GFMF 2016 concluded on energy, renewables and global geopolitics
A shift in mindset
Day 2 of the GFMF started with an opening address from NBAD Group CEO Alex Thursby, where he discussed the transformative role of technology in our lives, growing global trade and mobility, and reduced renewable energy costs. Despite these developments, the world is suffering from sluggish economic growth, a slowing in multinationals’ earnings potential, and far too many restrictions on broad-based wealth creation, Mr. Thursby argued.
To change this scenario, Mr. Thursby called on countries and businesses to shift their focus on cities to pave the way for a more decentralised urban model where cities become the power brokers of the future. He also urged policymakers and the financial industry to nurture entrepreneurs and SMEs, and for governments to create smart policy and innovative regulations that remove barriers to business development.
Today, the greatest opportunity can be found in “new centres of power, young cities” and in the fast growing economies along the West-East corridor, with 2 billion of the world’s youth living in 48 of the world’s least developed economies, the Group CEO said.
In the next five years, growth in emerging markets is forecast to be more than double that in the developed world. These markets are becoming increasingly interconnected, powered by trading and economic blocs, Mr. Thursby noted.
“Fundamentally, success will be measured by how we broaden and connect markets, reward those who take risks, incentivise long-term investment, and most importantly decentralise economic development that improves the living standards for everyone,” he concluded.
After the CEO speech, Pulitzer Price winning energy expert and Vice Chairman of HIS spoke about “The age of Energy Insecurity” followed by a Q&A session with the audience. Fatima Al-Foora Al Shamsi, the UAE Ministry of Energy’s Assistant Undersecretary for Electricity Clean Energy and Desalination of Water, covered various topics on renewable energy.
Renewables are the answer
Debating the relevance of renewable energy in a world of falling oil prices, Michael Liebreich, Founder and Chairman of the Advisory Board of Bloomberg New Energy Finance, touched upon the surging investment in renewables, the progress made in terms of energy storage, storage costs, the development of Tesla’s electric cars, and China’s growing importance in the market.
MrLiebreich said that clean technology is getting cheaper and cheaper. He also argued that air pollution was an issue facing major global cities and not only Beijing, and electric cars were the solution. Despite advances in adopting the technology, implementation around the world has been limited. However, the tide is shifting. “I think in the short-term electric vehicles are a tiny miniscule of cars on the road. Their impact on oil demand in 2017, 2018 or 2019 will be almost nothing, but when you look at longer term oil projects being cancelled to 2035 or 2040, we have a very different view of vehicle names and oil demand,” said Mr. Liebreich.
China, on a drive to invest heavily in clean energy, is starting to buy electric cars and is the fastest growing market for e-vehicles. By 2030, electric cars will comprise 80 per cent of the total number of cars in China, Mr. Liebreich noted, citing chinese official figures. Although he personally doubted the accuracy of the optimistic figure, he could see an “enormous push” in the country for electrification, with huge e-buses being deployed, while it is also more than likely Chinese oil demand will peak near to 2025. Other big markets might follow this trend. By 2040, around 45 per cent of vehicles being sold are expected to be electric, Mr. Liebreich noted.
Avoiding European disintegration
YanisVaroufakis, Former Minister of Finance in Greece, spoke about the challenges faced by Europe, including the migrant crisis, debt, currency, Brexit and the future of the European institutions. MrVaroufakisrecapped the political pressure his government was subjected to, to prevent the restructuring of the country’s public debt.
When the moderator Mark Blyth, Eastman professor of Political Economy at the Watson Institute for International Studies and Brown University asked the question of why Europe was following a policy of austerity when the rest of the world and the IMF itself agreed that it did not make any sense, MrVaroufakis explained that the European Unionwas focused onhow to pretend they are enforcing rules known to be impossible to enforce. “Europeans countries pretend their economies are solvable by means of piling up more unsustainable debt”, he said.
Concerning the migrantscrisis, MrVaroufakis said that while poorer countries like Jordan, Lebanon and Turkey were able to take millions ofrefugees, the reason why rich European countries could not, is because of their “terrible architecture”.
As to breaking the structure and starting all over again, the minister warned against European disintegration, because it would push everybody back to the 1930s he said. “Millions of working poor in Eastern European countries would become millions of unemployed poor,” he said, with high inflation and would benefit growing radical nationalistic movements in Europe. He also said that a Brexit would not help Great Britain escape European problems but only accelerate them and still drag Great Britain down with them.
Time to calibrate
For a panel discussion on the regulatory environment and its impact on doing business, Richard Teng, CEO of Abu Dhabi’s Financial Services Regulatory Authority (ADGM), joined RashedAbdul Kareem Al Baloushi, CEO of Abu Dhabi Securities Exchange (ADX) and Alex Thursby, Group CEO of NBAD.
Mr. Thursby kicked off the discussion by highlighting the need for “calibration” in today’s financial industry, which is yet to regain people’s trust in banking after the 2008 downturn. Stringent regulations on capital is concerning and is causing more volatility in the market, he noted. On whether banks are ready for Basel 3, a set of voluntary regulatory reforms tackling bank capital adequacy, stress testing, and market liquidity risk, Mr. Thursby expressed skepticism of seeing a full agreement for implementation, even among G20 countries. Regulators also need to address key challenges such as cyber security and global liquidity, he said.
For his part, Mr. Teng highlighted the ADGM’s unique value proposition as an emerging financial hub and the access it provides to local capital. “With the benefit of Abu Dhabi’s political security and stability, we have become a natural magnet for financial institutions looking to service the region,” Mr. Teng said.
The ADX’s Mr. Al Baloushi said there is a consistent uptick in the number of international investors opening accounts with the exchange. The market continues to be attractive for foreign institutional investors, with the value of shares they own increasing to AED 40.1 billion, he said.
Vikram Mansharamani, Lecturer at Yale University followed the session by making 16 predictions in 16 minutes for 2016.In a Q & A session with the audience, Alastair Newton, Co-founder and Director of Alavan Business Advisory Ltd and former diplomat, thenspoke about various global geopolitical challenges, including the outcome of US elections, Russia’s internal and international issues, regional tensions, as well as Chinese and European challenges. Mr. Newton predicted that Hilary Clinton would become the next American President but that Donald Trump’s voice will remain. He also thought that Great Britain would vote to stay in the European Union but showed concern about Denmark and right wing nationalist parties.