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Davos 2024: A Gateway to Rebuilding Trust

29 January 2024

The 54th annual meeting of the World Economic Forum in Davos took place during a critical and challenging period, highlighting the crucial role of international cooperation in tackling a myriad of global challenges. These challenges encompass the escalating risks of global warming, a fragile international economy, elevated financing expenses, and declining trade and transportation security – issues that transcend borders and impact individuals worldwide.

This year's edition of the forum brought together over 3,000 leaders from government, public and private sectors, as well as across generations. The presence of senior government leaders, along with key players from all industries created a new atmosphere of unity and collaboration, even among individuals with divergent opinions. 

Davos 2024 sought to address global security challenges and promote collaboration in a fractured world. The emphasis was on fostering long-term and organized interaction among governments, with the objective of inspiring cooperation. The forum addressed four primary concerns as follows: (1) Attaining security and collaboration in a divided world, (2) Generating development and jobs for the next era, (3) Harnessing artificial intelligence (AI) as a driving force in the economy and society, and (4) Developing a long-term strategy for climate, environment, and energy.

Davos as An Effective International Forum

Since its foundation, the World Economic Forum (WEF) has played a crucial role in addressing various vital global issues. It facilitated the resolution of the Turkish-Greek conflict in 1987, contributed to Germany's reunification, and helped end apartheid in South Africa by facilitating a handshake between Nelson Mandela and Frederik de Klerk in 1992. 

In 2023, the world witnessed rapid fluctuations and numerous challenges, including the rapid expansion of artificial intelligence and its impact on society, economic uncertainty, the ongoing climate crisis, and escalating geopolitical crises and continuous unrest across the world. Examples of these crises include the persisting Russian-Ukrainian war in Europe and the outbreak of a new war in the Middle East. The forum recently called for an end to the Russian-Ukrainian war and made headway in promoting sustainability and environmental preservation.

Each year, the forum covers a wide range of key themes, including sustainability, global crises, energy challenges, the future of work, innovation, health, food, and other issues that impact individuals and societies. The theme for Davos 2024 was 'Rebuilding Trust,' with a focus on restoring trust at three levels: for the future, within societies, and among nations. The purpose of this theme is to provide a platform for examining fundamental concepts that underpin trust, such as openness, consistency, and accountability.

Arabs: Representation and Concerns 

Despite global economic concerns, the Middle East and North Africa (MENA) region maintained a robust performance. The UAE, Saudi Arabia, and Egypt are paving the way for regional economic growth through innovation and investment. Last month, Saudi Arabia and the UAE, two major Arab economies, joined BRICS with Egypt, expanding the size of the economic bloc, which formerly consisted of only Brazil, Russia, India, China, and South Africa. 

This year's Arab presence at the Forum was exceptional. Arab delegations took part in a variety of events, and the ratio of private sector involvement increased to almost 80%, as exemplified by the Emirati mission, which was the third-largest represented delegation at the forum. The issues discussed, included those that had a significant impact on the Middle East region's security and stability, particularly considering the ramifications of the war that broke out on October 7, 2023, as well as developments in the security situation in Bab al-Mandab Strait and its drawbacks on trade and navigation in the Red Sea. It also considered the potential it poses to economic growth in the Arab nations, which make up the majority of the region.

However, Arab engagement extended beyond these concerns, with a key role in hosting and establishing initiatives such as the Trade Technology Initiative, for which the UAE signed a memorandum of understanding with the forum. Additionally, there is ongoing follow-up on the outcomes of the climate summits in Sharm El-Sheikh and Dubai (COP27 and COP28), along with recommendations for action to mobilize funds supporting the goals of both summits.

Davos Main Initiatives; A Remarkable Progress

Davos brought together leaders from the Western Balkans and the EU, who reaffirmed their commitment to a shared European future centered on regional growth and stability. Additionally, the “Humanitarian and Resilience Investing Initiative” unveiled over 50 commitments aimed at bolstering impact investment, with potential to unlock over $15 billion in Frontier markets. The summit’s primary focus was on revitalizing the necessary growth to rebuild economies and communities. 

The “Future of Growth Initiative”, is a two-year campaign that aims to go beyond GDP growth. It seeks to help policy makers and economists share new ideas and best practices to balance growth with Innovation, inclusion, sustainability and resilience goals. 

The "Trade Tech Global Initiative" envisions the collaborative use of technology for worldwide commerce, with the goal of unlocking billions of dollars in trade. New insights on the future of global fintech have charted a road to resilient and inclusive growth in the industry and the future of industrial strategy. This effort sheds light on the prospects for businesses and governments to co-create the next generation of industrial strategies. Participants in the initiative have made significant progress on climate action, nature protection, and energy transition. 

The First Movers’ Coalition has grown to almost 100 companies, providing the world's largest demand signal for breakthrough climate technologies in high-emission industry sectors, such as steel and cement. The forum has launched a network to mobilize clean energy investment for the global South. This network aims to help unlock an estimated three trillion US dollars needed for the energy transition. The WEF’s Trillion Trees Platform, is also another an important action, within which over 100 companies have pledged to conserve, restore and grow 12 billion trees. 

The AI Governance Alliance has launched a new worldwide endeavor to improve AI access to the core of the fourth Industrial Revolution, which has been expanded with additional centers in Germany, Vietnam, and Qatar. 

The Reskilling Revolution Initiative aspires to empower one billion people with better education, skills, and economic opportunities by 2030. It has already reached more than 680 million people with opportunities for improving education skills and job opportunities. The Philippines, Vietnam, and Qatar have joined a growing network of 20 countries accelerators focusing on human capital Investments. 

The Asymmetric Impact of De-globalization

One of the major issues discussed in Davos was the impact of de-globalization, which is caused by disruptions in the supply chain and the US-China trade war, among other global and regional geopolitical variables. Economists at the forum discussed the asymmetric impact of de-globalization on trade activities. Mexico, for example, has already benefited from nearshoring, having lost market share in the United States to China after the latter joined the WTO. The trade restrictions on Chinese items entering the US market have created favorable externalities for Mexico, allowing it to regain its market share in the world's largest economy. 

Most Latin American nations have not fully globalized or integrated into the global economy at any point, and therefore may profit from near shoring and friend shoring possibilities. Similarly, Arab countries may also improve pan Arab inter-trade by adopting the concept of near shoring among Arab nations. This approach can help improve their balance of payments in relation to Western economies.

The Pan Arab Free Trade Area (PAFTA) has not been fully implemented. It was planned that all trade among Arab member nations would gradually be phased out between January 1, 1998, and January 1, 2005, with the goal of creating the Arab Free Commerce Area. Given the recent deglobalization trends, it is essential to revive and implement this ambitious plan. 

According to an estimate made in October 2023, the World commerce Organization (WTO) anticipates commerce to expand by 3.3% in 2024. However, economists at the World Economic Forum (WEF) have expressed concerns about capital market fragmentation, arguing that de-globalization will have negative consequences for almost every country. 

Despite various data indicators balancing out over the past year, European Central Bank President Christine Lagarde does not anticipate a return to economic "normality" until 2024. The "new normal" for the global economy is characterized by the development of artificial intelligence and geopolitical concerns. Lagarde referred to the post-pandemic period as “strange, extraordinary, and difficult to analyze.” She also highlighted three stabilizing from the previous year: consumption, trade, and inflation. These insights were shared by Lagarde during a Bloomberg panel at the World Economic Forum 2024.

The road to Davos 2025

The next edition of the world economic forum will take place in a world undergoing dramatic transformation. The upcoming US presidential elections are expected to bring back Trump to office. During his previous administration, Trump focused on adopting friend-shoring and reshaping global supply chains to favor allies over major rivals like China and Russia. The chip war with China serves as an example of this approach. Additionally, Trump's presidency is likely to undermine the United States' current support for climate action. The world recalls June 1, 2017, when President Donald Trump announced that the US will withdraw from the 2015 Paris accord on climate change mitigation, alleging that the agreement would "undermine" the US economy and put it "at a permanent disadvantage."

Monetary easing in the United States and Europe is expected to continue through 2025, as inflation pressures decline, and the US monetary policy soft landing in 2023. Central banks will often lower interest rates while increasing the money supply in the market. This will have a favorable impact on the cost of finance and global GDP growth. However, the projected slowdown in China, caused by the real estate crisis, may offset this positive impact, as well as would the increasing fuel prices.