Activity Report 2011: Interviews

Figures for decision
Activity report 2011
Interviews
We have presented these interviews in their
original language so as to not distort the subject.
At the start of 2012,
the outlook for the world economy remains uncertain and highly divergent..
Most emerging economies have shown an upturn and while there has been moderate recovery in North America, prospects for growth
in Western Europe remain weak. Furthermore, countries in the West continue to struggle to restore their public finances. Their central
banks have been injecting massive amounts of cash into the economy, maintaining structural imbalances and inflating asset values.
For each country where Accuracy is present, an expert provides clarity and analysis in their field.
.
CANADA
THE NETHERLANDS
Mr Roland Lescure
Mr Dick Verbeek
Premier Vice-President and Head of Investments,
Caisse de dépôt et placement du Québec
President and member of the board of
several international financial services firms
UNITED KINGDOM
GERMANY
Mr Michael Ward
Mr Jack Artman
Director of Trade and Investment,
UK Trade & Investment
Senior Director, Head of M&A,
Infineon Technologies AG
FRANCE
Mr Jean-Pierre Petit
INDIA
Economist,
President - Les Cahiers verts de l’économie
Mr Karan Bhagat
CEO,
IIFL Private Wealth Management
01
ITALY
SPAIN
Mr Andrea Andorno
Mr Juan Iranzo
Vice-President Finance, Alitalia
Dean of the Madrid College of Economists
and Vice-President of the Instituto de Estudios
Económicos
CANADA
Roland Lescure,
Premier Vice-President and Head of Investments
Caisse de dépôt et placement du Québec
Comment réagissez-vous à cette thématique d’ensemble ?
La politique monétaire est pour le moins créative dans les pays occidentaux. C’est sans doute un passage obligé. Suivant la crise
financière, le désendettement des ménages et des gouvernements force les banques centrales à appliquer une politique monétaire atypique en réponse à une reprise économique mondiale plus faible qu’à l’accoutumée. Comme le désendettement prendra
encore un certain temps, cette dynamique de faible croissance et d’interventions monétaires devrait perdurer. Elle permet tout
simplement de gagner du temps dans un processus de désendettemment qui en a cruellement besoin.
Comment voyez-vous les problématiques et enjeux spécifiques de votre pays / ou zone ?
Le Canada est un des grands bénéficiaires de l’urbanisation des pays émergents, qui se traduit par un besoin important de
matières premières. Il profite aussi de la solidité de son sytème bancaire, lié à des règles prudentielles plus exigeantes que la
moyenne. Enfin, le faible endettement public rend la situation du Canada enviable par rapport à la quasi-totalité des pays développés. En contrepartie, l’économie intérieure ralentit puisque les effets stimulants des politiques marcroéconomiques sont
maintenant épuisés. En outre, les consommateurs canadiens sont lourdement endettés ce qui hypothèquera sans doute la croissance future. Au niveau des entreprises, la force du dollar canadien continue de poser un défi considérable pour les secteurs
exportateurs non directement reliés aux matières premières.
Quelles seront selon vous les grandes transformations ou évolution économiques du monde / de votre pays, dans les
cinq années qui viennent ?
Les pays émergents doivent poursuivre leur programme qui vise l’urbanisation et l’émergence de la classe moyenne sans provoquer de dérapage des prix. Leur croissance réelle devrait encore surpasser largement celle des pays développés au cours des
cinq prochaines années et soutenir les prix des matières premières. Dans ce contexte, le Canada est très bien positionné. Cela
dit, davantage d’investissement seront requis pour améliorer la croissance de la productivité de la main-d’œuvre canadienne et
faire croître plus rapidement le stock de capital. Le Monde occidental dans son ensemble doit résoudre l’équation quasi-impossible qui vise à conjuguer rigueur dans le désendettement et ambition pour la croissance. Que de défis !
Les effets du vieillissement de la population commenceront également à s’observer dans la plupart des pays développés, ce qui
aura une rétroaction sur les finances publiques.
Quelles sont selon vous les thématiques microéconomiques ou secteurs les plus porteurs pour les années qui viennent ?
Plusieurs pays émergents voudront sans doute améliorer l’état de leurs infrastructures et certains pays développés voudront les
rajeunir. Dans cette optique, ce secteur semble être porteur. Le secteur des technologies de l’information devrait également bien
tirer son épingle du jeu et poursuivre l’innovation réalisée au cours des dernières années. Un marché de plus en plus important
se dessine sur ce plan auprès des pays émergents. L’ascension de la classe moyenne des pays émergents devraient également
engendrer une forte croissance des déplacements dans le monde et assurer une bonne croissance des industries du transport.
Finalement, le secteur de l’énergie, surtout aux État-Unis, sera sur la sellette. Les récentes découvertes de gaz de schiste risquent de venir perturber l’environnement énergétique actuel aux États-Unis. Des effets de substitution pourraient à terme faire
diminuer les coûts de l’électricité pour les entreprises, un facteur positif pour l’économie américaine.
Comment voyez-vous le marché du M&A dans votre pays ? Avec les pays partenaires ?
Les ressources naturelles du Canada seront encore probablement convoitées par les investisseurs étrangers étant donné les
prévisions d’une demande soutenue au cours des prochaines années.
02
FRANCE
Jean-Pierre Petit,
Economist, President - Les Cahiers verts de l’économie
Au risque de la caricature, la fin 2011 avait été caractérisée par les trois « R » : a) une Récession européenne ; b) une Résistance
américaine ; c) un Ralentissement asiatique et émergent.
L’économie mondiale se redresse maintenant progressivement, grâce notamment au retour de l’esprit de compromis et coopération aux USA (accord budgétaire républicains/démocrates), dans le monde (accord de swaps en dollars à la fin novembre) et en
Europe. L’esprit de compromis manifeste en effet quelques progrès en Europe. Il y a eu une attitude progressivement plus compréhensive de l’Allemagne à l’égard de la nécessité de la croissance et à l’égard de l’extension de capacité de l’ESM (European
Stability Mechanism) qui entrera en vigueur l’été prochain. Les discours plus réalistes et pragmatiques de M Draghi et la mise en
place de la LTRO (fourniture illimitée à 3 ans de liquidités aux banques) participent de ce mouvement.
Ajoutons que la baisse passée du prix des matières premières a permis de maintenir la demande finale mondiale et aux mesures de relance monétaire (en Asie, Amérique latine et dans le monde) de se mettre en place. Dans le monde riche, la nouvelle
politique de communication de la Fed signifie qu’il n’y aura pas de hausse des taux courts avant fin 2014 et qu’une nouvelle
phase de Quantitative Easing est probable avant l’été. En zone euro, c’est la LTRO qui constitue la meilleure illustration de cet
assouplissement monétaire. Dans le monde émergent, on observe une baisse des réserves obligatoires en Chine et, plus récemment, en Inde ainsi qu’une amorce ou poursuite de la baisse des taux au Brésil, aux Philippines, Israël, Chili, Taïwan, Thaïlande,
Indonésie,…
Les signes d’une ré-accélération cyclique mondiale se sont mis en place, comme le montre le redressement généralisé des
indices PMI, y compris en Europe. L’économie américaine manifeste toujours une belle résistance et peut envisager une croissance de l’ordre de 2% (voire un peu plus) dans les prochains trimestres, malgré la récession modérée en Europe. Les dernières
enquêtes démontrent la relative vigueur du redressement de l’emploi. Au total, la hausse cumulée de l’emploi depuis le démarrage de la reprise aura atteint 3,2 millions (selon la « payroll survey »). Si l’on se souvient que les pertes cumulées avaient atteint
8,8 millions durant la grande récession (2007-09), il y a indéniablement, comme nous l’avons souvent souligné, un potentiel
significatif de rattrapage.
Ce redressement ne doit pas conduire à un « emballement » dans les anticipations de croissance.
Ainsi aux Etats-Unis, il n’y aura pas de très forte accélération:
• D’abord, le relatif dynamisme de la croissance américaine en fin d’année 2011 doit pour beaucoup à des phénomènes non
extensibles; fort restockage, probable avancement des dépenses d’investissement des entreprises avant la fin d’avantages
fiscaux au 31 décembre, baisse du taux d’épargne des ménages au T3,…
• En outre, la croissance restera heurtée par certains facteurs :
a) Une restriction budgétaire de l’ordre de 0,7 point de PIB en année pleine avancée sur le 1er semestre. Cela est heureusement
moins négatif que ce qui serait advenu sans l’accord républicains/démocrates (reconduction des baisses de cotisations sociales et des aides aux chômeurs) mais ce n’est pas tout à fait négligeable; il faudra d’ailleurs bien surveiller la suite des débats
car la reconduction ne va pour le moment que jusqu‘à fin février.
b) La reprise du marché immobilier sera freinée par la persistance de surcapacités (probablement autour de 1,2 million de logements)
c) Le désendettement des ménages, amorcé il y a plus de 4 ans, n’est pas terminé.
03
Par ailleurs, la récession de la Zone Euro est enclenchée et ne sera pas négligeable pour de nombreux pays ou zones; les exportations vers la zone représentent ainsi, en pourcentage du PIB, 5% en Chine et au Mexique, 10% en Russie, 8% au RoyaumeUni, près de 20% en Pologne et en Suisse,…
FRANCE
Jean-Pierre Petit,
Economist, President - Les Cahiers verts de l’économie
04
Le retour d’un stress systémique en Zone Euro est également loin d’être écarté. Malgré certaines avancées, la détente actuelle
s’explique principalement par la politique très accommodante de la BCE et la correction auto-réalisante des anticipations des
marchés. Mais les problèmes de fond sont loin d’être réglés (écart de compétitivité, manque d’intégration budgétaire, politiques
pro-cycliques). Le stress souverain pourrait revenir en cas d’échec de l’accord de restructuration volontaire de la dette grecque,
qui se diffuserait au Portugal, ou de récession plus importante qu’anticipée en Espagne ou en Italie.
Enfin, les évènements d’Iran (près de 5% de la production mondiale de pétrole) génèrent des risques potentiels très sensibles
en termes de prix d’équilibre du baril.
En Europe, la question-clé sera celle de la qualité de la gouvernance publique et son adaptabilité aux déséquilibres européens
(coexistence entre zones déficitaires et zones excédentaires) et, plus généralement, aux défis du vieillissement et de l’extension
de la globalisation.
Pour la France, la problématique principale sera d’inverser son modèle d’économie administrée, sous-compétitive et corporatiste pour l’adapter aux exigences de la gouvernance allemande de l’Europe et de la mondialisation en général.
La principale transformation économique réelle des 5 prochaines années sera la montée en gamme de l’industrie chinoise.
Il y a plusieurs facteurs favorables au développement des M&A en France (M&A/capi faible, valorisation et perspectives de rentabilité élevées dans certains secteurs,...) mais il y aura aussi des obstacles (endettement, cycle macro médiocre,…).
GERMANY
Jack Artman,
Senior Director/Head of M&A
at Infineon Technologies AG
What are your overall thoughts on this situation?
Generally, I agree with the statement above. But if I focus on the semiconductor sector, it is not for the reasons you mention. For
Infineon, the European market is not that vibrant because of the under scale representation of semiconductors here. However,
we still have a lot of things to work on, e.g. on the topic of the European Union and Euro. These are challenges which will not
disappear short term. They are going to be readdressed at least in the mid-term period with each subsequent country coming
into our picture.
In your view, what significant changes or economic trends will we see in the world / in your country / region over the
next five years?
We will spend a lot of time in the next five years dealing with the topic of the Euro and the European Union. I think that many
companies are going to be also taking some time to read on the consultant papers on what will happen to the Euro. Obviously,
Europe is very much export oriented. The relevant question in this context is: How much of the external trade is taking place outside of European continent and within it? Since a lot of cash flows are coming from outside Europe, the issues with the different
currencies are being dealt with anyway. I think that programs will only be affected where the European Union works as a whole,
which is not applicable for all of our product groups.
I think in the five year midterm there won’t be any drastic changes to business models of the companies in Europe. However,
from the longer term perspective, there is a sort of consolidation and deconsolidation taking place where both suppliers and the
customers are taking a look at the entire value chain and determining where they want to end up on that supplier chain.
The best example for a very good consolidation is the mobile communication industry. Some fights are still going on regarding
what the future form and type of mobile device, but most of that war is going on in very few hands.
Other sectors only seem concentrated already (e.g. automotive suppliers) while others are still considered deconsolidated, like
power, for example.
Which micro-economic areas or sectors will be the most productive over the next few years?
In the semiconductor industry, we have a trend towards power management, safety and security. Of these three, power management and security are the biggest issues going forward. As more things become programmable, they pose a bigger risk
for hacking, ranging from credit cards to big capacitors storing energy in the grid power. Further, for power management the
problems resulting from the lack of oil and volatility of oil prices are discussed by everybody and result in a general shift to renewable energy. We had some government initiatives on renewable energy, determining the priorities and how energy comes into
the grid. Introducing renewable energy can result in certain spikes which are not wished, determining how often the generators
of the utilities have to start up at full force or be driven down. This together with the shift to electric powered vehicles drives the
demand for semiconductors in the next years. Semiconductors are therefore key for power management, not only power form
and size but also power distribution, accessibility and storage.
05
How do you see the M&A market in your country? Cross-border M&A with partner countries?
Europe-wide, there are only three large semiconductor manufacturers. Given that, M&A potential for deals of significance is
somewhat limited within Europe. On country level, it is even worse with us being the only large semiconductor company in Germany. Unless there is a shift with ‘captive’ semiconductor activities and on how they structure their value change, the chance of
something happening in M&A in Germany is basically nil.
It is even more problematic/exacerbated, with an under-scale industry representation; you do not develop the technical clusters
like it is the case in the Silicon Valley, for example. Germany has a good engineering cluster in general, but there has to be a
group of several firms within an industry though which workers can freely shift, exchanging knowledge and supporting university
infrastructure that can promise students jobs. Accordingly, we only have very limited start up activities.
Therefore, the outlook for semiconductors was and is always cross border. And the two main markets will continue to be the
US and China. The first because it is the biggest market in terms of companies. China, the latter, because it presents the largest
end-market opportunity.
What about other BRIC countries?
India is a good place for software development, but we question whether they have the infrastructure to sustain physical investments by us. However, India is a very good source of IP. All in all, China is the hotspot for everyone in the semiconductor industry.
How do you see 2012 for Infineon?
GERMANY
Jack Artman,
Senior Director/Head of M&A
at Infineon Technologies AG
06
We and most of our semiconductor colleagues have forecast some reductions in forecasts and have all indicated a relatively
flattish year. It won’t be negative, but no one is yelling that it’s widely positive. So it’s somehow flat but still coming out of the
uncertainties unleashed from 2009.
What is nice to see that you have a fair number of firms that have restructured and tend to be pretty efficient now. What we see
is a seller’s market - those public acquisitions that have been announced have seen premiums of 50% to 120%. That’s a lot and
implies that many companies feel undervalued currently, when the premiums split from the valuations. Maybe in 2012 this will
normalize and we will see the return of more normal premiums and a better buyer’s market.
INDIA
Karan Bhagat,
CEO, IIFL Private Wealth Management
What are your overall thoughts on this situation?
The contrast between the western or developed economies and the emerging economies actually kick started post the 2008
financial meltdown itself and has grown over time. This clearly gets reflected in the current scenario. While the Western world is
trying to stay afloat the emerging economies were trying to cool of their high growth and equally high inflation. North America
has been showing some signs of improvement or should we say some green shoots are visible in its economy. It’s still too
premature to start believing it’s out of the woods and back to a slow, but constant growth path. The consumption which drives
it has not been very consistent. It’s only visible in parts. There has to be a phase of steady consumption and spending growth
to conclude that growth is back. For Europe it is a real tough time and maybe more to come in future. It’s struggling from every
corner possible. Too many of its member nations are on life support. To my thinking the safest way to save these struggling
economies within the European Union is through a bailout, for the time being. Any sovereign default can leave us with a lot of
unknown repercussions. The contagion effect could further hit the global economies. Some may still argue that pumping money
is inflating asset prices, to which I would still say that for these economies to stay afloat we need to give more time and make
sure that they tighten themselves as well. Until such time you have to make sure the asset prices don’t crack. It’s a known risk
that would be taken rather than something unknown because of defaults.
What are the specific problems and issues facing your country / region?
For our region the two main issues especially in the case of India and China were overheating in the growth and high inflation.
The two central banks did struggle to get the inflation under control initially. But with constant rate increases they have managed
to do so. This has resulted in the growth slowing down significantly and brought us to the debate whether there will be a hard
landing or not. In the case of India there were some more structural issues like absence of government policies, no reforms, high
interest rates hitting the corporate growth and slowing the capex plans. The rupee also played spoil sport, consistent high oil
prices, ballooning current a/c and fiscal deficit, less inflow of foreign capital and investments. To sum it up Indian economy was
fighting against too many negative factors. This resulted in slower growth rate in turn.
In your view, what significant changes or economic trends will we see in the world / in your country / region over the
next five years?
Globally, USA will clearly play the biggest role in reviving the global economy. The way things are moving I feel it should be
back on steady growth path over the next five years. Europe would continue to be a dampener. I don’t foresee it getting back to
consistent growth path in the near future. The dominance will shift to Asia. If US will be the biggest consumer then Asia will be
the growth engine and help in filling the gap created by the European Union.
In India clearly the onus lies with the government. It’s more of the governments inactions that has hurt the economy than any
of the global factors. Some amounts of policy actions are visible and the desperation is also seen within the government circle
to move ahead with reforms. I would clearly believe that this log-jam within the government has played itself off. We would surely see a lot more action on their part going forward. We are already seeing the inflation coming off and the interest rate cycle
peeking. With the softening of the interest rates both the consumption and capital spending will be back. The Indian corporate
has the capability of bouncing back from the most difficult situations. Over the next five years we would be able to get back to
economic growth of 8-9%. This in turn will help the corporate growth.
07
Which micro-economic areas or sectors will be the most productive over the next few years?
With the Government moving ahead with its reforms and policies as well as reversal in the interest rate cycle, I would say the
most beaten down sectors such as Infrastructure and Power should clearly do very well. These sectors are required to do well
in order to achieve the required high GDP growth. It also provides for a better platform within India to carry on other businesses
smoothly. Another sector that should do well is banking. That’s always the fuel for any economic growth.
How do you see the M&A market in your country? Cross-border M&A with partner countries?
Consolidation will happen in extremely fragmented sectors where profits are low due to excess competition, which is forcing the
weaker players to sell out or exit (e.g. airlines today and cement three years ago, the recent 2g verdict on telecom companies).
Consolidation will also happen in sectors where scale of economies are extremely important (e.g. generic pharma globally).»
Mergers and acquisitions improve pricing power and cuts cost while improving efficiency. In a country like India where you need
to have better pricing power to tap the huge demographic population, mergers and acquisitions are crucial. Other sectors which
can see increase in M&A activities are sectors like IT, Pharma, Media & Entertainment and Banking.
INDIA
Karan Bhagat,
CEO, IIFL Private Wealth Management
08
Also new-generation industries see a lot of M&A activities, the primary reason being a lot companies enter the sectors to tap
opportunities arising from newer markets. (Eg – low cost airlines - it saw the entry of several new players who wanted to tap the
opportunity, it only creates excess capacity, which then have to be rectified through M&A activities).
On cross border M&A, a large number of Indian companies have underleveraged balance sheets and the confidence to operate
outside India. However proper due diligence should be done so that overvalued acquisitions are not done which can strain their
balance sheets. The good part is increasing number of deals are available in the global markets which is a positive sign for Indian
companies as these deals are relatively cheaper than the valuations which prevailed prior to the global crisis.
ITALY
Andrea Andorno,
Vice-President Finance, Alitalia
What are your overall thoughts on this situation?
Qualitative easing programs appear to be the best answer to the liquidity threat the European banking system has been facing
since the end of 2011. A tighter policy on liquidity would risk to push even further down the Western Europe economy which
remains a pillar of world economy regardless of the current crisis. The European Central Bank is able to support or to show it
will support the Union despite the potential downside of such a policy. The stronger the role of the ECB, also by an open easing
policy, the more effective the tools to counterbalance such policy (uncertainty and delay in a reaction would be far worse than
asset values inflation triggering even more speculation).
What are the specific problems and issues facing your country / region?
Unfortunately the Euro itself has been showing to be an unexpected indicator that the European Union is far ahead from being
truly united when it comes to fiscal policy. European Union political success is now more than ever linked to the Euro overcoming
its worst crisis since it was created. I think that since no major European country has walked away from the project and there are
enough resources available in the region, Western Europe will slowly gain back worldwide investors’ confidence.
In your view, what significant changes or economic trends will we see in the world / in your country / region over the
next five years?
Italy’s downgrading from rating agencies following the strong increase of its Italian 10 year bond yields have caused a very important reaction in the country. A new technical government strongly focused on overcoming the crisis and promoting reforms
has been appointed in order to address what has become a not deferrable priority (very important step). The next 12-18 months
will be very critical because, while cutting public spending/increasing tax pressure, further measures will have to be found in
order to have the Italian economy exit from recession. After the first critical months mentioned above, in the following years it is
foreseeable to have an increase in Italy’s competiveness, due to the positive effects of the reforms aimed at reaching a higher
productivity and full alignment with major European peers.
09
SPAIN
Juan Iranzo,
Dean of the Madrid College of Economists and Vice-President
of the Instituto de Estudios Económicos
Quels sont les problèmes spécifiques que doit affronter l’Espagne ?
L’Espagne a un problème fondamental de compétitivité qui diminue sa capacité de croissance. De plus, l’Espagne est dans
une situation de surendettement de ses ménages, des entreprises et du secteur public qui limite la capacité de croissance de
la demande interne, c’est-à-dire, la consommation, l’investissement privé ou public. Enfin, bien qu’ils aient baissé récemment,
l’absence de confiance, accentuée par un très fort taux de chômage, engendre des coûts de financement aujourd’hui encore
trop élevés.
Quels changements ou tendances économiques allons-nous observer en Espagne ou en Europe au cours des prochaines
années ?
Deux scenarios sont possibles: si l’Espagne améliore sa compétitivité grâce à des réformes structurelles, le pays réussira à profiter des opportunités qu’offre une économie globalisée représentées par des pays comme ceux d’Amérique Latine, dans le cas
de l’Espagne, mais aussi l’Inde, la Chine, l’Indonésie, la Turquie et certains pays d’Europe de l’Est.
Si l’Espagne n’améliore pas sa compétitivité, elle perdra son potentiel de croissance, entrera dans une phase de stagnation et
verra sa présence au niveau international diminuer.
Quels secteurs peuvent échapper à la crise dans les prochaines années ?
Ce n’est pas tant une question de secteurs qu’une question d’entreprises et de projection à l’extérieur, aussi bien via des investissements directs à l’étranger ou via la demande externe et l’exportation. Par exemple, certaines entreprises du secteur
touristique, automobile, chimique ou agroalimentaire peuvent sortir de la crise renforcées.
Quelles sont, selon vous, les perspectives du marché des fusions et acquisitions dans votre pays, et en particulier celui
des fusions et acquisitions transnationales ?
L’Espagne, comme ses pays voisins, souffre d’une restriction du crédit qui affecte les fusions et acquisitions. Cependant, il serait
souhaitable que ces processus s’accélèrent tant le tissu des entreprises espagnoles est atomisé, ce qui représente aussi un
fardeau pour la compétitivité du pays.
10
THE NETHERLANDS
Dick Verbeek,
President and member of the board of several
international financial services firms
What are your overall thoughts on this situation?
In my opinion 2012 has a better outlook, than people tend to think. Everybody is now aware that there is a problem, which is part
of the solution. Times remain, however, challenging, everybody knows this and is as such working hard to find solutions. In many
countries - among which Italy, Portugal and Ireland - measures are being taken. As such, overall I have a more positive mindset
about the year 2012 than I had about the years before.
What are the specific problems and issues facing your country / region?
Although we are still one of the better performing countries in this financial crisis, especially in Europe, medium-term adjustments
are required in the employment conditions. Pension costs are rising rapidly, forcing our country to take difficult and politically
challenging adjustments. In addition to that there appears to be mismatch between the level and skill of education and to the
other side the requirements of employment market, for example in engineering. However, overall The Netherlands are less impacted by financial crisis and continue to be a very international driven and competitive economy.
In your view, what significant changes or economic trends will we see in the world / in your country / region over the
next five years?
The contribution of emerging markets such as India, China, Brazil and Russia will continue to increase in size and importance.
Many Dutch companies are already very international and therefore should be able to benefit from this. The open character of the
Dutch economy is fit to make adjustments in this aspect. As stated above, The Netherlands should focus on the labour market
in order to remain competitive. In that sense a liberalization of this labour market is key for a sustainable economic performance
of our economy.
Which micro-economic areas or sectors will be the most productive over the next few years?
The Netherlands will continue to have a strong position in the sectors agriculture, food, energy-related (natural, gas, trading and
off-shore construction) and logistics (although increasingly under pressure). In this respect The Netherlands - although being a
mid-size economy in Europe - has many leading international companies active around the world.
Last but not least, the financial services sector, currently involved in many changes/developments, will remain to be substantial
and a driving engine for the Dutch economy.
How do you see the M&A market in your country? Cross-border M&A with partner countries?
I have a positive view on this! In view of the limited economic growth expected in The Netherlands, M&A will be a key factor for
achieving growth. Since many of the Dutch companies have a healthy balance sheet, they should be able to play an active role
here in. Not only on local level, but especially in cross-border deals increased action could be expected.
11
UNITED KINGDOM
Michael Ward,
Director of Trade and Investment, UK Trade & Investment
What are your overall thoughts on this situation?
The key issue is what we do about the challenge of lower growth in Europe and stronger performance in most emerging markets.
At one level the answer is simple: find new ways to grow developed economies. In the UK it is clear we need to tackle a chronic
trade deficit which has been a brake on growth for a generation. This is a job which will take several years. If consumer spending
will not drive growth then we must turn to international trade and investment. In the UK 20% of SMEs export yet the European
average is 25%. Getting substantially more companies into exporting is crucial. This is achievable with the right mix of support,
capacity building and help from government agencies like UKTI with help from finance and business service providers. Specifically we propose to double the number of companies we help to 50,000 by 2015. There is also a job to be done with mid caps,
often family owned and sitting on cash which could be mobilized into investing in internationalizing their business. Similarly we
have to maintain the upward trend of Foreign Direct Investment (“FDI”) projects coming to the UK, which continues to be the
most attractive destination for FDI and associated jobs in Europe.
The second question is where do we look for opportunities? The bulk of export opportunities for companies in the UK and Europe
are in Europe. Around three quarters of UK companies exporting for the first time look first at markets close to home. Europe and
the US are by far the largest source of FDI for the UK. But of course the opportunity is growing faster in higher growth markets. So
our challenge as a government export and investment promotion organization, hit by spending cuts as part of essential budget
deficit reduction, is getting the right balance between an increased effort in high growth markets and the right level of support
for exporters and investors in developed markets. We are shifting some resource to new markets and learning to work smarter,
including with private sector partners, in developed ones. There is no doubt that we need to improve our trade performance in
both developed and high growth markets.
It is too easy to be mesmerized by macro-economic gloom. There are new opportunities. Bilateral trade in goods between the
UK and France increased by an estimated 10% in 2011. FDI projects into the UK also increased. So there is some good news
and we intend to persevere in the search for new growth.
What are the specific problems and issues facing your country / region?
A year ago the UK government set out a frank assessment of the challenges we face in a White Paper on Trade and Investment
for Growth (http://www.bis.gov.uk/assets/biscore/international-trade-investment-and-development/docs/t/11-717-trade-investment-for-growth.pdf). These include concerns about skills shortages in engineering particularly, the complexity of the tax system,
access to finance, restrictions on migration and planning rules. This has brought about a significant shift in how government
approaches the needs and resolves problems raised by investors: better co-ordination on policy and practical issues; better
strategic relationship management of key investors; ministers leading more trade missions and so on. There is still much more to
do but there is progress and the direction of travel is clear.
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In your view, what significant changes or economic trends will we see in the world / your country / region over the next
five years?
I would point to two slightly contradictory trends which will influence the investment climate in developed markets:
•The UK’s analysis that future growth will need to come from attracting more FDI and international trade is shared by many
countries. So we are already seeing intensifying competition among countries to convince foreign investors of the attractiveness of their business environment. That is playing into a wide range of fiscal and regulatory policies – e.g. planning R&D
tax breaks, lowering corporate taxes and so on – which the UK is doing too of course. Watch out too for more visible efforts
to tackle high costs of production. Germany’s relative success in the Eurozone over the last decade will spur on others. The
UK already has lower labour costs than its main European competitors and has a pipeline of measures to cut red tape, make
planning decisions more efficient, finance technology and innovation and stimulate investment in smaller firms.
UNITED KINGDOM
Michael Ward,
Director of Trade and Investment, UK Trade & Investment
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•Stronger political challenge to open markets in the form of favouring local manufactured content, reciprocity, repatriating jobs.
This is already a significant debate which promises to be divisive. We will want to do all we can to remove any barriers to high
quality investment into the UK and Europe and prevent new ones being erected.
Which micro-economic areas or sectors will be the most productive over the next few years?
We are active across most sectors but the areas we see as most promising for internationally mobile investment over the next
couple of years at least in the UK are the digital economy and software, clean tech and energy infrastructure, some areas of
aerospace and automotive - and high end advanced engineering more generally - and innovative business services.
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