Forward Agenda, May 2018
Workers participate in a Mayday rally in Jakarta, Indonesia May 1, 2018 Image: REUTERS/Darren Whiteside - HP1EE5107GXKH
Grüezi mitenand! Welcome to the World Economic Forum’s NEW monthly update - the Forward Agenda. Building on the success of the Agenda Weekly, each month my team will pull together the most relevant and insightful points on the global agenda and publish here on the 1st of each month.
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Global growth in 2018 is predicted to be nearly a point above its 3.0% post-crisis average. But global debt has risen to $164 trillion and in advanced economies, public debt is higher than at any time since the end of WW2.
- Cause for concern? More borrowing, means more confidence. Plus, with low interest rates, it makes sense for governments to load up on debt in their own currency.
- Caveat: Business isn’t borrowing at the same level as government and 75% of growth in loans to the private sector is from China. And India’s growth story is still fragile.
- Forward view: The assumption that rising GDP lifts all boats is looking increasingly flawed. We need a model for growth that puts inclusion and sustainability at its core.
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Global trade posted its strongest increase since 2011 at 4.4%. But trade trouble between the US, China, and Europe risk undermining business confidence. Beneath the tit-for-tat on steel and soybeans, the tensions centre on intellectual property security and strategic technologies like AI.
- The real story? Trade tussles are not trade wars. US tariffs are only 0.25% of China’s GDP. Chinese counter tariffs are at most 0.3% of US GDP.
- China’s role: In Beijing, meeting World Economic Forum Executive Chairman Professor Klaus Schwab, President Xi Jinping vowed to continue China’s open approach to globalization, although its economy remains more protected than India’s and Russia’s.
- Two long-term plans that will impact trade: Made in China 2025, to grow its domestic market, and Belt and Road, to increase trade capacity across Eurasia, Africa, and the Indian Ocean.
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Korean peninsula: South Korean leader Moon Jae-in proposed a peace-treaty road map to end the state of war between DPRK and ROK, and provide a broader political context for the de-nuclearization talks. The peace initiative has the approval of President Trump, who continues his own plans for a summit with the DPRK leader.
- What could an agreement mean? A significant shift in NE Asia’s geopolitical balance of power, potentially including the withdrawal of some or all of the approximately 30,000 US troops stationed on the Korean Peninsula.
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China’s plans to lead in AI are progressing. Since presenting its ambitious 2030 plan, China has invested heavily in AI research and education. Chinese facial recognition company SenseTime raised $600 million from investors, making it the most valuable AI company in the world. China’s AI advantage is not only due to high investment – unregulated data protection makes it easier for AI companies to develop and market new products.
- What could change? A recent expert paper on AI policy argues that China should play a key role in global standard setting and regulation on AI.
- Forward view: China’s leadership position in the Fourth Industrial Revolution depends not just on its innovative capability, but how technologically ready its wider economy is.
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The US formally blamed Russia for a cyber-attack on internet infrastructure. The Trump administration is attributing cyber-attacks to foreign countries at a rate of 8 times that of the Obama administration.
- Forward view: Our Global Centre for Cyber Security provides a space for all actors to work together to build a safer cyberspace.
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Europe’s new privacy law, the General Data Protection Regulation (GDPR), comes into force in late May. As more cases of data abuse come to light, there are warnings of big changes to companies’ data collection and protection. GDPR only applies to EU citizens, but the bloc’s size will likely put pressure on companies to extend new rights further afield.
- Not just privacy: The tech sector faces at least three other major regulatory concerns: disinformation/free speech/impact on democracy, competition and anti-trust, bias and discrimination.
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The ‘War on Plastic’ is putting more pressure on consumer packaging. The UK is positioning itself to play a stronger international role announcing measures to clean the world’s oceans of plastics, establishing a new alliance, and proposing bans on plastic straws and cotton buds. China’s decision to ban the import of foreign waste has added pressure.
- Weak signal: Could plastic-eating microbes/ contribute to solving the challenge of plastic pollution?
- Forward view: In 2016, we raised the spectre of a future where oceans contained more plastic than fish. Here’s a map of the issues.
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The shipping and airline industries were left out of the Paris climate agreement. Now the International Maritime Organization has struck a deal to cut the shipping sector’s greenhouse emissions by 50% by 2050. That’s not yet in line with the global accord. It’s being framed as an initial strategy, with a long-term plan set to be adopted in 2023.
Ships carry over 90% of the world’s trade, producing just 3% of its greenhouse gas emissions. But many ships burn heavy fuel oil, so just 15 of the biggest ships emit more noxious gases (nitrogen and sulfur oxides) than the world’s cars.
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In Tokyo, the World Economic Forum’s new Chief Representative Officer, Makiko Eda, launched the Center for the Fourth Industrial Revolution Japan in collaboration with the Asia Pacific Initiative and the country’s Ministry of Economy, Trade and Industry.
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EarthTime, a new Forum-supported site, ties together diverse data layers to show the patterns and connections behind some of the major social and political trends of the past two decades – and how they are inscribed into fast-changing landscapes.
- Forward view: Understanding how the world is changing, and how these changes are inter-connected will determine humanity’s potential to build a sustainable future.
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The Fourth Industrial Revolution and military alliances: After the US withdrew military assistance, Pakistan responded by turning to China for advanced #4IR technology such as drones, stealth jets, and next-generation armour. As the quality and sophistication of Chinese and Russian military hardware approaches that of US-sourced equipment, states have options when it comes to supply. India used to import much of its military equipment from Russia, but it has increasingly switched to the US.
- Defence procurement is locking in new long-term alliances. As weapons systems get more complex, buyers need stable relationships to guarantee access to upgrades and servicing of equipment purchased years or decades previously.
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Climate in the boardroom: as we enter the US proxy season, board composition, executive compensation, and climate and environmental risk will feature high on the agenda. In 2017, 20% of shareholder proposals were environment-related (the largest category). For the first time, three measures introduced at energy companies received majority support as several large institutional investors shifted their votes.
- Sustainability concerns are real for shareholders and will consume more time in the boardroom.
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Watch out this month: the West Balkans is in the spotlight at an EU summit in Sofia mid-May. Six countries are candidates to join the bloc, with Montenegro and Serbia on track for entry in 2025. The region remains a strategic hotspot – Russia is an energy supplier, and both it and Turkey are looking on with interest at what EU enlargement might mean.
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