Decoding Critical World Issues, with ADQ

Good afternoon. Um, thank you for that lovely introduction and thank you for being here. Uh, delighted to have an incredible panel to discuss decoding critical world issues with ADQ. There is so much to unpack. What a year 2025 has been from tariffs, trade wars to potential peace deals that could have incredible uh influence to question marks about AI.

Is it a bubble or is there more to come and of course investments thinking about the strength of investments around the world especially here Abu Dhabi the capital of capital. So I want to turn to you Roberto first. How do you assess the health of global trade today, especially given what we witnessed with the tariffs this year?

Yeah. And I think that what's interesting is that if you're looking at trade in big numbers, so the macro numbers, um it hasn't been that much of a change. Uh but if you go a little bit more granular, if you look at companies, if you look at investments, then the impact has been pretty pretty significant. So companies uh to begin with uh they have to um mitigate risk factors uh and the risk factors are abundant now. Uh geopolitics is a major issue.

Well, wars, sanctions, um they have to live in a completely different environment now. So companies are diversifying. They are multinationalizing. They're becoming more local. Instead of setting one base and connecting to all the different uh suppliers and clients, they are now being more uh fragmented.

They are setting up shop in different places and in different markets. Uh investors also are very much affected. Investors like predictability. They want to know what the rules are uh in the near future. So they themselves are holding back.

So even companies when they're making decisions on capex where they're going to invest, what they're going to be doing, where to set up their plants, their facilities, they're holding back at this point in time. So there is a lot of impact at the more granular level rather than at the macro uh level.

And do you think the macro level will be impacted next year or the year after unless the trend is changed? As you said, you don't immediately feel it, but do you think the trend is towards us?

It could. And I think one of the major factors that could affect that is trade agreements. So right now uh companies and and and countries are beginning to figure out who their partners are, who the where the channels are going to be open with some consistency and where unpredictability is going to to grow. So new alliances, new geographical uh deals, uh trade blocks, bilateral deals, all that may change and then the macro numbers may affect if not at level but composition and geographies.

Um Philip, I want to turn to you. We we've just heard from Roberto kind of the trends that we're seeing but also longer term it could have an impact on investments and how organizations investment companies are thinking about these issues. I want to ask you how will geopolitical fragmentation impact the investment climate for next year in your assessment and also how best to mitigate against it.

Yes. Uh Roberto alluded to it. I think fragmentation, geopolitical, political fragmentation, trade fragmentation is one of what we call mega trends that is affecting and changing the investment landscape. There are others. Think of demographics, think of uh artificial intelligence, think of defense becoming a priority, energy prices being incredibly important.

So what is happening is that the what used to be a much more linear way to invest uh much more continuity much more focused on traditional business cycles. We now have to refocus on these big structural trends of which fragmentation is one and see how that impacts the way you think about investments, what opportunities it generates. And so what we're seeing is that large portfolios are in a sense organizing themselves differently away from a traditional asset allocation metrics based on the normal sort of traditional business cycles that we've seen in the post-war period and instead they focus much more on these big themes that are really part of the manifestation of the of the changes that we're seeing in the global economy. So you know we find now when we speak to clients they almost immediately go to what are the big structural trends and how can we seize the opportunities that are reflected in these trends and there's no doubt that fragmentation uh more focus on resilience less focus on pure efficiency that typically entails higher costs. These are these are the classic long-term trends that investors are focusing on.

And with those long-term trends, how do you think mitigation, for example, you speak about resilience, what does that look like, especially in in the coming year, shortterm short-term thinking rather than the long term?

Well, short term, and this is what we're seeing in in essence in relatively sticky inflation, this new system or the transition to a new system has increased the base cost, right? uh so that's something that investors have to get their heads around. This also happens at a time when in most countries uh fiscal policy is hitting limits. Debt levels are at a point where um you know depending on the country, depending on the moment there are concerns about debt sustainability. And so one of the results of this combination of high debt, relatively elevated fiscal vulnerability, and sticky inflation, of course, is that interest rates, particularly the long end, tends to be um rates tend to be drifting up.

And that's that's again a sort of structural new element in the investment landscape that you have to take into account. And as we're seeing as a result, things like private credit are much more in focus. um equities can very much be in focus and investors are getting concerned about long-term um government bonds in many countries around the world

and a lot of those issues you know be it inflation be it having that governmental thinking about investment of course affects infrastructure and perhaps now more than ever there's there's a real strain on public budgets and financing especially in in perhaps the the traditional large economy when it comes to infrastructure. So, Mans, I want to turn to you. As global growth increasingly relies on infrastructure and that demand is growing faster than frankly public spending is happening, how can economic systems evolve to ensure long-term capital that allows infrastructure development from an ADQ perspective?

Thank you. Thank you, Mina. I think uh there is a a growing disconnect between the global need for modern infrastructure and the capital available for it. Without a timely and adequate investment, economies lose uh lose the competitiveness and become slower and more slower as they go. According to a McKenzie study, there is hundred trillion US dollar trillion US dollar of infrastructure uh requirements or investments required globally by 2014.

So the capital you know this is it's be mindboggling number. It's a it's a huge number and uh definitely there will be ladders there will be some saving of some sort. So if governments adopt these strategies of modernizing their infrastructure, they will get there. So there will be a couple of trillion of saving between now and then. But what that doesn't take away is there is a huge requirement for infrastructure investments globally.

And uh in fact uh us at ADQ we we owe our existence to infrastructure. we were established to elevate and some of the local uh infrastructure players into global champions. Uh again the thought behind it is infrastructure delivers great and stable returns when it unlocks economic well it unlocks economic activity. U we have multi numerous examples. So one of our companies Abuabi ports adopted the strategy uh few years ago actually not uh so it's been in existence for 20 years but for the last five years we adopted a new strategy of globalizing the company and diversifying it into to become more globalized.

We're still in that journey. We're going uh very steadily towards that uh strategy and it's paying off. You can see the flexibility, the economic multiplier and also the enablement of the the whole ecosystem if you want. We have also other companies like Dhaka airways, Abu Dhabi port, Abu Dhabi airport sorry which are key enablers for uh economical activities and connecting Abu Dhabi to the UA and the UAE to the world. Uh one thing uh one final thought is we are blessed to have leadership that is foresight into way into the future very deep into the future as building an airline or a nuclear power plant.

It's not an easy decision to take especially in the last couple of decades.

These these decisions are paying off today. We can see Abu Dhabi connected to the world. we have more efficient power system. So infrastructure in the UAE is already enabled. Sometimes we do feel that we're still playing catchup.

But when we look around us, we we're thankfully in a much better shape and uh that's that's great because of the great leadership of the United

and that long-term investment into infrastructure reaps its rewards into the economy.

Um Philip, I want to turn back to you. I mean technological changes, geoeconomic indicators, all the uncertainty that we're currently living in, but also comes at a time when there is this need for capital investments. So how do you think long term given the level of short-term changes ahead? One thing we know is if you look at particularly the the whole complex around AI and I would include very much in that the infrastructure piece Moner just mentioned think of all the data centers. Think of the power ideally renewable cheap power that will be needed for these data centers.

We know that there are going to be huge investment needs that need to be met. Some of the numbers that you would all know suggest this could be as much as five or even more trillion dollars until 2030. So this is a a vast investment wave that is really about to hit us or has has been part of the reality for the last year or so. No compared to this is in line with some of the biggest investment cycles in in past history. Think of railroads, electricity, the internet.

This is very much in the same kind of scale and possibly even even faster. So one needs to be part of this both from a country perspective but also from an investment perspective. If you think about the profits that will be generated, the productivity for countries, future growth rates that can go up. So we need to be in the market basically and and what it shows is the importance of the depth of capital markets. The reason or one of the reasons the US is a leader in this because the US has had such deep capital markets.

Uh and this has been the story of the last 20 years since the financial crisis. Today, US capital markets represent somewhere between 60 and 70% of the world's capital markets. And so from a country perspective, you need to try to do everything you can to develop and deepen your capital markets. Think of Europe lagging far behind in this regard. You look at what the region has been doing in recent years, it's all about trying to develop a domestic deep capital market.

And from an investment perspective, you have to think about the long-term gains that could be generated if indeed this technological innovation allows us to lift potential growth rate, create more productivity, and ultimately create more prosperity. And finally, I would say it's a way for us longer term to deal with the debt problem that I mentioned uh a minute ago. You know, most countries today face considerable uh debt challenges and of course the best way to tackle that is again by innovating your way out of it and lifting productivity and growth rate. So from an investment perspective, you really have to be invested in order to be able to capture these opportunities.

I have to ask a follow-up. You said Europe is lagging behind and the deep capital markets for course that we see in the US and we see in the Gulf. Why is Europe lagging behind?

I think you know many reasons. Uh others have optined on this. There's certainly too much bureaucracy probably regulation has gone overboard but I would say the two principal reasons are the the domestic the internal common market is not complete. Some of the latest studies suggest that the obstacles to internal trade represent something like a 60% tariff. So to Roberto's point, if you could just liberate that, that would give you enormous growth potential inside Europe.

In services, it's even more. The estimates that the ECB has published, it's as much as 100% tariff. Uh so this is at a time when the global trade is no longer expanding the way it used to. You really need to focus on this. And then second is the point I made a minute ago, the depth, the breadth and the liquidity of the capital markets because if you want to fund innovation today, you need to do it through the capital markets.

So this is a critical point and reform point for for Europe.

And of course, multinational companies have to operate in these different markets um and have to choose where they are. Roberto, earlier you were saying about how companies have to think about having local presence and I want to follow up with you on that because again as multinational companies are thinking about their growth plans and their presence, how do you as a multinational large company think about your future planning when protectionism and localism start setting in? Yeah, I think the first um thing that that they should be thinking about is that this is not circumstantial. This is not something that is going to disappear once uh an administration in one country or another changes and then okay so everything's going back to normal. No, this is the new normal uh for many reasons and we don't have time for that.

But clearly uh companies should be planning uh long-term thinking about the current situation. This is not going to change very quickly. So they they need to change from the just in time mindset to the just in case mindset. So things may change at any point in time. Channels of trade may open and close very quickly and in in an completely unpredictable way.

So they need the the best way to do that is to localize is to be to have a global mindset but local in operations because um the rules will change the regulatory environment will change, governments will change and they will change very quickly and very dramatically. Uh so what is the best way to localize to be truly a local player is to have good partnerships. So you need to find the right partners. Partners who know the market, who know the culture, who know the politics, who know the regulatory environment, who can obtain or already have licenses and permits in place. So the speed to go to market is quicker.

Um and and so two things I think uh with this localization effort need to be very important. First is make sure it's a good fit.

That the partner has the same objectives you do, that they have the same long-term goals, that they have the good governance uh along the lines of what you hope for yourself, good reputation. And finally, uh localize but not but make sure you don't fragment,

right? that you still have a global and organized and well-coordinated approach despite the fact that you are in so 20 30 40 different countries

and of course that affects global supply chains too. This idea of local the idea of how protectionism can affect global supply chains. So Monor I want to turn to you. We know how linked and fragile global supply chains are and so what broad shifts are shaping the future of supply chains and how will that influence capital flows in the foreseeable future. I

think u global supply chains are as you rightly said Mina very fragile and uh the turn into investing or treating supply chains like infrastructure is out of question. I think what we're trying to do now is what we learned from the pandemic is that uh without supply chains you're tied your hands are tied and you cannot progress you cannot uh you know you cannot progress ahead so we are investing in these supply chains we've invested uh in a global uh company the Louis Drafus company as one of the most influential agriculture AL companies globally for example as a country and now we have security of supply because we have the ships we have the grains we have the oil seats and so on so forth so these are becoming more and more important as you look into the future supply chains if you let him just

consider them as secondary you will always have this worry or fragile system so it has to be viewed as a integral part of your future Thank you very much. Unfortunately, we've run out of time. There's a lot I can pick up on, but I'm afraid we have to move on to the next panel. Many takeaways from my excellent speakers. Thank you for your time.

Thank you.