EUROPEAN BUSINESS REVIEW (EBR) 03/2014 by European Business Review (EBR)

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RUSSIA PIVOTS TO ASIA

WORKPLACE OF THE FUTURE

MYTHS ABOUT GERMAN LEADERSHIP

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Editor in Chief N. Peter Kramer

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Issue Contributors Uri Dromi, Laszlo Andor, Steven Blockmans, John Kornblum, Jan Techau, Kenneth Courtis, Emma Marcegaglia, Greg Satell, Alexandra Papaisidorou, Eliot Bendinelli, Daniel Cohen, Matthew Sargeant, Ken Somers, Shada Islam, Gauri Khandekar, Patricia Diaz

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Founder

06 EDITORIAL

Juncker for President? Who is Juncker?

08 OPINION

What now for Israel after breakdown of the peace talks? Embed social innovation in policymaking to deliver on Europe 2020 Impact of the ‘Big bang’ enlargement on EU foreign policy – 10 years on

16 EU AFFAIRS

5 Myths About German Leadership Moldova, a European Neighborhood Tragedy in the Making

20 ENERGY SECURITY Russia Pivots to Asia

22 ENERGY

An opportunity for natural gas in the motorization field opens up

24 SOCIAL RESPONSIBILITY

“ Climate change is the biggest global health threat of 21st century”

27 SPECIAL REPORT

12th European Business Summit The Business Community’s Vision for the European Union in 2014-2019 A Dynamic Pharmaceutical Sector for Better, Cost-Effective Healthcare How can we finance innovation? Boosting our Industrial Growth Regions and business vouch for an effective economic subsidiarity

36 THE WORLD

Indian Elections: Gearing up for a “new” India?

38 LEADERSHIP

Strategy Is No Longer a Game of Chess

40 TRENDS

Digitisation and the Workplace of the future 3-D printing takes shape

46 MARKETPLACE

A unique museum for children! Currency Trading for Retail Investors is Fraught with Danger

48 ARTS & CULTURE

Acropolis as the everlasting symbol...

50 LAST PAGE

Huawei supporting European top football

For previous editions archive and up-to-date information on major topics and events you may visit our website http://www.europeanbusinessreview.eu

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A BRUSSELS VIEW

Juncker for President? Who is Juncker? by N. Peter Kramer, Editor-in-Chief

German weekly Der Spiegel writes about Barroso’s succession process: ‘what one could call a rigged game anywhere else, is called democracy in Brussels’. According to one of the British Conservative MEPs is the concept of ‘Spitzenkandidaten’ - candidates for the position of Commission President put forward by the main pan-EU political parties a ‘direct power grab by the European Parliament’. German Chancellor Angela Merkel didn’t agree with the Spitzenkandidaten process from the start because she knew there would be no agreement in the European Council. Now it looks that she could ‘live’ with Jean-Claude Juncker, the candidate of the European People’s Party (EPP), as Barroso’s successor. British Prime Minister David Cameron still does not want Juncker to get the job as he views him as too much of an old-style European federalist who will obstruct his push to reform the European Union and persuade British voters of the merits of staying within the EU. The wheel of fortune spins. Juncker subsequently tweeted ‘I am more confident than ever that I will be the next European Commission President’. But who is Juncker? A poll (by Advanced Market Research) found out that only 8% of the European voters are able to identify him. In Germany three quarters of respondents were unable to name Juncker, in Britain 99% of voters said they had not heard of him.

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Another key position in the European Commission is the highly visible post of High Representative for Foreign Affairs and Security Policy. After the disaster called Lady Ashton, the European Council might want to nominate somebody capable. The present Polish foreign minister Radoslaw Sikorski looked certain to replace her but his boss, Prime Minister Tusk, aimed instead for a post ‘which is key from Poland’s point of view, energy or competition for instance’. Now, the name of Helle Thorning Schmidt, the Danish Prime Minister, is often mentioned as Ashton’s successor. See what a selfie can do for you. Let’s wait and see. It is called European democracy…

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OPINION

What now for Israel after breakdown of the peace talks? by Uri Dromi*

“Right now, the peace talks are based on only one thing, only on peace talks. It makes no sense at this point to talk about the most contractible issue. It’s Jerusalem or bust, or right of return or bust. That has led to failure and is likely to lead to failure again.”

said Israeli Prime Minister Benjamin Netanyahu, except that he said it not now, when the last round of talks between Israelis and Palestinians came to a dead end once again, but back in 2008, when then-Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas were close to a deal. Needless to say, there was no deal. Even then-Secretary of State Condoleezza Rice was impressed by Olmert’s willingness to acquiesce to the Palestinian demands. In her memoirs, published in 2011, she recalled her incredulity: “Am I really hearing this? I wondered. Is the Israeli prime minister saying that he’ll divide Jerusalem and put an international body in charge of the Holy sites? Concentrate. Write this down. No, don’t write it down. What if it leaks? It can’t leak; it’s just the two of us.” Leak or no leak, Mahmoud Abbas, like Yasser Arafat before him, wouldn’t take Yes for an answer. Netanyahu’s 2008 observation, then, was right, except for the wrong reason: Whether you talk about Jerusalem and the refugees’ right of return or whether you don’t, peace talks seem to always lead to nothing. Netanyahu, now on a state visit to Japan, seems not to be drawn into such fatalistic conclusion. In an interview with the Mainichi Shimbun newspaper, he expressed his concerns about the failure of the talks with the Palestinians. “The status quo is not a good idea, because I don’t want a bi-national state,” he said. Indeed, according to Haaretz newspaper, Netanyahu, two weeks ago in a cabinet meeting, asked his ministers to come up with new ideas on what steps Israel might take in the new situation created by the end of negotiations and by the recent reconciliation between Fatah and Hamas. I’m not sure that our government ministers are the most creative people, and if they are, some of their ideas, like annexing the West Bank and boosting settlements there, are a recipe for sheer disaster. In that case, our prime minister should have extended his request for new ideas to all Israeli citizens, and perhaps appealed to anyone in the world, to email him all the brilliant ideas about how to make peace in this troublesome area. One suggestion I’m sure he’s heard already allegedly came from a frustrated American

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senator: “Why can’t those Arabs and Jews just sit down, and like good Christians settle their differences!” More seriously, if Netanyahu had asked to pick my brain on this, I would have suggested that Israel pull back unilaterally to borders it insists on keeping, leave the IDF deployed in the Jordan Valley and wait for the Palestinians to come to their senses and negotiate in good faith. I don’t know if Netanyahu would appreciate advice from a former aide. Usually, people who have worked for him were either shown the door or left banging it, swearing never to look back. One of them is Uzi Arad, Netanyahu’s former national security adviser and a former senior officer of the Mossad. When I discussed with him this week that idea of a unilateral withdrawal, he agreed, saying he didn’t believe it was the Palestinians’ intention to reach an agreement in the first place, hoping that they will always gain more as time passes, without making any compromises. But then Arad added an important improvement on my idea: We shouldn’t be doing it entirely unilaterally, he said. We should coordinate it with the Quartet. This group, consisting of the United States, United Nations, Russia and the European Union, established to promote peace in the Middle East, will surely back Israel if it chooses to ease its grip on the Palestinians, and even reward it by thwarting any anti-Israeli international moves. If, however, Netanyahu doesn’t trust anyone (and he doesn’t), then, as a last resort, he can turn to what he himself said in the same statement in 2008: “We must weave an economic peace alongside a political process. That means that we have to strengthen the moderate parts of the Palestinian economy by handing rapid growth in those areas, rapid economic growth that gives a stake for peace for the ordinary Palestinians.”

* Uri Dromi is director general of the Jerusalem Press Club, a former spokesman for the Rabin and Peres governments and a retired colonel in the Israeli Air Force. He writes a column on Israeli affairs for the Miami Heral. DROMI@JERUSALEMPRESSCLUB.COM ** This column is originally published in The Miami Herald.

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OPINION

Embed social innovation in policy-making to deliver on Europe 2020 by LĂ&#x2030;szlo Andor*

We are at a defining point in the development of the European Union. A stronger EU architecture can only be created through more solidarity and innovation, and more efficient social investment. This is what has to be encouraged and also supported, writes LĂ&#x2030;szlo Andor.

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is important to reassert how social policy innovation is crucial to ensure that EU countries can exit the social crisis and how we can make the European social model more resilient through better cooperation. That is the vision of the Europe 2020 Strategy, which seeks to build an EU based on a social market economy fit for the 21st century, capable of fostering smart, sustainable and inclusive growth. To accomplish this, the Member States in 2010-11 set themselves targets, including lifting at least 20 million people out of poverty and social exclusion and ensuring that 75% of those aged 20-64 are in employment and that at least 40% of young people earn a third level degree by 2020. Today, we are far from meeting these targets. While some countries made good progress, the financial crisis has caused divergence and polarisation in Europe in terms of employment and the social situation. Inequality has been growing, and the number of people at risk of poverty or exclusion has risen by 6.6 million. In 2012, 123 million Europeans were living in poverty or facing the risk of social exclusion. We face enormous challenges. The eurozone crisis is not yet over. We still need to find the way to a balanced, sustainable and job-rich recovery. Solidarity is lacking at the EU level but often within societies too. Member States have to prove that they can rise to these challenges by accelerating reform of the EMU. At the same time, it is also crucial that Member States implement the necessary reforms in line with the Employment Package, the Youth Guarantee and the Social Investment Package in order to strengthen safety nets and facilitate more and better investment in human capital.

OPINION

The time for action is now. The social dimension of the EMU has to be strengthened, and social policy innovation needs to be better embedded in policymaking, including in the European Semester. Over the last few years the focus already has shifted from supporting innovative community projects and transnational cooperation to enabling services, investing in children and ensuring access to quality healthcare and long-term care in line with the policy goals we have set at EU level. The best way to demonstrate that social policy innovation not only improves citizens’ lives in the short term but also feeds into social policies in the longer term is to look at concrete projects. One example is the European Social Fund-supported Digital Activist Inclusion Network (DAIN) project in the UK, which aimed to combat digital exclusion, reaching individuals without basic digital skills or access to the Internet. The project is a good example of innovative and sustainable investment in human capital and the promotion of social inclusion. The digital activist volunteers were recruited from disadvantaged groups to engage over 3000 digitally excluded individuals in activities to promote e-inclusion. My second example is a project-collaboration by Italy, Romania and Bulgaria introducing a new professional figure, the ‘Social Intermediary’, to ensure a smooth transition out of institutional care for young people. The use of social intermediaries was considered successful and the project recorded improved socialising and relationship skills of the young people involved. In 2012 when financial support for project by the EU’s PROGRESS programme ended, a major bank continued working with the municipality of Bologna and has since proposed to replicate the project in Rome. This demonstrates that municipalities and the private sector can successfully work together to secure social outcomes. And that it can feed into the Commission’s policy work. In this particular case the experience with the project helped to develop the 2012 “Common European Guidelines on the Transition from Institutional to Community-Based care”. My third example is the “Social Innovation and microsavings in Europe” project, which looked at the role of financial inclusion in social investment strategies. Three pilot schemes in Belgium, France and Hungary were tested to promote savings among low-income and impoverished people (micro-savings). These projects and the many others have highlight-

ed some key lessons the Commission considers vital for the future development of social innovation. First of all, public authorities should be involved in social policy innovation to a greater extent with a view to effective scaling-up and improving sustainability. Secondly, the policy objectives should be an integral part of the methodology used and social outcomes should be measured. Thirdly, we need to recognise and support more strongly the role of social entrepreneurs in devising innovative solutions, particularly when working in partnership with public authorities. But further work is also needed from a broader policy perspective. We need to better embed social policy innovation in the policy reforms we advocate under the European Semester and link the outcomes to policy priorities. Member States have been asked to explain in their yearly national social reports how they used social policy innovation to make social protection more effective, improve social services and boost social investment. This will help to assess the extent to which social policy innovation has played a role in the reforms we have been calling for in the Social Investment Package. With the help of EU funds such as the European Social Fund and the Programme for Employment and Social Innovation (EaSI, formerly Progress) we will continue to support social innovation throughout the EU. With EU support we need to ensure that Member States have the capacity to implement social policy innovation and that the outcomes feed into national reforms. To achieve this, I cannot overstate the importance of fostering strong partnerships between civil society, social service providers and social entrepreneurs. Broader alliances are needed for better results. We are at a defining point in the development of the European Union. A stronger EU architecture can only be created through more solidarity and innovation, and more efficient social investment. This is what has to be encouraged and also supported. The Commission’s actions in this area have been laying the groundwork for a resilient economy and an inclusive society in Europe. Social policy innovation is an essential tool for achieving these goals. * Commissioner for Employment, Social Affairs and Inclusion ** First published at Euractiv.com

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OPINION

Impact of the ‘Big bang’ enlargement on EU foreign policy – 10 years on by Steven Blockmans*

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OPINION

New horizons, new sensitivities The European Union’s leap from 15 to 25 members (and later to 28) was supposed to have consigned the Cold War legacy of separate and hostile camps in Eastern and Western Europe to the shelves of history. The fault lines that opened up across Europe in 2003 over the war in Iraq were therefore ominous signs for the development of a cohesive EU foreign policy after the fifth enlargement of the Union envisaged for 2004. All Central and Eastern European candidate countries signed letters supporting the US policy to ‘disarm’ Saddam Hussein’s Iraq. The position of the majority of Western European states, Germany and France in particular, was one of emphatically rejecting the impending war. Divisions were deepened by French President Jacques Chirac, who noted that the countries of Central and Eastern Europe had “lost a good opportunity to keep quiet”, calling their support for the US “infantile” and “reckless”. There was even an implicit threat that they might have their EU accession blocked by a French referendum. Although the other member states and the European Commission rejected Chirac’s criticism, the incident reinforced US Defence Secretary Donald Rumsfeld’s evocation of ‘old’ and ‘new’ Europe. The take-home message for the EU-15 was that the aspiring members would bring along their own sensitivities and stand up for their own interests. For those states not already members of NATO and the EU, the effects of the fall of the Iron Curtain were particularly dramatic as they all had to deal with the insecurities of internal transition – and some even with disintegration and war. For many Central and Eastern European states, the practical response to these predicaments was first a move towards NATO – thereby affirming the transatlantic link to the hard power of the US – and then towards the EU – the best method to address myriad soft security challenges. The dual enlargement has contributed to the stability of a large swath of Central and Eastern Europe. Contrary to the prevailing message, however, EU enlargement has in some cases heightened security concerns. With the south-eastward push of its external borders, the European Union has imported the frozen conflict over Cyprus, pitching it more sharply against Turkey, and it has been confronted more directly with hard security threats emanating from the (new) neighbourhoods: from tensions over Kosovo’s independence and bursts of violence in the South Caucasus to the slaughter in Syria. The worries in the Baltic States and Poland about

the stand-off with Russia over Ukraine also show that the stability of EU territory remains vulnerable at the edges. By the same token, the EU’s ‘big bang’ enlargement has compounded softer security challenges such as illegal immigration, organised crime and the disruption of the flow of energy resources, to name just a few. Within the EU, the last decade has been characterised by a sense of transition and political tension over the failed Constitutional Treaty, the economic and financial crisis, the nature of external border security, the new foreign policy architecture established by the Lisbon Treaty and differing visions of the EU’s external relations, including the future of EU enlargement. The addition of 10+2+1 new member states has affected how the EU perceives and tackles these and other issues, thereby shaping the European Union’s foreign policy role overall.

Impact of enlargement on leadership and decision-making Whereas it is now safe to say that the innovations of the Lisbon Treaty have strengthened the EU’s visibility and efficiency of decision-making in the realm of external action, the successive enlargements since 2004 have nevertheless complicated the Union’s political balance. The Big 3 – France, Germany and the UK – continue to play a crucial role in the Union’s foreign and security policy-making, as their efforts to spearhead a resolution of the nuclear dispute with Iran demonstrates. At the next level down, Italy and Spain have been joined by Poland as another ‘large state’ demanding a seat at the top table. In certain domains (e.g. Ukraine), the Weimar Triangle has allowed Poland to steer EU foreign policy alongside France and Germany. Together with Sweden, Poland also tabled the plan for an Eastern dimension to the European Neighbourhood Policy, presenting it as a path towards EU membership – thereby truly envisaging the stated aim of the ENP, i.e. the eradication of new dividing lines on the continent after the 2004 enlargement. While the initiative for an Eastern Partnership immediately drew criticism from Bulgaria and Romania, which did not want to see the Union’s Black Sea Synergy undermined, the Commission and the Czech Republic threw their weight behind the plan, which led to the inaugural summit of the Eastern Partnership in Prague in May 2009, during the Czech rotating Presidency of the Council.

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OPINION

Dominated by bans on foodstuff, plans for a missile shield and energy shortages, the political climate in EU-Russia relations has seen a dramatic drop in temperature since 2004. This was to a considerable extent the result of a more assertive attitude adopted by the EU under the influence of some new member states from Central and Eastern Europe. Gradually, older member states have hardened their positions as well. Yet, dealing with Putin’s Russia remains emblematic for the division among member states, even among the new ones. Countries like Slovakia and Bulgaria have different cultural, economic and political sensitivities towards Russia from those felt by the Baltic States and Poland. Geographical proximity and cross-border trade or minority issues condition the approaches to Russia in several and diverse ways. This goes to show that there is no Central and Eastern European ‘bloc’ within the EU. At best, there are changing coalitions around the ‘Visegrad 4’ (Czech Republic, Hungary, Poland and Slovakia). As the majority of new member states can be classified as ‘small states’, their interests and sensitivities within foreign policy decision-making have been uploaded to the EU level, especially during the rotating Presidencies. Cases in point are Slovenia and Hungary’s focus on the Western Balkans, Cyprus’s attention to the Mediterranean and the Middle East, and Lithuania’s ambition to turn Ukraine, Moldova, Georgia and Armenia away from Russia and into the arms of the EU. Given their shared history under the Soviet yoke, the new member states of Central and Eastern Europe have more reason than most to be wary of Moscow’s intentions and actions. This has translated in their markedly western orientation, which has tipped the internal balance of the CFSP/CSDP in an Atlanticist direction. New member states have been increasingly engaged in civilian and military crisis-management

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operations under the EU flag. As a rule they have done so as modular components of bigger multinational units and under foreign command. Much as their contributions have been limited in time, scope and numbers, the new member states have proved their willingness and ability to participate and perform in CSDP operations, especially in the Western Balkans and the Eastern neighbourhood, but also further afield.

Impact In size, scope and character, the ‘big bang’ enlargement of 2004 was nothing like the previous accession waves and it is unlikely to be anything similar of those in the future. The (by now not so) new member states have brought their own preferences and interests to bear, thereby complicating in some cases the already-fractured foreign and security policies of the EU. Despite the nuances that persist among the latest entrants, the enlargement rounds of the last decade have introduced an undisputedly new eastern dimension to the EU’s foreign policy, a more encompassing and at the same time more assertive Ostpolitik than the one sought by Willy Brandt in the 1970s. Today’s blurring distinctions between internal and external policies and between hard and soft security demands a more holistic and inclusive approach in tackling challenges and seizing opportunities if the EU is to make good on its foreign policy objectives. In this respect, the experience and expertise of the (by now not so) new member states has been and will continue to be indispensable for the European Union. *S teven Blockmans is Senior Research Fellow at CEPS and head of the EU Foreign Policy research programme. This commentary was first published as an editorial in the May issue of European Neighbourhood Watch.

EU AFFAIRS

Myths About German Leadership by John Kornblum*

1. Germany has traditionally shied from taking the lead in the West. Germany was never the political dwarf it was made out to be. Over the first five postwar decades, German leaders have been skilled at leading the West to support their national goals. Slowly and without fanfare, Germany has been remaking Europe in its image. It has made its wishes more palatable by paying more than its share. If others have misunderstood Germany’s role, that is in part because the country has succeeded in wrapping its ambitions in an image of selflessness. Germany has been as singleminded in pursuit of its goals as former French president Charles de Gaulle ever was with his, but German politicians have almost always left public leadership to others. Germany emerged from its cocoon during the euro crisis that began in 2010. All of a sudden, it became clear that the euro had been designed primarily to further German interests. But the “Germanization” of Europe had been going on for some time. Germany pushed so hard for access to nuclear weapons in the 1950s that the United States came up with an entirely new, and ultimately unworkable, proposal for a multilateral nuclear force to still German desires. The Ostpolitik, or Eastern policy, of former chancellor Willy Brandt was pursued in the face of major skepticism by Western powers. Another chancellor, Helmut Kohl, devised a ten-point plan on German reunification that he shared with no one, not even his own foreign minister, before publishing it. Plans for NATO enlargement were hatched in the defense ministry in Bonn and not in Washington. Chancellor Angela Merkel’s Energiewende, or energy transition, was previewed to no one before it was announced. And, despite its peaceful intentions, Germany remains the world’s thirdlargest arms exporter.

2. Germany must now shed its past reticence and help lead the West. Germany’s international personality is unlikely to change. Over the years, Germany has de-

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EU AFFAIRS

veloped an international style that suits its history, economic interests, and, above all, the political psychology of its population. Germany’s determined effort to seek accommodation with even notorious wrongdoers has at times added an air of irresponsibility to its image. The difference today is that Germany’s strengths— its economic dominance, its central geographic position, and its export-oriented industries—often seem more relevant than the traditional diplomacy of the British, the French, or even the Americans. This growth in German influence leads to calls for Germany to accept more responsibility for international stability. Those calls will be disappointed.

3. Germany’s reduced military expenditure contributes to irresponsibility. Not necessarily. Germany should carry more of the Western defense burden, but so should almost every other European member of NATO. Germany’s image of irresponsibility comes less from the size of its quite competent military forces than from its hesitation to join strong rhetorical, economic, or military reactions to international aggression. Germany’s deep-seated desire to avoid conflict often appears weak or at best egotistical in the face of clear commitments by other partners. The UN votes on imposing a no-fly zone over Libya in 2011 or on upgrading Palestine to observer status in 2012—both cases in which Germany abstained—are classic examples. Equally instructive is the painful effort by Germany’s foreign minister to find positive elements of Russian behavior in the Ukraine crisis. This restrained approach has brought Germany benefits. It is regularly voted the world’s most respected country. But none of this respect has helped ease the transition to leadership. A country that has worked for nearly seventy years to become “normal” like everyone else is now finding it difficult to fit in with the “normality” of others.

4. The solution to Germany’s leadership dilemma is closer European cooperation. Don’t hold your breath. While Germany strongly supports the goal of a common European foreign and security policy, neither its concrete contribution nor its strategy have furthered the process.

Others have shied from European solidarity as well, and it is doubtful whether any European framework could increase the EU’s role in the world. But instead of taking the lead in defining an active European global engagement, Germany has increasingly focused on its own interests and view of the world. European partners shake their heads with disbelief as Germany’s leaders repeatedly justify their unilateralism with the twin traumas of history—war and hyperinflation. Even the unilateral action that led to the Energiewende was justified by the fact that the Fukushima nuclear disaster somehow reminded Germans of their terrible past.

5. Germany’s unwillingness to lead is the fault of the United States. Yes and no. The United States has traditionally been the essential foundation for responsible German behavior. Strong American leadership has often helped Germany to act decisively in times of crisis. And America’s role has in fact declined in recent years. But even strong U.S. leadership has often failed to crack Germany’s determined reluctance to step forward. Over the years, Germany has sunk into a state of “strategic haplessness” that often hinders its ability to understand the importance of confident approaches to security challenges. As a result, U.S. leadership is increasingly seen as a threat to the comfortable world Germany has built for itself. Anger over U.S. support for Ukraine is a good example. The crisis is the result of European, not American, policies. The German public is by no means pro-Russian, but U.S. leadership in countering Russian President Vladimir Putin is still viewed by many as a threat both to peace and, above all, to German economic well-being. What Europe and the United States both want from Germany is the one thing Germany’s leaders probably cannot deliver: that Germany “grow up” and act with the graciousness and self-confidence urgently needed from Europe’s most indispensable leader.

*J ohn Kornblum is senior counselor at Noerr LLP and former U.S. ambassador to Germany.

EUROPEANBUSINESSREVIEW

EU AFFAIRS

Moldova, a European Neighborhood Tragedy in the Making by Jan Techau*

With tensions still on the rise over Ukraine, Moldova threatens to become the next playground for the power clash between Russia and the West. Having spent much time recently interviewing politicians, diplomats, think tankers, and journalists in Chisinau and Tiraspol (the capital of the breakaway region of Transnistria), I have returned with a strong sense of pessimism.

he case of Moldova demonstrates in an exemplary way how the current transformational model employed by the EU in its Eastern neighborhood has run into a conceptual dead end. The European Neighborhood Policy aims at incremental change in the political, economic, and social spheres in the hope of creating democratic market economies based on the rule of law and high standards of human rights. But with political elites in recipient countries refusing to implement the reform agenda, the EU’s approach has precisely the opposite effect of what was intended. Instead of fostering change, the policy ends up cementing the status quo. The existing elites, to whom the EU assigns the role of drivers and agents of change, pretend to put the reform agenda into action but have no interest in promoting change as they profit from keeping things as they are. Considerable portions of EU money are siphoned off, and much of the rest of it is used to “buy” stability, which in reality means stabilizing existing power structures, not making society more resilient. It would seem natural, then, to fundamentally rethink the EU’s approach and consider stopping its engage-

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ment altogether. But the EU can’t just end its work and withdraw its money. With roughly a quarter of Moldova’s annual budget coming from the EU’s coffers, the short-term effects of a pullout on the country’s political stability would be catastrophic. Furthermore, the geopolitical contest between the EU and Russia in Europe’s Eastern neighborhood allows for no withdrawal from Moldova, a country roughly split in half between pro-Russian and proWestern sentiments. Such a step would essentially mean caving in to Moscow’s openly aggressive policies and leaving the Western-leaning part of the Moldovan population in the lurch. The political elites in Moldova, whose record on good governance is abysmal and who have developed a strong sense of entitlement vis-à-vis the

EU AFFAIRS

West, understand the EU’s dilemma full well. They have become rather professional at using this quandary for their own purposes. Moldova is a country under multiple stresses. It hasn’t been very successful in building resilient statehood: a broadly shared sense of citizenship and a solid political system. Moscow has constantly interfered in the country, either directly by keeping open the question of how to deal with separatist Transnistria, or indirectly by exploiting the country’s energy scarcity, unresolved minority issues, and dependence on agricultural exports to Russia. As the room for maneuver between Russia and the EU shrinks, Moldova’s risk of disintegration is growing. This kind of existence on the edge is nothing new for Moldovans. For centuries, their country has been an in-between territory-not big enough to be sustainable on its own, not weak enough to implode or just be left alone. As tributaries to the Ottomans, as a backwater in czarist Russia, as the weaker half of greater Romania, or as a sideshow within the Soviet Union, Moldova has always been a fringe entity. Since gaining independence in 1991, Moldova has turned its in-between existence into something resembling a virtue. Being equally involved with the two blocs to its east and west, the country has achieved a fragile internal stability. Small-scale oligarchs have been able to use the country as the basis for their economic success without ever committing fully to either the Russian or the Western orbit. As a consequence, Moldova managed to survive its many internal contradictions essentially by avoiding a commitment to either side. Staying “in between” became a political survival strategy. However, as the power rivalry between Russia and the West intensifies and Moldova’s unhealthy economy shows no substantial signs of improvement, this in-between situation is becoming increasingly difficult to sustain. Both Russia’s expansionism in its old Soviet backyard and the transformative agenda of the European Neighborhood Policy-one a threat, the other an offer-are putting pressure on the political elites and society as a whole. These factors are forcing Moldova’s noncommittal society to make a choice-a choice that threatens to literally tear the country apart. What is the alternative? From a strategic viewpoint, the EU and the United States have few options. They can’t just buy a country and turn it into a full-blown

client state. That is not something the West wants or could sustain politically at home, nor is it what the situation on the ground calls for. So the EU will slightly revamp and extend its neighborhood policy, which will continue to fail. A Western military engagement in Moldova is unthinkable, and indeed, NATO has recently ruled this out. The only remaining hope for Moldova is that its own elites will finally get serious about reforming the country and addressing some of its simmering lethal internal threats. Most observers in Chisinau don’t believe this can happen. Such a course might have been a distant possibility under more normal circumstances during the last twenty years. But the opportunities were wasted, and now time is running out. Amid the current regional tensions, successful internal modernization looks impossible. And thus, Moldova’s future as an independent, sovereign state looks increasingly questionable as well. Grim prospects indeed on Europe’s Eastern flank.

* Director of CARNEGIE Europe

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ENERGY SECURITY

Russia Pivots to Asia by Kenneth Courtis*

The Russia-China Energy Agreement is the world’s largest commercial deal ever.

he $400 billion, 30-year natural gas deal just announced by China and Russia is the biggest single trade agreement in history. With this deal, Russia has signaled a major and sharp pivot of its economic and strategic focus to Asia. Russia’s pivot to Asia and dramatically enhanced relations with China, which this deal and related agreements signify, will have substantial long-term implications for Asia and more broadly for the Asia Pacific region. The largest previous natural gas deal which China has signed was with Australia, a dozen years ago. That was a $25 billion deal and runs through to the end of the next decade. The China-Russia natural gas deal is about 16 times larger. By any measure, it is a big, big deal. Indeed, it is the single largest trade deal ever.

Long term implications While perhaps accelerated by recent pressures brought to bear on both Russia and China by the United States, the deal has been a decade in the making - and it has a significance far beyond the immediate time horizon. Important for Russia, the agreement includes a base

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price formula with reference to oil prices. This is something the Chinese side has resisted tenaciously, just as Russia strenuously held out for an oil reference price formula to price the gas supplies. Through negotiations in the past few weeks, and indeed right up to the final agreement, this was the key, final sticking point.

As with Europe, so with China The pricing of Russia’s very substantial natural gas sales to Europe is based on an oil price reference formula. With oil prices so high, the oil-based price formula for natural gas allows Russia to sell its gas at a higher price than if it were based on spot-market natural gas prices. Russia has been determined to protect this price formula. Had the country failed to do so with China, Western Europe countries would have immediately demanded a revision of their natural gas supply contracts with Russia. So the agreement is a big breakthrough for Russia. The two parties have announced that the price will remain a “commercial secret.” However, it is thought that, in exchange for China having finally accepted an oil-related price formula,

ENERGY SECURITY

which it has never done previously, China has negotiated an initial price close to what it has been proposing. In addition, the agreement includes that Russia cover $70 billion in upfront spending on infrastructure, while China will pay upfront $22 billion. Earlier in the negotiations, Russia had proposed a 55:45 split of upfront commitments.

Russia’s pivot to Asia The gas will start flowing to China by 2018, which is significant because it is 3-4 years before any North American natural gas would be available for shipment to Asia. While China’s demand for natural gas will continue to increase, and substantially, for many years to come, this massive deal is a major new element in the equation for those players looking to export North America’s surging shale gas supplies to Asia. In addition, as part of the agreement, Russia has accepted the doubling of its oil exports to China to approximately a million barrels a day. The two countries also announced during the two days of meetings in Shanghai a number of other agreements. This includes the joint production of commercial aircraft and heavy helicopters as well as joint developments in petro-chemicals. These agreements represent a vast upgrading in China-Russia relations. More significantly, they mark a sharp “Pivot to Asia” by Russia.

Next stop for Russia: Japan But Russia has more on its agenda. Next on the list for Russia is a big energy deal with Japan. Negotiations have been going on for some time. Both sides are working toward an agreement for the visit of President Putin to Japan in September 2014. Japan is the world’s largest importer of natural gas. It continues to seek to diversify its sources of supply. Japanese buyers are less focused on price than is China, as they also include in their calculations security of supply, stability of supply and consistency of the composition of imported natural gas. Japan also has accepted an oil reference formula for pricing its natural gas purchases. At the same time, expectations are building in Japanese political circles that the two countries can come to an agreement later this year on their protracted, and for most outsiders, senseless territorial dispute. Tokyo hopes are that negotiating the energy deal can be doubled up with an agreement on its territorial claims which date back to the circumstances of Japanese surrender in 1945.

Russia and North Korea? In addition to the deal with Japan, there is a real curve ball in preparation. Over the last two years, Russia has settled all outstanding commercial issues with North Korea. These touched essentially on the issue of trade debt and other unpaid loans. Russia accepted to forgive $10.9 billion in outstanding debt, with the remaining $1 billion to be paid in equal instalments over 20 years. In settling these issues, Russia and North Korea have set the base for substantially increased economic relations. Against this background, Russia’s Gazprom and North Korea’s Ministry of Energy have come to an understanding to build a natural gas pipeline that would enter North Korea at the Khasan crossing of the Tumen River, on the Russian-North Korean border. The pipeline would then extend through North Korea to South Korea (Korean Gas Co).

Russia connects North and South Korea; East and West hemispheres Tantalizing, in what shapes up to be a new case of Russian “gas diplomacy,” this supply line would supply both North and South Korea. This project has been discussed for more than a decade, with much of the initial impetus coming from South Korea. But it is Russia that has moved into the driver’s seat in the last two years. A related project would see a modern rail line built from South though North Korea into Russia, and then connecting to the Trans-Siberian Railway. Even more fascinating, this would allow high-speed rail connections directly from South Korea to the markets of Europe. If such a natural gas line and railway were to be built and there is strong support for this in parts of the South Korean establishment and business community - it would not only provide South Korean producers direct land access across Central Asia and all of Europe. It would also provide the impetus for transforming the North Korean economy - and change that region’s frozen geopolitics in the process. In short, if its vision comes to pass, Russia would become anchored in Asia as it never has been in the past. Better yet for Moscow, all major economies of East Asia would become linked to Russia in a way few had previously imagined possible. And that would be truly a pivot to Asia. That also means that Russia will become enmeshed in East Asia in ways which will pose new challenges for Russia itself. * Kenneth S. Courtis is chairman of Starfort Holdings and managing partner of Courtis Global & Associates

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ENERGY

An opportunity for natural gas in the motorization field opens up The opportunity of converting cars to gas powered ones, at low cost and gaining great economic and environmental benefits, is offered at last

owadays, a driver who owns a natural gas powered car, pays 0,965 €/kg fuel cost. If we convert one kilo of CNG to thermal equivalent of one liter petrol, then we note that the “lucky” driver of this particular car paid just 0,64 €/lt -including VAT- when last weeks, the standard average disposal price of 95 octanes of petrol, in Greece, was 1,676 €/lt. So far, in order for drivers to be benefited by the extremely low cost of natural gas, they should buy one of the car models which are available in the market and have the heat plant of CNG or FISIKON, as these are the brand names of natural gas automobile in Greece. Usually a natural gas powered car is slightly more expensive than a petrol car. However, in a short time period there is depreciation of the cost difference, since besides the reduction of fuel consumption, a natural gas powered car requires lower service cost but also offers vehicle tax exemption.

Until recently, Greek drivers could use the benefits of natural gas motorization only by buying a gaspowered vehicle, since the conversions of petrol-powered vehicles were not still possible in Greek market.

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But, the fact is that, due to the economic crisis, the opportunity to buy a new car has been dramatically limited for most buyers. As a result, the economic recession acts as a deterrent to a large number of private vehicles drivers who might wish to change their car. At least, this was applied until a few days ago, since now the opportunity to convert petrolpowered cars, in order to operate with natural gas, was established by a decision of the Deputy Minister of the Ministry of

Infrastructure, Transport and Networks, Michalis Papadopoulos.

A decision of the Deputy Minister of the Ministry of Infrastructure, Transport and Networks, Michalis Papadopoulos, establishes the opportunity to convert petrol powered cars into gas fuelled cars. What does this decision mean? Practically, today there is the opportunity to install a liquid gas powered “kit” (namely liquid gas or LPG as it is known

ENERGY

al framework which increases the expectations for the further entering of national gas in the transport area, with significant benefits not only for the drivers but also for the environment.

New amendments, regarding gas-fuel, create a new institutional framework which is expected to boost the gasfuel market, offering significant benefits both to drivers and the environment. to most consumers) to a private vehicle, costing almost the same as… changing tires, and the same will apply to the comparatively much more cost-effective and efficient natural gas in compressed form.

We remind you that natural gas is the most efficient and costeffective fuel since 1kg CNG is energetic equivalent to 1,5 lt of petrol, to 1,3 lt of diesel and to 2 lt of liquid gas LPG. It is also noted that CNG bears no relation with the well-known liquid gas or LPG that has entered the market for decades, without showing impressive results in cost-efficiency or the environment and at any case the results are not comparable with those of CNG.

Now, drivers can reduce drastically the fuel cost by costing them almost the same as… changing tires. According to the last ministe-

rial decision, installation of these special natural gas “kits” will take place into authorized, certified garages and mechanics, while afterwards the proper functioning will be certified by MOT testing. As the Ministry of Transport stresses, “with this specific regulation, which was a steady demand from citizens, combined with the ability of constructing unmixed or mixed natural gas service stations, the whole regulatory framework regarding the natural gas introduction to vehicles in Greece is completed”. Indeed, it is reminded that only recently the technical specifications of establishing and operating natural gas stations were defined, a fact that consists of a significant step for the expansion of fuel use in the transport field. Also, it must be noted that at CNG there is no room for adulteration, since the fuel delivery takes place to the stations by the national transmission system, through special pipes, while the delivery from the station to the car happens through specific certified equipment. Therefore, the two decisions create a new –gas fuelled friendly- institution-

After all, the environmental performances of the engines that use natural gas are impressive. CNG cars, compared to petrolpowered ones, produce 25% less carbon dioxide while they achieve reductions of 95% carbon monoxide emissions, 80% hydrocarbon emissions and 30% nitrogen oxide emissions.

At this moment, gas-fuel, in Greece, remains at an early stage of development, with DEPA promoting significant initiatives to enhance supply infrastructure but also promoting gas consumption in targeted professional groups (corporate fleets, taxi drivers). The ambitious goal, that has being set until 2020, is 20% of the car fleet to use natural gas, which is an internationally well-known, mature and safe technology and today is used by more than 14 million cars around the world.

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SOCIAL RESPONSIBILITY

“ Climate change is the biggest st global health threat of 21 century” by Dr. Wen-Ta Chiu

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SOCIAL RESPONSIBILITY

On May 21, Taiwanese Minister of Health and Welfare Dr Wen-Ta Chiu addressed the World Health Assembly in Geneva, Switzerland. In his speech he stipulated that climate change is the biggest global health threat of this century. The minister illustrated this with facts and figures from his own country, Republic of China (Taiwan).

the medical journal Lancet once stated, “Climate change is the biggest global health threat of the 21st century”. And climate change is clearly affecting my country, Taiwan. From 1909 to 2008, our average temperature increased by approximately 1.1 degrees Celsius. Between 2000 and 2009, 11 typhoons brought heavy rainfall that caused serious flooding. In contrast, before 2000 the average was only four such events per decade. As we are aware, climate change can harm human health in three ways: infections, emergencies, and environmental changes. As for infections, evidence and National Health Data Bank shows that the spread of four communicable diseases in Taiwan is closely related to climate change, including dengue, leptospirosis, melioidosis, and tsutsugamushi. Due to the heightened frequency of typhoons and intensive rainfall, dengue outbreaks since 2007 have grown from intermittent common-source outbreaks to continuous outbreaks. Over the past decade, three melioidosis cluster outbreaks all happened within one to three weeks after typhoons with torrential rain. After Typhoon Morakot hit Taiwan in 2009, a leptospirosis

cluster outbreak brought about 130 confirmed cases. Moreover, since 2000, the incidence of tsutsugamushi has more than doubled. As far as emergencies, the second way climate change can harm human health, the frequency of flooding caused by typhoons has tripled over the past decade in Taiwan, with a corresponding rise in casualties. In order to meet such challenges, Taiwan has set up the Central Emergency Operation Center, which is capable of responding to 22 types of disasters. Meanwhile, more than 500 hospitals across Taiwan have established emergency response mechanisms. In terms of environmental changes, the third way climate change harms human health is the combination of rising temperatures and high humidity, which has magnified the number of related fatalities. Research shows that heat index readings above 38 degrees Celsius can cause a higher mortality rate, especially when humidity rises concurrently. In response, Taiwan has established a project that supports vulnerable populations before and during extreme weather events, such as overly high or overly low temperatures. For ex-

ample, cardiovascular disease and stroke patients admitted into emergency rooms during the coldest months rose by 11% in 2012 so more lives were able to be saved. Other diseases caused by environmental change, such as cataracts and skin cancer, which stem from excessive ultraviolet radiation exposure, and airborne allergic diseases like asthma, have also gradually increased over the past decade. Taiwan fully supports the WHO’s work plan on climate change and health. We have established a cross-ministry standing committee that develops policy frameworks and action plans aimed at mitigating the impact of climate change. The impact of climate change on human health is imminent and present. We need to work as a team to tackle this challenge. Taiwan is willing and able to join and contribute to related global efforts. We hope that our good will is noted, and that our meaningful and dignified participation in the WHO can be broadened. I call for the model of our presence in the WHA to be further expanded to other WHOrelated meetings, mechanisms and activities, so that we can join WHO efforts to fight health issues caused by climate change.

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SPECIAL REPORT

SPECIAL REPORT: th 12 European Business Summit by N. Peter Kramer, Editor-in-chief, European Business Review

On May 14 and 15th, in Palais Egmont in Brussels, more than 1,650 participants coming from many different backgrounds - think tanks, academics, NGOs, and representatives of civil society, as well as 100 speakers and 150 journalists, took part in the debate in over 15 session. Traditionally, European Business Review (EBR) was one of the media partners of the event. The 12th European Business Summit (EBS) presented a new format called â&#x20AC;&#x153;Meet the Experts Sessionâ&#x20AC;? that encouraged an interactive and alternative debate, aiming to inform and allow participants to engage with speakers. In this EBR-special we present our

readers reports of 3 of these sessions, the openingsspeech by EUROPEANBUSINESS President Emma Marcigaglia; and a report of the input of Assembly of European of Regions, key partner of EBS 2014. The organisers and EBR regret that there were arrests by the police among the D19-20 demonstrators gathered at Place Poelaert during the summit.

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SPECIAL REPORT

THE BUSINESS COMMUNITY’S VISION FOR THE EUROPEAN UNION IN 2014-2019 by Emma Marcegaglia*

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SPECIAL REPORT

The Euro-pessimists are wrong. The European economy is improving. But this does not mean that we can relax our efforts because we have not yet regained the ground lost since 2008. Furthermore, while we were repairing our economic system, the rest of the world did not stand still.

ur competitors made structural reforms, invested in infrastructure, machinery, skills and innovation. They worked hard to make the best of information technologies and improve their competitiveness. Europe is walking, when the rest of the world is running. Only 23% of the 150 European countryspecific recommendations for growth-enhancing structural reforms are implemented properly. We talk of increasing the share of manufacturing industry in the EU GDP to 20% by 2020, but we shy away from policy changes to reach that goal. We want to reduce unemployment, but we resist reforms that will boost job creation. We know that one European job out of ten comes from exports, but we have irrational fears about the Transatlantic Trade and Investment Partnership. It is time for Europe to become much less defensive, much more ambitious and much more future oriented. We have a lot to offer as a region. Europeans are skillful. Many entrepreneurs are keen to develop their companies’ potential. But they need a supportive environment to be successful. Europe must stop regulating itself to death and unleash its innovation potential. BUSINESSEUROPE and its member federations have a clear PICTURE of where the next European Parliament and the next European Commission should take Europe to by 2019, at the end of the next European institutional cycle.

latory and tax burden on European companies. Where T stands for a talented Europe, because labour market, education and training reforms are urgently needed to put an end to a shameful European paradox: high unemployment co-existing with unfilled vacancies! Where U stands for a unified Europe, because there is huge untapped potential in the Single Market. And because our trading partners are still too often able to score points in international negotiations by exploiting European divisions. Together we are stronger! Where R stands for a resilient Europe, because we have not yet solved key home–made problems. Excessive public debt and fragmented financial markets hamper access to credit for companies. We urgently need to implement a Banking Union. And necessary reforms!

We PICTURE a global Europe. Where E stands for an entrepreneurial Europe because ultimately, only enterprises can create jobs and generate the wealth that our societies aspire to.

We PICTURE a global Europe. Where P stands for a powered Europe, because excessive energy prices and unrealistic climate change targets undermine growth. This cannot go on! Where I stands for an innovative Europe, because more research, more innovation and a digitalisation of our economies is essential to stop losing ground in the global economy.

We PICTURE a global Europe. Where C stands for a competitive Europe, because we can remain the world’s largest exporter of manufactured products if we reduce the regu-

* President of BUSINESSEUROPE ** T his article is part of Mrs. Marcegaglia’s speech during the Opening Plenary Session of the European Business Summit 2014 on May 14, 2014.

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SPECIAL REPORT

A Dynamic Pharmaceutical Sector for Better, Cost-Effective Healthcare In an interesting EBS session it became clear, that the pharmaceutical industry remains one of the most important sectors in the European Union; not simply in terms of healthcare and benefits to patients, but also in how the industry can drive research and innovation, and be a prime driver for growth. This session heard from industry experts and policy-makers keen to discuss the complexities of the sector, and also its potential in helping to lift the European, and global economies, out of the financial doldrums. The aim of the European Commission in the coming years should be to “ensure an effective and sustainable healthcare system in Europe,” according to Paola Testori Coggi, Director-General for Health and Consumers. While, at present, health remains the competency of individual member states, she said the role of the Commission should be openness to aid member states with the optimum management of their health systems. “We need to contribute to creating a regulatory framework that works,” she said. “Outstanding issues that need to be addressed include completing the falsified medicines directive, and working on effective regulatory frameworks for accessible medicines, cross-border patient care, advanced therapies and the role of the sector in creating growth and jobs” “The pharmaceutical industry is a driver of growth,” said Ron Cooper, a Member of the Executive Committee EFPIA and President of Bristol-Myers Squibb Europe. “It has economic, as well as health, benefits. The economic potential of the sector is potentially massive in Europe; it currently employs 700,000 people and accounts for 17% of all research and development”.

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That last point is very important added Cooper, and highlights where the industry can grow further, mirroring as it does the EU’s commitment to research and innovation. “We are committed to R&D even in the most difficult times,” he said. While healthcare remains a member state issue, the European Commission is keen to usher in a new healthcare regime in Europe, working with individual countries on a range of issues, such as cross-border patient care, accessible medicines and effective use of budgets. Research and development is key to the EU’s longterm economic strategy, and, as Ron Cooper said, is also a vital component of the pharmaceutical industry’s plans. With people living and working longer, it is vital to keep innovating. “All industries need R&D spending, but pharmaceuticals are at the top. We bring added benefits to lives; people living with disease and disabilities need innovation. We need to have a sustainable approach to health care, one that is fully integrated into the economy. We have a significant contribution to make to GDP.” In ensuring that the sector continues to bring economic benefits to the EU, there needs to be a strong collaboration between policy-makers and industry according to Nick Haggar, President of European Generic Medicines Association and Head Western Europe, Middle East and Africa of Sandoz. “There need to be strong links between the healthcare, industrial and economic policies in the EU, what he called a “stability pact” between interconnected sectors. “Partnership and dialogue are very important for a medicines industry in Europe,” he added. Currently, generic medicines account for about 54% of the sector in Europe. The key to maintaining this success is stability, and keeping “predictable prices.” The European Commission needs to come together with industry to ensure sustainable, high-quality medicines in Europe, according to Haggar, including through the upkeep of “stringent regulations”, something, he said, that is vital for maintaining high safety standards in the sector. Like Ron Cooper, he agreed that the health care sector can be a great driver for growth and jobs in Europe, not just through research and development, but also through creating a strong manufacturing base. However, he warned that industry must communicate more effectively if it is to get its message across. “If we don’t convince those outside our community, then we won’t succeed,” he said.

Δεν χρειάζεται να είναι ακριβό για να είναι πολύτιμο Τα γενόσημα φάρμακα διασφαλίζουν το ίδιο θεραπευτικό αποτέλεσμα με τα πρωτότυπα φάρμακα εξοικονομώντας πολύτιμους πόρους από τα ασφαλιστικά ταμεία προς όφελος όλων των πολιτών. Η TEVA είναι η κορυφαία εταιρεία παραγωγής γενοσήμων φαρμάκων και μεταξύ των 15 μεγαλύτερων φαρμακευτικών εταιρειών στον κόσμο. Εκτός από γενόσημα φάρμακα, αναπτύσσει και παράγει και καινοτόμα θεραπευτικά μόρια για νευρολογικές, αιματολογικές και ογκολογικές παθήσεις.

Γιατί στην ΤΕVA πιστεύουμε ότι η υγεία είναι ένα αγαθό για όλους. Και η προστασία της δεν χρειάζεται να είναι ακριβή.

TEVA Pharmaceuticals Hellas S.A. Κηφισίας 166Α & Σοφοκλέους 2, 151 26 Μαρούσι, Ελλάδα, Τηλ: +30 210 72 79 099 www.tevapharm.com

SPECIAL REPORT

How can we finance innovation? by EBR

•M oderator Frédéric Simon (EurActiv.com), opened the discussion by highlighting the leading position of the EU in the field of research and innovation. In his view, however, the EU sees its leadership challenged more and more by China and developing economies. • Robert–Jan Smits, European Commission DG for Research and Innovation, emphasised the importance of Research and Development as one of the new sources of economic growth. For him, countries that got through the financial crisis were the ones with the most funds allocated to research. He stressed the fact that the funds allocated for science and innovation saw a huge increase in the EU budget for the next seven years – from €50 to 80 billion. He was optimistic that industry would be “put back in the game”. He also promised that Horizon 2020 will see interesting developments in the future with new financial instruments available for young and innovative companies. He closed by announcing that Horizon 2020 is the biggest innovation strategy in the world and that everybody interested should join in. • Michael Goldman, Executive Director Innovative Medicines Initiative, cited the uniqueness of Public Private Partnerships (PPPs) in promoting economic growth along with the health sector and also addressed current societal challenges. He said that each year “25 000 Europeans are dying because we have not developed the proper antibiotics”. His organisation supports projects that encourage and develop new business models. Focusing on examples such as autism and Alzheimer’s disease, he highlighted the need for a change in the way medicine research is encouraged and financially supported. He closed his presentation with a call for bringing disruptive change to the pharmaceutical sector through improved PPPs and better investment.

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• Daniel Sanchez, General Partner Nauta Capital & Member, Venture Capital Platform Council, EVCA, reminded those in attendance that innovation should be self-sustainable and profitable in order to be successful. In his words “innovation is about money and public subsidies but also about a proper ecosystem”. For him, a culture of innovation, entrepreneurs, and investors need a whole ecosystem so that venture capitalists can find it attractive from a financial point of view in order to finance innovation. He called for public funds to be available for startups alongside additional financing initiatives, such as the European Investment Fund. • Thierry de Molinari, Co-founder & CFO CO.station, began by saying that for him “innovation is the future of Europe”. In his view, the question of how to finance innovation is extremely important in the world of venture capital. He focused on his experience and described how accelerators find the best start-ups and also provide access to new markets. This is something that the US currently leads Europe in. For him, one of the main remaining issues is how can actual talent be capitalised and financially supported. • José Zurstrassen, Chairman MyMicroInvest, commented that one of the main challenges today is to find a way to diminish the risk factor in businesses. He was confident that every European citizen should be able to receive funding for a viable idea. He also highlighted the importance of the Horizon 2020 programme but warned that “we have in Europe some of the most brilliant scientist but the problem is transforming them in industrial businesses as we`re missing the entrepreneurs”. For him, one of the main problems is finding the teams to execute these innovations and put them to practice and help these entrepreneurs to avoid failure. Removing the stigma of failure, he continued, is vital to spur more innovation and entrepreneurship in the EU.

SPECIAL REPORT

Boosting our Industrial Growth by EBR

Moderator Sarah Gordon (Financial Times) opened by saying that Europe lags behind on the global growth curve with Germany as the only country in the Eurozone that is growing in real terms, France at a standstill and the other economies shrinking. Therefore, as a matter of urgency she called for support for innovation and re-industrialisation as a matter of urgency. The European Commission aim is for European industry’s share of GDP to reach 20%. However, industrial innovation is inhibited by the high cost of energy.

have left businesses wondering whether to focus on the EU as a whole or adapt their strategy to the Eurozone. In industry’s view, the cost of energy must be reduced and there are calls to exploit shale gas on a European level.

Pedro de Sampaio Nunes (EUREKA) said that, with the economic crisis in Europe not yet over, public administration must be geared to growthfriendliness. Europe’s industrial policy will have to boost innovation and human capital, as well as contribute to lower energy prices. Policies in all areas must support small and medium-sized enterprises. Industry should be able to count on public support to retain a competitive advantage in areas of high-level expertise and knowledge.

Industry representatives warned that Europe’s share of global manufacturing is shrinking in particular with regard to the chemical industry. ‘There is too much regulation on health and safety in the work place’ remarked Hubert Mandery, Director General, CEFIC. Something that, he said, adds a punitive cost. He also argued that new legislation should not inhibit competitiveness.

Daniel Calleja Crespo, European Commission DG for Enterprise and Industry, European Commission called for a focus on key enabling technologies accompanied by better access to finance for entrepreneurs. There is, he declared, a complete disconnection between education and business. He argued that there ‘must be more skills training, an approach that should be mainstreamed across EU policies’. He then revealed that the Commission will introduce a so-called SME check before adopting new rules; any regulation should be screened for its impact on small and medium-sized enterprises. There was broad agreement on the panel that the changes to the governance of the Eurozone

Loïc Armand, President L’Oreal France, said that the EU labour market should be increasingly mobile, adding that ‘a smart Trans-Atlantic Trade and Investment Pact would be beneficial for companies in terms of regulatory convergence, such as on labelling’.

Echoing these sentiments, Pedro de Sampaio Nunes lamented what he referred to as the state of over-regulation in Europe, as well as the high price of energy saying that ‘there is the risk that the new approaches to innovation do not work at all’. He added that the EU must act on lowering energy prices saying the obligation on industry to to use renewables ‘kills industry in Europe’ and that those taboos must be addressed. Alexandre Affre, Industrial Affairs Director of BUSINESSEUROPE, concluded that despite the challenges, industry still does retain a big share of the economy in many EU member states, wishing for reinforced governance of industrial competitiveness and calling for the exploitation of shale gas in Europe as part of a renewed push for diversification of energy sources in the EU.

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SPECIAL REPORT

Regions and business vouch for an effective economic subsidiarity by EBR

Since 2013, the focus of the Assembly of European Regions (AER) has shifted with the ambition of creating stronger links between the business sector and regions throughout Europe. It was therefore a natural progression that AER became an official partner of the European Business Summit (EBS), the event “where business and politics shape the future”.

ithin the framework of this year’s EBS topic, “Rebuilding a Competitive Europe – The Business Agenda 2014-2019”, AER organised a session on “How European Regions contribute to competitiveness?”, attended by more than 130 participants, among which Commissioner for Regional policy, Johannes Hahn. At a period when globalisation of the world markets has changed the rules of the game, Europe must focus on opportunities, and turn to its regions and SMEs (99% of European enterprises are SMEs) to reap the benefits from this evolution. Regions are close enough to their citizens to grasp both the practical reality and needs of their entrepreneurs and strategic enough to inscribe local and regional development in European strategies. So, what better level than the regional to promote economic development in Europe?

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SPECIAL REPORT

Regions can play a key role in avoiding that companies leave from one European region to another, or even out of Europe. For this, a better use of the European funds is needed, mainly through a simplification of procedures. It is indeed sometimes too difficult for SMEs to complete the procedures, as they do not have the necessary human resources and legislation knowledge. Regions must also adapt themselves to the new situation, and support their SMEs in the same way. Some concrete examples coming from Açores (PT), Timis (RO), Bruxelles-Capitale (BE), Noord-Brabant (NL), Dnipropetrovsk (UA) and Liverpool (UK) showed that, despite the geographical and cultural differences, all regions have underlying potential to be exploited. It was unanimously agreed that this diversity is an asset for Europe! Regions and their SMEs must find their way to keep or attract investors and young talents, and AER is the place to share experiences and ideas to reach this goal. The level of decentralisation is a key factor when unlocking potential for competitiveness: the more decentralised regions are, the more they are able to exploit their resources and help their SMEs to be attractive. It is not only about money, but increased competences give the freedom to better use and connect all existing resources. Dialogue, support and recognition from regions to entrepreneurs is also essential. During the session participants exchanged views with SME representatives. Tim Kievits, an entrepreneur from NoordBrabant (NL), strongly stated that “Politicians at all levels should understand that it’s not all about money and financial help, we should focus more on people. The boost of confidence we get from being recognised for our contributions and successes helps greatly in further developing our SMEs’ future in and outside of Europe”. Mrs Hande Özsan Bozatli, AER President, warmly thanked Commissioner Hahn who all over his mandate was attentive to the regions’ needs and proposals: “You have been a great supporter of our work at AER and I thank you for the trust and confidence that have always characterised our many exchanges.” Building on the EBS Regional session, on 2nd day of the Summit, Hande Özsan Bozatli gave the three main AER messages to the audience:

-R egions need to be actively involved in the formulation and implementation of European policy and programmes addressing globalisation, be it the Europe 2020 flagship initiatives, especially “An Industrial Policy for the Globalisation Era” and “Innovation Union” or ultimately in the free trade agreements’ negotiations. - Regions have done and are doing their homework already to participate in the global competitive environment. - Free trade and open markets have their benefits, but we need to be careful not to trade off our own European cultural heritage and diversity and in particular cultural products. The AER Delegation of 60 elected and business representatives from 20 regions, as well as the 20 journalists, welcomed the inclusion of a regional dimension into the European Business Agenda, and reinforced the message that without the regions, the EU2020 goals cannot be reached.

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THE WORLD

INDIAN ELECTIONS: Gearing up for a “new” India? by Shada Islam, Gauri Khandekar and Patricia Diaz*

Expectations of change are high as Narendra Modi, leader of the Hindu Nationalist Bharatiya Janata Party (BJP), takes charge as India’s new prime minister. Critics describe him as controversial and polarising. But with his ground-breaking outright parliamentary majority, Modi certainly has the mandate to take strong and decisive action to revive economic growth and tackle India’s many other challenges.

ndian business leaders have embraced Modi as their man, seeing him as the best hope for ending paralysed government policy and bringing in more foreign investment. An impressive turnaround in the fortunes of Gujarat, the Indian state he led as chief minister since 2001 (his supporters speak of a “Gujarat model of success”), has further burnished Modi’s credentials. Still it won’t be easy. With India’s economic reform and liberalisation programme running out of steam and growth falling from 10.3 per cent in 2010 to less than 5 per cent annually, the new prime minister faces an uphill struggle to turn election pledges into effective national policies.

Parliament), with the BJP itself securing a sweeping outright majority by winning 283 seats. The impressive numbers mean that he owes his victory to Indians from every caste, class and religious background, including Muslims, many of whom appear to have set aside their suspicions about his role in the bloodletting in Gujarat in 2002. Modi has always denied any wrongdoing and the Indian Supreme Court ruled in 2010 he had no case to answer. The election also signals a radical transformation of India’s political landscape, with the long-ruling Congress Party, led by the Gandhi dynasty, winning only 44 seats, down from 209 in the previous Lok Sabha.

A paradigm political shift

Good times are coming

He has the voters with him. Modi’s election victory is stunning, triggering a tectonic paradigm shift in Indian electoral politics. The BJP-led coalition, the National Democratic Alliance (NDA), won 336 seats in the 543-seat Lok Sabha (India’s lower house of

During hundreds of rallies across the country, the BJP leader promised his voters that “good times are coming” as he vowed to promote development, revive economic growth, tackle youth employment, build a world-class infrastructure, and ensure wom-

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THE WORLD en’s safety. The list of tasks for the incoming government is long and Modi, who campaigned on promises of “smaller government, more governance”, will have to act fast. The first priorities will be to kick-start the economy, overhaul the infrastructure sector and with 13 million young people entering the job market every year, the new Indian leader will have to act quickly to deliver on promises to create jobs. It will be a challenge. Analysts say India must create 10 million jobs a year, four times the pace of the last 5 years, to absorb youth into the workforce. Over half the country’s population is aged under 25 years.

Big and bold Rebooting India’s economy will require big and bold reforms on several fronts, including changes in labour laws which discourage foreign companies from setting up factories in India. Such a change is pivotal: revving up the manufacturing is essential to create more jobs, but manufacturing makes up only 15 per cent of India’s economy, compared to 31 per cent in China. An overhaul of India’s tax system and better infrastructure will also help encourage foreign investors. In addition, with his focus on urbanisation, Modi has promised to build 100 new cities and construct a high-speed rail network. With 400 million Indians still living in desperate poverty and 217 million of the country’s children malnourished, enormous social challenges continue to demand attention.

Foreign policy challenges Modi spoke little about foreign policy during the election campaign, leading to speculation that a drastic shift from past policies is unlikely, not least because of the continuity provided by India’s permanent bureaucracy. Analysts concur that the government’s engagement with the outside world is expected to focus heavily on trade and investment. Pakistan has wasted no time in making overtures to the incoming prime minister. Modi has been invited to visit Pakistan but many are worried the new Indian prime minister will be hostile towards its neighbour. The optimistic view is that Modi will follow in the footsteps of the former Indian prime minister Atal Bihari Vajpayee who was also a BJP leader but developed good relations with his Pakistani counterpart Nawaz Sharif in the 1990s. Sharif is also Pakistan’s current prime minister. The new Indian leader will have to make up his mind on whether he wants to do business and trade with China or whether – as some of his statements have indicated – he will adopt a more assertive posture towards Beijing. Modi will almost certainly pursue stronger economic ties with Japan, with an eye on expanding the flow of Japanese investments into the country. Relations with ASEAN are likely to be further consolidated as part of

India’s “Look East” policy of upgrading economic ties with Asia’s rising economies.

Last but not least: Europe… Given the expected focus on Washington, Beijing and Pakistan, relations with the European Union (EU) are not likely to be an immediate top priority for the new government. The EU is hoping, however, that Modi will put energy and effort into the successful conclusion of the much delayed EU-India Bilateral Trade and Investment Agreement (BTIA). Brussels and Delhi have been trying to clinch the elusive investment deal for the last seven years. But differences over tariffs and market access as well as questions related to the protection of intellectual property rights have impeded progress. EU officials say the pact could be signed in 2015 – provided both sides summon up the political will to look beyond the array of technical issues to the deeper strategic importance of their relations. A recent EU ban on imports of Indian mangoes because of phyto-sanitary concerns has injected new strains in the relationship, however. Beyond the BTIA, Brussels is hoping the new government will demonstrate stronger interest in developing the EU-India relations. Europe and India have much to discuss. The new government’s jobs and growth programme resonates deeply in Brussels given the EU’s own struggle to generate employment and boost economic recovery. Both sides confront the challenge of expanding economic reforms, bolstering trade and tackling regional disparities. The EU-India conversation on security and counter-terrorism has taken off as has cooperation on regulatory cooperation and data protection. Discussions on environmental protection, urbanisation and water and food security are ongoing. The challenge now is to take the relationship to a higher and more genuinely strategic level. European investors are willing and eager to enter the Indian market. European know-how could be valuable to India’s reform and modernisation agenda. Europe, meanwhile, needs new markets to keep its modest economy on track. EU and Indian leaders have not met for summit talks since February 2012. An early meeting between Modi and the EU’s new presidents of the European Commission and the EU Council this autumn will be an important step in marking a fresh start in relations. Convening such a meeting should be a priority. * Shada Islam - Head of Policy at Friends of Europe auri Khandekar - Head of the ‘Agora Asia Europe G Programme’ at the think tank FRIDE atricia Diaz - Programme Manager at Friends P of Europe

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LEADERSHIP

Strategy Is No Longer a Game of Chess Legendary strategists have long been compared to master chess players, who know the positions and capabilities of each piece on the board and are capable of thinking several moves ahead. by Greg Satell*

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LEADERSHIP

t’s time to retire this metaphor. Strategy is no longer a game of chess because the board is no longer set out in orderly lines. Industries have become boundless. Competitive threats and transformative opportunities can come from anywhere. Strategy, therefore, is no longer a punctuated series of moves, but a process of deepening and widening connections. The first person to think seriously about how businesses function was Ronald Coase. In his groundbreaking 1937 paper he argued that firms gained competitiveness by reducing transaction costs, especially those related to information. In his view, firms could grow until the point that organizational costs cancelled out transactional benefits. In the 1980s, Michael Porter built on this idea and made it more possible for managers to act on with his concept of value chains. His ideas provided managers with a blueprint for building competitive advantage. By increasing scale companies could create efficiencies along the entire value chain through either operational excellence or bargaining power with suppliers and customers. Costs would be further reduced through scale as firms moved up the experience curve. In effect, competitiveness was the sum of all efficiencies and you created those efficiencies by building greater scale. The world envisioned by Coase and Porter was relatively stable. Transaction costs were like weeds, which managers could gradually root out. Once the lines of competition were drawn, strategy was a

mainly a matter of bringing “relative strength to bear against relative weakness,” as UCLA’s Richard Rumelt has put it. Yet today we live in a world of accelerating returns, where cost efficiencies can improve exponentially and nullifying scale advantages. Further, technology cycles have begun to outpace planning cycles. So in the course of planning and executing any given strategy, relative strength and relative weakness are likely to change—sometimes drastically. So we find ourselves in an age of disruption, where agility trumps scale and strategy needs to take on a new meaning and a new role. We can no longer plan; we can only prepare. This requires what Columbia’s Rita Gunther McGrath calls a shift from “learn to plan” to “plan to learn”. When Jeff Bezos started Amazon, his purpose was to sell books against traditional competitors like Barnes & Noble. Yet today, Amazon is much more than a retailer. It offers cloud computing services to enterprises, builds computer hardware, and develops TV shows. It directly competes with firms as diverse as Microsoft, Walmart, and Netflix. However, Amazon is not a conglomerate; it is a platform. The same cloud architecture that runs its online store is what it offers as a service to enterprises and distributes entertainment to consumers. As it expands connections to into new areas, it deepens capabilities at its core. This is why, if you’re looking at the competitive landscape, it doesn’t make sense to talk about Amazon’s “industry position” as much as it does to examine its ecosystem.

When Coase wrote his famous paper in 1937, transaction costs were a much heavier burden. Today’s most valuable corporate resources aren’t tied to a physical place, don’t substantially diminish with use, and are easily distributed. The world has changed and so must strategy. Many have argued over what this shift should entail. For instance, McGrath argues, in her excellent book, The End of Competitive Advantage that sustainable competitive advantage is no longer possible and we must be content with achieving transient advantage. In her view, rather than focusing on a distinct set of capabilities, firms must constantly be moving on to greener pastures. And yet I’m not sure this part of her argument holds. Clearly, there are plenty of firms such as Amazon, Walmart, and Apple that are able to not only maintain, but deepen their advantages over time. Sure, they’ve increased their scope as well as their scale, but their core businesses have also improved. What’s changed is that competitive advantage is no longer the sum of all efficiencies, but the sum of all connections. Strategy, therefore, must be focused on deepening and widening networks of information, talent, partners, and consumers. Brands, in effect, have become more than assets to be leveraged, but platforms for collaboration.

*G reg Satell is a recognized authority on digital strategy and innovation. He is a speaker, consultant, and writes the Digital Tonto blog.

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TRENDS

Digitisation and the Workplace of the future by Eliot Bendinelli*

From Business to civil society, the impact of digital technologies on interaction is not to be demonstrated anymore.

Presentation & Study components

Important Key findings

As the changes in public spaces illustrate, the modification of people’s behavior induced by five major forces of technology – Cloud Computing, Mobility, Big Data, Social Media and Artificial Intelligence combined with Robotics – is directly recognizable through the digital transformation of the economy. In this context, young people in the workforce are both the inheritors and drivers of this new reality and thus will shape and be shaped by these changes to the greatest extent.

The report found 10 key findings, compromising of distinguishable facts, confirming a natural intuition but also surprising the audience. Indeed, 86% of young Europeans find it desirable to move between countries, enforcing the idea of a globalized world where people travel as much as information itself. To enforce this shift in the relation between workers and the workplace, the study show that only 7% of the surveyed care about the brand, benefits and salary suggesting

“Business never stands still, but today technology is accelerating the pace of change as never before.We are reimagining how business is being done across every sector, leading to a transformation of enterprises in Europe -which is further reshaping the nature of work itself” – Henri Malosse (President of the European Economic and Social Committee) On April 23rd, ThinkYoung and Tata Consultancy Services (TCS) released at the European Voice event the research “Workplace of the future: A view from European Youth”, to start a dialogue between young people, employers and policy makers on the topic of the future digital workplace. The study was carried out on over 500 young people, aged between 18 and 30 years old, coming from the EU. The research was conducted with a quantitative survey and supported by audiovisual qualitative reaction on the topic from EU youth. In response to the survey findings and interviews, the study also sought perspectives from some of Europe’s leading politicians, business leaders and academics to add their voices to the debate. Neelies Kroes, Henri Malosse and Lynda Gratton thus gave their input and view on the topic in addition to the speakers present during the event.

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an evolution of the workers’ values. But despite the will to travel, it also reveal than 70% of this young people want to work in a physical office, which considerably impacts the way workplaces should be organized. When it comes to the workplace itself, the management shift is clearly illustrated as 59% of Europeans thinks people oriented leadership is the most valued.

“In a workplace of specialists, young people are being asked to learn and work differently. They must learn one thing very deeply. They are increasingly being asked to work on more complex problems, collaborating -often virtually- with people all around the world.” – Lynda Gratton Finally, in spite of the clear need for digital skills (the Commission signals that by 2015 700,000 to

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1 million ICT jobs will not be filled in Europe, due to lack of skilled personnel), the study also clearly illustrates that the European education system is not yet adapted and inadequately prepare for careers in digital enterprises. This is supported by the fact than 63% of the young Europeans, feel their education didn’t prepare them for a digital workplace.

Analyze

also represents a very valuable material for businesses to apprehend young people’s interests. This will allow European companies to stay attractive, competitive and enjoy their digital approach while proposing an appropriate environment for the workers. Finally, this study is drafting an insightful vision of the workplace of the future which should inspire Europe in its development. Indeed, young people represent the future of the Europe’s economy and proposing a more adapted workplace is assuring a more productive and innovative source for the Union.

Two distinct tendencies can be extracted from this research. First, the rising necessity of digital skills and its benefits in the workplace in relation to a poor education system that does not support this need. While digitization is *Project Manager at THINK YOUNG embracing businesses and markets, European countries, and in particular in Sweden, show important lacks in their education system, which creates the skills mismatch also approached by ThinkYoung in another study. Second point, the approach from young people regarding the workplace is mostly relying on physical interaction despite the important digitization component. Indeed, young people value more the company values, the location and a people oriented leader instead of the salary of the company itself. These elements should thus push the EU to improve its policies in terms of digital education and to keep its effort constant on exchange programs. It

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TRENDS

3-D printing takes shape by Daniel Cohen, Matthew Sargeant and Ken Somers

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TRENDS

3-D printing, or additive manufacturing, has come a long way from its roots in the production of simple plastic prototypes. Today, 3-D printers can not only handle materials ranging from titanium to human cartilage but also produce fully functional components, including complex mechanisms, batteries, transistors, and LEDs.

he capabilities of 3-D printing hardware are evolving rapidly, too. They can build larger components and achieve greater precision and finer resolution at higher speeds and lower costs. Together, these advances have brought the technology to a tipping point-it appears ready to emerge from its niche status and become a viable alternative to conventional manufacturing processes in an increasing number of applications. Should this happen, the technology would transform manufacturing flexibility-for example, by allowing companies to slash development time, eliminate tooling costs, and simplify production runs-while making it possible to create complex shapes and structures that weren’t feasible before. Moreover, additive manufacturing would help companies improve the productivity of materials by eliminating the waste that accrues in traditional (subtractive) manufacturing and would thus spur the formation of a beneficial circular economy (for more, see “Remaking the industrial economy”). The economic implications of 3-D printing are significant: McKinsey Global Institute research suggests that it could have an impact of up to $550 billion a year by 2025. The advantages of 3-D printing over other manufacturing technologies could lead to profound changes in the way many things

are designed, developed, produced, and supported. Here are five 3-D printing disruptions that senior executives should begin preparing for.

1. Accelerated productdevelopment cycles Reducing time in product development was a key benefit of the first 3-D printing machines, which were designed to speed the creation of product prototypes (and in some cases helped reduce turnaround times to a matter of hours, from days or weeks). Now many industries are poised for a second wave of acceleration as the line between additive and conventional manufacturing blurs. For example, additive manufacturing is already being used to get prototypes into the hands of customers faster, for quicker and more detailed feedback. (This is happening thanks to advances in printer resolution, higher-definition coloration, and the broader use of materials, such as elastomers, that help customers envision the final product.) The ability to make prototypes without tooling lets companies quickly test multiple configurations to determine customer preferences, thus reducing product-launch risk and time to market. Companies could even go into production using 3-D printed parts and start selling products while the traditional production tools were still being manufactured or before the deci-

sion to produce them had been made. When companies did order those tools, they could use additive-manufacturing techniques to make them, saving even more time and money. We expect that the use of such techniques will contribute to significant reductions in productdevelopment cycle times over the next decade. (For example, 3-D printing makes some aspects of day-to-day R&D work, such as producing simple lab apparatus, vastly more productive.) Over time, 3-D printing will begin to affect how companies think about R&D more broadly, given how the technology enhances the ability to crowdsource ideas through remote cooperation. For some companies, that crowdsourced brainpower might one day begin supplanting R&D activities, making its management a new priority.

2. New manufacturing strategies and footprints As of 2011, only about 25 percent of the additive-manufacturing market involved the direct manufacture of end products. With a 60 percent annual growth rate, however, that is the industry’s fastestgrowing segment. As costs continue to fall and the capabilities of 3-D printers increase, the range of parts that can be economically manufactured using additive techniques will broaden dramatically. Boeing, for example, already

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3. Shifting sources of profit

uses printers to make some 200 part numbers for ten different types of aircraft, and medicalproducts companies are using them to create offerings such as hip replacements. Nonetheless, not every component will be a candidate for the technology and reap its benefits (cost reductions, performance improvements, or both). Companies should understand the characteristics that help determine which ones are. These include components with a high labor-cost element (such as time-consuming assembly and secondary machining processes), complex tooling requirements or relatively low volumes (and thus high tooling costs), or high obsolescence or scrap rates. Forward-looking manufacturers are already investigating ways of triaging their existing parts inventories to determine which hold the most potential. Additive-manufacturing techniques also have implications for manufacturing-footprint decisions.

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While there is still a meaningful labor component to 3-D printed parts, the fact that it is lower than that of conventionally manufactured ones might, for example, tip the balance toward production closer to end customers. Alternatively, companies could find that the fully digital nature of 3-D printing makes it possible to produce complex parts in remote countries with lower input costs for electricity and labor. A related area that executives should watch with interest is the development of the market for printing materials. The cost of future materials is uncertain, as today many printers use proprietary ones owned or licensed by the manufacturer of the printing equipment. Should this change and more universal standards develop-thus lowering prices-the implications for executives devising manufacturing strategies and making footprint decisions would become very significant very quickly.

Additive-manufacturing technologies could alter the way companies add value to their products and services. The outsourcing of conventional manufacturing helped spur companies such as Nike to rely more on their design skills. Likewise, 3-D printing techniques could reduce the cost and complexity of other kinds of production and force companies to differentiate their products in other ways. These could include everything from making products more easily reparable (and thus longer lived) to creating personalized designs. Indeed, reducing the reliance on hard tooling (which facilitates the manufacture of thousands of identical items) creates an opportunity to offer customized or bespoke designs at lower cost-and to a far broader range of customers. The additive manufacture of individualized orthodontic braces is just one example of the potential of these technologies. As more such offerings become technically viable, companies will have to determine which are sufficiently appealing and commercially worthwhile. The combination of mass customization and new design possibilities will up the ante for many companies and could prove very disruptive to traditional players in some segments. In certain parts of the value chain, the application of additive manufacturing will be less visible to customers, although its impact may be just as profound. A key challenge in traditional aftermarket supply chains, for example, is managing appropriate inventories of spare parts, particularly for older, legacy products. The ability to manufac-

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and adjusting the properties of novel materials. Indeed, tuning materials is quite a challenge. While plastics are relatively straightforward to work with, metals are more difficult. Slurries and gels (for example, living tissue or the material for printed zinc–air batteries) are extremely difficult. The most successful players will understand these challenges. Some are already creating centers of excellence and hiring engineers with strong experience in additive manufacturing.

5. Disruptive competitors

ture replacement parts on demand using 3-D printers could transform the economics of aftermarket service and the structure of industries. Relatively small facilities with on-site additivemanufacturing capabilities could replace large regional warehouses. The supply of service parts might even be outsourced: small fabricators (or fabs) located, for example, at airports, hospitals, or major manufacturing venues could make these parts for much of the equipment used on site, with data supplied directly by the manufacturers. Of course, retailers too could someday use fabs-for example, to let customers tailor products such as toys or building materials to suit their needs. That business model could represent a value-chain play for manufacturers if, for instance, they owned the machines, core designs, or both.

4. New capabilities Design is inherently linked to methods of fabrication. Architects can’t design houses without considering construction techniques, and engineers can’t design machines without considering the benefits and limitations of casting, forging, milling, turning, and welding. While there is a wealth of knowledge around design for manufacturing, much less is available on design for printing. Our conversations with executives at manufacturing companies suggest that many are aware of this gap and scrambling to catalog their design know-how. Getting the most out of additive-manufacturing techniques also involves technical challenges, which include setting environmental parameters to prevent shape distortion, optimizing the speed of printing,

Many benefits of 3-D printing could cut the cost of market entry for new players: for example, the use of the technology to lower tooling costs makes it cheaper to begin manufacturing, even at low volumes, or to serve niche segments. The direct manufacturing of end products greatly simplifies and reduces the work of a designer who would only have to take products from the computer screen to commercial viability. New businesses are already popping up to offer highly customized or collaboratively designed products. Others act as platforms for the manufacture and distribution of products designed and sold online by their customers. These businesses are gaining insights into consumer tastes and building relationships that established companies could struggle to match. Initially, these new competitors will be niche players, operating where consumers are willing to pay a premium for a bespoke design, complex geometry, or rapid delivery. Over the longer term, however, they could transform industries in unexpected ways, moving the source of competitive advantage away from the ability to manufacture in high volumes at low cost and toward other areas of the value chain, such as design or even the ownership of customer networks. Moreover, the availability of open-source designs for 3-D printed firearms shows how such technologies have the potential to create ethical and regulatory dilemmas and to disrupt industries.

* Daniel Cohen is a consultant in McKinsey’s New York office, Matthew Sargeant is a consultant in the Stamford office, and Ken Somers is a master expert in the Antwerp office. The authors would like to thank Michael Chui and Markus Hammer for their contributions to this article.

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MARKETPLACE

A unique museum for children! It is a unique children’s museum in Athens which uses interactive exhibitions, play and fairytales, in order to encourage children to discover their emotional world, to learn more about themselves and others. Moreover, it sensitizes adults, parents and teachers on subjects which deal with the children’s emotional development and socialization. The museum is member of the Association of Children’s Museums HOI «HANDS ON INTERNATIONAL». Ages: The museum is addressed to children 4 to 12 years old and their families Days and hours for foreign visitors: Every weekend 10am-1pm. In July on Saturdays. In August the museum is closed. Interactive exhibition: 2013-2016 “Hello Mr. Fear!” An exhibition on the different fears that children experience and on how to live with them as well as possible. All the instructions of the exhibition are in Greek and English language. Exhibition’s ticket price: 4 € per person

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EMOTIONS MUSEUM OF CHILDHOOD 7 Karatza Str., 11741 Athens, Greece Tel.: 0030 210 9218329 | Fax: 0030 210 9218323 e-mail: info@mce.gr | url: www.mce.gr

MARKETPLACE

Currency Trading for Retail Investors is Fraught with Danger It’s not often you see an online forex broker that relies on a steady flow of new clients opening accounts to generate revenue and profit, talking about the dangers and riskiness of undertaking such business. Well the fact is that for those firms that are well regulated, like FxPro which is dual regulated by both the UK’s Financial Conduct Authority and Cyprus’s Cyprus Securities and Exchange Commission, warning potential and existing clients of the risks involved with forex trading is a standard requirement. As with any investment there’s the chance that you can get things wrong, the market could go against you and losses can accumulate or things can go in your favour with potential to profit. However, all too often retail investors and don’t appreciate the sort of risks they are exposing themselves to when they open a leveraged online trading account. There’s a widely known fact that a greater proportion of retail investors lose money than make money when trading using a leveraged account. This means happy days for market maker brokers that reap the rewards of client losses. There’s no question that leverage increases the risk of an investment, but if used responsibly and if risk is managed properly, it can be a very powerful way

to generate returns. Whether you are starting a new business or investing money in the stock or FX markets, the risks need to be assessed and managed in order to ensure survival. But before you even start it’s best to ensure your trading partner or broker is someone who has their interests aligned with yours. Those who have adopted the Agency Model of trade execution, as opposed to being a market maker, are more likely to have the tools that are specifically designed to help clients become more profitable and genuinely want them to succeed rather than just saying so on their website. Becoming an Agency Model broker is no easy feat and it can take up to a year to make the transition. You need to ensure that you have the technical systems built, the liquidity providers in place and most crucially a prime broker to facilitate all the transactions and clearing. Once the considerable investment is made and the transition to being an Agency Model broker is complete, then the really hard work starts as the broker looks to build innovative tools with the sole purpose of making clients profitable.

RISK WARNING Trading CFDs involves a high risk of loss

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ARTS & CULTURE

Acropolis as the everlasting symbol... says Mrs. Nelly Rapti, artist.

by Alexandra Papaisidorou

Unity, optimism and bringing Greek culture close to each place all around the world is the basic motto of Nelly Rapti’ s creativity. The artist has a great series of works from Germany and UK to China and America.

er talent and the punctuality of techniques she used to apply make her drawing skills to gain more and more popularity. In the beginning of summer 2014 - a summer after a harsh winter both economically and socially for Greek people, Nelly Rapti decided to present a great public collection of lithographies, a new type of her latest works of art. She will depict a few of her favorite works in lithographies made by cotton paper from the oldest bookshop of Holland estimating 370 gr. of cotton to each of the materials used. As Nelly Rapti comments: “I will not create too many! No, it does not make any sense. I think that as fewer as they may be, their value will be getting higher and higher”. Athens Hilton hotel will be the gracious sponsor and the host venue of this exhibition during July 2014 and it will be easily accessible for everyone. Her concept is based on the quality we must have. “It’s about time to start our first artistic approaches”, as Nelly Rapti says, “because colors through art is always a source of hope and optimism especially for

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this period of our lives that art plays a smooth role for our inner state too”. For this special reason, the artist chose to expose lithographies in fair prices and smaller dimensions, as to be affordable for as many. Her inspiration, most of the times, comes from the city of Athens where she was born and raised. That is why, Acropolis on lithographies was the artist’s choice as a souvenir for a significant medical conference with participants from all over the world. Nelly Rapti decided to artistically edit the conference by creating original copies of Acropolis on lithographies distributing them to twenty professors of ten different countries. The artist wants to send her message that of giving prominence of Greek values out of borders in an authentic and alive way leaving behind the unconscious forms of past expressions. This step must focus on a discreet and flexible projection of our values keeping the first place they deserve. Our country needs to go ahead and it is certainly ready to accept these changes without extremisms and losing control but with patience and stability, ends up Nelly Rapti.

ARTS & CULTURE

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LAST PAGE

Huawei supporting European top football by EBR

Making the dream possible – Huawei is extending a helping hand to a range of European football clubs, bringing the field of technical innovation and the football field closer together through a series of partnership and sponsorship initiatives. Huawei is committed to bringing out the best in European football by working to heighten the fans’ experience and by helping clubs realise their dreams with corporate sponsorship.

uawei is proud to share its passion for football and show fellow fans across Europe its sustainable commitment to countries in which it is active. Arsenal, Ajax, Milan, Glasgow Rangers, Paris St Germain, Dortmund/BVB and Spain’s La Liga. Mr. Jean-Claude Blanc, Deputy CEO of the Paris Saint-Germain Football Club, commented: “Dreaming even bigger everywhere in the world is our first and foremost ambition. Huawei participates in this dream by opening the doors to China and by developing the best performing technology to do so.” Ajax and the Amsterdam Arena stadium signed recently a partnership agreement with Huawei which will enable fans to use a unique Huawei Wi-Fi network embedded in the stadium for free. ICT plays a vital role in the world of sport: it brings football into people’s living rooms, enabling people to share the experience and emotions. Tom Fox, Chief Commercial Officer at Arsenal Football Club, said “We are delighted to be partnering with Huawei at such an exciting time in the development of its brand globally, and, in particular, in the UK and Europe.” Huawei’s technical expertise is helping Glasgow Rangers and Dortmund/BVB clubs with groundbreaking, fully converged, stadium-wide WiFi deployments. The projects will ultimately give every fan at Ibrox Stadium and Signal Iduna Park full, instant access to content-rich media, allowing them to participate in real-time interactions with the Club. Rangers’ Chief Executive Craig Mather said “Huawei

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has shown an enormous appetite for, and commitment to, providing an absolutely best-in-class service. More and more people are using smart devices as a primary means of communication and we look forward to revolutionising the way in which Rangers fans can engage with the club before, during and after the match.” “The high data capacity that WiFi delivers will allow fans to use social networks to share their experiences, as well as allowing clubs to enhance their ‘digital dialogue’ with their supporters”, said Victor Zhang, CEO, Huawei UK. As technology partner of Huawei will not only help Spanish football promote itself in Asia, but also open football summer camps for fans to experience Spanish football culture.

Huawei’s European profile It is clear. Huawei is recognisably European in its values and practices. In a recent interview with journalists, CEO and founder Ren Zhengfei has reconfirmed the company’s intention to increase investment in European research and development while explaining the added value of Huawei’s employee-owned structure. Mr Ren, who founded Huawei in 1987, said Huawei would continue to increase its research spending, which rose last year to roughly $5 billion. A key focus of this investment would be placed on Europe, where Huawei has already opened 14 R&D sites and intends to create 5 500 additional jobs, 850 of which will be in R&D. Huawei’s European strategy is not just about investment; however, it is also about full integration with the European business environment: “our idea is to make people perceive Huawei as a European company,” he said. Transparency and openness are part of this strategy.