUNT

OF MONEY

BUT

INFLATION

IS FLAT

HUGE TECHNOLOGICAL

INNOVATION

BUT

PRODUCTIVITY

DOES NOT MOVE


THE PUZZLE OF PRODUCTIVITY….

REAL GDP per PERSON EMPLOYED

Source: IMD World Competitiveness Yearbook, 2017

-1% to +1%

+1.87%



HUGE AMOUNT

OF MONEY

BUT

INFLATION

IS FLAT

HUGE TECHNOLOGICAL

INNOVATION

BUT

PRODUCTIVITY

DOES NOT MOVE

THE ECONOMY

IMPROVES

BUT

INCOMES

STAGNATE


0 50% 100%

INCOME STAGNATION

% HOUSEHOLDS WITH FLAT/DECLINING INCOME (2005 – 2016)

75%

70%

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HUGE AMOUNT

OF MONEY

BUT

INFLATION

IS FLAT

HUGE TECHNOLOGICAL

INNOVATION

BUT

PRODUCTIVITY

DOES NOT MOVE

THE ECONOMY

IMPROVES

BUT

WAGES

STAGNATE

GOVERNMENTS

RUN MASSIVE DEBT

BUT

INTEREST RATES

ARE LOW/NEGATIVE


DEBT IN THE G20 COUNTRIES

NEGATIVE

YIELDS$9tn

TOTAL

GOVERNMENT

DEBT

$46tn

PRIVATE SECTOR(non financial)

DEBT

$135tn(235% GDP)


HENNY YOUNGMAN

1906 -1998

THINGS COULD

BE WORSE…

I COULD BE

ONE OF

MY CREDITORS!”

DOES ANYBODY CARE?


THE “MATERIAL”

ECONOMYTHE “IMMATERIAL”

ECONOMY

GDP, INFLATION etc. ?

MEASURING THE “TWO” ECONOMIES?


THE CONSEQUENCE


RECONCILING

HARD DATA

AND

SOFT DATA


A UNUSUAL ADVICE…

“PLEASE

DON’T CONFUSE

ME

WITH FACTS!”

Anonymous banker…


SOFT DATA (STOCK MARKET)?

“ANIMAL SPIRITS?”

US$7bn US$151bn

REVENUES

MARKET CAPITALIZATION

US$52bn US$47bn

PRODUCTION(cars)

76,000 6.7m


THE ADVICE OF KEYNES

JOHN MAYNARD KEYNES,

1883 - 1946

SUCCESSFUL

INVESTING

IS ANTICIPATING

THE ANTICIPATIONS

OF OTHERS

FORECASTING

THE ECONOMY


WHO

HAS

MONEY?


SOVEREIGN WEALTH FUNDS

$813BN

CHINA INVEST.

CORPORATION

$441BN

SAFE INVEST.

COMPANY

$456BN

HKMA

$828BN

ABU DHABI

INVEST. AUTHOR.

$524BN

KUWAIT INVEST.

AUTHOR.

$514BN

SAMA

$320BN

QATAR INVEST

AUTHOR. $359BN

GOVT. INVEST.

CORP.

$998BN

GOVT. PENSION

FUND

9 SOVEREIGN WEATH FUNDS

$5’825bn

Q

$19,7bn

ISIF

http://images.google.ch/imgres?imgurl=http://www.amnet.co.jp/i_pal/china.gif&imgrefurl=http://www.amnet.co.jp/i_pal/cir.html&h=200&w=300&sz=2&tbnid=8KIAPzAWRScJ:&tbnh=74&tbnw=111&start=10&prev=/images?q=CHINA+FLAG&hl=fr&lr=



CASH AND EQUIVALENT

$1.700BN

$1.300BN

$5.500BN

Listed companies 2017 (Bloomberg estimates)

$2.100BN

COMPANIES HAVE MONEY…



SOME PEOPLE HAVE MONEY…

$2.4m

BRIEFCASE UNDER YOUR BED

$100.6m

YOUR HOTEL ROOM

$11.900m


PRESIDENT

TRUMP’S

AND NOW…


THE BLUEPRINT

DEFENSE SPENDING: + 10%

CUT CORPORATE TAXES: 20%

INVEST IN

INFRASTRUCTURE:$550bn - $1000bn

DEREGULATE: BANKS - ADMINISTRATION


❖ NO WW INCOME TAXATION

- LOCAL TAXATION

- BUT TAX AVOIDANCE MEASURES

❖ BRING PROFITS BACK

12% RESHORING CASH

❖ NO DEDUCTABLE INTEREST - ON LOANS, MORTGAGE, etc,

THE NEW PROPOSED TAX CODE

❖ CORPORATE TAX RATE:

35% 20%

❖ FULL EXPENSING

ONE YEAR WRITE-OFF CAPEX

Dropped


50 US COMPANIES = $1,100bn 5 US TECH COMPANIES = $504bn

$256BN $112BN $70BN $61BN $52BN

93% of

Cash

abroad

90% of

Cash

abroad

58% of

Cash

abroad

+$1.9tn

BRINGING THE MONEY BACK HOME…


- TERRITORIAL REPORTING

- PEER REVIEW

- EQUALITY OF TREATMENT

- TRANSPARENCY

BUT: NO TAX RATES

HARMONIZATION!

PRINCIPLES BEHIND THE GLOBAL TAX REFORM


THE VOLKER RULE:

297, 000 WORDS

A WORLD OF REGULATIONS

NEW TESTAMENT:

181,253 WORDS

600 REGULATIONS

= $743bn

Source: The Trump Administration


3.6%WORLD-WIDE =

Investment as a % of PIBINFRASTRUCTURE SPENDING

8.5%

5.2%

2.6%

1.2%

3.7%2.1%2.0%1.8%

4.4%3.9%

2.4%

STREETS, SEWER, WATER, POWER…

24 – 29 YEARS OLD

Source: BEA, 2015

GLOBAL NEED = $3.7tn

INVESTED = $2.7tn

GAP = $1.0tnAnnually

Source: World Bank, McKinsey Global Institute, 2016





AT WHAT COST?

US FEDERAL DEBT

$20.6tn(106% of GDP)

US BUDGET DEFICIT

$666bn(3.4% of PIB)

TRUMP’S PROGRAM?

BUDGET DEFICIT?

= $950bnTAX REFORM INCOME LOSS

- $1.08tn on 10 years


“I AM THE KING OF DEBT,

I DO LOVE DEBT,

7 MAY 2016

I LOVE PLAYING WITH IT…”

IS THERE A DEBT ISSUE?


A FEW

GLOBAL

UNCERTAINTIES…


THE BREXIT AGENDA

1. THE WITHDRAWAL(June – Dec. 2017)

• EXIT BILL (55bn?)

• CITIZEN RIGHTS

• IRELAND

2. THE FUTURE RELATIONSHIP (Jan – June 2018)

• MARKET ACCESS

• FINANCIAL SERVICES

• DISPUTES?

3. THE TRANSITION (July – Oct 2018)

• JURIDICTION

• FREE MOVEMENT

• AGENCIES

4. RATIFICATION(Nov 2018 – March 2019)

759 AGREEMENTS WITH 168 COUNTRIES

5,000 EXTRA

CUSTOM

OFFICERS!


OIL PRICE: CONFLICTING FORCES…

OPEC /RUSSIA

Production deal

ECONOMIC

RECOVERY

DISCOVERIES?Lowest in 60y

174/450

US SHALE OIL

RENEWABLES

4.9 b/d

60% Capacity

Growth

STOCKS

278 days

50$

60$

70$

80$

90$

Source: Data International Energy Agency, 2017

PRICE PRESSURE ON OIL PRICE

WTI


WHO

OWNS

WHAT?


GLOBALIZATION + CASH + TAX OPTIMIZATION

M&A AND CONSOLIDATION

$1,492bn ( 1st half 2017)

=

THE “MAGIC” FORMULA


WHO IS DOING WHAT?

ELECTRONIC PAYMENT

CLOUD COMPUTING

ADVERTISING

BATTERIES

WATCHES

Q


A REVOLUTION IN CORPORATE OWNERSHIP

NEWCOMERS’GLOBALIZATION

EMERGING

ECONOMIES

COMPANIES

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http://www.huawei.com.mx/perfil_archivos/solo_logo_huawei.gif

http://images.google.ch/imgres?imgurl=http://www.it158.com.cn/images/lenovo_logo.jpg&imgrefurl=http://www.it158.com.cn/&h=125&w=300&sz=21&tbnid=4ovrAxsTVCYJ:&tbnh=46&tbnw=110&start=12&prev=/images?q=lenovo+logo&hl=fr&lr=


PRIVATE EQUITY FUND

$ 93 billion

MONEY-MARKET FUND

$165 billion

EVEN MORE MONEY…


CHINA BUYING…

OUTBOUND M&A 2016: $225bn

20%


AND NOW THE CENTRAL BANKS?

buying shares…

$98bn (200 of 225 Nikkei shares)

$130bn (50% in the US)

PRINTING….


ALAN GREENSPAN

1926 -

“IF I SEEM

UNDULY

CLEAR TO YOU…

YOU MUST HAVE

MISUNDERSTOOD

WHAT I SAID“

IN FULL TRANSPARENCY?


TECHNOLOGY

BECOMES

INTELLIGENT…


THE IMPACT ON JOBS

OFFSHORING

BLUE COLLAR JOBS

ONSHORING

WHITE COLLAR JOBS

SOCIAL

UNREST

EARLY

DE-

INDUSTRIALIZATION


ROBOTS OUTPERFORMING HUMANS?

1997:

DEEP BLUE (IBM) - CHESS

2016:

ALPHAGO (GOOGLE) – GO

2017:

LIBRATUS - POKER

ASSEMBLING,

TRANSPORTATION,

HEALTH,

AGRICULTURE,

FINANCE, TAXATION,

TRANSLATION, etc.

JOBS

“TAX THEM”

BILL GATES WHAT IS A ROBOT?


ARE HUMAN VULNERABLE?

SLOW

BIOLOGICAL EVOLUTIONFAST

RE-PROGRAMING


“WE ARE LOOKING FOR SOMEONE WITH YOUR EXACT QUALIFICATION…

BUT A ROBOT VERSION!


ARE ROBOT VULNERABLE?

COMPETENCE

ULTIMATE WEAPON

COMPREHENSION

IS NOT

UNPLUG!


A

“YOUTHQUAKE”!


“MEISM”

REALISATION DE SOI

et

“Narcissisme…”

THE “SELFIEs”

GENERATION

“MEISM”Self

Fulfillment

and

“Narcissism…”

UNDERSTANDING MILLENIALS (age 18-35)


ESCAPING REALITY…Time spent

with a screen

SMARTPHONE

TV

PC

TABLET

Source: Nielsen Audience Report, 2016

10 HOURS, 39 MINUTES.

SLEEPING

-7H.30CONFRONTING

REALITY:

6

HOURSper day

Q



LITTLE

AFFILIATIONPolitical, Religious…

“MEISM”

REALISATION DE SOI

et


“MEISM”Self

Fulfillment

and

“Narcissism…”

CONCERNED

State of the World


“WE HAVE A GENERATIONAL CHALLENGE:

NOT ONLY

TO CREATE NEW JOBS,

BUT TO CREATE

A RENEWED SENSE OF PURPOSE,

NOT ONLY FOR YOURSELF,

BUT ALSO FOR OTHERS!”

MARK ZUCKERBERG

1984 -



LITTLE


“MEISM”

REALISATION DE SOI

et


“MEISM”

Self

Fulfillment

and

“Narcissism…”

CONCERNED

State of the World

ENTITLEMENT

Demanding

And

Intrusive


MARK TWAIN, 1835 - 1910

“NEVER

DO WRONG,

ESPECIALLY

WHEN SOMEBODY

IS

LOOKING! “

A SENSE OF TRANSPARENCY?


OWNERSHIP(SHARING)


ENTITLEMENT

Demanding

And

Intrusive

LITTLE


MEISM

Self

Fulfillment

and

“Narcissism…

”

CONCERNEDState of the World

“Free is Cool!”


THERE IS NO FREE LUNCH…

IF YOU THINK THAT A PRODUCT IS FREE

TIM COOK, CEO APPLE

THEN YOU ARE THE PRODUCT!


I LOVE YOUR

MOVIES

I HAVE PIRATED

THEM ALL


A NEW FAUSTIAN BARGAIN?

“IF IT IS FREE…

THEN YOU CAN HAVE ALL THEINFORMATION ON MY

PRIVATE LIFE”


“HOW CAN I TRUST YOUR INFORMATION WHEN YOU ARE USING…

SUCH AN OUTDATED TECHNOLOGY!

MILLENIALS LEAD THEIR PARENTS

33% OF USERS ARE OLDER THAN 45 YEAR OLD


MANAGING

VALUE

SYSTEMS


MANAGING VALUES IN A COMPANY

WORK /

SUCCESS

COMPANY

ACHIEVEMENT

20s 65s

> 60 HOURS A WEEK

COMPANY ANIMALS

MOBILE

SUCCESS DRIVEN

FULLY DEDICATED



WORK /

SUCCESS

COMPANY

ACHIEVEMENT

WORK / LIFE

BALANCE

SOCIAL

ACHIEVEMENT

20s 65s

40 - 60 HOURS A WEEK

PERSONAL ACHIEVEMENT

MOBILE WITH A HOME BASE

WORK-LIFE BALANCE



WORK /

SUCCESS

COMPANY

ACHIEVEMENT

WORK / LIFE

BALANCE

SOCIAL

ACHIEVEMENT

LIFE / LIFE

BALANCE

PERSONAL

ACHIEVEMENT

20s 65s

< 40 HOURS A WEEK

LIFE QUALITY

IMMOBILE

LIFE-LIFE BALANCE


PETER DRUCKER, 1909 - 2005

THAN

CHANGES

IN MANAGEMENT

TODAY,

CHANGES

IN SOCIETY

HAVE A DEEPER

IMPACT ON COMPANIES


TAKE NOTHING FOR GRANTED

OLD DELHI – BRITISH COLONIAL TIME

REWARD

RAISING SNAKES SNAKES BACK IN THE STREETS

THE LAW OF “UNINTENDED CONSEQUENCES”


“IF YOU THINK

THAT YOU ARE

TOO SMALL

TO MAKE A DIFFERENCE…

THEN, YOU HAVE NOT

SPENT A NIGHT

WITH A MOSQUITO!”

CAN WE MAKE A DIFFERENCE?

AN AFRICAN

PROVERB

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A COMPETITIVENESS OUTLOOK FOR 2018, AND BEYOND · 2020. 6. 13. · when you had hair … 0.6%....

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