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2.1.3 THE CHANGING DYNAMICS OF GLOBALISATION AND THE NEED TO COMPETE BETTER
In recent years, the global supply chain has had to grapple with the changes brought about by evolving geo-political dynamics and various trade conflicts – most prominent being the US-China disputes on trade and technology. The pandemic has added further complexities, prompting most governments and businesses to rethink the interdependence of global supply chains, particularly in critical areas such as health, food, strategic technologies and other essential sectors.
This could possibly rewire the configuration of global manufacturing and trade as well as various other aspects of globalisation, including the bifurcation of technology, inward sourcing or reshoring aspects of supply chains and greater restrictions in human capital mobility. There are also calls to strengthen regional co-operation, diversify sources along the value chain to mitigate risks and enhance the resilience of supply chains with the greater use of technology. Overall, this trend emphasises the need for greater competitiveness, especially in emerging economies. This would require investment in both capabilities and productivity-driven technology, underpinned by a supportive financial system. Under these circumstances, market-based financing can emerge as a more suitable alternative to fund these companies. As such, economies which have more efficient markets, both public and private, will have a greater edge when it comes to cultivating more competitive businesses.
2.1.4 THE DEMOGRAPHIC CHANGE AND THE RETIREMENT DILEMMA
The global population, on average, is fast aging – people are living longer and birth rates are declining. While longevity has resulted in greater demand for healthcare, technology and biosciences, an aging population will contribute to a shrinking global workforce, productivity and pool of savings, while adding pressure on pension and welfare systems. Against a backdrop of other societal trends, including increasing income inequality, human capital pressures with the rise of technology, rising public sector debt burden and expectations of lower asset returns, the changing demography could result in profound implications on world politics, economic growth and the financial system.
While there are various complexities surrounding this subject, a key challenge that is in the spotlight for most governments is retirement savings, which, if left unaddressed, will lead to fiscal issues. Governments in other countries have started looking at innovative retirement income and care solutions entailing mechanisms like social risk pooling and long-term care insurance7. Attention is also drawn to the need to address private savings for the future. This entails enabling greater savings and investment risk-taking by the broader population. Millennials, with net worth of up to US$24 trillion globally8, and the middle income or mass affluent segment, with net worth of up to US$140 trillion globally9, have differing characteristics when it comes to savings and investment. Moving forward, these differences will fundamentally shape the growth of the asset management industry.
There have been initial developments around age technology (AgeTech) – digital technologies that improve the lives of the older population – for financial services. This is built around the needs and wants of senior investors, with digital-inclusive initiatives to bring senior investors along the digital financial services journey – all of which point to the start of markets’ evolution to cater to longevity.
These countries are most ready to deal with ageing population, World Economic Forum, February 2020. Responding to Megatrends, Principles for Responsible Investments (PRI) and Willis Towers Watson, December 2017. Global Wealth Report 2019, Credit Suisse, October 2019.
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36 SECURITIES COMMISSION MALAYSIA