Plenty of food for thought at WEF discussions

Frank Kane writes about two sessions at the World Economic Forum global summit in Abu Dhabi that proved to be stimulating, informative and thought-provoking.

From the smorgasbord of ideas, discussions and opinions at the World Economic Forum global summit in Abu Dhabi, I took in two particular sessions that proved to be stimulating, informative and thought-provoking – exactly what the WEF is intended for. Both had obvious and succinct lessons for the UAE in its economic development strategy.

The first was on a topic prominently on the minds of policymakers in the capital and in Dubai: the explosive growth of urban centres in the global economy, and the challenges this will present in the decades to come.

“Future cities” will involve more than 2 billion extra residents by the year 2050, the expert panel reported, while asking: how to harness the positive economic, creative and cultural dynamics of this unprecedented migration, while at the same time building resilience and social fabric.

Razeen Sally, from the Lee Kuan Yew School of Public Policy at the National University of Singapore, noted that this urbanisation “mega-trend” was happening almost entirely outside the western world, and was mainly affecting medium-ranking cities with populations of 5 million to 10 million people, rather than the bigger metropolises of 20 million-plus.

A recent study identified the factors that make some cities attractive places to live and work: the business climate; the attitude of decision-making institutions and infrastructure, both “hard” in terms of physical buildings and transport systems, and “soft” in terms of connectivity and culture.

Singapore, Abu Dhabi and Dubai were “rip-roaring successes” on these criteria, Mr Sally said, while other urban centres in some Asian centres suffered from “sprawl”, poor connectivity, bad planning and inefficient and corrupt public authorities.

Incidentally, he thought that Detroit, long held up as the epitome of the failed city, was actually running itself around. “The mood in Motown has changed completely,” he said.

That led to a discussion of how best to plan a new urban development, and Mr Sally noted that while the so-called “great” cities of Europe – London, Paris, Rome – were in liberal western countries, when they were first founded and for much of their growth they were part of authoritarian political entities. Western-style democracy is not a prerequisite for urban success, it seems.

The next session was on another topic top of the list for economic policymakers in the UAE: are we ready for the next global financial crisis?

There was the promise of controversy on this panel, with Louka Katseli, chair of the National Bank of Greece, confronting Beatrice Weder de Mauro, former economic policy adviser to the German chancellor Angela Merkel turned professor at the University of Mainz.

But actually the two of them, despite the bitter relationship between their countries over the Greek financial crisis, mainly agreed that the European Central Bank had done a good job in helping to settle Europe’s ailing economy, and could be relied on in any future crisis. I’m not sure I agree with them on that.

But the fireworks came from the third panel member, Belarusian-born Aleh Tsyvinski, currently economics professor at Yale University in the US. For Mr Tsyvinski, one of the rising stars of the global economics scene, the issue is not about financial threats, but about growth, particularly Chinese growth.

“Chinese stock market worries, and fears about the real estate and banking sectors will be non-existent as long as the country can keep growing its economy,” he said, counter-intuitively. Chinese growth would continue in the 7 to 10 per cent range in current circumstances, and even the “worst-case scenario” – a return to the economic polities of the Mao Zedong era – would be subject to growth of 5 to 6 per cent, he believed.

What are the fundamental signs that a financial crisis is looming? The Greek and the German agreed again that national current account deficits and growing levels of private sector debt were early warning signs of a looming financial crisis, but the Belarusian again took a different stance.

“I don’t believe economists can predict crises, and this has been proved by numerous studies. And the evidence confirms that no early warning system should have told us in 2007 there was a financial crisis looming,” he said.

Sobering stuff. Looks like we’re just going to have to grin and bear it again.

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