Hong Kong, China - December 11, 2013 - One of the things I am often asked by clients and people from within KPMG is what the big trends affecting business over the coming twelve months will be. While it is never easy to predict with certainty what is likely to happen, I believe that as business prepares for 2014 there are some trends that will impact global growth and which business should be ready for. Over the last year, we've seen a lot of change. I've already written on LinkedIn about China's reform agenda, which will continue to be watched with great interest, and of course the continuing emergence of new economies. Looking beyond these ongoing issues, I see ten big trends for 2014, which I've summarised below (in no particularly order of significance): Shale Gas Revolution, Industrialisation of the Internet, QE Tapering, Free Trade Chess, Big Data, Infrastructure Revolution.
Hong Kong, China - December 11, 2013
|Photo courtesy Michael Andrew / Getty Images / Glowimages
By Michael Andrew
|Michael Andrew, Global Chairman and CEO at KPMG.
Photo courtesy Michael Andrew
Global Chairman and CEO at KPMG
One of the things I am often asked by clients and people from within KPMG is what the big trends affecting business over the coming twelve months will be.
While it is never easy to predict with certainty what is likely to happen, I believe that as business prepares for 2014 there are some trends that will impact global growth and which business should be ready for.
Over the last year, we’ve seen a lot of change.
I’ve already written on LinkedIn about China’s reform agenda, which will continue to be watched with great interest, and of course the continuing emergence of new economies.
Looking beyond these ongoing issues, I see ten big trends for 2014, which I’ve summarised below (in no particularly order of significance):
Shale Gas Revolution – recent advancements in technology are having a profound effect on the global economy.
The reduced price of domestic energy is helping to continue a shift of manufacturing back to the US.
This reindustrialisation has led to a rise in wages and productivity – aiding the US recovery. That the US could also be the world’s largest oil producer and entirely energy self-sufficient by 2015 is likely to cause dramatic shifts in the global energy market and geo politics.
Industrialisation of the Internet – the much talked about next phase of the internet is set to have a major impact on, amongst other things, high-tech manufacturing.
The ability to monitor and track for example wear and tear of parts in machines will help to dramatically increase productivity, keeping machines online for longer and reduce stops in manufacturing.
Intelligent machines and soft analytics will also have a major impact in areas such as healthcare, where for example patient scans can be sent directly to doctors and assessed before the patient is back in their bed.
QE Tapering – for better or worse, the world’s financial markets have been addicted to the cheap money that has been flowing into the global economy, as the US and other developed nations embarked on round after round of money printing.
We saw in Asia the momentary panic which threatened to infect markets when the prospect of US QE tapering was raised a few months ago.
In 2014 the Fed is expected to gradually slow this supply and the world is going to have to learn to live without it.
Free Trade Chess – the future of free trade will increasingly hinge on free trade agreements (FTAs).
During the past year we’ve seen several regions and nations start to discuss tie-ups guaranteeing free trade, reducing tariffs and promoting shared IP.
FTAs are becoming the most coveted of international agreements.
Only last week David Cameron was in China making a strong pitch for the speedy advancement of talks between the EU and China on a free trade agreement.
Other important trading blocs are also coming to the fore, not least the ASEAN region which is expected to shortly become one of the world’s top ten economies when in 2015 the ASEAN Economic Community becomes active.
Big Data – everywhere a business looks it can find data, so much data in fact that it is often hard to know what to do with it.
The value of data is no longer in the ability to store it, but in the insights which you can derive from it using the right analytics.
A recent survey commissioned by KPMG International found that 96% of businesses believed there were untapped benefits of data on the table.
This is an astounding figure, and it shows there is still a huge amount to be gained by businesses who can extract real value from the data they and their customers create.
Infrastructure Revolution – as the global recovery continues to gather pace I expect to see an even greater focus on infrastructure.
We’ve already seen China invest heavily in infrastructure over the last few years; India is also now making significant investments, as is Brazil – spurred on by the need to be ready to host the 2014 World Cup.
A recent HSBC report identified that emerging Asia alone is likely to need US $11 trillion in basic infrastructure investment between now and 2030.
Meanwhile the World Bank has calculated that a 10% increase in infrastructure provision can result in a 1% increase in output.
Global PPP models need to develop in order to better link long term savings with secure long term asset returns.
Climate Change Back on Agenda – the global financial crisis, both helped and hindered the climate change agenda, one effect of the crisis was a (short-term) reduction in greenhouse gas emissions, however, the bigger problem was that climate change slipped down the agenda.
Governments became less concerned about CO2 emissions and more worried about unemployment and interest rates.
But in the last few years huge investments have been made in green energy across Europe, solar power and technologies are now one of China’s most famous exports – the climate change agenda certainly has not stood still.
In 2014 I think it will be right back at the top of business and government’s agendas, where it should be.
Africa – I’ve had the pleasure of visiting Africa on a few occasions over the last year, it is clear to me that it is a continent that is finding its role in the global economy, with many countries now enjoying long and stable periods of democracy. I visited Nigeria earlier this year and was amazed at its development, the urbanisation of Lagos is on a par with any major Chinese city. You can see how the whole continent, led by some strong examples, such as Nigeria, Ethiopia, Kenya and South Africa is really taking off.
India and Indonesia – both these countries will hold important elections during 2014, the outcomes of which will have a profound impact on the direction of their economies for years to come. In India a general election will see the incumbent Prime Minister, Manmohan Singh come up against strong opposition in the form of the Nerendra Modi led BJP Party. After years of less than impressive growth, this could be the election that allows India to live up to its BRICS potential – which arguably it never has. Reform of the economy will likely be at heart of the election debate. Indonesia meanwhile will elect a new President with the incumbent, Susilo Bambang Yudhoyono, constitutionally blocked from seeking a third term, the current favourite in the polls is Joko Widodo, the current Governor of Jakarta.
Smart regulation – finally, I hope there will be some real progress in 2014 in the area of smart regulation. It's a topic I found myself talking about a lot during 2013, it started back in January when I was on a panel looking at this area at the World Economic Forum. Smarter regulation doesn’t mean less or more regulation. Good and smart regulation assists the markets to function efficiently, in order for this to work regulations need to be built with consideration of the long term and/or unintended impact. We need to encourage business to take calculated risks and to introduce more leverage into the capital markets.
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