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Highlights from day 2 of the Davos WER

posted 27 Jan 2011, 10:57 by Sam Mbale   [ updated 27 Jan 2011, 11:00 ]

World leaders warned on Thursday, the second day of the World Economic Forum Annual Meeting in Davos, Switzerland, that soaring food prices risked stoking unrest and even war, citing recent events in Tunisia and Egypt as urgent examples that some type of regulation is needed. Lessons learned during the ongoing recovery from the economic crisis were high on the agenda as well.

DAVOS-KLOSTERS, SWITZERLAND - One of the greatest potential destabilising forces for the world economy is the rise and instability of commodity prices. Indonesian President Susilo Bambang Yudhoyono said Group of 20 nations should focus on food and energy security to avoid conflict, as rising populations increase competition for natural resources. The world's population is on pace to reach 9 billion people by 2045, with more than half located in Asia. "The next economic war or conflict can be over the race for scarce resources if we don't manage it together."

French President Nicolas Sarkozy also focused on commodity prices. He called for regulation to rein in excess speculation and volatility in world prices for key commodities. Sarkozy, who holds the chair of both the G20 global economic forum and the Group of Eight major industrialized economies, said that speculation and poverty fed off each other. It was not logical that the financial industry saw the need for regulation of some financial derivatives but not those from commodities. Noting recent extreme swings in oil, grain and other commodity prices, Sarkozy said regulators needed to step in. "Regulation. Not an excess ... but regulation," he said. "We should put in that transparency. Let those who buy big quantities of commodities commit to putting on deposit part of the financing for those commodities."

Another element of the New Reality is being prepared for the next crises. Looking at recovery from the current debt crisis, JP Morgan Chase Chief Executive Jamie Dimon said the European Union is right to try to resolve the euro zone's debt crisis without restructuring that would force banks to take losses, "I think Europe did the only good choice, which is to get through this crisis, because if you don't fix it here, you're going to fix it there, which is in the banking system," he told an interactive session on "The Next Shock: Are We Prepared?". "I think that would be far too risky," he said, citing the weakness of the financial sector and the risk of triggering unpredictable capital flight and a banking crisis if countries were forced to restructure their debt.

In a panel discussion on how to restore European cohesion following recent turbulence in the Euro zone, European Central Bank President Jean-Claude Trichet echoed comments by Britain's Deputy Prime Minister Nick Clegg. Trichet said stronger governance was essential; but paradoxically, in its fiscal position, the Euro zone is in a better position than the United States and Japan.

A session on Russia's steps to modernisation looked into that country's growing attractiveness to investors in the post-Soviet age. There was discussion of disincentives such as lingering corruption, and security concerns following this week's Moscow airport bombing. But there was high praise for today's business environment in Russia from Indra Nooyi, CEO of PepsiCo, which only the day before had received confirmed approval from the Russian government for its acquisition of a controlling share of Wimm-Bill-Dann Foods, Russia's leading branded food-and-beverage company, a deal which took mere weeks to complete. Russia's First Deputy Prime Minister, Igor Shuvalov - standing in for Prime Minister Medvedev - said Russia still had an image problem in global media, but the reality was much more positive.

China's impact on world trade came under scrutiny at a discussion marking the 10th anniversary of the People's Republic joining the World Trade Organisation. China's Commerce Minister Chen Deming outlined a decade of rapidly growing participation in international economic activity. China's investment abroad had increased more than 60-fold over this period, he said, adding that his country was "going international".

Water security is an issue which has climbed up the Davos agenda in recent years. At a press conference on the subject, there was a stark warning to politicians for threatening future water supplies by favouring cultivation of biofuels. Nestlé Chairman of the Board Peter Brabeck-Letmathe pointed out that food and energy prices are linked to water availability. Future concentration on biofuel cultivation would have a disastrous effect on food prices, the cause of recent events in Tunisia, Egypt and elsewhere, he added.

Former US president Bill Clinton, who is currently the United Nations Special Envoy to Haiti and co-chair the Clinton-Bush Haiti Fund, told the Forum audience that he is not satisfied with the progress made in Haiti in the year since the devastating earthquake there. But he said that whatever progress that has been made can be sustainable as long as there is political agreement and a sustained effort by the private sector as well, which has pledged over $100-million to the relief and rebuilding effort.

On the opening night of the Annual Meeting on Wednesday, 26 January, opera singer José Carreras and musician A. R. Rachman received the World Economic Forum Crystal Award 2011. They were honoured for their contribution to the world of arts and culture and for reaching out to other cultures, supporting the Forum's mission to improve the state of the world. "Countries that work to eradicate poverty and help the poor are the best," said Rachman after Hilde Schwab, President and Co-Founder of the Schwab Foundation for Social Entrepreneurship, presented him with the award. Carreras was honoured for his work to fight leukaemia. He said opera singers were privileged, and it was their duty to use their popularity to repay society. Carreras then treated delegates to a performance of a Neapolitan song, Passione.

Comprehensive information about the Annual Meeting 2010 can be found on the Forum website: