Shaky world recovery tops agenda

Inflation, asset bubbles, jobs are big worries

By Ravi Velloor

DAVOS (SWITZERLAND): The Waldhotel at the back of the World Economic Forum's (WEF) Congress centre was once called the Waldsanatorium.

It is a reminder of the old days when the mountainside resort of Davos was favoured by people being treated for pulmonary diseases.

But for the last four decades, Davos has served as something of a pilgrim centre for the key people who manage the state of global economic health, a place where government and industry leaders and scholars converge every January as though to check out one another's New Year resolutions.

Hence it is quite appropriate that this year's five-day conference, which opened yesterday amid a blanket of snow, is themed 'rethink, redesign and rebuild' the world.

Prominent Singaporeans who will lend their minds to this year's conference include Government of Singapore Investment Corporation deputy chairman Tony Tan, Foreign Minister George Yeo, Lee Kuan Yew School of Public Policy dean Kishore Mahbubani and National University of Singapore president Tan Chorh Chuan.

With the chill of the global crisis that many feared would lead to a Second Great Depression, the WEF has gathered this year's summit around six streams. Values and people are one. Economic and social welfare, global risks, security challenges, resources and sustainability, and new institutional approaches complete the rest.

In some ways, Davos is playing catch-up with the Group of 20 process. But the Davos agenda, which used to focus on celebrating capitalism and open markets, is now getting wider and more introspective. And each of the issues is so critical they all bear iteration at every global forum.

Take security. On Tuesday, the head of Davos police was found dead in his hotel room and although initial reports pointed to suicide, investigators will doubtless check every other angle with world leaders gathered here.

Or take global risks. The International Monetary Fund has just issued an upbeat assessment of the global economy, centred on growth in the United States, China and India. But with jobs and consumer spending in the US still a point of worry, the economic ground is as slippery as the snow here.

This week, Nobel Prize winning economist Paul Krugman, the man who accurately called the Asian economic flu 15 years ago, turned on his former departmental head at Princeton University, Mr Ben Bernanke, for another reason. The chairman of the US Federal Reserve, Professor Krugman complained, was in danger of letting the US financial sector lapse into its bad old ways just after supervising a miraculous recovery of the industry.

From Asia, global heads will be looking for cues on its hottest prospects, the fast-expanding Chinese and Indian economies. Chinese Vice-Premier Li Keqiang's comments are bound to be read very carefully. Last year, his boss, Mr Wen Jiabao, lectured the Western world for causing the financial crisis. Now there are fears that asset bubbles are building in China as well, a factor that has hurt market sentiment across Asia.

Inflation is emerging as a major worry in both China and India, and central bank action to contain price rises, it is feared, may also cool growth by choking off credit or making it more expensive.

Mr Li will surely also be pressed on whether Beijing will allow a quicker appreciation of the yuan's value, as much of the world demands.

Source: Straits Times, 28 Jan 2010.