Back from Davos - Europe takes an optimistic view

Inspite of over 500 reporting journalists from 120 countries covering the World Economic Forum held in Davos, publishing a scorching 200,000+ articles on it, the gathering still holds an element of mystery to most people. This leads to the forum often being misunderstood and not being seen for what it really is - the world's foremost platform for dialogue and building trust between the gathered 3000 business, government, academia, media and civil society leaders.

To demystify Davos, the European Business Summit holds an annual event in Brussels called "Back from Davos" which invites a prominent European leader to share what was discussed at the forum and what it means for the region. As a Strategic Partner to both the World Economic Forum and the European Business Summit, Tata Consultancy Services was privileged to support this event.

View from the European Commission, EBS & Tata Consultancy Services

The 2019 edition of Back from Davos was fortunate to have Mr. Carlos Moedas, the EU Commissioner for Research, Science and Innovation, who addressed the gathering of 200 leaders from the various EU institutions, business, think tanks and academia. While his comments were made under chatham house rules and can not be reproduced here, the Brussels Bureau Chief of the Wall Street Journal, Mr. Daniel Michaels, took him through a range of issues ranging from space exploration and startups to the EU's leadership position on climate change. The commissioner was positive and inspiring, fuelling an optimistic sentiment related to Europe's strong fundamentals, inspite of a full range of challenges it faces in 2019.

The Director General of the European Business Summit, Mr. Arnaud Thysen, shared his perspectives from Davos, particularly on the issue of public trust and on what Globalization 4.0 means for Europe. 36% of delegates at Davos were from European countries, making it the largest and most engaged bloc followed by the United States with 26% and the BRIC countries with 10%. EBS was also present at a major event hosted by HRH King Philippe of Belgium and the Prime Minister of Belgium, Charles Michel.

Representing Tata Consultancy Services (TCS), I had the privilege of sharing our experiences from Davos and the growing conversations around digital technologies. TCS conducted two important summits at Davos, in partnership with MIT on Blockchain and Artificial Intelligence and in partnership with Brand Finance on the role that CEOs and Boards have to play in strengthening public trust. These events gathered 500 top leaders in engaging conversations that will continue to echo across the year.

Image: TCS, Forbes and MIT Data Trust Consortium's Summit on Artificial Intelligence and Blockchain at the World Economic Forum.

While the conversations and engagements are always excellent at Davos, there are often questions by people on whether anything tangible gets accomplished there. At the Back from Davos event, I highlighted two examples of concrete outcomes from Davos towards the 4th Industrial revolution, that are of particular relevance to Europe:

a) Closing the Skills Gap: The single largest obstacle to the fourth industrial revolution is the growing deficit of skills towards new technologies. The demand for Data scientists, Artificial Intelligence researchers, IOT engineers etc. is far outstripping the supply in the labor markets worldwide. 35% of the skills demanded by industry will change by 2020. Working with the World Economic Forum, TCS supports an initiative to have companies reskill their current and future workforces. Last year at Davos 2018, this initiative set a target of reskilling 10 million people by 2020, and we were pleased to report that in just one year, this target had aready been overachieved, with 17 million pledges in place. You can find more on this website: https://closingtheskillsgap.org/

b) Factories of the Future: Over the past year, the World Economic Forum has evaluated over 1000 manufacturers across the world, finally identifying a set of 16 sites, which it has adjudged Advanced lighthouses of the Fourth Industrial Revolution. These facilities have been the foremost adopters of advanced digital technologies and are showing the way to others on what the factories of the future will look like. Impressively, an overwhelming 9 out of these 16 facilities are based in Europe, showing how the region is leading from the front in the manufacturing space.

These include BMW, Schneider Electric, J&J, Rold, Sandvik Coromont, Phoenix Contact and Bayer. Proudly our client and sister company Tata Steel's IJmuiden facility in the Netherlands is also part of the list. I had the opportunity to speak to their CEO in Davos, who explained to us what lies behind his recognition.

This remarkable achievement by Europe's manufacturing houses is best marked by this quote from the World Economic Forum: "The geographic distribution of the “lighthouses”demonstrates that while Europe has struggled to produce its own home-grown internet giant, the region remains a powerhouse when it comes to applying advanced technology to manufacturing."

Europe - More Reasons for Optimism

In a year that will see the European elections take place, the Brexit deadline come up and a change in administration at the European Commission, no one can deny the many challenges that Europe faces. The latest Eurobarometer, a periodic bi-annual survey of Europe's citizens, states that the top 5 issues of main concern for Europeans are Immigration, Terrorism, State of Public Finances, the Economy and Climate Change.

Yet this largest of its kind survey of 27 thousand people, and other reports from the Commission also indicate 4 reasons to remain optimistic:

1. Growing Trust in the EU: Public trust in the EU has continued to be stabilize over 2018, back to the levels seen in 2009. Over 2018, the trust in the EU has increased in 12 member states, with 17 member states showing a majority position in terms of trust in the EU. Overall, trust in the EU (42%) is higher than trust in National governments (35%). Notably, an overwhelming 71% of respondents expressed a feeling of being citizens of the EU, representing a clear majority in each of the member states. (see chart below, source; Eurobarometer, Nov 2018)

The top five positive results of the EU cited by its citizens are: The Single Market, Peace among its members, the Euro, the Erasmus Student programme and the Economic power of the EU.

2. All time high support for the Euro: At 75%, the support for the single currency, the Euro, is at a 15 year high inside the Eurozone, reversing the downward trend seen after the 2008 financial crisis. Over the course of 2018, 15 of the EU28 countries have seen a strengthening of this support, with Finland leading from the front at 82%. (Source: Eurobarometer, Nov 2018)

3. Dropping Unemployment: The EU-28 unemployment rate stood at 6.6% in December 2018, the lowest since the start of the EU monthly unemployment series in January 2000. The last five years in particular have marked a strong trend of job creation, with an estimated 12 million new jobs being generated since 2014. (Source: Eurostat)

4. Changing Economic Sentiment: While showing some recent weakening towards the end of 2018/start of 2019, over the last 5 years the annual GDP growth rate in the EU has hovered around or above 2%, marking a relative recovery from the financial crisis. While announcements in January 2019 have shown downward revisions of economic forecasts and the possibility of a recession in countries like Italy, there is yet an underlying reason to be hopeful. The Eurobarometer survey shows an ongoing change in sentiment, with a larger number of EU citizens believing their national economies were in a good situation versus those who think they are in a bad situation. This marks a swap in positive sentiment overcoming negative sentiment for the first time since 2007 (see chart below). As Nobel laureate and Economist Robert Schiller shared in his pathbreaking research on Narrative Economics, narratives have an overwhelming impact on human behavior, even economic behaviour like spending and investing. If Europe's leaders can tap into the underlying positive sentiment and create an optimistic narrative this year, they have an opportunity here to forge a more positive future outcome.

Globalization 4.0 versus the 4th Industrial revolution

The theme for Davos this year was Globalization 4.0: Shaping a new architecture in the age of the 4th Industrial Revolution. In a way, this theme embodies the very duality that the world faces. In Globalization 4.0, we need to confront the heads winds of trade frictions, Brexit and declining influence of the multilateral order that has held the world together over the past seven decades. While in the Fourth Industrial Revolution, we see the largest economic opportunity of our times - driven by advances in digital technologies. Indeed, for TCS our operations in the EU28 have been our fastest growing markets worldwide over the past few years, spurred on by our Business 4.0 strategic framework.

There is no denying that many risks do abound as we go further into 2019; however, given all the trends above, it is also hard to deny the optimist's view that the glass is at least half full for Europe. As Commissioner Moedas pointed out at Back from Davos, there is much to be hopeful for and look forward to. I agree.

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Image: The EBS and TCS team with Commissioner Moedas. (L to R), Jipson Mathew (CEO, TCS Belgium), Arnaud Thysen (Director General, EBS), Carlos Moedas (Commissioner for Research, Science & Innovation, European Commission), Abhinav Kumar (CMO - Global Markets, TCS) and Vidhya Sampath (Director of European Affairs, TCS)