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"We need to remove obstacles. We have to open the windows; we have to breathe deeply the fresh air. And we have to seize the opportunities." Angela Merkel (session I webcast), Federal Chancellor of Germany
The confluence of mood and world events, made discussions at this year's Annual Meeting even more focused than usual. With over 240 sessions covering eight subthemes and involving leaders from business, government, international organizations and many other communities, participants sought to apply fresh thinking to pressing global challenges.
The eight sub-themes of the Annual Meeting 2006 comprised five challenges and three responses. The challenges include the Emergence of China and India, the Challenging Economic Landscape, New Mindsets and Changing Attitudes, Creating Future Jobs, and Regional Identities and Struggles. The responses include Building Trust in Public and Private Institutions, Effective Leadership in Managing Global Risks and Creativity, Design Strategy. In this summary, we highlight key messages emerging from participants on these eight sub-themes. Following this, we further delve into each theme concerning each of the five challenges and then separately consider the three responses. |
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| Challenges |
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 | The Emergence of China and India
"The story has moved beyond GDP growth rates... the emergence of China and India gives the world an opportunity to experiment and make sure that there is equitable wealth generation." Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited
These two very different, yet rapidly growing countries face enormous challenges as they restructure and integrate their economies into the global system. For China to continue to grow it must expand domestic demand, reduce its reliance on exports and foreign direct investment for growth and further reform financial systems so consumers can spend some of their savings and privately held businesses can finance their growth. Consequently, the government will need to find a balance between structural reforms, social equity and statist control. India continues to face poor infrastructure, deregulation and bureaucratic corruption. It may be the "fastest growing free market democracy" the world has ever known, but its leadership must respond rapidly to create jobs and reduce income disparities. |
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 | The Changing Economic Landscape
"Two things move the world, and two things move economies: hope and fear. In the short run in financial markets I fear that we have too much hope and too little fear." Lawrence H. Summers, President, Harvard University
Given US influence on the global economy, its current account deficit of 5.7% of GDP in 2004 or US$ 666 billion, continues to concern policy-makers in Washington DC and abroad. China’s economy is still too small to counter a possible US slowdown, and Europe and Japan, while perhaps improving, are currently too slowgrowing to drive the global economy forward. Moreover, the major economies are struggling to keep fiscal promises as their pension and healthcare bills grow. Inequities in trade and increased competition for natural resources mean risk is rising – especially to the environment. While the world economy has proven resilient enough to absorb a sustained US$ 60 a barrel for oil, participants were quick to agree, if prices rise further and stay high, the effects will hurt. |
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 | New Mindsets and Changing Attitudes
"I have been seeking to change... the mindset that international relations are nothing more than relations between states, and the United Nations is little more than a trade union for governments.” Kofi Annan (webcast), Secretary-General, United Nations
The 21st century will be about managing the implications of a shrinking yet more fragmented and complex world. Individual states have less influence than in the past and are subject to the wider interests of regional or economic groupings. Institutional frameworks designed to respond to cold war threats are not appropriate to deal with global warming, international terrorism or poverty reduction. Leaders themselves will need to learn or re-learn skills if they are to drive organizations to innovate and adopt new ideas. For policymakers in the developed and developing world the challenge will be to create educational curricula that will provide today’s youth with the tools they will need tomorrow. |
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 | Creating Future Jobs
"Cities like Shanghai are saying, ‘We need 20,000 experts right now and if you can find them abroad, we’ll give them work permits’. They are doing the first – that I’ve seen
worldwide – rigorous forecasting of skill requirements and … channelling people into the right vocational skill lines for future requirements.” David Arkless, Executive Board Member, Manpower
The challenge for many countries is not only what new jobs they create, but also how these jobs translate into livelihoods. And with the total global workforce having doubled over the last five years, pressure on wages is likely to continue. So where are the jobs of the future? With fiscal budgets already stretched, they are unlikely to come from the public sector. But policy-makers can play an important role in providing the environment for the private sector to create jobs. More generally, both developed and developing countries will need to re-examine education strategies to build the skills necessary for the future. |
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 | Regional Identities and Struggles
The challenge that has dominated the headlines is … a minority group of extremist Muslims who have taken upon themselves to distort Islam in order to justify violent action… And I think this has led the Muslim world to a very critical crossroads of self-evaluation and self-definition and to really look at what it is that we stand for. And this has led to a reaffirmation of the basic principles of Islam.” H.M. Queen Rania (webcast) of the Hashemite Kingdom of Jordan
Closing regional income gaps will require regional cooperation, coordination and compromise. Trade is key but targeted investment in infrastructure, education and easier access to capital are also important concerns. But, without geopolitical stability, regional cooperation efforts will be hampered. The Hamas election victory sparked reactions from many, though some saw this as a moment to trigger change. However, Iran, whose absence from the meeting served to accentuate the gravity of the current situation, drew most attention. Experts warned that, whatever the outcome, the consequences for the region and the international community will be significant. |
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| And from Where Will Responses Come? |
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...Through Building Trust in Public and Private
Institutions
"The unfortunate thing is that companies haven't done a good job of building the [public's] trust by managing themselves in a positive way." Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School
Evidence shows public disenchantment and mistrust of institutions and business is growing. In the developing world, corruption and inefficiency threaten to overwhelm trust. In industrial countries, economic change spurs fears of a broken social contract. If not addressed through truly collaborative solutions, global leaders face a potential political backlash. |
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...Through Effective Leadership in Managing
Global Risks
"The basic ingredient of a leader, I personally feel, is that he should never panic... whatever the problems, whatever the circumstances..." Pervez Musharraf (session I webcast), President of Pakistan
In a globalized world, risks cannot be dealt with in isolation. Despite increased attention and some success in mitigating, if not preventing calamity, new risk frameworks are still in their infancy. Recent natural disasters in Asia or the US and public concern about pandemics, are further proof that today’s international institutions and frameworks are not designed to respond to the nature, or the frequency, of the risks that lie ahead. What is clear is that the way in which organizations mitigate, manage and respond to risk is a source of differentiation. |
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...Through Innovation, Creativity and Design
Strategy
"Today, if you don’t innovate, you're just going to die." Barry S. Sternlicht, Chairman and Chief Executive Officer, Starwood Capital Group
Finally, the frameworks and assumptions upon which leaders in business and government have long depended to make
decisions are no longer adequate. The economic and political context in which businesses and government institutions seek to compete or otherwise serve their constituents has fundamentally altered; new models, new leaders and new mindsets are necessary. As the world reacts to a new emerging architecture and creativity increasingly drives the economy, tomorrow's leading companies and institutions will be those who seize the courage and capability to adapt. |
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| "Do we need to worry? Of course we need to worry ... We know that terrorists are highly sophisticated and are interested in acquiring nuclear weapons or nuclear material ... What you have to do is simply to cross your fingers and prioritize." Mohamed M. ElBaradei, Director- General, International Atomic Energy Agency |
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