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Quest Means Business
IMF Cuts Global Growth Forecast; Global Growth; European Shares Up; Volatile Day for the Dow; Oxfam Concerned about Staggering Scale of Inequality; State of the Union to Focus on Middle Class; Survey Says Russian CEOs Least Confident
Aired January 20, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: A topsy-turvy day. The Dow was heavily down, then it rallied back up again. And when the gavel is hit by "The New York
Times," we're essentially flat --
(GAVEL HITS)
QUEST: -- on Tuesday, it's the 20th of January. Tonight, we're in the snow, and the growth is slow. The IMF revises down economic growth.
Also, income inequality, it is staggering. We'll be talking about that this evening.
Live from the World Economic Forum, I'm Richard Quest, and of course, I mean business.
Good evening tonight from Davos. The stage is set. The World Economic Forum has begun, and it started with all the grandeur and gravitas
that only Davos and WEF knows how to produce.
(BEGIN VIDEO CLIP)
(OPERA SINGER HITTING HIGH NOTE)
(END VIDEO CLIP)
QUEST: Ah! That's one of the best openings of the forum I've ever seen, Andrea Bocelli, the singer there. With that, the WEF is open for
business. "Nessun Dorma," None Shall Sleep. And on this program tonight, we will not rest until we've brought you the leaders that you need to hear
from.
We've got them on every key theme of this year's forum. For instance, concern over growth as the IMF downgrades its forecasts. In a moment,
you're going to hear from the deputy managing director of the IMF.
Fears over falling prices of oil. We'll be live with the head of the UAE's Crescent Petroleum. The question of leadership, with the heads of
PWC and IHG -- that's Intercontinental Hotels. And underpinning all this growth, grotesque income inequality. We'll be live with the head of Oxfam
and the head if UNI, U-N-I, the global trade union.
Now, if that doesn't give you the full Davos agenda, you're watching the wrong program. First, the new warnings about the health of the global
economy. The IMF has cut its growth forecast to 3.5 percent for the year. There's a sharp divide. The US is pulling ahead, the vast majority of
countries falling behind.
The IMF says to boost the economy for falling oil prices, there's a host of risks. These are the risks. Volatility in the financial markets.
Just look at what you've seen today, the Dow sharply down, then back up.
The Swiss central bank decision to set the franc free sent investors running for safety. Emerging economies relying on oil exporting and
hurting. In Nigeria, the naira hit a new low. And in Europe, weak investment is keeping the economy in a slump. The IMF says the ECB needs
to go big on stimulus to meet investors' expectations.
The IMF's warning came as China's growth slowed down. Min Zhu is the IMF's deputy managing director and former deputy governor of the Bank of
China. I asked him why this oil price, down 50 percent, wasn't enough to spur growth.
(BEGIN VIDEOTAPE)
MIN ZHU, DEPUTY MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: I think oil called down growth, because of both from the supply side and the
demand side. From the supply side, it's really -- you don't have macro policy side, you don't have a fiscal space, you don't have monetary policy
space to further -- to support the growth.
On the supply side, really the key issue is investment is so low. I'll give you one number. You compare today with 2017 -- 2007, in Europe,
the investments are 5 percent of GDP lower. Even in the US, investments are roughly 2 percentage points lower.
QUEST: Is this downgrade worrying?
MIN: It is a worry. We're worrying, in particular, corporate sectors, and people set a lower expectation for future growth, which were
transformed into the even lower growth.
QUEST: Has a cycle begun that's going to be very difficult to stop?
MIN: It's very unclear. We don't have very much demand-side space. We don't have a demand policy. So we need to move into the supply side to
break the cycle. I think this is absolutely important.
QUEST: The supply side, of course, governments are -- central banks are printing as much money as they possibly can. You've got higher
interest rates coming along. You've got the ECB, perhaps this week. So, the supply side's doing quite as much as can be done.
MIN: No, the demand side has tried in the past. As you say, the central banks printing the money.
QUEST: Right.
MIN: And the fiscal policy is very much in neutral now.
QUEST: Yes.
MIN: Instead of cutting a few years ago, they tried to maintain space. But the growth today is really from the productivity from the
supply side, from the investment side. From structural reform to make, for example, the labor market more flexible. From the productivity increase in
service, in product market. I think those are the key areas.
QUEST: China's numbers. China's numbers today. They were better than expected, they were worse than they should be.
MIN: Well, several points. First, it's not too bad. I think it is lower growth for good reason. We forecast China's growth this year to be
even lower to 6.8. And it's for good reason, because China needs an internal rebalancing, which means reducing investments and do the
structural change, push up the service sector. In the process, growth will slow.
QUEST: So, the IMF is not concerned at this slowdown in China, and believes its manageable?
MIN: We think it's for good reason. We think a slowdown is good news if China pushes the growth into the high-level, whereas the big stimulus
policies were a concern.
(END VIDEOTAPE)
QUEST: The deputy managing director of the IMF. And later this week, putting it crudely, you're going to hear from his boss. Christine Lagarde,
the MD of the IMF, will be on this program on Friday to wrap up our week- long coverage from the World Economic Forum.
Joining me now is Gillian Tett, who we're always delighted to have, the US managing editor at the "Financial Times." Lovely to see you.
GILLIAN TETT, US MANAGING EDITOR, "FINANCIAL TIMES": Great to be on the show. And hey, you're surviving the cold weather.
QUEST: Well -- you haven't got a coat. I should have taken my coat off.
(LAUGHTER)
TETT: I've run to be here with you, Richard, so there you go.
QUEST: I'm blushing.
(LAUGHTER)
QUEST: Gillian, look. The IMF's downgraded growth today.
TETT: Yes.
QUEST: Just a tad, and it's expected. But it says that oil prices cannot -- the falling oil is outweighed by these adverse reasons. What's
going wrong?
TETT: Well, what's going wrong is not so much the fact there's growth or not. It's the composition of growth. And that's what's really worrying
here in Davos, which is ironic, because we're here at the play central of the elite, if you like. But they're increasingly reason there's growing
fracture across the landscape.
In Europe, you'll see increasing political polarization. In America, you're seeing increasing complaints about the way that growth is
distributed. The rich are taking more of the gains than the poor. And that's really weighing on sentiment here.
QUEST: So, in that environment, do people expect things to go really, seriously wrong? I know we had the SNB last week with the Swiss franc, and
we've had Denmark, and of course, Norway and Sweden will follow on. We've got to -- are people really thinking people could turn -- overturn again?
TETT: Well, you have to look on the bright side. This is not 2009, where people were panicking about a global meltdown and financial crisis.
There is a sense that actually things are growing.
And remember, although the IMF downgraded the growth outlook, it's still projecting growth of 3.5 percent or so, which really isn't that bad.
The problem, though, is that people don't really see where the growth is going to come from in the future. And of course, you do have a moment
of tremendous geopolitical tension. And yes, oil is providing some boost. But it's also hurting the oil producers.
QUEST: Net-net, it's better for us.
TETT: Net-net, it's definitely better. We spend -- what? -- $7 trillion a year globally on energy. If that becomes cheaper, net-net, it's
better.
QUEST: We need to talk about the State of the Union tonight. You've going to be up late --
TETT: Absolutely.
QUEST: -- I suspect, listening.
TETT: Unfortunately so, yes.
QUEST: As the US managing editor of the FT. Look, this tax cut that President Obama is planning to pay for by tax increases, let's be honest,
he stands no earthly chance of getting it through a Republican Congress.
TETT: This is political shadowboxing. It's laying down a marker. But it plays absolutely to the themes that they're talking about in Davos,
which is the question of how growth is distributed.
And I've just come from a dinner -- I've run to be here -- but I've come from dinner where there were a number of CEOs who are really angry
about the kind of language that President Obama is using, saying this is just stoking up more class warfare.
QUEST: But they're top 1 Percent. They're part of the 1 Percent.
TETT: Well, that is part of the tension, it's part of the dialogue right now.
QUEST: Right.
TETT: And that's a concern.
QUEST: Come and join me over at the QUEST MEANS BUSINESS Risk Map.
(LAUGHTER)
TETT: And guess what? I'm much shorter than you, Richard.
QUEST: Right. Don't worry about that. Put your dot -- what's the one -- Karl Schwab went for three yesterday. What's your one area that you
think is the biggest risk? Where are you most concerned in 2015? You can have one.
TETT: I can only have one?
QUEST: Yes.
TETT: OK. I would say --
QUEST: Make it two because you're Gillian Tett.
TETT: All right. OK, thank you. France. What happens in next in terms of whether or not France can actually get its act together growth-
wise --
QUEST: Right.
TETT: -- is going to have crucial implications for the wider eurozone.
QUEST: All right.
TETT: And secondly -- it's not original, but I think China has to be watched very carefully.
QUEST: Add it on.
TETT: We have data today which came out a lot slower than expected, and there are people wondering about whether China can actually carry on
providing the engine of growth.
QUEST: All right, thank you very much, indeed. China. You get two. Now, see, this is going to be a theme of the week --
TETT: And I realize, I put a circle, not a dot. That's me being freethinking.
QUEST: Don't worry -- you can be freethinking. Many thanks, indeed. Lovely to see you.
TETT: Thank you. Good to see you.
QUEST: You can go back to dessert and coffee now.
(LAUGHTER)
TETT: I gladly will.
QUEST: Thank you very much, indeed.
Now, European shares climbed on Tuesday on expectations that the ECB may move further and harder than had particularly been thought. As the
share prices, as you can see on the Xetra DAX was up just a tenth of a percent, the CAC was up as well by 1.1 percent. Zurich SMI up a third of a
percent.
US stocks ended almost completely flat following a volatile session. Our digital money correspondent from CNN Money, Paul La Monica, joins me
now. Paul, what we've seen is down 140, up some 20, back to just about flat, up 3.6 percent. What drove the market?
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: Yes, it was a crazy day. I think a lot of it had to do with earnings, as you point out. We
were in the red most of the day, eked out some gains there. Johnson & Johnson, big Dow component, the strong dollar is hurting their revenue, and
I think that's going to be a theme that we're going to see with a lot of companies this earning season.
But then you have things like cheaper oil, that's helping a lot of companies, too. Delta surging on really strong results, and their CEO said
they can save more than $2 billion this year because of lower fuel costs. So, you have that kind of war going on right now, where some multinational
companies are hurting. Others loving the cheaper oil prices.
QUEST: All right, Paul. I'm going to let you have one place on the map. Where is your big risk premium for 2015? Where are you most worried?
I will put it on the map for you.
LA MONICA: Thank you --
(CROSSTALK)
QUEST: What country or what --
LA MONICA: -- that's very gracious of you.
QUEST: Go on.
LA MONICA: Again, it's not being original, but I think it has to be China. A prolonged slowdown in China is bad news for Europe, and by
extension, the US. I hope --
QUEST: All right.
LA MONICA: -- people are talking about decoupling being a myth in Davos.
QUEST: Paul, we'll -- you're on the map, now. Many thanks, indeed. Paul La Monica joining us for that.
When we come back in just a moment, the executive director of Oxfam, who is with me -- you are with me. Thank goodness. Anyway, Winnie is
here. She's going to talk about inequality, bad for global growth. What she plans to use her influence at the forum to force change. We'll be
talking to you after the break.
(COMMERCIAL BREAK)
QUEST: "The scale of global inequality is simply quite staggering." Those are the words of Winnie Byanyima. She's the director of Oxfam
International, one of the co-chairs of the forum, and Winnie's with me now.
When you said that and you brought out your report yesterday that basically said the top 1 percent will own more than the rest by next year.
What are you hoping they're going to do about it here? They know that. They're the top 1 Percent.
WINNIE BYANYIMA, EXECUTIVE DIRECTOR, OXFAM INTERNATIONAL: Yes, Richard. Last year, I came here and I told you that 85 people, who could
fit on a double-decker bus, owned as much as the bottom half, 3.5 billion. This year, that figure has dropped to 80.
So, inequality is rising very fast. And the people here, the political and economic elite here need to know that they've got to do
something. They've got to check it. If they don't, next year, 1 percent will own more than the rest of us, the 99 Percent. And this is dangerous.
QUEST: But -- it's dangerous, but what do you want them to do? Because this is a classic statistic where everyone tut-tuts and says how
dreadful. But nobody does anything about it.
BYANYIMA: There are solutions. And we have seen things happen in other regions. For example, Latin America in the last ten years has been
bringing down inequality while also achieving growth. So, it can happen, and the solutions are there. For example, we need to fix the global tax
system.
QUEST: President Obama's going to do something on that tonight --
BYANYIMA: That's good.
QUEST: -- in the US.
BYANYIMA: That's good.
QUEST: Do you approve of his actions tonight?
BYANYIMA: It's not enough, though. We need to fix the whole global tax system, because unless we can stop wealthy companies, multinational
companies taking and hiding what they earn and not being taxed at source where they produce, we're not going to have the resources needed to lift
people from poverty.
QUEST: Taxation.
BYANYIMA: So, taxation's one. Two, rolling out basic services, public services, free public services: education and health. These are
known --
QUEST: Paid for by higher taxes?
BYANYIMA: Indeed. Paid for by more revenue collected that is now being hemorrhaged. Richard, developing countries lose $100 billion every
year in tax -- through tax dodging and tax incentives, like tax holidays and this competition to the bottom.
QUEST: I don't want to make you sound alarmist or forecast violence or anything like that, but what's your fundamental fear if this isn't
addressed? And how much time do you think there is to address this?
BYANYIMA: One, my greatest fear is that we will not be able to eradicate poverty. This extreme wealth coexists with poverty. One out of
nine people in the world goes to bed hungry. One billion people still live on less than $1 a day, and we are not going to eradicate poverty unless we
check this rising tide of inequality.
QUEST: So, you come to Davos, you're very well received, you're extremely respected. But are you listened to? Because this is the 1
Percent that makes the difference.
BYANYIMA: The 1 Percent have an interest in a stable society, in --
QUEST: Self interest.
BYANYIMA: Self interest. Growth. Growth is hurt by extreme inequality. This is the message, now, we are getting from the IMF, the
World Bank. The people who have championed growth without addressing inequality are now saying they were wrong. So, growth -- which the
people, the 1 Percent here want -- is --
QUEST: Right. But in this regard, are women more vulnerable? Because the statistics in your survey clearly show -- and here at Davos,
they've managed to fail to meet their own target for the number of delegates.
BYANYIMA: Absolutely. In fact, one of the reasons that inequality is rising is because the share of growth that goes to labor has been
declining. And within that is the share -- is the fact that women are not paid -- are not given an equal pay for equal work as men.
So in fact, by opening the economy and rewarding women fairly for their work, you actually will increase growth and reduce inequality.
QUEST: We need you to move over to the map, if you'd be as kind, Winnie. You get one mark on the map. Where do you think the biggest risk
in 2015 comes from? We've got a lot around China, quite a few in Europe. Only one from the United States. Here's the pen, just put your dot on the
map.
BYANYIMA: For me, because I'm most concerned about inequality --
QUEST: Please do.
BYANYIMA: Latin America is the most unequal region, but also in Africa, and I'm very worried about the explosion in this region --
QUEST: Just put a dot somewhere.
BYANYIMA: -- that's a result of --
QUEST: You can have a big circle. Have a circle.
BYANYIMA: I'll put a big circle here. This is a very unstable region.
QUEST: Right.
BYANYIMA: Where there is terrorism, there's inequality, there's poverty, there's marginalization, and we're going to see more trouble
there.
QUEST: That's the area -- it's basically around Niger, Chad, Nigeria --
BYANYIMA: Yes.
QUEST: Central Africa.
BYANYIMA: Saharan region, the northwestern, West African region.
QUEST: Thank you, ma'am, for coming in. Lovely to have you on the program as always.
BYANYIMA: Lovely to have you, Richard.
QUEST: Thank you very much, indeed.
BYANYIMA: Thank you.
QUEST: Now, we talked about the State of the Union, and in just a few hours, President Obama will make his State of the Union address. The
speech will focus squarely on the middle class. Athena Jones is in Washington and joins me now. So, it's all about taxes, Athena. The middle
class gets a bump up, the wealthy get taxed.
ATHENA JONES, CNN CORRESPONDENT: That's right, Richard. Middle class economics, those are the buzzwords the White House is using to describe the
main focus of this speech.
And what you said is exactly right, middle class tax cuts in the form of tax credits, mostly. For instance, a $500 tax credit for married
couples who are both working. There'll also be tax credits for things like college or to pay for childcare.
How they're going to pay for that? The proposal is to pay for it by raising taxes on wealthier individuals, raising the capital gains tax, for
instance, to 28 percent. Closing the so-called trust fund loophole to make sure that inherited investments are also taxed.
These, of course, are ideas that Republicans are not going to support, we know that already. This is the president's wish list. It's his vision
for what he'd like to see done, and his way of communicating what the Democratic Party will be about for the next two years. But it really is
just that, a wish list. Richard?
QUEST: It's a wish list that stands little chance, at least in the current febrile political environment in Washington. Athena, thank you for
joining us.
Caution and optimism. You need to strike a delicate balance between the two. That is, when you're the boss. Tonight from Davos, we'll gain
insight into the views of the world's chief execs on business and the global economy.
(COMMERCIAL BREAK)
(SWISS MUSIC)
QUEST: Well, you can't beat a bit of Swiss music, a bit of oompa music, and a nice, snowy backdrop here in Davos. And look at our map. So
far, no one has put Russia as offering the most risk in 2015 on the Risk Map. But it has gone from first to last. Russian chief execs are now from
the most confident, they are now the least confident in the space of a year, according to results of a PWC survey released today.
Now, the survey is a reflection of uncertain times. Overall, it showed that chief execs are less optimistic about the global economy than
they were last year. I sat down with PWC international chairman Dennis Nally, and I asked him, what are chief executives really concerned about
this year? Their own companies or the broader economy?
(BEGIN VIDEOTAPE)
DENNIS NALLY, CHAIRMAN, PRICEWATERHOUSECOOPERS: I think they're worried about the global economy and the fragility of the recovery. What's
interesting about the survey results this year is when you ask them about their own company results, they're feeling about as confident as they were
a year ago, which is very interesting.
QUEST: Right. That's a contradiction, because --
NALLY: It is.
QUEST: -- if the wider economy is not doing well --
NALLY: Yes.
QUEST: -- why are they so confident about their own companies?
NALLY: Well, I think it's an acknowledgment that the world is pretty challenging, pretty complex, and really produces a lot of instability right
now. Those are things that CEOs can't control, can't influence. But what they can control, which is their own company, that's what they're focused
on.
QUEST: Why are they less confident on the bigger picture?
NALLY: Look. We know the story here, in a sense, the geopolitical issues that are out there. Oil, big part of the question, the instability.
Some of the events we've seen in 2015, Paris in particular. You've got a whole host of issues that are out there that are just putting what I
describe as the black cloud around the global economy.
QUEST: I must talk about Russia, because fascinating what happened in your survey with Russia. Talk about from hero to zero --
NALLY: Yes.
QUEST: -- in one year.
NALLY: Yes, exactly. So, as you say, a year ago, Russia, the most confident of any of the CEOs, and this year, just 12 months later, the
least confident in terms of growth prospects.
Obviously very much tied to what's going on in that country, not only in terms of oil prices, but the other issues as well. That's one of those
clouds that no matter how optimistic you are, that impacts your thinking and your confidence levels to really invest for the future.
QUEST: If we now take something like cyber security, do you think post-Sony, cyber will move up?
NALLY: Without question. I think the cyber issue is a big issue. It's a real issue for governments, it's a real issue for businesses, and I
think we're just beginning to see the risk associated with that.
This is only the second year we've actually tracked it, but when you look at the increase year-to-year, significant increase in just 12 months.
QUEST: So, you are getting more calls from companies saying please come in and advise on?
NALLY: Absolutely. The whole issue around risk, how do you manage this risk. The investments that are being made around systems from a
security standpoint is at an all-time high, from our perspective.
QUEST: Right. You do your survey --
NALLY: Yes.
QUEST: We have the Risk Map.
NALLY: The Risk Map. Yes.
QUEST: The Risk Map. You can have one point on the map. You can define risk however you like, probably economic, maybe in your case. Where
in 2015 are you most concerned? Put your dot on the map where you're most concerned about.
NALLY: Right there in the Middle East, if I drew it properly.
QUEST: You have gone for --
NALLY: I just think there's so much issues around the geopolitical stability that has broader tentacles to the rest of the world --
QUEST: And getting worse.
NALLY: And getting worse. And therefore, that has, in my judgment, the most potential to disrupt the global economy more so than any of the
other ones that are out there today.
(END VIDEOTAPE)
QUEST: So, Dennis Nally takes our little mini map that we have, our little mini Risk Map that we have and I will put it -- he wants it the
Gulf, the Middle East. He says in this particular area. As you can see, it's all going to get very messy before we are finished this week. But
wherever they want it to go on the map, that's where they go. We have little mini wrist map to come with us.
As oil prices fall, the IMF says risk is shifting to oil exporters. In just a moment, the chief executive of the Middle East's oldest private
oil company says the region should consider it's a warning, urgent economic action is needed. This is QUEST MEANS BUSINESS, and we're live in Davos.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in a moment, when we'll hear from the head of Intercontinental Hotels on
why trust in our leaders is disappearing.
And we'll speak to the head of the UNI Global Trade Union on how the world needs a new Magna Carta.
The presidential palace in Yemen has been overrun by Shiite rebels according to the country's information minister. She described the
situation as the completion of a coup, telling CNN that the president has no control.
Japan's prime minister has condemned a threat by the Islamic terror group ISIS to murder two Japanese hostages. ISIS has demanded $200 million
in exchange for the release of the two men. That's the amount of money Japan has recently pledged in non-military aid to help those affected by
ISIS.
Authorities in Belgium are hunting for the suspected ring leader of a terror cell with links to ISIS in Syria. Abelhamid Abaaoud is a 27-year-
old Belgian Moroccan. His last known location was believed to be in Greece. The IMF is warning of weakness in the global economy. The group's
cut its growth forecast for the year to 3.5 percent and says the risks from emerging economies in market outweigh the benefits of the falling price of
oil. The IMF's deputy managing director Min Zhu told me investment is needed to stimulate growth.
(BEGIN VIDEOCLIP)
MIN ZHU, DEPUTY MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: It's very clear we don't have very much equity demand size space, we don't have
a demand policy. So we need to move into the supply side to break the cycle. I think this is absolutely important.
(END VIDEOCLIP)
QUEST: AirAsia flight 8501 climbed faster than a fighter jet at the speed of 6,000 feet a minute, seconds before it crashed according to the
Indonesian media. The transportation minister told the "Jakarta Post" the aircraft was not designed to soar so fast. And on tomorrow night's "Quest
Means Business," you'll hear form Tony Fernandez, the chief executive of AirAsia who will be talking to us about the incident on - talk to us on CNN
where of course on this network the news always comes first.
Now before we continue, we do need to get the very latest on this situation in Yemen. Nick Paton Walsh is in Sana'a and he's the only
Western TV journalist in the country. He joins me now. There is a delay, so we will bear with that. Nick, what is actually happening? I mean, who
is in control, if anyone?
NICK PATON WALSH, SENIOR INTERNATIONAL CORRESPONDENT FOR CNN INTERNATIONAL BASED IN BEIRUT: We don't know at this stage. We know that
the president is in his residence, we know there was gunfire briefly outside of there this afternoon, we know that Houthi rebels have moved in
to the presidential administration and we know that the man who leads that Houthi rebel movement, Abdulmalek al-Houthi, has given a lengthy speech in
which he's asked at the end after a pretty substantial (ph) justification of their moves here and criticism of the government, he wants changes to
the new constitution that was supposed to be put into place and effectively a larger share of power here. But he still calls the president the
president and he didn't really refer much to what was ongoing in the presidential administration itself.
So a lot has changed here. I'm sure three are a lot of cabinet ministers who wonder whether they should go in to work tomorrow. One
diplomat said if it walks like a coup and talks like a coup, then it probably is a coup. But that isn't the word we're hearing universally
here. So effectively a power vacuum as Yemen tries to work out precisely who runs its government right now. Richard.
QUEST: Within that context, fighting on the streets, sounds of gunfire besides that which you're talking about around the presidential
palace. I mean, how aware are - if you like - ordinary people in what is already a very difficult situation economically, politically, socially in
Sana'a? How aware of what is happening?
WALSH: Well it's been bizarre to watch the city try and recoil from intense shelling we saw yesterday that hit some civilian areas. We saw the
damage ourselves and people really carrying (ph) at home frightened, stray bullets, etc. It's been a terrifying time for those living around the
buildings where the fighting has happened, then of course terrifying for many people simply living in the capital because they struggle enough to
have anything like a functional government. Most of the time now we simply don't know who's in charge at all. There's also of course been a fallout
today too from a shooting incident last night from the U.S. embassy vehicle near the embassy which the embassy believed actually was intentionally
designed to kill U.S. diplomats inside the armored vehicles. They escaped uninjured.
So extraordinarily high levels of tension here but I think that level of uncertainty amongst normal Yemenis here just adds to years of exhaustion
from conflict here, and a sense really that their state is going from failing to failed. Richard.
QUEST: Nick Paton Walsh who is in Sana'a with a state going from failing to failed and what might seem somewhat of an extraordinary - Nick,
thank you very much indeed. In what perhaps is a little awkward juxtaposition we go from Sana'a and its coup - attempted coup - to Davos up
a Swiss mountain where the 1 percent elite are. The International Monetary Fund is warning that the collapsing price of oil is shifting economic risks
around the world. Oil prices fell again. Brent was down 68 cents - more than 1 percent. West Texas down more than $2, that fell a force (ph) of
about 4 - just over 4 and a 1/2 percent.
The IMF says global growth receives an overall boost. Net-net, lower oil is good. Both those oil exporters are facing increasing risk. Joining
me now is Majid Jafar, the chief exec of Crescent Petroleum. Crescent's a private oil and gas company headquartered in the UAE. Good to see you,
sir.
MAJID JAFAR, CEO, CRESCENT PETROLEUM: Good to see you.
QUEST: Good to see you. Now, where - let's just get your - let's get the brass tacks out the way. Where does this oil price end in terms of its
fall? Where do you feel it stops?
JAFAR: I think we're at or close to the bottom, but I could be wrong. But we've been lower than this in recent memory. I remember it being $9
and I'm not that old. The key is to learn the lessons and take advantage of this. There are key energy reforms that are needed in many countries,
and particularly in the Middle East where we are. There are some major economic reforms.
QUEST: Because that's the real issue now. Yes, there's lower revenue from oil for these countries - countries like your own. Lower revenue from
these - from oil - but spending and of course the economic side of the equation has to account for that. Is it going to?
JAFAR: Well, OPEC has lost - if oil price stays it is -- $500 billion over one year. It's not clear who the winners are though, and as we've
heard today, it's going to take a while to trickle down. But what is, there's a lot of capital in the region but our biggest problem actually
beneath the headlines of failed states like Yemen or Libya or you're having issues with Iraq and Syria, are the economic drivers behind a lot of the
instability. And above all, the youth unemployment which is our biggest challenge in the region. The ILO figures came out this morning. We're 30
percent youth unemployment in the Middle East and rising -- the fastest in the world.
QUEST: Do the rulers and the ruling families in the Gulf and in other OPEC countries - do they get it?
JAFAR: I think they do, I think there's been a lot that's happened within the Gulf. But of course the Gulf is a small percentage of the
population of the wider MENA region and it's how to create sustainable job creation -
QUEST: Oh, but the Gulf -
JAFAR: -- in the wider region.
QUEST: But the Gulf finances for good or for not in much of the rest of the region in some shape or form.
JAFAR: You're seeing that now in a very positive way in places like Egypt where there's a recognition that major infrastructure projects. What
we really need is an economic revolution now in the region. We need, you know, four years on from the Arab spring, it's turned into a winter of
discontent. We need to somehow defrost that.
QUEST: Right.
JAFAR: And create some buds of growth. We're growing - you know, you mentioned the IMF figures for the world. The Middle East is 1 to 2 percent
and we need to grow at 5 percent just to maintain current levels of unemployment which are already too high.
QUEST: You'll be familiar of course with John Defterios my colleague on "Emerging Markets" (inaudible). John Defterios believes and bangs on
about the fact the instability that's caused by the low oil price in the region - because of its knock-on effects. Is he right?
JAFAR: I think the instability's caused fundamentally by a lack of economic opportunity for the new generation. And this fall in oil prices
could be a good wake up call for up. Our true natural resource is the youth. If we can put them to meaningful, sustainable employment, then we
have a hope. Then we have a hope of turning this `round into a virtual circle rather than the vicious one we're currently in.
QUEST: So why didn't Saudi agree to be the swing producer once again and help jack up the price? Or at least prevent it going down to where it
is?
JAFAR: I think everyone might have underestimated how far it was going to go down, but I think from Saudi's perspective, they would like to
test renewables and shale oil -
QUEST: Right.
JAFAR: -- and - they've been losing market share with the rise from U.S. production. But more important than the supply is the demand. What's
really driven this is the Chinese growth - albeit at 7 percent - is the lowest in a generation.
QUEST: Here's the pen, there's the map - the risk map.
JAFAR: Well I sort of led up to it despite my concerns for the Middle East -
QUEST: Go where you're most concerned -
JAFAR: -- on a global scale.
QUEST: -- on a global scale. Go on.
JAFAR: I'll have to say China. Not original, but from a global scale, that's the most important.
QUEST: You're all going to China. You don't think that Li (ph) and Xhi's (ph) going to pull this together?
JAFAR: I'm not doubting it, but even they have said, --
QUEST: Right.
JAFAR: -- I mean - they're aiming for domestic-driven lower levels of growth - the new normal. What that actually is and what it means to the
rest of the world will be key.
QUEST: Good to see you, sir, thank you very much indeed.
JAFAR: Good to see you.
QUEST: Fascinating. Fascinating the way the risk map is developing and it will continue to develop over the course of the week. You may have
heard of the three Cs of organizational wealth - financial capital, intellectual capital, human capital. They're the three Cs. Well the chief
exec of IHG -- Intercontinental Hotels Group - adds another C - trust capital. He'll be here after the break. "Quest Means Business" in Davos.
(COMMERCIAL BREAK)
QUEST: A key theme at the World Economic Forum this year is trust - something the Intercontinental Hotels Group says is being increasingly
eroded in public and private sectors. Their 2015 trends report says building trust is critical for companies' bottom line. The chief exec of
IHG is Richard Solomons. It's good to see you as always, Richard.
RICHARD SOLOMONS, CEO, INTERCONTINENTAL HOTELS GROUP: Hi.
QUEST: So, this barometer that you've come up with - that you - it's about consumers and it's about trust -
SOLOMONS: Yes.
QUEST: -- to companies. But what is it fundamentally telling you? There's a lack of trust? Tell me something I didn't know!
SOLOMONS: (CHUCKLE). I think we know that, but I mean this is based on research, it's not something we just came up with. And it is a very
complex world - there's lot of things (inaudible) talking about you know what governments are up to, what's happening in economies, the
uncertainties in the world. And what became clear is that consumers want to be able to trust the brands that they deal with, and that enables them
just to think about value differently and make easy decisions. If you know who you can trust, you don't have to go and look at 15 different websites,
you can straight to the business that you trust.
QUEST: Now when you say distrust or they don't trust, is that because they don't get the product they paid for, it's overpriced, goods not fit
for service? What causes that distrust?
SOLOMONS: There's aspect of it. I mean, we've still got value in terms of costs. It's very different today, so our value in terms of
everything that you get, and what you're trying to create as we are in the hotel business is loyal consumers. Not repeat buyers because there's a
deal, but trying to create loyal consumers who come to you because what they get is consistent and is value for money - not necessarily cheap.
QUEST: So, as you look at this, what can you as a chief exec do? Because you're the top of the pyramid, and really you're the victim of
every single one - or the beneficiary - of every single one of your employees.
SOLOMONS: Yes.
QUEST: And you've got to get your consumers to trust you.
SOLOMONS: I think it starts at the top, no question. Leadership and defining trust is something important, it's actually crucial. Making it
clear to everybody what it is you're about as an organization, having a very clear understanding what the brand stands for. And for us, we have
4,700 hotels around the world, nine brands - can you consistently deliver the promise of each brand every day? That's the most crucial thing.
QUEST: Well, you've got another brand, haven't you?
SOLOMONS: Kimpton.
QUEST: One of the hotels you just bought.
SOLOMONS: Yes.
QUEST: Which is a very well-known boutique hotel. It arguably invented the boutique -
SOLOMONS: Yes.
QUEST: -- business. Are you, I mean - Richard, let me be blunt if I may.
SOLOMONS: As always, yes go on.
QUEST: Please, you know - you can't screw it up. I mean, you've taken this new - you've got this subsidiary, it's very successful -
SOLOMONS: Yes.
QUEST: -- and the industry says it could be a huge benefit for IHG.
SOLOMONS: Yes.
QUEST: Provided you keep your hands off it.
SOLOMONS: I think it's how you integrate, how you work together. We've appointed their COO as CEO of Kimpton, so a guy who knows the
business really well. They're fantastic at design and operations, at food and beverage. They're the boutique player and the fastest-growing sector.
We have Hotel Indigo - another boutique brand. And for us it's benefiting from what they have as a brand and us helping them with our scale. Think
about technology, think about systems, think about presence (ph), think about taking it outside the U.S. into Europe, into Asia. So, great
opportunity to work together but clearly not taking away from what their brand stands for.
QUEST: And finally before we go to the map --
SOLOMONS: Yes.
QUEST: -- finally, is IHG still in play? All right, you may not admit it, but last year you had a bid, it was turned down, we all went
away, it's gone quiet - are you still in play?
SOLOMONS: There were rumors last year. Don't believe everything you hear on the TV or read in the papers. So, no, we're very strong -
(CROSS TALK)
QUEST: What are you suggesting?
SOLOMONS: (LAUGHTER).
QUEST: Are you suggesting there's a trust issue between and the viewer?
SOLOMONS: Maybe with some networks. Surely not you and CNN.
QUEST: Get over here. Go out the one part of the world that you are most concerned about in 2015 for economic growth over there.
SOLOMONS: There are clearly issues around but I would still say Middle East.
QUEST: The Middle East.
SOLOMONS: Yes. Lots go on there.
QUEST: That's the bit that you're most concerned about?
SOLOMONS: Yes.
QUEST: Take away what you need. Good to see you.
SOLOMONS: Good to see you, Richard.
QUEST: Be very trustworthy.
SOLOMONS: Thank you.
QUEST: Now, you can read my article on this year's Davos themes on cnn.com. We have special web coverage on our website. It's at
cnn.com/davos.
Netflix shares are up more than 12 percent after hours. The company's added 4.3 million subscribers in the fourth quarter - slightly more than
analysts expected. Samuel Burke is in New York and joins me now. Why are they up so much? Netflix is one of those stories that just going `round.
SAMUEL BURKE, BUSINESS CORRESPONDENT: Well, it's that original content - series like "Orange is the new Black," and it's particularly
interesting, Richard, because Netflix stock had actually be down nearly 25 percent over the past six months, so it's really welcome news for them the
fact that they've had solid revenue, solid member growth. I noticed that they had more growth when it comes to international members than they did
members - growth here in the United States -- so they're doing really well. So much so that they're saying that they'll complete their international
expansion within two years. Earnings per share are very strong - 72 cents versus expectations of 45 cents.
And, Richard, they said they're going to stream "The Interview." Don't forget a lot of companies it didn't seem like they were going to help
out Sony at first. Finally Google's YouTube stepped up to the plate, now Netflix is doing it. Their stock is up 13 percent now, Richard, which
allows me to do something rather cheeky. You would usually stop me from doing this if you were in the studio, but you're in Switzerland, Richard.
I have a bell (RINGS BELL), and get to ring it.
QUEST: Well, if you call that a bell.
BURKE: (LAUGHTER).
QUEST: IBM profits beat revenues - had the profits beat but the revenues missed as well. IBM very much no longer selling computers or such
- much more a digital services company. What's going on there, Samuel?
BURKE: Yes, earnings per share did all right, a little bit better than expected. But the end of the day, Richard, revenue down for the 11th
straight quarter in a row for this company. The stock's down about 2 percent right now. Long story short, this was a hardware company. You
used to see their cash registers with that blue IBM logo everywhere - restaurants. Now, they're have to - people are replacing that with
software and apps and IBM is having difficulty making that pivot.
QUEST: Samuel Burke in New York. Samuel, don't touch the bell. As we continue on "Quest Means Business," for eight centuries, this medieval
manuscript has stood the test of time. It's the Magna Carta, and tonight there's a call to action for a new Magna Carta. Who's the protagonist who
wants Runnymede all over again? He's here in Davos.
(COMMERCIAL BREAK)
QUEST: The United Nations International Labor Organization's warning pay inequality is rising and could lead to social unrest. The ILO report
says the richest 10 percent of earners bring in as much as 40 percent of total income around the world on average. Now, you've got to put all this
into context as the poorest 10 percent earn around such a tiny fraction of the total income. This fight against inequality isn't new. It was going
on 800 years ago. Think of it as Magna Carta. Now, Magna Carta is the first legal document that supported the idea of basic rights. You know the
old idea that no one is above the law - not even the king. Latin for "Great Charter" - Magna Carta, issued by King John in England in 1215 -
Runnymede and all that - and appease the disgruntled barons. But 800 years on, the workers union UNI Global is calling for a new Magna Carta for
equality, jobs and sustainable growth. Philip Jennings is the secretary general of UNI Global Union.
PHILIP JENNINGS, GENERAL SECRETARY, UNI GLOBAL UNION: Good to see you.
QUEST: You never - you're never backward at being modest in your names in terms of these. I mean, to call for a new Magna Carta's a bit
rich, Phillip.
JENNINGS: On the 800th anniversary of the Magna Carta, I mean, you have to put things into context. We have a rights deficit in this world,
we have a jobs deficit in this world, we have a dignity deficit in this world. Therefore, we have to connect with an instrument or with an idea
that connects in people's minds and actions. A Magna Carta is about action.
QUEST: So what does this Magna Carta have in it?
JENNINGS: It's a Magna Carta about including you - that's the theme - including you. It's about going for economic growth, going for inclusive
growth, going for job growth, and doing something about income inequality which means minimum wages, collective bargaining, it means recognizing
unions.
QUEST: The tide is against you at the moment on these things.
JENNINGS: It's not against us, you're absolutely wrong, Richard. All the evidence that is stacking up, they can't be bulldozed away. The ILO
agrees with us, the OECD agrees with us, the World Economic Forum today is producing its own benchmark on social inclusion. Klaus has got his own
Magna Carta for inclusive economic growth -
QUEST: All right.
JENNINGS: -- and so the music goes on.
QUEST: So people are listening, but is anything changing?
JENNINGS: Yes.
QUEST: Look at the fight over the minimum wage that's taking place in the United States for example.
JENNINGS: We're winning. When I came on your show two years ago, I talked about workers needing a wage rise, and you didn't take me that
seriously I have to say. This is now taken off everywhere. Labor movements everywhere are making a major thrust on this issue. We're going to have a
minimum wage in October in Germany for the first time - never had it before. We're seeing more push for a minimum wage in the United States of
America than we've ever seen before. The issue is being addressed - Barack Obama's taking the gloves off at last --
QUEST: All right. All right.
JENNINGS: -- on the tax issue and on the wealth issue.
QUEST: Let -
JENNINGS: We're fighting back! Our voice is being heard!
QUEST: So when you hear this Oxfam survey, the top 1 percent and the 99 percent - you know the details, we've talked about that and you saw/you
heard Winnie talking about it earlier. She says it's staggering. She's right, isn't she?
JENNINGS: Absolutely right. The top 1 percent owns what the rest of the 99 percent has. You see, the problem is the - if you look at the
world's most powerful economy -
QUEST: But are you -
JENNINGS: -- just - no - 1 percent. In United States of America have accrued 98 percent of all of the income. Therefore we have to go back to
the policy levers at work - a voice for workers, collective bargaining, minimum wage.
QUEST: But come on, are unions, are unions losing their voice and their power? That people are fleeing unions not joining them?
JENNINGS: I don't know what statistics you're looking at. Our movement is growing. More educated people like yourself - professionals -
not just factory workers are joining our numbers.
QUEST: Right.
JENNINGS: And the World Economic Forum gets it. When they're looking at inclusive development and growth, they say look at union density because
they know that's a policy lever that could be pushed. We have more women in membership, more professionals in membership -
QUEST: All right. Settled.
JENNINGS: -- we're on our way.
QUEST: Settled, shh.
JENNINGS: (LAUGHTER).
QUEST: Take it easy.
JENNINGS: Well there we are.
QUEST: Come over to the map.
JENNINGS: Late at night.
QUEST: That's right - the risk map.
JENNINGS: The risk map.
QUEST: Come one, where do you want to go on the risk map?
JENNINGS: Well -
QUEST: Put one area.
JENNINGS: -- but the one area I'm worried about - an oil-exporting nation that is the fastest-growing nation in Africa is Nigeria -
QUEST: Right.
JENNINGS: -- and nobody is really paying attention to Nigeria. The Middle East of course -
QUEST: Well put a mark on then.
JENNINGS: OK then, well it's a big place, Nigeria.
QUEST: Do wherever you want.
JENNINGS: There we go. I got Nigeria and a few others as well. So, oil exporting -
QUEST: And they're no longer attending Davos this year apparently.
JENNINGS: Well, there's an election taking place, that's why.
QUEST: Thank you very much indeed. Very good to see you.
JENNINGS: Thank you for your support for the Magna Carta.
QUEST: The Magna Carta.
JENNINGS: Yes. King Richard.
QUEST: (Inaudible).
JENNINGS: And you know what happened to him.
(LAUGHTER)
QUEST: So much for equality for all. We'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." As the debate over inequality continues and will range (ph) large here in Davos, it's starting to become
clear just how many different facets it has. You heard about them on tonight's "Quest Means Business." First of all, you've got simple wealth
inequality - the 1 percent versus the 99 percent. But then as you look around the rest of the world, you've got - you heard Majid Jafar talking
about the inequality that exists in jobs in the Middle East, you've got the inequality that exists in labor relations whether it's in Latin America or
even indeed, say for example as you just heard Philip Jennings talking about, with the new minimum wage in Germany. Across the globe the issue of
inequality is now very firmly on the agenda, and it'll be the business and political leaders that have to deal with it. If they don't, they'll find
themselves in deep trouble indeed. Because there can't be too many more years where everyone's promised jam tomorrow. And that's "Quest Means
Business" for tonight. I'm Richard Quest in Davos. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you
tomorrow.
END
