Following are excerpts from a CNBC interview with Bob Moritz, Global Chairman of PwC, from the World Economic Forum 2018 by CNBC's Akiko Fujita.
AF: Hi there, Nancy, well, we're now joined by Bob Moritz, who's the Global Chairman of PwC, here with me on set at Davos. Welcome!
BM: Thanks very much for having me!
AF: You know, you just released a global CEO survey, and what's interesting here is just the level of optimism that we are seeing globally here. You know, we're speaking here, just, what, hours after the government ended the shutdown-,
AF: There's certainly a lot of geopolitical headwinds. What is continuing to drive the optimism among CEOs right now?
BM: Yeah, it's interesting, we've got record snow in Davos, we've got record optimism in terms of the CEOs' view on the global economy. Two things are happening. The macro trends are still there, very positive as you look at the rise of the consumer, the rise of the middle class on a worldwide basis, and particularly coming out of Asia-Pac, in terms of what's happening there. The second thing is, it's the first time in a long time we've had all regions around the world equally as positive. In previous years, we've had, last year, the issue with Brexit, what was the implications on Europe and the like. So, this level of optimism on the economy is at a really high level. In fact, it's a record high, compared to what we've done in the last 20 years. The challenge is, the CEOs' confidence for their ability to deliver revenues? Not as high. It's up, but just not as much as their level of optimism in the economy, overall.
AF: What are-, what do they see as the biggest risks going in to 2018?
BM: So, the two things that come across in the risk factor and the threats is, many of the traditional business risks, FX, access to capital, the level of debt that's out there, has dropped down a bit, in terms of the risk that they see. What's risen is the things that are outside of their control. The issue around terrorism, the issue around the geopolitics going on right now. Concerns around climate change, no surprise, which was actually a record jump, in terms of their focus around those things. So, many of the CEOs are doing, what I'll call their usual business planning for traditional risks, but actually, scenario planning for all these other factors that, if they hit, could have a really negative effect in terms of what they want to accomplish, from a business perspective.
AF: One of the things that struck me in this survey is just how the CEOs see the two biggest markets, the US and China. More opportunities for investment in the US, over China. Now, you mentioned that this is a transition, or a shift, that happened a few years ago. How much of this has to do with the optimism coming from the tax reform, the Trump administration policies? How much of it is just how difficult it is still for non-Chinese companies to do business on the mainland?
BM: Yeah, so what we saw is, a couple of years ago, the US took the lead, in terms of the views of the CEO of where they'd like to invest, outside of their home country. And, for about a good ten years, China was the number one destination of choice, based upon the demographics, the needs of the consumer, and the like. This year, you-, or the last two or three years, you've seen that change. Now, this survey was done before the tax reform, so, what's driving that change right now is you still have the concern around corruption in China, which the President's trying to deal with, you still have the issue of ease of doing business, acceptability to come in and do business in a way that makes sense for them, and there's many, many restrictions. They don't have that issue in the US. The second thing that you see now is an interesting inflection point. China definitely taking advantage of AI, but everybody still sees a really resilient consumer in the US to take advantage of, and perhaps provide services to, and the question is, is there enough innovation that's going to be there? So, there's a little bit of dispersion that's happening between the US and China, both are big opportunities, and a big distance, in terms of what the second-, or, sorry, the third, fourth and fifth players are, right now, in the world.
AF: You talk about the challenges that exist for companies trying to do, or multinational companies trying to do business in China. Do the CEOs still see the opportunities there? Because for years, tech companies, for example-,
AF: Have tried, through many outlets, to gain a foothold there, whether it's through partnerships, whether through other ways. Are you getting the sense that that battle, that struggle, is still worth it for these companies, because of the potential opportunities there?
BM: I think the tech industry's a little different, when you look at what the Alibabas and the Tencents are trying to do, in terms of the view that they have of the market share. But, you definitely see the CEOs being very interested in China, not only from the domestic perspective, but also, China's One Belt One Road Initiative, and the implications across the region, is a big opportunity. So, if you think about infrastructure companies, logistical companies, and things of that nature, in various other sectors, they definitely see the opportunity, they think it's worth it, and the reality is, the shifts have moved in that direction, as you look at Asia-Pac as an opportunity overall.
AF: Automation has certainly been a big concern for these companies. You look at the employment picture globally, there's no question it's improving-,
AF: In the US, we're looking at near full employment. But yet, there does seem to be a concern among these companies that the skillset that's in the market doesn't necessarily match what exactly these companies need. So, how do these companies address that?
BM: So, there's two or three ways they're addressing it. Number one is, they are looking at M&A, as a way to capture not only skillsets but IP in that digital world. Second is, they're actually looking at alliances. You see a lot more joint ventures, and virtual ways for people to combine themselves, and actually be part of some of the technology revolutions that are happening. And the last thing is, investing a lot of their capital in on-the-job training.
BM: The CEOs have definitely said, 'I don't have the necessary skillsets to move to that digital world.' Education systems in various countries don't do it themselves. They've got to do more, in terms of on-the-job training, to transfer the skills, and actually-, and essentially change their workforce, from what they have today, to what they're going to need for tomorrow.
AF: Okay, great, we'll have to leave it on that note, Bob, great to have you on today-,
BM: Great. Thanks.
AF: Nancy, we'll toss it back to you.