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Speaker:
Jim Whitaker, Founder and Director, Project Rebirth; President, Feature Production, Imagine Entertainment

Moderator:
Andrew Alper, Chairman, EQA Partners LP

Moderator Andrew Alper introduced the audience to director Jim Whitaker, who shared an exclusive preview of his emotional film Project Rebirth: Rebuilding Lives, Rebuilding the World Trade Center. Whitaker explained that it was essential to record not only the rebuilding process at the World Trade Center site but also the recovery process of individuals who suffered losses on 9/11. "I am interested in exploring everyone's point of view about September 11 and sharing it with the rest of the world," he said.

To create this remarkable documentary, Whitaker formed a non-profit entity called Project Rebirth that will capture the history of 9/11 before it is lost and follow the construction of the Freedom Tower.

The filmmakers have been following ten individuals affected by the tragedy, chronicling their road to recovery. Each year these participants take part in candid three- to five-hour interviews to explore the developments in their lives. Four of these individuals were featured in the film excerpt that Whitaker screened.

One of the subjects interviewed was a woman who lost her fiancé, a New York City firefighter. She described the process of growing stronger each year until reaching the point where she felt her life was back on track. She ultimately found a new relationship and married a man she calls "her knight in shining armor" — but she still wears her original engagement ring in remembrance of the love she lost.

Also featured in the film was a young man whose mother worked in one of the Twin Towers and was killed in the attacks. The son was accepted to Yale University in the fall of 2001 and felt the pain of being unable to share the experience with his mother. Throughout the course of the film, the audience witnessed his growing strength and acceptance of his loss. "The hardest thing about my mother being gone is my inability to hold her," he confides. "Worst of all, she won't be there to see me graduate, get married and have children. She would have been the greatest grandmother alive."

Another featured subject was a woman who was in the World Trade Center that fateful morning. She survived but endured serious burns that left her with extensive scarring and paralysis of the right side of her body. The audience watched as she recounted the struggles she has faced in the intervening years, including 30 reconstructive surgeries.

Lastly, the audience was introduced to a man who lost everything and everyone he knew on 9/11. After the disaster struck, he picked up and headed West. While living in California, his apartment building flooded — which he took that as a sign that he was meant to return to New York and start over. "It is so hard to be back here," he said. "But I am dealing with it. Day by day I am dealing with it."

The audience members had an intensely emotional reaction to the film, with many left in tears. Whitaker will continue to follow his subjects for the next few years, while also recording progress at the World Trade Center site. Project Rebirth has 12 cameras trained on the construction, and plans to use time-lapse photography to capture a visual image of the new towers rising.

The final version of Whitaker's film will be a part of the World Trade Center memorial and museum. Proceeds from the film will fund the Project Rebirth Center, which will offer therapeutic, educational and training resources to support the victims of future events that cause traumatic loss.

Moderator:
Glenn Yago, Director of Capital Studies, Milken Institute

Panelists discussed Israel's potential as a financial powerhouse and global destination for entrepreneurial startups and capital investment. But to be a key player in world financial markets, Israel needs massive growth in investment capital, explained moderator Glenn Yago of the Milken Institute. "And to fund R&D projects and infrastructure," he said, "Israel must establish itself as a world-class destination for international corporations."

Yossi Hollander of the Israeli Institute for Economic Planning addressed some of Israel's challenges, noting, for example, that it is "unique among all western nations … (because) it will have the highest rate of (projected) population increase in the world — from 7.5 million today to nearly 9.5 million in the year 2025." To serve its citizens, he said, there must be a 50 percent increase in available jobs, from 2.6 million to nearly 4 million in the next three to five years. GDP must increase 4.5 percent annually each year, compared to 1.2 percent each year for the past 30 years. Israel must also maintain an 8 percent annual growth in high-tech exports, from $71 billion to $230 billion in the next five years. He summed up the challenges, warning that "Israel must learn how to turn into a global financial center and international headquarters for the developing world in order promote social cohesion and avoid poverty gaps and unemployment within the state."

Guy Ben-Ishai of LECG and Tal Keinan of KCPS & Co. highlighted the Bachar Reforms, improving credit allocation and the birth of Israel′s bond market. "In the last four years," said Ben-Ishai, "Israel has been increasing economic growth by 5 percent each year, and has moved from an A to an A+ by Moody's."

"From the land of milk and honey, Israel became the land of milk and financial startups," said Ben-Ishai, "and is now becoming the land of milk, financial startups, and finance." As the audience chuckled, Keinan quipped, "It's a double mitzvah! To make aliyah (as a Jew, to immigrate to Israel) and help the economy of Israel at the same time." Israel is closer to emerging market partners in Eastern Europe than is London, and its less expensive resources are a boon to new opportunities in finance and investment.

The country is fast becoming a global center for investment, Keinan added. In 1990 the nation had no tech industry, but it took just a decade for the industry to blossom. ""What Israel has on its side," he explained, "is an impressive human resource allocation, a solid higher education system, expertise and experience gained internationally and concentrated locally, and an amazing and resilient entrepreneurial spirit — not to mention western legal and accounting procedures."

Neri Bukspan noted that government support is crucial to the success of a country's advancement and financial growth, and that Israel has that support. He offered his recipe for a "stew of success," which includes solid regulatory infrastructure, skilled personnel, open access to consumers and clients, good corporate governance, efficiency of markets, tax incentives, infrastructure and government support. Not to be excluded from the list are quality of life, Zionism, language and culture, he said, adding that "Israel has the right ingredients. Now it just needs to keep it cooking."

Israel is a land of creativity, innovation and idealistic thinking, the panelists agreed, and these characteristics have helped to create the progress we see now and will propel Israel into the future.

Moderator:
Larry Carroll, News Anchor, KFWB News 980

More than 2,400 days after 9-11, panelists convened to discuss the threat of terrorism in the face of a war and growing public complacency. Moderated by news anchor Larry Carroll of KFWB, the panel discussed whether U.S. efforts to thwart terrorism are effective.

Ronald Noble, Secretary General of Interpol, was not able to attend as planned, but he sent comments that were read aloud by Carroll. What keeps Noble awake at night, he notes, is the increasing number of fraudulent travel documents. Interpol currently has the only stolen travel document database in the world, with 14 million entries. But only a handful of nations, including the United States, consult the database when travelers enter. There are still more than 150 countries that do not consult the database, providing an opportunity for potential terrorists to cross the borders of those countries illegally.

Brian Jenkins of RAND brought up the pessimistic realities of the U.S. focus on building walls and fences. "We are in danger of creating a security society," he observed. The United States could continue down a path of fortifying itself in the face of terrorists that have the philosophy of "war is life," but going that route has costs, including a loss of information exchange and commerce. Instead of building moats and walls to protect failing infrastructure, he says, we should instead look at solutions that are more sustainable.

When asked to share his nightmare scenario, Peter Katona of UCLA brought up nuclear and biological weapons. He noted that when there were only 22 cases of anthrax cases, there was psychological trauma. Furthermore, in the face of large catastrophes such as Hurricane Katrina, the United States lacked well-tested regional plans for response. These examples have led him to believe that a full-fledged attack could be much more devastating.

Michael Intriligator of UCLA brought up flaws in the current Department of Homeland Security (DHS). As a major port, Los Angeles is a prime target for a terrorist attack. But DHS continues to focus narrowly on airline security, not moving forward with addressing other areas of potential terrorist attacks such as seaports. Meanwhile, Al Qaeda is continuing to franchise its organization much like a business model, using the latest technologies, while the United States still lags behind in working multilaterally and using new creative techniques and services.

The panel offered solutions for tackling the issue. John Sullivan of the Los Angeles Sheriff's Department acknowledged the importance of space. By having a community take ownership of a particular space, even something as prosaic as a taco stand on a corner, that community bands together in promoting economic progress. They will also recognize those that do not belong in that space, and report them to the proper authorities before something dangerous happens.

Prevention is difficult, Jenkins noted, so it's best to look for investments that bring benefits. Jenkins commented on the U.S. mechanisms for prevention, saying, "Be very afraid but keep shopping." He called for educating and engaging the public, which in the end is the best way to handle and defeat terror.

Moderator:
Miguel Marquez, Correspondent, ABC News

"Iraq is open for business," declared Miguel Marquez of ABC News, expressing the collective opinion of the panelists for this session. However, it was very clear that he disagreed with them on a variety of important issues, and he used his experience as a correspondent in Iraq over the last three years to challenge their assertions. Parts of this panel discussion seemed like a debate between Marquez and the panelists. All three participants clearly saw signs of economic growth and prosperity, but Marquez persistently disputed their optimistic assessments of political stability in Iraq.

Bartle Bull of Prospect, felt that the fiscal situation is excellent, and Iraq will soon be living up to its economic promise. In fact, he expressed unmitigated optimism that Iraq would shed the legacy of more than 30 years of a state-run economy. Bull focused on overall economic growth, infrastructure development, new construction and oil production. He was also emphatic that Iraq remains a single, cohesive country with a shared identity, offering the analogy of America's own turbulent origins, which remained unresolved until after the Civil War. "Anyone who would have challenged the United States' ability to succeed would have been proven wrong . . . Iraqis have proven us wrong." Bull highlighted the very real sacrifices that Iraqi Kurds have made in order to remain part of the union when conventional wisdom suggested at times that they might try to form their own country.

Ambassador Lawrence Butler expressed similar enthusiasm about Iraq's future. The U.S. government is spending less on Iraqi reconstruction, and the Iraqis are spending more. More important, large corporations and U.S. venture capital firms are finally starting to seriously invest in Iraq's future. Inflation is down, and oil production is up. Butler observed that Iraqis are very entrepreneurial, but this generation of businessmen is learning how to operate in a capitalist society for the first time. "For every step forward, they often take at least a half-step back," he said. However, they have progressed to the point of achieving sustainable improvement. While he did point out the challenges of the new economy, he said, "Corruption is capitalism unbridled by the rule of law. As the rule of law increases, corruption decreases." Iraqis are learning that they have to play by the established international rules regarding trade and economic development, and as they learn, all parties benefit.

Nibras Kazimi of The New York Sun observed that most Americans see the situation in Iraq as either a disaster or an overwhelming success, depending on their political view. While there are many persistent problems in Iraq, they are fixable and many sincere people are working towards their solution. Kazimi believes that most problems regarding the economy relate to a lack of transparency and the sheer newness of the environment. "The old rolodexes are out," he explained, as Iraqi citizens and investors try to find their way through a rapidly evolving economy. Kazimi also argued that the Iraqi government has done an excellent job of restoring order and providing services. Furthermore, the Iraqis have come together as a unified country, rebuffing numerous attempts by their neighbors to influence progress. Regarding the dying insurgency and the limited influence of Iran, Kazimi remarked that the easiest way to denounce religious and militia leader Muqtada al-Sadr is to remind people that he currently lives in Iran. This echoed Butler's point that even though Shiite Iraqis share a sectarian bond with Shiite Iranians, the more important factor was that Iraqis are Arabs and Iranians are Persians. This ethnic divide ensures that Iraqis stick together.

Throughout the session, the moderator seemed incredulous regarding the panelists' optimism. At every opportunity he directly challenged the panelists, and they pushed back. When Marquez asked about the possibility of al-Sadr's Mahdi Army reemerging, Ambassador Butler shot back, "And the Earth could be hit by a meteor, too, but we are dealing with realities." Marquez's most pointed shots were directed at those who hold up Basra as a model of Iraqi success. He correctly pointed out several major inaccuracies in reports that the Iraqi government had independently and successfully assumed control over Basra following the withdrawal of British forces. However, the panelists presented compelling arguments to support their case that Iraq is, indeed, open for business.

Two final points require acknowledgement. First, the educational system in Iraq never faltered. Even when the insurgency was at its worst, the Iraqis valued education enough to keep sending their children to school at all levels. Furthermore, while the business community fled Iraq due to violence, teachers and professors stayed. Finally, many foreigners are now investing heavily in Iraq at the expense of U.S. firms that are not benefiting from our dominant military position there. In particular, Chinese, Saudi and Russian firms are benefiting from the emerging stability, while many U.S. companies will not be able to share in future prosperity if it is achieved.

Moderator:
Perry Wong, Senior Managing Economist in Regional Economics, Milken Institute

"Quality over quantity" was the phrase of the day to describe China's new commitment to a "Harmonious Society" — one based on sustainable growth and a vision of prosperity that encompasses overall well-being. Quipping that China seems to have heeded the advice of last year's panel at the Global Conference, moderator Perry Wong of the Milken Institute asked the panelists what "Harmonious Society" really means and why it is critical.

Andy Rothman of CLSA Asia-Pacific Markets placed the new development in the context of several waves of policy and economic growth. In the 1980s the trend was capitalizing on cheap labor, while increasing privatization defined the 1990s. Now, in this third wave, China has clearly decided "we no longer want to be the world's sweatshop for junk." This means closing down factories that use dirty old technology or pay below minimum wage, ending export subsidies and preparing to take the economic hit that will come with restructuring industry. It also means getting past the problem of "lacking a leading ideology other than to get rich," as Jim McGregor of JL McGregor & Company put it.

Despite a reputation for announcing broad goals and then failing to meet them, the central government is serious this time, according to Rothman, and it appears they will be effective in their new aims. Specifically, they are actually working to change the incentive structure at the local level, so that, unlike with many past initiatives, it is now the case that "political and career incentives now aligned with policy."

Rothman later illustrated the importance and effectiveness of this incentive alignment with a stark example. In visiting many cities around China several years ago, he noted a conflicting response to two high-level directives: one to close down high-tech zones, and one to close down steel mills. There was 100 percent compliance in shutting down high-tech zones, but zero compliance for the steel mills. It turned out that those responsible for implementing the changes would be "sacked tomorrow" if they didn't shut down the high-tech zones, while little incentive was put in place to comply with the steel mill directive. The government has now recognized the important role of these incentives and is using this mechanism to ensure compliance at lower levels, though "extreme party discipline at all levels" will still be required, according to McGregor.

"The Chinese government is not as powerful as we believe," posited Bobby Chao of DFJ DragonFund China. McGregor agreed, pointing out that even within the central government, "People who run China today are not dictators. They're people who have to operate on consensus." However, he added, when it comes to implementation, leaders tend to be more powerful in their second term after they have gained more influence relative to lingering appointees from previous administrations — thus we can expect the central government to further pick up the pace of implementing its change the longer Hu Jintao remains in power.

A healthy environment is central to sustainable growth and China's vision of a harmonious society. On this topic, Wong suggested that perhaps China has suffered "a confusion between growth and development."

James Boettcher of Focus Ventures agreed, but with some optimism about China internalizing the message and working to address it. According to him, the Chinese realized "we cannot follow the paradigms that the West followed for the last 100 years." They now recognize the need for innovative and leapfrog technology to allow growth without negatively impacting their environment and health. There are signs of this in many places, including the goal of producing five gigawatts of wind energy by 2010 (a benchmark they expect to meet early). Boettcher also highlighted the importance of cleanly utilizing coal, and combining coal with fuel-cell technology to essentially double the efficiency of one of China's primary resources.

Environmentally friendly technology is not the only element of balanced growth. Chao characterized several types of "old" growth models for China, most of which were focused on some combination of low-cost labor, imitating other business and capitalizing on local markets. The goal now is to aim for world-class innovative technology for global markets — and that will require more intellectual capital, intellectual property rights and venture capital. Chao neatly summed up what is happening as China transitions to a new mode of growth: "They've become pretty smart now."

Moderator:
Steve Forbes, Chairman and CEO, Forbes Inc.; Editor-in-Chief, Forbes

The moderator of Monday's general session, Steve Forbes of Forbes Inc., started the panel discussion by bluntly asking the speakers about the status of the American economy: "How bad is it?"

In response, Nobel laureate Gary Becker stated that although America's economic problems are worsening, he does not expect a major depression. He said that one must distinguish between the real sector of the U.S. economy and the financial sector, where the problem is contained. Becker argued that the United States has faced a variety of major crises and survived, and it can similarly overcome the current credit crunch.

Jean-Paul Betbèze of Crédit Agricole addressed what he called a "global cooling" in the economy. He observed that Europe is managing to benefit from the U.S. slowdown and inflation in other countries.

The panelists argued that European policy-makers must face the challenges of reducing expenditures and enacting tax reforms. Becker argued that European political leaders needed to cut taxes first to place pressure on the tax system.

Michael Neal of GE noted that he was surrounded by pessimism, but he offered an optimistic view. He cited the success of exporting firms and agricultural machinery manufacturers in the United States, arguing that the economy would likely turn around for the better by the first quarter of 2009.

Ruben Vardanian discussed the Russia's successful growth and new opportunities. He cited the burgeoning Russian middle class who are "going abroad buying" and "want goods and services."

Becker discussed the issue of inequality within societies versus the inequality between countries. He argued that globalization is leveling the playing field between rich and poor countries, but increasing the gap between skilled and unskilled workers within individual societies. He summed up by saying that world inequality is declining.

On this same note, Vardanian argued that Russia needs to compete on the global scene by developing more human capital and better managerial skills. He even argued that corruption in Russia is less of a threat to economic prosperity than is a lack of managerial skills.

The panel addressed the issue of rising prices for commodities, including biofuels, oil and natural gas, and the impact of this spike on the price of food worldwide. The panelists agreed that unlike the commodities boom of 30 years ago, the current rise is driven and sustained by increased demand.

Betbèze offered a final tongue-in-cheek comment: To avoid economic crises in the future, people must "solemnly promise that they will never do this again."

Moderator:
Stéphane Voisin, Head of Sustainable and Responsible Investment, Crédit Agricole Cheuvreux

There are two periods of the European Climate Exchange, or ECX, so far: the pilot phase, which began with the birth of the exchange in 2005 ran through 2007, and the Kyoto phase, which began this year and continues through 2012. Now over the rough patches in Phase 1 and solidly into the second phase, the ECX offers the world and the United States, in particular, one clear lesson from its experience: carbon trading does work.

The ECX currently provides cap-and-trade for 11,000 industrial plants, representing approximately half of all carbon emissions from the entire EU. There has been free banking and borrowing during each period, but not from one period to the next (which turned out to be problematic as prices dropped at the end of the first phase in anticipation of the transition). This has produced six preliminary results according to Christian de Perthuis of Caisse des Dépôts and the University Paris-Dauphine.

1. First, in less than three years, the ECX has become the largest carbon market in the world, expanding from 7.9 billion euros in 2005 to 38.3 billion in 2007.

2. Europe now has a real carbon market price.

3. Europe has seen between 5 megatons and100 megatons of carbon abatement per year from 2005 through 2007.

4. There has been limited impact on electricity prices, despite previous fears.

5. As an open market with an established carbon price, the ETX has driven the creation of new environmental projects elsewhere around the world.

6. Any link between future U.S. carbon abatement programs and the EU would exponentially bring opportunities on all sides, the United States still being potentially the largest carbon market on earth.

Neal Eckert of Climate Exchange PLC noted that $600 million a day is currently traded on the ECX. The total should increase further, thanks to recent incursions of big investment firms that offer structured plans to consumers. Eckert explained that "fuel switch" is the big driver in energy trading, and that "thanks to the ECX, if you trade energy today, you need a carbon desk." The ECX has two separate programs, one domestic, and one international, and Eckert said it was his one big wish that the United States would become involved in the international program.

According to Tim Yeo, Chairman of the Environmental Audit Select Committee of the U.K. House of Commons, if one is to fully understand the trajectory of policy regarding carbon trading, one must understand it within the context of the urgency of global warming, which every day appears to be happening at a much faster rate than previously understood. If we continue "business as usual," he said, the planet could hit its tipping point within 50 years. Yeo maintained that limits far in excess of Kyoto will be necessary to avert calamity. What the past two-plus years of ECX activity have shown is that market incentives coupled with government regulation (i.e., cap-and-trade) are the best way for this to occur. The ECX includes 27 countries, and that given the scope and size of the players in the market Yeo said, the first lesson to be learned is that caps have to be tight enough to force reductions in the face of enormous lobby pressure to the contrary.

The second lesson, according to Yeo, is that the auction of allowances is the most effective way to incentivize trade. By comparison, the existence of heavy taxation on engines in Germany, and the total failure of the same to effect production of cars, are perfect examples of why a carbon tax will not work.

The third lesson, said Yeo, is that the market must include as many industries as possible, and as quickly as possible. Lastly, low carbon industries will show the fastest growth under the market conditions established by the ECX. Yeo beseeched the Americans in the audience to get the United States on board with a cap-and-trade program ASAP.

Electricity is responsible for 40 percent of carbon emissions in the EU, but it is important to recognize the role of electricity in reducing carbon emissions in other sectors via clean-tech electricity generation, such as solar power, and in turn fuel switching from different sectors, e.g., coal. In contrast to Yeo′s assertion that market forces are the fastest way to achieve carbon abatement (and while agreeing that more auctioning would be the best way to facilitate growth), Jean-Yves Caneill of EDF Group asserted that specific policies will be necessary to allocate money from auctioning into R&D for clean tech.

Returning to the theme of electricity as part of the solution, Erich Merkle of Solar*Tec AG cited solar-generated electricity as a zero-emissions source. With a one-time investment, solar panels will yield a fixed income for 20 years, he said. The total cost of production will be levied on consumers at the rate of only 2 euros per month on average. More than 50 percent of all photovoltaic (PV) installations are currently in Germany and have gone up in only the past few years, prompting other nations, most notably Spain and Portugal, to join in. In 2006, he said, more than 214,000 jobs were created in PV, with a 23 billion euro turnover per year, representing 100 million tons of carbon reduction. PV now represents an investment opportunity in its own right, he said, adding that power generation occurs during daylight hours, the hours of peak usage.

In response to a question from the audience about the potential for carbon asset trading to bolster pollution rather than alleviate it, by allowing the bigger polluters to buy their way out of abatement, all panelists asserted that market forces will bring about greener technologies on their own and that policy-driven reduction on caps is essential to the entire experiment. Personal or individual trading will incentivize the greening of the housing and transportation infrastructures, said Yeo, but he conceded that this too must ultimately be policy-driven.

How exactly this fits into any dogmatic attachment to a free and unregulated market is unclear. What is clear, however, is what is getting results in Europe — and in turn what must be done in the United States, regardless of whether it upholds the popular economic model of the hour.

Moderator:
Josephine Price, Deputy CEO, CLSA

The panel started off recognizing that throughout history, China and India have had some of the largest cities in the world. Josephine Price of CLSA, the panel moderator, explained that Beijing was the world's largest city in 1800 and six of the top ten cities in the 1500s were found in China and India. Urbanization is not a new phenomenon in these countries.

China, with 40 percent of its population concentrated in urban areas, and India, with 25 percent, have some of the densest and dirtiest cities in the world, and they're growing ever larger as populations migrate from the countryside to urban areas in search of opportunity. But these two nations are encountering different sets of conflicts and issues as this trend continues.

The recently built Beijing Airport was originally designed to accommodate 13 percent growth in capacity, but the reality of 22 percent growth quickly outstripped the pace of development. Charles Liu of HAO Capital spoke about the great opportunities inherent in this incredible growth, from people buying LCD TVs to goat herders texting with cell phones. "In the 20th century it a took generation or more to become an urban consumer. Today it takes a year," he said.

Michael Woo from the University of Southern California turned the discussion to whether China can preserve the environment in the face of such massive a building boom and infrastructure development. The average income in China has risen from $293 in 1985 to $2,029 in 2006. This growth in discretionary income has created a vast population of more aggressive urban consumers. By 2020, some 700 million people will be in or ready to join the consumer class in China. Woo went on to explain that the auto industry's potential in the years to come, as 11,000 new cars hit the roads every day. China is experiencing the greatest wave of urbanization in world history, and the pace of development is not sustainable.

For India, unlike China, a democratic system of government has its own restrictions. Anuj Gupta of South Asian Real Estate spoke about Indian developments being inadequate for the 21 century. He mentioned that zoning laws in Indian cities that prevailed for 50 years were changed only recently. The World Bank has warned the Indian government that in the decade to come, some 70 to 80 percent of the Indian population will migrate to urban areas. Every Indian city has been stretched to the limit in terms of capacity, infrastructure development, electricity, roads and water. Gupta recommended an integrated urban planning system that coordinates government and the private sector for better sustainability.

The Indian government has been involved in the development of new satellite cities and the expansion and promotion of two-tier cities, but Gupta felt that planning has lack cohesion. By the time the typical project is completed, it is swamped by explosive population growth or a lack of foresight becomes apparent. He cited the example of Gurgaon, a satellite city near New Delhi built some 20 years ago by an Indian real estate company called DLF. Today Gurgaon is GE′s home in India and has a population of 750,000. But until recently, only one road connected Gurgaon to New Delhi.

In India's 40-odd large cities, needed infrastructure development is projected at $400 to $500 billion, of which 50 percent will be in developing new resources of power and electricity. "Urbanization is inevitable and presents a whole host of challenges and opportunities for governments and private capital to partner in a holistic manner," said Gupta.

Moderator:
Chris Osborne, CEO, Troika Dialog USA

Chris Osborne of the Trioka Dialog USA began the session by asking how many audience members had been to Russia in the last two years. Surprised by the show of hands, he began discussing the rapid growth of Russia's GDP, its rising middle class and the recent flood of foreign direct investment. However, Osborne noted that most observers are aware that investing in oil and natural gas is not sustainable. He added that the incoming Russian president Dmitri Medvedev has stated his priorities for investment in the three I's: infrastructure, innovation and institutions.

Most of the panelists agreed that now is a good time to invest in Russia. Asadov emphasized opportunities outside the oil and gas sector, noting that other industries are ripe for innovation and have little competition.

Gregory Karpovsky of Eurokommerz, the largest factoring company in Russia, used his own story to illustrate the degree of opportunity that is available. A young, self-made entrepreneur in an industry outside of the oil and gas sector, he started a company at age 22 and is now a CEO at 28.

Dmitry Mosin of Sochi 2014 described the upcoming Winter Olympics and Paralympics as an opportunity to showcase a new country to the world, attracting investment and commerce. Mosin cited the Olympic Games as a priority for the prime minister; as a result, all investments will be guaranteed by the government. Private funding will drive construction of the needed infrastructure and hotels.

Vadim Asadov described his experience in Russia's technology sector. A physicist turned investment banker, he established NeurOK in 1998 as an angel incubator for technology financing and commercialization. To nurture the human capital necessary for innovation, he has also founded advanced institutes for physics and mathematics.

Evgeny Zaytsev of Asset Management Company affirmed that there is a great deal of potential in Russia's life sciences sector. Consumer demand is rising, especially in health care. The problem, he says, is the shortage of managers in Russia.

That issue is being addressed by Wilfried Vanhonacker, Dean of the Moscow School of Management. The Russian government has made it a priority to stimulate entrepreneurial talent and leaders who can manage a fast-moving economy. Although Russia's president-elect, Dmitry Medvedev, is chairman of the school's advisory board, the school is entirely privately financed.

When asked about Russia′s negative image abroad, Asadov said that he is surprised at how inaccurately the Western media portrays Russia. "This contradiction of reality is bad for Russia but even worse for America," he said, noting that it leads U.S. investors to shy away from investment opportunities. "Russia is a best-kept secret."

"Russia has been doing a pretty poor job of managing its PR as a country," said Zaytzev. He discussed the lack of awareness by Westerners of all the positive developments in business, education and the arts.

Vanhonacker noted that the problem of Russia's image has some cultural origins, observing that Russians are very direct and don't always consider the audience they are speaking to. He has found this issue a challenge in building the business school. "I have no problem selling the projects to get faculty. The problem is selling Russia."

"Communication is everything. It's all about how you are going to communicate your country," said Moisin. He cited his experience with winning the Olympic bid for Sochi, calling it in effect a global election. "Intense, targeted, and motivational communication is key is in how you want to present your story. It can be done."

Despite the challenges, Vanhonacker reaffirmed that Russia is where the opportunities lie. "Russians are proud and highly educated, with a maturity and understanding of what goes on the world." The country only lacks soft skills such as management. "But these are the challenges that come when faced with high growth and different talents," he said.

Moderator:
Lesa Mitchell, Vice President, Advancing Innovation, Ewing Marion Kauffman Foundation

"People, people, people" make a knowledge economy hum — that was the consensus among this session's panelists.

Moving away from the traditional norms and practices that guaranteed success in an industrial economy, today's economy values expertise and intellectual property more than land or natural resources. Such an economy thrives on, and in fact requires, highly intelligent and educated people.

After brief introductions by each member of the panel, Ross DeVol of the Milken Institute placed the discussion in a larger context. Through a variety of slides that summarized years of research, DeVol hypothesized that a community's economic success is driven by its ability to retain human capital. While "it is critical to have large tech firms . . . [we] need people who know how to start new companies to have long-term success." A community that can lure and keep entrepreneurs will maintain a long-term competitive edge.

This sentiment was echoed by nearly every member of the panel. Lynde Coit of Plasco Energy Group emphasized the importance of the "special sauce" that led his company to place its headquarters in Ottawa, Canada. Plasco's technology, which converts waste into synthetic natural gas that can be used to generate electricity, was developed over a 20-year period in Ottawa. It was Ottawa's "long history of innovation and entrepreneurship" that made it an ideal locale for Plasco's plant.

Salvador Malo of the Mexican Institute for Competitiveness explained that, for the first time, Mexico has "a sense of competitiveness and innovation at the federal level of government, and local governments are trying to attract all forms of capital." He highlighted the state of Guanajuato, which has a population of less than 5 million but an ambitious "six economic corridors plan" to attract energy, biotechnology, nanotechnology, aerospace, information and automotive industries to the area.

David Fransen of the Institute for Quantum Computing further elaborated on the specific types of people necessary to create an entrepreneurial environment: "rich people and nerds." (DeVol jumped in to remind the audience that these groups were not mutually exclusive.) And not all rich people are created equal. Fransen believes that people who have made their money in today's economy — as opposed to "legacy rich" who have inherited money — are more likely to appreciate risk and investment in research. Such people tend to be less outcome-based and appreciate all aspects and benefits of the entrepreneurial environment.

Mayor Gavin Newsom of San Francisco agreed that "the competitive differentiator is talent." As mayor, he adheres to a philosophy of "reinvent or die." He highlighted the various tactics San Francisco employs to create a thriving city where the most talented people will want to live and work: "anchoring the connection to Asia" by supporting Chinatown, Little Saigon and Japantown; mapping out a new area in Mission Bay for the University of San Francisco; and training community college students for specific jobs that major corporations say they will need to fill in five to ten years.

At one point Newsom and Fransen clashed briefly over the importance of diversity if the aim is to create an economic engine. Fransen posited that "rich nerds" do not require diversity; only superior minds and superior technology will lure them to a given place. Newsom countered that "openness to new ideas," be they cultural or technological, is imperative to attract top minds.

The moderator, Lesa Mitchell of the Ewing Marion Kauffman Foundation, kept the conversation lively, moving briskly speaker to speaker and offering insights of her own. She emphasized the importance of universities in attracting talented young minds to a given area, but she noted that the responsibility of retaining them eventually shifts back to the locality. Every city or town must work to keep its graduates living and working in the area if they want to capitalize on the intellectual property.

Moderator:
Carol Lin, Founder and CEO, Cancer Social Network

Panelists discussed the provision of health care to the very poor in developing countries, particularly Bangladesh and India. All agreed with moderator Carol Lin of the Cancer Social Network, who said in her opening remarks, "It takes money to get health care."

Nobel Peace Prize laureate Muhammad Yunus discussed the state of health care in Bangladesh, where he founded Grameen Bank, making small loans to poor people — 97% of whom are women — to start their own micro-enterprises. "Income is the best medicine," Yunus stated.

He described prevalent health problems in Bangladesh and the tactics that the Grameen Bank has used to address them. For instance, night blindness among children was a major problem caused by vitamin A deficiency, a problem that has typically been addressed by providing supplements. Grameen Bank decided to sell seeds to families so that they could grow their own vitamin-rich vegetables, eliminating the risk of deficiencies and allowing the families to sell the surplus. Night blindness vanished (and Grameen became the number one seed-seller in Bangladesh).

Grameen Bank has also been involved in working to address water shortages, the need for sustainable housing, sanitation and malnutrition, all of which are major sources of health problems in Bangladesh as well as in other developing countries. Through joint "social business ventures" with private companies such as Dannon and Veolia Water, Grameen has been able to tackle childhood malnutrition and arsenic in well water, respectively. As Yunus put it, "Health is not just medicine coming from a doctor; health is something that you build."

That is exactly what Grameen Bank has been doing through such social business projects with private partners and its new health-insurance program, which allows members of Grameen communities to pay premiums of $1.50 for primary-care services and telemedicine (telephone consultations with doctors, made possible by the expansion of technology). Yunus hopes to see other private and public enterprises venture out of the profit-maximization model and into the world of social businesses to alleviate global poverty.

Eugene Williams of Translational Medicine India addressed the issue of sustainability of programs and services for the poor. These cannot be provided solely as charity, since that model is not self-sustainable. He believes that the poor must participate in health services by paying for it, even in small amount. When asked what he sees as a tangible outcome in 25 years, Williams stated that he would like to see "a health-care system in the developing world that we wish we had in the United States, with continuous improvement and sustainability."

Tomas Philipson of the University of Chicago directed attention to the problems of delivery, which he said are more important than the availability of technology. The costs of delivery must be considered in any viable solution to providing health care in developing countries. He remarked that profit motives are very important to the development of health care and research in the developing world, and financial rewards should be present for those that seek opportunities to contribute to this work.

Anne Wojcicki of 23andMe is interested in collaboration with organizations such as Grameen Bank to improve the quality of health care globally. Through such collaborations, a global community can be created to direct the revolution in health care in the developing world.

The question of whether for-profit companies can effectively participate in developing world programs came up in the discussion. For the panelists, the answer seemed to be a matter of the design and intent of the for-profit's participation. For instance, Wojcicki stated that if 23andMe were to take on a project in India or Bangladesh, it would not have a for-profit purpose. It would be separate from the profit centers of the company, but take advantage of those entities' capabilities and knowledge. Yunus stressed the importance of maintaining profits within the "social business" and eliminating shareholders that could influence the work of such a venture.

When asked what she sees as a tangible outcome for the future, Wojcicki replied with a plan for her own company. She stated that 23andMe wants to work with global development organizations such as Grameen Bank to identify the most pressing health issue in the developing world and begin tackling it.

Speaker:
Luiz Henrique da Silveira, Governor, State of Santa Catarina, Brazil

With the highest standard of living and most educated work force in Brazil, the state of Santa Catarina is an ideal place for foreign investors and business owners to begin operations in the region. This was the message from the governor of Santa Catarina, Luiz Henrique da Silveira, who explained many of the attractive characteristics of the economy of his state. In Portuguese, he argued that his is the most progressive and business-friendly state in Brazil.

Santa Catarina is most certainly an engine for growth in Brazil. The state's growth rates have exceeded the national average of 5 percent each year during the country' recent economic boom.

With ambitious plans to expand and improve infrastructure, Santa Catarina offers an educated work force and tax incentives to foreign businesses seeking opportunities in southern Brazil. Its maritime ports make Santa Catarina the Brazilian state with the most container traffic in the country, the governor said.

Santa Catarina is unique in Brazil due to its high standards in education, health and income distribution. Additionally, the state has adopted a county system, similar to the American model — something not practiced in the rest of Brazil — and has positioned itself as one of Latin America's regional centers of venture capital.

Santa Catarina's tax policy offers incentives to attract foreign investment, including a waiver of VAT for foreign companies during their first 10 years in the state. The state government also facilitates the opening and organization of businesses, he said, by providing an efficient licensing process, in fact, the fastest in Brazil.

The state is interested and committed to public-private partnerships, or PPPs, and is one of only two states in Brazil that use PPPs. Partnership opportunities exist for foreign investors in hospital, freeways and port construction.

Governor Silveira said he expects Brazil to continue growing at a healthy annual rate of around 5 percent for the next 15 years. Growth will be sustained by recently discovered submarine petroleum deposits, as well as the biofuel industry. With regard to alternative energy, the governor argued that wood ethanol would soon prove to be more efficient than other biofuels, including ethanols derived from corn and sugarcane. Also, he said, Brazil's economy is such a powerhouse that it accounts for more than three-fifths of the economic activity in South America. As the world's fifth most populous country, Brazil offers an attractive opportunity for foreign investors and business leaders.

Moderator:
Nicholas Sandler, Senior Vice President, Crestwood Pacific Group; Head of Business Development, Crestwood China Hydro LLC

China's ever-increasing financial growth presents a host of opportunities, but realizing that potential is often harder than it looks. Moderator Nicholas Sandler of Crestwood Pacific led a panel devoted to spelling out the realities of China's current business environment and the challenges for foreign investment.

"In China, there are cultural and regulatory barriers to entry, with cultural being the easier to penetrate," explained Jim Lavelle of Houlihan Lokey. "To do business in China, there are several hoops to jump through." For example, some sectors of the economy (such as transportation, defense and media) are closed to foreign investment, withstanding China's political shift from communism to socialism. Real estate investment is restricted as well.

"So where do you start?" asked one attendee. "Good question! And I have an answer for you," replied David Tang of Kirkpatrick & Lockhart Preston Gates Ellis. "It all starts with a catalog ... available to the public that lists out and divides industry groups available for foreign investment." Some examples of encouraged sectors for investment include high tech, new tech and some legal opportunities. There are substantial R&D incentives backed by China's government to help facilitate growth and expansion.

"There are ways to work around the loopholes," insisted Mitchell Nussbaum of Loeb & Loeb. "The Chinese are very warm and helpful people. It is the government officials that are a bit harder to work with unless (you) have a financial services license." He continued: "There are three ways to facilitate foreign investment in China and maintain a long-term presence there. First, have a representative's office there. Second, do a joint venture with a Chinese company already established there. And third, create a 'WOFE,' or wholly owned financial enterprise."

It is civil law that one must have a license to entity in order to open up a bank account. "No license, no account, no business," Tang explained. He continued to explain how joint ventures can be equity 90/10 partnerships, or flipped to be 10/90 in certain cases (50/50 is deemed undesirable due to potential deadlock). Access to local market expertise and good relations with local officials can translate into new funding for projects by government, expanded manufacturing capacity and assistance in exit opportunities and domestic listings.

"Relationships with government and local officials really help speed through the red tape always present in a growing economy," Nussbaum explained. "There is a lot of capital floating around, and China is always looking for ways to expand its economy. With half a trillion in reserves, there is always room for Western assistance."

Growing issues in China's economy led to the 2007 anti-monopoly laws. On January 1 of this year, new labor laws have gone into effect, governing severance, pay, rights and benefits. "The market's flexibility has waned a bit," commented Sandler. "The government is involved in the front side as well as the operating side." The best strategy for investors always involves cooperation, planning and foresight.

Moderator:
Paul Gigot, Editorial Page Editor, The Wall Street Journal

Panelists addressed the current economic climate in the United States, the housing market and the expected effects of government policy on the future of the economy.

Moderator Paul Gigot of The Wall Street Journal began the discussion by commenting on the sharp increase in commodity prices since August 2007, the record low value of the dollar and the risk aversion exhibited by investors. When asked whether the United States is in a recession, Peter Orszag of the Congressional Budget Office replied that we are experiencing negative growth, but the potential impact of the tax rebates that are being issued over the next quarter should not be overlooked. The stimulus totals more than 1 percent of annual GDP, but the rebates will have the effect of 4 percent of GDP since they are being administered in a single quarter. Regarding the housing market, Orszag said, "There was the potential for a 30 to 40 percent decline in housing prices, and we haven't come anywhere near that." He does expect another 10 to 15 percent decline in housing prices before values begin to recover.

Commenting on the likelihood of further write-downs by major banks, Suzanne Nora Johnson, formerly of Goldman Sachs, explained that mark-to-market accounting practices will result in additional write-downs as underlying assets (such as mortgages) continue to decline in value. "I think we are at the end of the beginning," she said. "We had a snakebite called leverage and are now starting to find the antidote."

Felicia Thornton of Knowledge Universe Education U.S. said that while middle-class residents of California, Arizona and Florida are experiencing noticeable effects from the economic downturn, "nobody is panicking." Thornton has seen a slowdown in turnover among the 50,000 employees in her organization due to an increased desire for job security.

Allan Hubbard of E&A Industries interjected that "it's very unclear that we're actually in a decline." He highlighted the Federal Reserve's aggressive action to cut interest rates in recent months, saying, "You can't criticize them for being inactive or inattentive." He also pointed out the role of allowing temporary, faster write-offs for business investments as part of President Bush's stimulus package.

Some panelists questioned the actions that Congress is taking to address the mortgage meltdown. Under legislation currently being considered, Hubbard expects that banks would keep the soundest mortgages and turn only the most risky loans over to the Federal Housing Administration. Johnson added, "The challenge is that Congress is in a very tough spot to show households that they are doing something to achieve parity."

Gigot turned the discussion to the long-term issues that the United States needs to address to sustain growth. Thomas Donohue of the U.S. Chamber of Commerce explained that "America is its own worst enemy." Education, immigration, energy, infrastructure and trade are all issues "that America can take care of itself." Hubbard called for the renewal of President Bush's tax cuts, while Orszag pressed the need to eliminate unproductive health-care spending. Thornton called for improving the quality of America's teachers, especially in the earliest grades. Johnson spoke of the need to invest in infrastructure — in the nation's physical as well as its human capital — to ensure that opportunity is available to all Americans and is not stifled by ineffective policies.

Moderator:
James McGregor, Chairman and CEO, JL McGregor & Company

Moderator James McGregor of JL McGregor & Company led an enlightening panel discussion on Asia's rise to power in the global economy, guiding participants through topics that included education, the economy, financial markets, trade and population growth.

"China is producing far fewer children today than in the past, almost half as many as in 1990," said William Meaney of The Zuellig Group. "Money is being poured into cars, real estate and property, as well as luxury goods formerly unavailable to a growing middle class." He went on to note that growth is not confined to China. "The Filipino population is growing faster than any country in the world per capita, including India . . . although India will soon overtake China as the most populous nation on earth."

The panelists discussed some interesting demographic trends and opinion polls. China values education, and parents prefer that their children become involved in government and public service, while in India it is prestigious to become a doctor or engineer. In Japan, more value is based upon science and mathematics. While citizens in Japan and the Philippines see their governments worsening, there is growing satisfaction with government among Singapore's citizens (rates in Thailand and India remained the same).

The GDP of Asian countries, collectively, is increasing by at least 10 to 15 percent each year for a total rise of 57 percent since 1995. "The growth potential is tremendous," observed David Murphy of CLSA Markets. The total population of East, Southeast and South Asia amounts to more than half of the world's population, and India's middle class is the largest in the world.

The middle class in China is growing at even a faster rate than in India's. "Luxury goods in China, Thailand and India are selling faster than in any other country in the world per square foot," noted Kriengsak Chareonwongsak of Harvard University. "People have money, and they are willing to spend it. They work hard, and want to treat themselves . . . and show their new status."

"China is becoming very materialistic," agreed Meaney. "The new generation wants to show off its newly created wealth with luxury items."

A rivalry is growing between the Asian countries, with Vietnam challenging China's dominance in the manufacturing of furniture and shoes. Vietnam has a highly skilled labor force, lower costs and solid quality. And Singapore is trying to overtake Hong Kong as Asia's financial capital. "But Singapore will never be able to do that," predicted Murphy. "Hong Kong will always be the destination for financial markets in Asia. Singapore and Shanghai may be good for multi-national corporations and banks."

Overall, the best investments in Asia are education, leisure spas, medical tourism, golfing and retirement villages or anything to do with serving the aging population. "Thailand's hospitals are fancier than most five-star hotels in New York, and at a fraction of the cost," said Chareonwonsak. "Now that's a vacation."

Moderator:
Abraham Lowenthal, President Emeritus, Pacific Council on International Policy; Professor of International Relations, University of Southern California; Senior Fellow, Brookings Institution

Does little news mean good news? Abraham Lowenthal of the University of Southern California argued that in the case of Latin America, this is true. Given the extensive challenges in other parts of the world, there has been little coverage of the region in the U.S. media.

The positive news is that there is a general move toward democracy and stability. But Lowenthal urged outside observers not to believe that Latin America is becoming homogeneous. He offered five "dimensions" in which Latin American countries differ from one another:

1. The nature and degree of economic and demographic interdependence with the United States (Mexico, the Caribbean and Central America have the highest, while the southern cone region has the lowest).
2. The extent to which countries have geared their economies to international competition (Chile has strongly pursued this).
3. The development of democratic governance, including accountability and rule of law (strongest in Chile and Brazil, and on the increase in Mexico).
4. The relative effectiveness of political and civic organizations besides the state (strongest in Chile, while deteriorating in Venezuela).
5. The integration of the region's more than 30 million disadvantaged indigenous peoples, who are becoming more self-aware and mobilized.

Carlos Bremer of Value Grupo Financiero argued that although there are some major challenges in the region, there are also many opportunities and reasons for optimism. He addressed the need for improving and expanding education to increase social equality and prosperity. Bremer criticized the leftist populism that is gaining traction in Mexico and throughout Latin America, and offered suggestions for the business community in Latin America. He argued that corporations must be concerned with socially responsible practices and economic openness to offer a better standard of living across the board. This would result in improved conditions for everyone in the region and the United States.

Pompeo Andreucci Neto of the Brazilian Embassy portrayed a rosy picture of Brazilian growth and stability. He stated that Brazil is interested in strengthening ties with other Latin American countries by supporting Mercosul, a regional trade agreement. Although there is concern about an economic slowdown in the United States, Brazil is optimistic about foreign direct investment, which increased dramatically in recent years. Inflation is under control, and a greater availability of credit has become very important, helping to fuel a sales boom in the country's housing market. He suggested that his country needs to reform its tax system and encourage innovation to solve its challenges.

Viviana Araneda, a trade commissioner for the Chilean government, gave the audience an overview of the successful economic growth and openness of her country. Chile has relatively low tariffs overall, while it grants most favored nation status to all. It has been ranked the eighth freest economy in the world, and number one in Latin America, with more than 50 free-trade agreements in force with countries around the world.

Finally, Ambassador John Veroneau argued that the U.S. Congress should pass the Colombia Free Trade Agreement. He criticized Congress and U.S. labor unions for their opposition to free trade, arguing that it contributes to economic growth and prosperity far more effectively than other options.

Moderator:
Catherine McCoy, Vice President, Global Environmental Finance, Stark Investments

More than 1 billion people are in need of safe drinking water. With that sobering fact in mind, moderator Catherine McCoy of Stark Investments led a panel of experts through a fascinating analysis of global water issues, noting that more than one third of the world's population will lack access to clean water by 2025. Jeff Seabright of The Coca-Cola Company described water scarcity as a "strategic risk" that must be addressed beyond the company's facilities, including watershed management and work in surrounding communities.

Booky Oren of the Arison Water Initiative pointed out the "urbanization challenge," suggesting that in times when more people live in urban areas than in rural areas, water scarcity is not confined to the developing world, but is a worldwide problem that cannot be solved by infrastructure alone. Increasing system efficiency and figuring out the "water supply puzzle" creates clear opportunities in the near future.

Andrew Benedek of Zenon Environmental compared innovative membrane water-filtration technology to chip innovation; he believes that it has the potential to solve water quantity and quality issues on small and large scales. Applying the right technology can alleviate the water crisis. "If a country is well managed, technology is here to solve water problems," he stated. "It is all about governance and management now."

Earl Jones of GE Water and Process Technologies connected water issues to technology, service, scale and globalization. He divided the water problem into the following pieces: supply strategy, demand management, energy nexus, public policy and "eco-system collaboration." Arguing for the need to take pro-active measures, he stated that "hope is not a method we can adopt" in relation to water.

Éric Lesueur of Veolia Water suggested viewing water as a public good. "At the end of the day, the mission is to provide water service to the people and achieve efficiency in managing the water cycle." He also recognized that water is a very different commodity than oil. Whatever we do, the amount of water on earth stays the same; what changes is the state and quality of the water.

The panel then addressed the pivotal question of how to bring clean water to the world's poor. Seabright suggested partnering with NGOs to work on scaling and replicating projects. Benedek stated that the membrane technology can be adopted at the household level and has the potential to be affordable for poor communities. Oren implied the need to view water as an economic problem, not a natural resource problem; he felt it must be addressed with a holistic approach.

The panel agreed that it is critical to understand the energy-water nexus. Food issues must be considered as well, especially where there are competing claims on crops for energy vs. food applications. The concepts of "waste to value" and "waste to energy" were discussed as an important part of the equation. It was pointed out that having a large supply of water is not enough; quality and accessibility are critical components. From an investment point of view, Jones suggested that we must find the right value proposition of water in order to promote sustainable development. Water reuse was brought up as an example of "water production." Wastewater treatment and reuse is especially applicable for agriculture and industrial applications, and the sociological barrier of using treated wastewater for drinking must be alleviated as well.

The panel concluded by suggesting approaches for solving the global water crisis. Oren brought up the need for sharing information on best practices and mistakes to avoid. Seabright added that investing in water efficiency is critical in order to be able to "produce more with less." The panel agreed that the issue of water pricing is a high priority, and the notion of "free water" can't continue. Water subsidies provide disincentives for investments and work against the market's pricing mechanism. When asked about water as a commodity, Lesueur described water as a very local matter.

With the example of water rights and transfers, the panel concluded that there is no simple answer. What works in one region might not work in another, especially if the consequences of water-rights trading are not well understood. Finally, innovations in distribution infrastructure and technology breakthroughs in treatment and desalination processes were brought up as future opportunities that hold promise.

Moderator:
Woodrow Clark II, Senior Fellow, Milken Institute; Founder and Managing Director, Clark Strategic Partners

Woodrow Clark moderated a panel concerning Japan's place in the world economy. While the panelists noted obstacles, they agreed that Japan has managed to use its focus on the environment and sustainability as a means to keep its economy strong and innovative.

Junichi Ihara, consul general of Japan, greeted everyone with positive news on Japan's growth. There has been a decrease in Japan's non-performance loans, which dropped from 8.7 percent in March 2002 to only 1.5 percent. Japan now has a "quality economy," one that is environmentally friendly, provides universal healthcare for its citizens and maintains a sustainable pension system.

"I am not worried about the future," announced Kunio Kojima of Keizai Doyukai. Exports and personal consumption are on the rise in Japan. He noted the potential for a political impasse in the Japanese government, but he believes that once this impasse is resolved, reforms can be put in place in order to handle many environmental problems. He listed four key areas for change: decentralization, administrative reform, regulatory reform and fiscal reform. In addition, he noted that Prime Minister Yasuo Fukuda recently promoted a plan to address global warming that will be presented at the G8 summit this summer in Hokkaido, Japan.

Keitaro Matsuda of the Union Bank of California offered a few concerns. The increasing strength of the yen is affecting exports to the United States. In addition, the slowing U.S. economy is adversely affecting Japan, since the United States is a major trading partner. Japan is also experiencing a slowdown in the construction of new residential homes, but this is not a reflection of a subprime loan problem; in fact, it is due to stricter building codes imposed in 2007 to protect against earthquakes. Lastly, as with other countries, rising oil prices are making a dent in Japan's economy.

There were some positives from Matsuda, however. Japan is beginning to broaden beyond its economic partnership with the United States. China has become Japan's top exporter in 2007 and Japan's overseas production share to China is now close to 20 percent. "The U.S. may have a cold, but Japan will barely sneeze," Matsuda commented. Because of these factors, Japan is changing its focus globally and environmentally, developing new strategies in a competitive world. The Japanese are achieving what may be a third Industrial Revolution, a vision that Matsuda dubbed "the Japanese Dream."

Yu Tanabe of Nikkei America brought up a new style of management in Japan that combines Japanese tradition with international standards. The Japanese once worked with much more of a group mentality than their Western counterparts; from this notion there grew a system of staying within the same company from graduation until retirement. But this lifetime employment system is changing, bringing greater dynamism and flexibility to the Japanese economy.

Moderator:
Amy Liu, Deputy Director, Metropolitan Policy Program, Brookings Institution

The United States is struggling to finance and modernize its transportation infrastructure at a moment when globalization and technological innovation have led to massive increases in trade, shipping and transport, and as concerns about climate change intensify. Many metropolitan areas lack transit options, while freight and port hubs remain congested.

Thus, it should come as no surprise that what reverberated throughout this session was "integrate, integrate, integrate" when it comes to national transportation policy. "The biggest need is a holistic approach," said Douglas Duncan of FedEx Freight Corp. Addressing roads, railways, ports and airports independently is no longer affordable, he warned, nor will it produce the national transportation system Americans need.

Moderator Amy Liu of the Brookings Institution burst that bubble quickly. A holistic approach would be difficult to achieve when national legislation is absent a meaningful purpose or mission statement, as is the case at present. She outlined the major challenges facing the nation through six issues that foster imperatives for reform: (1) infrastructure age (2) traffic congestion (3) growing freight traffic (4) energy consumption/emissions/climate change (5) rising fuel costs and (6) a lack of financing. Studies calling for support of the "Rebuild America" initiative of California Gov. Arnold Schwarzenegger, Pennsylvania Gov. Edward Rendell and New York Mayor Michael Bloomberg are positive, but much more is needed and the danger of waiting is real.

"Over the past two decades," said Liu, "transportation has pulled inventory out of the supply system and into the supply chain, creating significant cost savings. Those savings have flattened out the past few years and are in danger of reversing themselves through increased congestion and higher costs if we continue with 'business as usual.' If we allow that to happen, it will make America less competitive and doom us to smaller markets because we simply won't be able to move domestic product to major markets as competitively as foreign suppliers will."

"In the last 20 years we consumed the infrastructure windfall that Eisenhower created in the 1950s and '60s," said Steven Koch of Credit Suisse. "Not only do we need new infrastructure, but we need to recapitalize the existing infrastructure" if this nation is to remain competitive.

Funding new infrastructure and recapitalization is difficult, said Koch. For the past 30 to 40 years, infrastructure hasn't been a significant political issue. Today, incidents like the recent Minneapolis bridge collapse may temporarily draw the public's attention to our aging or inadequate infrastructure, but other political issues overshadow them. In addition, the public has a solid mistrust of politicians who come asking for infrastructure funding but who then divert the funds for other purposes.

In addition, the public has great difficulty visualizing the interrelated nature of facilities, said Kevin Klowden of the Milken Institute, especially the relation of infrastructure to their personal life. "They understand rush-hour traffic congestion, but not the impact Katrina had on the New Orleans area ports and movement of goods throughout the region and up and down the Mississippi that have a tangible impact on their personal economic well-being."

Better use of local public-private partnerships (PPPs) as delivery mechanisms can help, said Steve Allen of Macquarie Capital Group. "There are plenty of private investment funds available, and pension funds love infrastructure because it provides a stable return that meets or exceeds their target rates on contracts running 25 to 99 years." There are thousands of miles of roads that private capital does not care to invest in, he said, because the economic returns are lacking, but an economic return exists when PPPs can free up municipal funds for the construction and maintenance of those roads. PPPs can also be more efficient managers of roads for private equity worries. Roads are very expensive to build or rebuild, but maintenance is inexpensive. Private equity ensures appropriate construction and maintenance to minimize life cycle costs; municipalities that suffer from competing priorities and erratic funding over time would find these projects more difficult to complete.

"Look north to Canada and the Asia-Pacific Gateway and Corridor Initiative as an example of a successful PPP that emphasized local and national collaboration," said John Higginbotham of Transport Canada and an adviser to the initiative. By establishing a purpose-specific fund and signaling its commitment with $1 billion upfront funding, the Canadian government combined private and public resources to create the integrated system that now serves Canada and Midwest United States down to New Orleans. The initiative enabled selecting projects based on merit and innovation, with particular focus on security and environmental issues that sometimes proved challenging.

The panelists agreed that the United States must change its approach to planning, legislating and funding infrastructure projects if it is to achieve anything that approaches Canada's success and meet its pressing and readily observable future needs.

Moderator:
Robert Bush Jr., CEO, Majlis Capital

Robert Bush Jr. of Majlis Capital led a panel of experts through a fascinating analysis of shifting demographics in the Muslim world, examining the implications for the political and social future of the Middle East in relation to the rest of the world and particularly the West.

Author and scholar Reza Aslan noted that by 2010, three-fourths of the population in the Muslim world will be under the age of 35. This trend is having a profound effect on the authority structures in these countries, as political clerics are becoming marginalized. Furthermore, these young populations are technologically savvy and politically aware. "We in the United States have misplaced the core and the location of radicalism," said Aslan. "We are looking in the wrong place when trying to figure out what to do with radicalism."

Author Jared Cohen approached the topic from an immersive, ethnographic perspective. He spent a great deal of time in Muslim countries studying youth identity, the motivational needs of youth and the influence of grassroots movements. Cohen agreed with Aslan, asserting that "the United States does not understand the youth of the Muslim world." Satellite television, the Internet, mobile phones and other technology are so commonplace that their effects on this young population must not be underestimated. Technology serves recreational, interactive and social networking purposes, as well as a medium for information transfer regarding civil liberties. Furthermore, underground book clubs, political groups and other networks are being formed through information technology channels.

Dalia Mogahed of the Gallup Organization offered her expertise based on extensive opinion surveys, since Gallup conducted randomized surveys in 40 majority-Muslim countries. Mogahed was especially interested in the opinions of youth and women toward radicalization, democracy and the relationship between the West and their own societies. The women surveyed expressed "a desire for greater liberties and rights, which grow organically from within their own societies, not from outside."

The survey results indicated that the process of radicalization was not institutional in nature but rather a product of exposure to the Internet and other forms of information. Furthermore, those surveyed who felt that the attacks of 9/11 were not justified based that belief on the Koran. Survey respondents who felt that 9/11 was completely justified almost uniformly cited political rather than religious reasons. This indicates that radicalism does not correlate directly with religious fervor.

All of the panelists agreed that youth in the Muslim world want democracy, but they do not want to term it "democracy" because of the negative connotations now attached to the word. The disagreement arose over the route by which democratic change can be achieved in these countries. Cohen phrased it as a "battle of alternatives." Namely, by providing youth with alternatives to extremism and creating a demand for these alternatives through grassroots mechanisms such as information technology, an organic process of change can occur from the bottom up within these societies.

Aslan felt that the most effective way to influence democratic change in Muslim countries is to provide youth with access to the global free market economy. The United States has an important role to play in this case; isolating countries like Iran might contribute to keeping the political elite in place by leaving the population economically powerless. "U.S. policy should encourage development, [rather than] encourage 'democracy,'" said Aslan.

Moderator:
Joel Kurtzman, Senior Fellow, Milken Institute; Executive Director, SAVE; Publisher, The Milken Institute Review

"Global risk" is a vast topic, spanning threats to national security, energy supplies, public health, financial markets and more. As moderator Joel Kurtzman of the Milken Institute explained, the present concern is not the common and relatively small risks we know how to cope with, but risk from rare high-impact events such as terrorist attacks and pandemics. Perhaps the most surprising thing is how intertwined these risks really are, as our panelists revealed. Awareness of this entanglement certainly helped to achieve Kurtzman's goal. Building off the title of the session, he told the panelists: "If your job is done well today, none of us will sleep either."

The security and economics of energy best exemplified the tangled nature of global risks. The energy system forms the backbone of our economy, and according to Spencer Abraham of the Abraham Group, there is no future besides high prices resulting from "virtually infinite increases in demand" from developing countries. Even high-but-stable energy prices can have notable effects on our economy, but such prices also exacerbate the risk of volatility from supply disruptions of both economic and terrorist origin. Not only are most oil reserves concentrated in unstable regions (with 61 percent in the Middle East), "there is no question that al Qaeda gets the value of oil targets" and "long term, this poses a very serious threat to our national security," commented Frances Townsend, former assistant to the president for homeland security and counterterrorism.

Even without the threat of terrorists, the generally tight nature of the oil supply means that now individual countries have much more power to influence global markets: "Any single major producer has the power to do what it took the entire OPEC cartel to do years ago," said Abraham. Panelists were all concerned with the influence of Russia on natural gas markets, with its potential interest in forming an OPEC-like organization for natural gas.

Russia was a recurring area of concern for the panelists, who noted its significant fossil resources, its weapons left over from the Cold War and a foreign policy not always aligned with that of the United States. More concretely there are even some threats related to bioweapons that cause concern for Reynolds Salerno of Sandia National Laboratories. We "continue to be denied access to the military bioresearch sites" that we know exist, suggesting that Russia may be carrying on a bioweapons program.

Whether or not Russian bioweapons pose a problem worthy of considering on their own, there is no doubt that the two-sided coin of biotechnology research and biological warfare presents a thorny problem worldwide. Salerno was confident that the United States has secure research labs, but that the "dual-use" nature of biological research means confidently distinguishing between biotech for good and biotech for bad is quite difficult. Furthermore, even without engineering of biological weapons, the threat of a pandemic looms large in his mind: "We don't know very much about infectious disease, and I think we know considerably less than experts say we do."

George Hoguet of State Street Global Advisors pointed out the need for governments to convey information from large-scale events in a disciplined manner so as not to induce further chaos that would ripple though financial markets. Hoguet also had more general concerns about markets around the world, pointing out that the IMF estimates there is a 20 percent chance of global recession in 2009 — not high, but definitely not low enough to be ignored. The role of China cannot be ignored either, and the global economy is now heavily influenced by its exchange rate. As Hoguet mentioned, it is unreasonable to think that China won't at some point experience a recession in the coming years.

Fortunately, for the first time in several years of "Global Risk" panels moderated by Kurtzman, the session ended on a positive note. Abraham and Townsend confirmed that an attack on nuclear material in our power supply system is not something to be worried about. And Hoguet reminded the audience, "don't underestimate the United States as an attractive place to invest."

Moderator:
Shelly Singhal, CEO and Chief Investment Officer, Crestwood Pacific Group

Foreign investors looking for opportunities in China must navigate a complicated process. Jim Lavelle of Houlihan Lokey set the tone and defined the theme of the discussion by noting that when thinking about investing in China, investors need to pay particular attention to their exit strategy. Consideration should be given to the "how," as in through a merger or acquisition, an IPO or some other means.

Additionally, Lavelle described the changing nature of the Chinese economy and the transformation from "catch-up" development to the growth of highly innovative, R&D-intensive firms producing high-quality products and services that will be sold all over the world. What can we expect from China? "Don't be surprised when firms headquartered in China look to expand their operations globally, including making acquisition of U.S. firms and firms in other highly developed markets."

Panelist Charles Liu of Hao Capital discussed his experience doing business deals in China since 1975. First he noted that China's growth is phenomenal, but he warned Western investors that "you have to realize this is the first generation of entrepreneurs in China." Chinese businessmen and -women who grew small businesses into larger, more successful firms leveraged their personal, family and political capital to do so. Because of these ties and the dependence upon social capital, "if you try to buy out a firm like this, you may not be able to replicate the business success that the entrepreneur created."

Another challenge for Westerners interested in investing in, growing and scaling small Chinese enterprises is overcoming the social trust hurdle, said Liu. "It is very difficult for Chinese businesses to accept guidance or support from foreign investors," and in general, local venture capitalists do better in growing the Chinese SMEs.

In response to a question about the difficulty of contract enforcement, panelist Gary Locke of Davis Wright Tremaine LLP and a former governor of Washington State, said that that Western investors should be aware that Chinese corporate accounting practices are not necessarily aligned with international standards. Moreover, court systems are developing, but they're not yet mature — and in many instances are still corruptible. Additionally, the "last thing that Chinese leaders want is disruption of the people's "inner peace" — any kind of social disruption is bad. Therefore, Chinese leaders will avoid making policy changes that are likely to cause severe economic disruption leading to significant job loss, violence or protests.

According to David Tang of the Federal Reserve Bank of San Francisco and Kirkpatrick & Lockhart Preston Gates Ellis LLP, dispute resolution in China is to be avoided at all costs by Western investors, in particular because the government ownership of firms creates perverse incentives for party leaders.

Liu's multilevel friendships with the firms he partners with and invests with reduce his risk and uncertainty. Because firm governance is not particularly transparent and does not rely on the rule of law, investors must rely on social mechanisms to attain information parity about what is happening within the organization. This is the advantage of having a local partner.

Each panelist was asked how to advise Westerners interested in investing in Chinese SMEs. Lavelle said investors must do local due diligence, while Liu added that decision-makers must understand the whole investment picture from a strategic perspective. "Ditto, ditto," said Locke, "and I'd add that you have to be patient. Things are constantly changing in China." From Tang came this advice: "Adjust your timeframe for dealing with officials, business leaders, lenders and other market intermediaries."

Moderator:
Jonathan Fried, Executive Director, Canada, Ireland and the Caribbean, International Monetary Fund

Since World War II, the United States has been a champion of free and open trade. The North American Free Trade Agreement (NAFTA) was negotiated under two U.S. presidents, representing both parties, and it enjoyed the support of all living former presidents when it passed. Yet in the Democratic primary campaign, both candidates are battling over who will be tougher in renegotiating NAFTA labor and environmental standards. The agreement was heralded as a way to more closely integrate the Canadian, U.S. and Mexican economies. By lowering quotas and tariffs on a wide variety of goods, it aimed to expand cross-border trade and investment. Canadian and Mexican officials both feel the agreement has been successful and are dismayed by calls to reopen discussions. From the U.S. perspective, what is the hard evidence regarding NAFTA's overall impact on the economy? Have job losses been heavily concentrated in just a few regions and industries, while the gains are more dispersed? What points might Canada and Mexico want to discuss if NAFTA is reopened? This panel of experts offered a frank evalution of how NAFTA has transformed the economy.

Moderator:
Laurance Allen, Editor and Publisher, ValueNewsNetwork.com

International investors and development agencies alike have recently taken notice of Africa's unprecedented economic growth. With democracy taking root in many countries, some observers believe that the continent has turned the corner. Bankers from New York to London to Nairobi have launched new funds that invest in sub-Saharan Africa. This panel, moderated by Laurance Allen of ValueNewsNetwork.com, sought to analyze the risks and rewards from both the African and foreign investor perspective.

Blen Mekuria of Blenum Global Ventures cited the rise of Africa as a hotspot for foreign direct investment. She referred to China and India's increasingly important role in phasing out Africa's dependence on the West, along with high returns in the service sector as a result of a rising middle class. "Africa is the best source of aid to Africa," said Mekuria, referring to the high remittance rate to Africa from Africans living abroad. She also noted the intellectual capital being brought back to Africa by Africans who complete higher degrees of education in the United States and then return home.

Jonathan Stichbury of AIG Investments, Nairobi, cited some of the common perceptions of Africa: war, famine, disease, high HIV/AIDS prevalence and a low GDP. While acknowledging the seriousness of these problems, he contrasted that with other lesser-known realities of Africa, including the rise of democratically elected leaders; great strides made in AIDS reduction in Kenya, Uganda and Zambia; African growth exceeding the global average; an increase in liquidity; and fifteen functioning stock markets. "Africa is not without its challenges, but it is coming at a very low base," said Stichbury, highlighting the opportunities for investors. "Don't be distracted by the noise. There are a lot of good things going on."

"Today, Africa has clear frontier status," said Thomas Gibian of Emerging Capital Partners. Africa, which was once seen as exotic and forbidden, now presents a great opportunity for investors. "Africa has seen the demise of socialism. The Cold War is over. Capitalism and market-driven economies have won by a landslide." He added that there is a rising desire for foreign direct investment and an increase in the private sector. He cited the need for greater transparency in African countries and pointed to private-sector investment as a potential catalyst for better governance, decreased corruption and better political processes.

That view was disputed by economist George Ayittey of American University: "Those changes are baby steps." He affirmed that foreign investors are welcome in Nigeria, for example, but asked, "If Nigerians aren't investing in Nigeria, why should foreigners?" He said that most of the remittances are going to consumption and that every educated person who wants to make money goes to the government. "The informal and rural sector is neglected by the elite, which is why Africa can't feed itself." Ayittey discussed the importance of empowering farmers by finding markets for them. "It's like taking Africa back one village at a time."

Sivendran Vettivetpillai of Aureos Advisers said that as a fund manager, Africa is the strongest foothold for his business. He has seen an increase of inflow back into Africa and positive changes in infrastructure. He recommended growing small and medium-sized enterprises quickly in order to turn the greatest profit.

When asked about the drivers for growth, Mekuria noted that "the key is improved access to credit." She noted that Chinese companies undercut local companies for contracting bids, but in doing so they increase competition and quality while driving down prices. Gibian agreed, saying that Chinese investment is good for growing markets in Africa because "no market functions without participants." Ayittey disagreed, citing the lack of incentives for African political leaders to practice good governance when Chinese investments are not tied to reforms, as are IMF and World Bank investments.

Mekuria ended the discussion by saying, "The informal sector is vibrant, entrepreneurial and wants to work. A little help and a little credit will get them moving."

Speaker:
Lefei Liu, Chief Investment Officer, China Life Insurance Company

Moderator:
David Abel, Chairman and Managing Director, VerdeXchange Institute

Coordination and cooperation across borders was the big theme of today's discussion on the future of the Canadian energy industry. Moderator David Abel of VerdeXchange Institute immediately focused the discussion on the relevance of borders for the panelists, all of whom are in the vanguard of Canadian energy.

The general consensus was that these industry leaders would prefer for national and regional policy differences to figure very little into their business practices, though some acknowledged that differences in policy can have important effects on Canadian energy prospects, especially within North America. Bruce Aitken of Methanex Corp explained one way in which his company attempts to transcend borders. "We never talk about 'exports' in our business," he said. "We think about a global supply chain."

The reality, as pointed out by Michael Horgan of Environment Canada, is that there are important differences in policy between the United States and Canada, and also within Canada itself. Most notably, Canada is a signatory to Kyoto while the United States is not, so Canada has begun taking steps to limit its carbon emissions, imposing costs on its producers, while there is no comparable framework in the United States.

Thomas d'Aquino of the Canadian Council of Chief Executives put things more starkly, referring to the situation across and within North American nations: "Today what we have is a patchwork quilt," a situation that he called anathema to business. Leaders of the North American countries recognize the problematic nature of this situation, and the issues of borders, regulatory cooperation and energy and environment were the major themes of the recent meeting of the North American Competiveness Council, of which d'Aquino is a member.

Alisdair McLean of Plasco Energy Group did note that national level energy and climate policy is somewhat less relevant for his company's particular business of clean waste-to-energy, though Plasco's innovative process does face important hurdles in receiving appropriate classification at local levels, often getting lumped into outdated and dirtier classifications such as incineration. As he put it, "No one disputes the environmental benefits of what we're doing, but they're trying to find the right page in the rulebook to allow us to proceed." His business is particularly aggressive in attempting to make its success independent of larger policies, following a "win first in California" strategy, under the belief that success in California's stringently regulated market will mean they can succeed in most other places. Indeed, Plasco's business model can only be improved by a price on carbon dioxide, since their technology actually is a net reducer of GHG emissions.

The importance of cooperating to develop and deploy new technology was another theme the panelists generally agreed upon. Noting that Canada's prime minister has referred to the nation as an "energy superpower," d'Aquino also pointed out that much of these energy sources are very carbon intensive, and thus technology like carbon capture and storage will be very important in a climate-constrained world. But such technology will not only be beneficial to Canadian industry — it will also benefit the United States and the entire world by allowing rapidly developing countries such as China the opportunity to utilize their vast fossil resources (which they would likely do anyway) while minimizing their contribution to global climate change.

Tying together climate and energy issues and emphasizing their interdependence, Aitken offered some good advice for policy-makers to take home: "I don't think countries can develop climate policies without having energy policies."

Introduction By:
Luiz Henrique da Silveira, Governor, State of Santa Catarina, Brazil

Moderator:
Brian Sullivan, Anchor, Fox Business Network

It's a whole new world in Brazil. Long gone are the days of hyper-inflation and economic instability. Today the most populous nation in South America is an economic dynamo, fueled by a new entrepreneurial spirit and strong demand from a burgeoning middle class. With vast natural resources, Brazil has achieved energy independence. On almost all global surveys, it is ranked as a high-opportunity country, sometimes on a par with China. In this panel, policy-makers, entrepreneurs and businesses leaders discussed the challenges and opportunities of investing in Brazil.

Luiz Henrique da Silveira, the governor of the State of Santa Catarina, began with a brief talk that heralded Brazil's successes of recent years, including its political reforms, higher quality of life, abundant natural resources and high human capital. "Brazil today is one of the most attractive countries for tourism and business," said the governor. Speaking specifically of Santa Catarina, he said that economic growth rates are higher than the national average, 50 ports are currently under construction, and the state open to new partnerships. "You are welcome in Santa Catarina," he told the audience. "I repeat, you are welcome."

Ana Vigon of AIG Capital Partners in São Paulo reiterated Brazil's positive attributes, citing controlled inflation, sustained external debt and higher consumption as a consequence of those political reforms and better management. There is a booming middle class, she said, as well as increased credit consumption and low unemployment. Sustainable growth is a result of not only commodities but also from domestic consumption, she said.

Vinicius Lummertz da Silva, the secretary of foreign affairs of Santa Catarina, said that as a consolidated democracy with a multiparty system, Brazil is situated for sustained growth. Brazil is much richer that China and India, he asserted, and has a growing internal market. He added that although government expenditures are high, at 30 percent, this spending has helped stabilize the economy and move people into the market.

"I am an unabashed supporter of Brazil," said Arthur Byrnes, of Deltec Asset Management. "But they have been lucky." Offshore oil discoveries, hydroelectric capabilities and vast resources have been economic drivers. Da Silva agreed, adding that that Brazil continues to be politically stabile, compared to some of its neighbors, and citing its lack of racial, religious and urban tensions.

When asked about the risks of investing in Brazil, Byrnes said politics do remain a concern for him. "The country's institutions aren't strong enough yet to stand a bad president," he said. Also mentioned were high taxes, corruption, poor infrastructure and red tape. Vigon cited the large number of ministries, higher government spending and the recent increase to 70,000 public servants.

"I think people start to differentiate countries now," she added, noting that the Brazil has not suffered from the negative perceptions associated with its neighbors. Despite this, she said, it is still a challenge to persuade American investors to enter Brazilian markets. "We have to explain how things are different in Brazil," she said. Da Silva added, "We can't expect (Venezuelan President Hugo)Chavez to exist in Brazil. The preconditions for someone like Chavez were gone a long time ago."

Byrnes also cautioned that contract laws are weak, but improving. "Brazilians are good at getting things done," he explained. "The free market has overhauled some of the old practices in a good way." He stressed the importance of investing in the middle class, and Vigon added that many opportunities exist in education because the president is supporting postgraduate education and people are looking to invest in that sector. She also added that the best-performing stocks last year were banking stocks.

"Brazil has the second-largest development bank in the world," said da Silva. "If we improve the regulatory system and bring in private equity, I think we are going to have large and sustainable growth."

Moderator:
Steven Green, Former U.S. Ambassador to the Republic of Singapore; Managing Director, Greenstreet Partners

A decade after the devastating Asian Financial Crisis, the region's economy has staged a strong comeback. Despite a fast-cooling global economy, developing Asia projects 8.6 percent growth this year. Some observers believe the "miracle" of the 1970s and 1980s has returned. Emerging Asian economies have become vital components of the global market, accounting for more than a third of world trade flows. But unlike the 1970s and 1980s, this growth period is largely the result of increased regional trade integration, with China serving as the hub for manufactured goods. While the Association of Southeast Asian Nations (ASEAN) aspires to create the level of economic cooperation achieved by the European Union, many issues remain unresolved, including shipping security, terrorism and border disputes. Can the 10 members of ASEAN work with China and India, the region's emerging growth engines, to establish a stability that will promote prosperity and political reform throughout Asia? This panel provided an overview of the challenges and opportunities.

Moderator:
Janet Lamkin, California State President, Bank of America Corporation

Janet Lamkin of Bank of America introduced a distinguished panel of Californians to discuss the state's past efforts and future opportunities in clean technology and energy innovation. Former governors Jerry Brown and Gray Davis joined Schwarzenegger administration environmental adviser David Crane and Nancy McFadden of PG&E in a lively discussion about the challenges of policy-making in this area.

Both governors began the session by describing California's unique position in the country, and in the world, as a leader on climate change and environmental policy. Attorney General Brown cited California's history of entrepreneurialism and activism as key assets to facilitate progress in green technology, noting that 60 percent of green-tech venture capital goes to businesses in the state.

Davis agreed that California has a "record of innovation and conservation unmatched around the world." He added that California had also adopted a more realistic approach to power pricing, which has been important supporting commercially viable endeavors in this space. McFadden echoed this point by noting that the state has a decoupled system, under which megawatts get more expensive for customers as they increase consumption. Under systems in many other states, additional units of power are actually cheaper — a pricing structure that provides no incentives for efficiency. Policies like decoupling, she said, have helped California's aggregate energy use remain flat while its economy has grown, indicating increasing energy efficiency.

Crane shifted the discussion to the broader goals of climate change. Noting that California is responsible for 1 percent of global greenhouse gas emissions, he said that "we have to change the nature of the fuels we burn." He added that California's sheer size puts it in a unique position to influence the composition of energy produced in the country. He said that our "most powerful weapon is our demand. If [power companies] are going to be in business, [they] have to sell to California," and the state's environmental standards can therefore influence how power is produced.

Panelists, however, were realistic about the political challenges involved in taking action on climate change. Davis stated simply that implementing AB-32, a recent California climate change law, now would increase prices for energy consumers. Along those lines, McFadden added that while many customers want to take action on climate change, she estimates that at most 5 percent of PG&E customers would actually be willing to pay for an energy plan that complies with AB-32. Implementing this legislation would therefore require "a leap of faith," according to Davis.

Brown was blunt as he described a variety of procedural measures taken by legislators at the state level, as well as local governments, that might stall implementation of AB-32, which is set for 2012. "The rubber hits the road in 2012," he said. "And I want to be as far away from it as I can be." He went on to assert that the lack of discipline on the part of consumers, which led to the current mortgage-related credit crisis, might also limit American willingness to make real progress on climate change. This attitude poses a real challenge for politicians, who, as Davis mentioned, don't win by telling their voters that their standard of living will decline.

The panel wrapped up with each panelist highlighting the importance of California's research infrastructure. The research universities inside and outside of the UC system and the national laboratories in the state are a "real competitive advantage" and all agreed that keeping them funded should be a top priority for the state government.

Moderator:
Jonathan Slone, Head of Global Broking Operations, CLSA Ltd.

India has seen extraordinary economic growth for the past 10 years. Home to the two most dense population centers in the world, the country's rise as a global player in the global economy has been a domestically driven force, with expanding institutional investment. A decade of growth in the Asian subcontinent has proven to be a great story of development and modernization, but it is not without its challenges.

Moderator Jonathan Sloane of CLSA Ltd. led a passionate discussion with leaders in telecommunications, microfinance, education and infrastructure financing, all committed to investment in India. Vikas Kapoor of iQor Inc., a pioneer in the development of call centers and account services, has been witness to the evolution of India's growth. Skilled, cheap labor serving industries with little competition is no longer an investor's reality. Increasing costs of labor and supplies, coupled with the expansion of competition in neighboring economies, have increased the price if doing business in India.

As investors deal with the rising costs, India is dealing with the increasing disparity in urban and rural economies. A large part of rural India has not been part of the growth expansion, stated Sucharita Mukherjee of IFMR Trust Guarantee Company. A leader in the microfinance industry, Mukherjee attributes a majority of lending program attrition to the dearth of supply chain linkages in much of rural India. "A lot of rural investment is lacking the infrastructure to succeed," and without financial services dedicated to increasing local capacity, the concentration of wealth within relatively few traders will be unavoidable.

All of the panelists were in agreement that investment in infrastructure is critical to the maintenance of economic expansion. Infrastructure is the "need of the hour," said Arvind Rajpal of Morgan Stanley. Only with investment in roads, rail, ports, education and hospitals will India achieve the First World infrastructure that it needs to compete. Thirty percent of the food produced in India rots before it reaches the consumer, said Rajpal, and he believes it will take a nurturing government, patient capital, and a deep and liquid bond market to achieve the necessary infrastructure expansion.

Investment in human capital is another essential component to India's continued success. "The Indian growth story is not sustainable without a change in the education system," said Shantanu Prakash of Educomp Solutions Ltd. More than 100 million Indian children are not enrolled in school, and the 3 percent of GDP invested in education pales in comparison to that spent by neighboring nations.

A parallel issue to the absence of physical infrastructure is administrative infrastructure, said Kapoor. Sloane pointed out that anyone who has conducted business in India is familiar with the concentration of power and wealth there. The panel was in agreement that — as in most democratic societies — partisan politics are a threat to growth and development. Pointing out that the most rapid economic growth has occurred in sectors with little government interference, Prakash discussed the importance of knowing how to manage and manipulate processes.

Although the challenges being faced by one of the world′s emerging economies may be readily apparent, it is easy to forget that 15 years ago India was essentially bankrupt. All of these changes will take some time, and Kapoor urged everyone to "keep it in perspective."

Moderator:
Glenn Yago, Director of Capital Studies, Milken Institute

"The theme for Israel's anniversary is to establish its economic security and sustainability," announced moderator Glenn Yago of the Milken Institute. He added that while Israel should celebrate its tremendous achievements, "it is too soon to run a victory lap." Today's GDP does not show the same rate of growth posted before 1973. Moreover, the distribution of wealth is unequal and the periphery areas have not shared in the country's economic development.

Appearing in a recorded video announcement, Shimon Peres, the president of Israel, marked the occasion but reinforced Yago's sentiments, stating that the country has "the right to be proud but no reason to be satisfied." The president said that even though Israel has suffered through seven wars and two intifadas since its establishment, it never gave up "its democratic system, its desire for peace and its attempt to be a better society." Peres also spoke about the incomplete peace process that stands in the way of the country's full development and declared that "as we made peace with Jordan and Egypt, we will also make peace with the Palestinians." The country should be guided by a long-term vision rather than by immediate daily problems.

Yago said that the establishment of Israel symbolizes "the ability to transcend and transform history." Israel knit together a diverse social fabric to become a united entity; today it leads innovation in technology, health and medicine.

Stanley Gold of Shamrock Holdings spoke about the incredible diversity of Israeli society, which he called "a pluralistic denomination." He stated that the future of the country should include a paradigm shift in the country's ownership of intellectual property: "Israel has to own and operate its businesses worldwide." While native populations would run the operations in foreign countries, Israelis should not sell its intellectual property to international corporations. Furthermore, the economy should de-emphasize its European and American mentality and engage with the Asian, Eastern European and Latin American markets. Gold reviewed several examples of Israeli success stories in the developing markets of Latin America and Vietnam and proclaimed that Israel would find new allies through this economic expansion.

Booky Oren of the Arison Water Initiative also supported the call to advance the Israeli economy by cultivating companies to become worldwide leaders. In the water industry, the country has the top technologies in irrigation, desalination, water reuse and water management. Yet, as some of these processes are sold to the multinationals, Israel's leadership in the water industry is challenged. New-tech academic water institutes, technological water and clean-tech incubators, dedicated investment initiatives and committed clean-tech VC funds are solutions that can reinforce the high-tech industries. Oren noted that a large proportion of energy resources are used in the water industry, so great progress on global warming could be achieved through advancements in the water technology. He also proposed using water as a tool for building peace. Since many of today's conflicts involve the scarcity of water resources, Oren said, "it would be great if we can use water and make Israel a superpower in the water industry to bring about peace."

Another leading economic force in Israel is energy innovation. President Peres noted that the country should work to end its dependence on oil. The tremendous repercussions of global warming and the concentration of oil production in undemocratic countries make the invention of oil-free products and technologies ever more vital. Shai Agassi of Project Better Place explained that a program that will lead to the elimination of oil use in a single country could later be duplicated elsewhere, transforming international oil addiction to a dependence on goods "that we can democratically produce."

Agassi's company works to produces zero-emission electric vehicles and is collaborating with the Israeli government to catalyze a mass deployment of environmentally friendly cars. In order to scale back oil use, the government has offered a 60 percent tax reduction on the purchase of zero-emission cars. Agassi noted that the price of the car and maintaining its battery are cheaper than the price of a conventional vehicle.

"Israel is a miracle in any way you look at it," said Shlomo Ben-Haim of Impulse Dynamics, who discussed the state of the nation's life sciences industry. He stressed that Israel produces the greatest number of patents per capita, and that it is remarkable for a country that has existed for only 60 years to make such contributions to global health care. Israel is a hub for research and development, said Ben-Haim.

Most of Ben-Haim's own ventures have been developed in Israel and later sold to multinationals. While Israel has an impressive record of innovation in health care, most firms "are not skilled enough to own and expand the businesses abroad." Global collaborations will help the Israeli companies expand and improve their ability to commercialize discoveries; as there are 2 billion people around the world with no medical care, there are great social and financial opportunities in creating businesses in the developing world. Ben-Haim talked about his latest idea of developing medical kiosks in villages around India, an idea that has been warmly embraced by local officials.

Yossi Vardi of International Technologies Ventures remarked that Israel is an attractive destination for research and development centers for large IT companies such as Microsoft and Kodak. He noted that the Israeli entrepreneurial spirit mentioned by Ben-Haim also extends to the IT industry, where there are hundreds of bright minds establishing start-ups. In recent years he has been involved in 65 different investments — some less successful than others. But what brings him to Israeli high-tech is the "excitement of the younger people. The culture is amazing; the ideas are endless." But Vardi asserted that even though IT ventures are thriving, only a small population enjoys the revenues and lucrative salaries. Israel's challenge, he stated, will be to integrate the underprivileged into the process of economic development.