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World Investment Conference

10th edition

June, 20-22, 2012

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Contents

Executive Summary………………………………………………………………………page 3

Switching to a sustainable economy……………………………………………..page 5

Rejuvenating the European Dream…………………………………………….page 19

- A memo-board for visionaries

- A vision for Europe

- A Cultural Conclusion

Ernst & Young’s 2012 European attractiveness survey

Growth, actually…………………………………………………………………………page 22

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Executive Summary

Though Europe is being swept by an economic crisis and questions have been raised over how best

to assure the future of the euro, the continent remains one of the most attractive areas in the

world for foreign direct investment, which is a vital motor of the region’s economy.

More than 350 investors, business leaders, policy-makers and academics from 30 countries met at

the 10th World Investment Conference at La Baule, France, from June 20 to June 22, 2012, to review

Europe’s future attractiveness for inward investment.

They noted that with 500m inhabitants, and combined gross domestic product of $16 trillion,

Europe’s market is the largest in the world, and almost three times bigger than that of China. Even

with slower growth than many emerging economies, Europe therefore still offers substantial market

opportunities for international investors, backed by levels of political stability and the rule of law

which compare well with those in much of the world.

Looking ahead, Europe will emerge from the current hiatus and return to economic growth. Its

expansion will partly be driven by an economic transformation as the Third Industrial Revolution

gathers pace. This convergence of Internet and energy technology will facilitate a shift to distributed

renewable energy, distributed manufacturing, and electric vehicles. The revolution will be funded

largely by private companies, but facilitated by enlightened public policy enshrined in the vision for

Europe to derive a fifth of its energy from renewables by 2020.

A revival of manufacturing in Europe is possible, although the nature of manufacturing is evolving.

Manufacturing plants are increasingly automated, but it is also true that rising labor costs in China

and some other emerging economies are eroding their cost advantage, though the process still has

some way to run. But there are strong reasons for many companies to locate manufacturing close to

consumers, including those in Europe. As speed of response to changes in consumer demand or

taste become more important, so does manufacturing proximity, and the desirability of locating

research and development alongside manufacturing plants.

For both the Third Industrial Revolution and the need to respond to changing patterns of consumer

behavior are increasing the importance of innovation. Europe is an innovation leader in many

sectors, though other countries compete increasingly to attract research and development centers,

and innovation talent. Europe must nurture its innovation capacity, for it offers a strong foundation

for future growth.

So despite short-term uncertainty, there are many reasons to be optimistic about long-term

prospects for Foreign Direct Investment in Europe. That said, the conference recommended four

strategic objectives to promote FDI in Europe.

Stabilize the future of Europe and the Euro: In the short term, policy-makers must do whatever is

needed to resolve the economic crisis and assure the stability the euro. They must implement

austerity packages, but add the foundations for economic growth, with targeted investment and

measures to complete the single market and promote trade. In the medium-term, policymakers

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must create whatever pan-European institutions are needed to ensure a close, effective, and

enduring European Union.

Enhance the attractiveness of Europe for investors: Europe must be clear about what it stands for,

set out a clear vision of its future, and sell that vision to its citizens and foreign investors. It must

back its vision with a medium and long-term strategy to ensure a healthy environment in which

wealth-creation can thrive.

Build sustainable growth through innovation: policymakers must ensure high quality education,

especially in mathematics and science, and effective collaboration with private sector partners. The

Third Industrial Revolution offers a remarkable opportunity for Europe to develop sustained growth

through a transformative switch to distributed sustainable energy production. To facilitate the

transformation, firms must commit to innovation and empower employees to deliver it.

Europe must rejuvenate the ‘European dream’ of peace and prosperity through collective vision,

group action, mutual rights, and collective strengths. It must ensure that young people understand

and share this dream, and it must honor their desire for a Europe that is open and outward-looking.

More specifically, high-level workshops at the WIC recommended that:

To bolster the flow of new products, research, development, and innovation, Europe should

increase the industrial relevance of EU research by focusing resources via a clear European strategy

for research and innovation. It is important, too, to encourage large innovative companies to

transform innovation into jobs to complement the pioneering innovation of start-ups and SMEs.

Public Private Partnerships and public procurement should also be used to leverage innovation,

whilst stimulating open markets and common standards throughout Europe.

To promote manufacturing and assembly, it is essential to help people and governments

understand how manufacturing has changed to pave the way to revitalize it. Policy-makers and

companies should strive to get research ideas to market faster and public agencies should work

faster to enhance competitiveness. Policy-makers should also foster smart specialization by regions

while encouraging European synergies.

To facilitate a transformation of energy supplies and enhance security, Europe urgently needs a

common energy policy for the next decade. To ensure ongoing political impetus, the policy should

be underpinned by a master-plan for implementation. Energy efficiency is a necessary anchor of

energy policy, and meeting the needs of investment in smart grid and other infrastructure also

requires a stable political and legal environment.

To spur sustainable growth and social fairness, the conference urged companies to integrate

corporate social responsibility within their business activities to help solve society’s problems by

listening to customers, employees, and other stakeholders. Policy-makers, meantime, should reduce

barriers to talents moving within Europe and stimulate social mobility. And companies should work

together, strengthening transparency and promoting wider use of better reporting tools that

capture gender and cultural diversity.

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Renewing Growth

INTRODUCTION

The 10th World Investment Conference at La Baule, France, from June 20 to June 22, 2012, was an

essential forum for every international investor, business leader, and policy-maker involved in the

future of Europe and its attractiveness.

During plenary sessions, workshops, and a series of inspiring presentations, more than 350

participants from 30 countries debated the political and economic challenges faced by Europe. This

year, the conference opened against a somber economic backdrop. State deficits and a sharp

economic slowdown had combined to prompt some commentators to question the future of Europe

and its single currency, the Euro. But it soon became clear that while many business leaders say the

environment is challenging, almost all are confident Europe will weather the crisis, and remain one

of the most attractive places in the world to invest and build businesses in the years ahead.

Launching the conference program, Patrick Gounelle and Pierre Guénant, co-chairmen of the Europe

Plus Foundation, set out a forceful premise: the construction of Europe is a fabulous dream, and the

solution to today’s troubles is more Europe, not less.

Clara Gaymard, President of the 10th World Investment Conference, Vice-President GE International

and CEO of GE France, reminded participants of the distance already travelled. When the first WIC

was held in 2003 the Euro was newly minted and hopes for the future of Europe were bright. Yet

today, ten years later, Europe is facing important challenges; it must urgently resolve its financial

crisis and give its people a new vision. One urgent task was to ensure all of Europe’s citizens believe

that Europe is the best solution. Business leaders, policy-makers and politicians had a shared duty to

inspire confidence.

Ms Gaymard reminded attendees that Europe is a global economic champion. European companies

are among the world’s leaders, and the continent has a highly-skilled workforce of 288 million. The

crisis has nevertheless exposed clear weaknesses, including a need for better governance. But there

was a clear will among Europe’s leaders to make the necessary changes. She called on the

conference to propose practical ideas and concrete solutions.

Echoing the welcome, Jean-Bernard Guerrée, CEO, World Investment Conferences, also stressed his

belief that Europe would overcome its problems. But the continent and its people must develop

‘Euro-optimism’. He launched an electronic poll of those attending the conference. Overall, 43.6% of

attendees said the European dream endures today. Though others had doubts, overall five out of

every six attendees saw a future for Europe. Only 14.5%, feared that the dream had foundered.

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Weathering the crisis (there is a crisis but perception greater than reality)

On the first day of the conference, A panel of top-tier CEOs and executives reviewed Europe’s debt

and currency issues, and concluded that whilst policy-makers must act urgently to resolve the

continent’s difficulties, underlying attractiveness fundamentals for investors remain sound.

Do what it takes

Europe must do whatever was necessary to ensure solutions were quickly found to Europe’s

difficulties, the conference heard. One speaker likened Europe to a house that lacked a roof and

adequate foundations. The time had come to complete the structure. Often, Europe had been too

timid, and slow to act in response to the crisis. The US, conjured its Troubled Asset Relief Program

within weeks after the economic crisis began, whilst Europe took 18 months to launch its Long Term

Refinancing Operation (LTRO) in response to the latest crisis.

Yet Europe remains an economic powerhouse. Some of the economies of northern Europe, including

those of Germany and the Nordic countries had continued to perform relatively well, even though

there was weakness on the southern periphery. Yet with combined GDP of $16trn, Europe leaves the

US ($13trn) and China ($6trn) trailing. Today, the economy of Europe is almost three times as big as

China, the conference heard. Nani Beccalli-Falco, President and CEO, GE Europe and North Asia &

CEO, GE Germany, said: “If Europe grows at about 2.8% we are going to generate the same volume

of business as China growing at 8%.” Europe remains a massive market, and the opportunities for

companies to grow sales in Europe would remain considerable, even if its pace of growth was more

modest than that of emerging markets.

Add growth to austerity

Growth was the only solution, panelists said. “You cannot strangle an economy to prosperity,” Mr.

Beccalli-Falco insisted. “You can only squeeze the lemon so far, and then there is no more juice.”

Professor Christian de Boissieu, chair of France’s Council of Economic Analysis, said that despite the

hiatus, the Euro remained credible. It makes up 27% of foreign exchange reserves of banks

worldwide. In terms of economic prospects to the year 2020 European countries were ‘all in the

same boat’, with similar rates of forecast growth. First, however, the Euro crisis must be overcome.

Philippe de Fontaine Vive, Vice-President of the European Investment Bank, stressed that the

strengths of Europe are under-reported. Ireland was out of crisis, Portugal had done what it should:

Europe was taking the blame whilst the US and China ducked their failings. Europe needed to restart

growth by financing infrastructure and innovation, and the EIB stands ready to play its part as soon

as a planned €10bn capital increase was completed.

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The panel noted proposals to spur Europe’s economy with a €130bn growth package for investment

in infrastructure and innovation, equal to around 1% of GDP (agreed by Germany, France, Italy and

Spain on 22 June). Mr de Fontaine Vive said that €60bn could be loans from the EIB, an institution

trusted by investors worldwide.

European states must also contain current spending. Much Europe’s sovereign debt was run up by

regions, rather than national states – an issue that must not be forgotten.

Complete the single market and the Lisbon agenda

Some panelists urged early moves to complete the single market. Why not register cars, or

medicines, throughout Europe with a single process? Closed professions should be opened to

competition. Structural reforms, including of pensions, should be pushed ahead throughout the

union. Europe must go “from sick to seductive.”

The Lisbon Agenda, with its goals of supporting innovation, education, and entrepreneurial small and

medium enterprises (SMEs) must be implemented too.

Improve Europe’s decision-making processes

Europe must improve and speed-up its decision-making processes to solve the Euro crisis and

prevent a recurrence. Alastair Wilson, Chief Credit Officer EMEA at Moody’s Investors Service said

that above all Europe faced “a crisis of confidence.” The survival of the Euro depended upon

politicians agreeing how to preserve it.

Europe must resolve its institutional problems, clarify the resources and aims of the European

Stability Mechanism to be launched in July 2012, and nations must deliver their austerity programs,

he said. “Europe needs both austerity and growth and it is not going to get either quickly.”

Panelists said fiscal convergence also seemed desirable, in order to enable southern states to pay

“much less,” despite the fact that this would lead to Germans paying “a little more” to borrow

money.

Proposed moves to a single Eurozone banking supervisor – unthinkable just a couple of years ago –

were yet another desirable step. Most important was the quality of banking supervision, regardless

of who is was responsible.

Keep funds flowing

Concerned about the risk of a liquidity crisis and the probability of declining lending by banks busy

strengthening their balance sheets, many companies have been hoarding cash. Lionel Zinsou, CEO of

PAI Partners, said that although banks and insurers might make less money available to companies

because of Basel III and Solvency 2 regulations, Europe, and the world, had no shortage of savings.

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Today, banks finance 75% of the ‘real economy’ in Europe: that would fall to 50%, in line with the

American model, as markets and private equity fill the gap, he said. SMEs in some countries,

including France, faced a selective credit crunch, because their access to banks and markets was

more limited: he believed private equity should invest more in small companies.

Overall, Europe’s pool of savings is a great strength, enabling it to ‘self finance’, and even export

capital, creating big asset holdings in Africa, South America, and elsewhere.

Make Europe more attractive for investors

A panel of top-tier CEOs and executives reviewed why investors come to Europe, stay, or leave, and

concluded Europe must become more seductive.

Face the future

Enthusiasm for investment in Europe is today distinctly mixed. Some are waiting for Europe to

“speed up and do the necessary reforms”. Frank Dangeard, Managing Partner at investment firm

Harcourt, and Board member of companies in Europe, India, and the USA, remarked that, “when you

look in the rear-view mirror, things are pretty rosy, but when you look through the windshield,

things look bleak”. Future FDI would depend upon the success of growth policies, he said. After 40

years when Europe and the US were the options, three other continents now rival for investors’

projects.

Yet some remain confident: Sudip Nandy, CEO of Aricent Group, said his innovation and technology

services company had created “several hundred” European jobs through investment in the past 18

months and would create more. “We are very hopeful about Europe.”

Fix Europe’s image problem

Part of the problem is that “Europe thinks of itself as a museum,” said Stéphane Fouks, Vice-

President of Havas and Co-Executive Chairman, Euro RSCG Worldwide. Investment, on the other

hand,is a bet on the future. Europe succeeds when it is able to combine its history with strong

creativity, as in the luxury industry, or even aerospace.

Talk of crisis, austerity, and the need for reform were blighting investment. Confidence in Europe is

undermined by its poor image abroad. Europe has “great fundamentals, but a terrible road-show,”

said André Loesekrug-Pietri, the Chairman & Managing Partner of A Capital.

Europe gets a bad press in China, but Europeans hear far less about the problems of emerging

economies, he said. Yet even so, Chinese investors had invested heavily in water treatment, electric

cars, new materials, automotive, IT, and cloud computing in Europe.

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Promote Europe’s strengths

Europe has many technologies desired by investors, though often they are applied in emerging

economies. Its market is enormous, and offers incomparable opportunities in sectors such as

healthcare. Companies that learn to care for Europe’s aging population will have opportunities in

other regions in decades to come. Moreover businesses benefit from the rule of law, enforceable

contracts, and open, relatively stable markets.

Keep costs in perspective

Companies active in China know that costs in the Pearl River Delta have risen 20% per year over the

last five years, although from a low base. China’s coastal states no longer qualify as low-cost regions,

and while it is expected that China’s cost advantage will remain for the next 5-7 years, the country is

already losing some industries to rival countries with cheaper labor. This pattern is becoming visible

in other BRICs as well.

Improve entrepreneurship and education

Panelists believe Europe needs to pay much more attention to education and entrepreneurship too.

Creative talent is good, but technology skills are often in short supply. Jan Mühlfeit, Chairman

Europe at Microsoft Corporation, urged measures to bolster entrepreneurship, including relevant

education in schools, more flexible bankruptcy laws and re-directing half of all corporate subsidies to

start-ups.

Mr Mühlfeit stressed the need for better education, especially in mathematics, science, and

technology. Panelists called for more and better education in technical subjects to reduce youth

unemployment levels, which reached 22% in Sweden and 50% in Spain. Young people needed the

right education. “We don’t have enough engineers in Europe,” he said, especially in information

technology: “In a new Mercedes 60% of the budget is software”.

Have a vision and a strategy

Whilst companies construct strategies for five years, politicians are often locked into short-term

thinking, panelists believed. Confidence in the ability of politicians to resolve the crisis was weak.

Too many of Europe’s leaders are “still kicking the can down the road,” said Mr. Dangeard.

Politicians must ditch their fixation with industry. “If we get bogged down in trying to create low-end

manufacturing jobs we have a problem,” said Mr. Dangeard. “The future is about productivity in the

services industry. It is about the supply chain from design to delivery.”

China pursues long-term industrial strategies with great success, panelists noted. Europe has also

had success with state-sponsored programs in aerospace and transport implemented in the past.

Today Europe needs new state-sponsored programs in services where it excels, such as healthcare

and entertainment.

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Modernize labor laws

To facilitate the work of industry, and above all the success of services, which are estimated to

account for 75% of European GDP and 70% of employment, labor laws must be updated.

Europe’s employment laws were conceived for an industrial era, but the rise of services and the

spread of technology are changing the nature of work. Labor laws should be shaped to allow

flexibility and to permit enterprises and employees to work the way they need and wish to work

today.

Ironically, it is because the rule of law is respected in Europe that the continent needs to update its

rules, Mr Nandy said: “Laws in India and China are significantly more anti-business, but they don’t

enforce them.”

Build sustainable growth through innovation

A panel of top-tier CEOs and executives stressed the need to build sustainable growth through

innovation.

Encourage employees to innovate

To maximize innovation potential, organizations need to recognize the abilities of their staff, no

matter where they are in geography or hierarchy. Thierry Pilenko, CEO of oil services group Technip,

stressed that Europeans, though able, have no monopoly on good ideas. With operations

everywhere in the world, Technip has its biggest customers in Brazil and Saudi Arabia. By nationality

its biggest group of employees are French, with Brazilians second, and Indians third. “It is only once

you have established parity that people come to you and say ‘this is my idea,’” he said. Diversity,

empowerment, and diversification were keys to creativity.

Dominique Louis, Chairman of the Management Board of Assystem, said that “For a company like us,

creative disorder offers huge leverage.” Top managers could not be all-knowing and inevitably right.

Managing empowered employees in organic structures required special skills, as well as humility. “It

is a big deal to manage creative disorder.”

Karsten Langer, Partner at Riverside Europe Partners and Chairman of the European Private Equity

and Venture Capital Association (EVCA), said that in the venture capital world, innovation only

happened when employees were truly committed to their role, and worked in teams. “True

innovation breakthrough really comes from a team that is passionate about whatever they do,” he

said. It was vital to allow the team to focus on the things that all involved believed were delivering

results.”

Use public policy to facilitate innovation

Balázs Hidvéghi, Hungarian Deputy State Secretary for External Economic Relations and International

Affairs, said that to promote effective innovation, countries had to take their cues from business.

“You have to listen to companies,” he said. Hungary used to support innovative companies through

automatic tax credits. Now it is introducing a system where companies have to bid for public funding

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to support innovation by demonstrating the innovative virtues of their project in a competitive

tender process.

Creating bodies that are independent of government and in constant conversation with industry is

essential, as well as evaluating the effectiveness of programs. The success of this approach was

shown by the revival of Tungsram, a Hungarian electrical group, after GE became an investor. Today,

it was working with cities and regions to renew urban lighting systems.

Encourage free thinking

Creating an entrepreneurial spirit through a national education system isn’t easy, panelists noted.

Policy makers can strive to promote incentives for innovation. But equally, they can try to an

atmosphere in which “a sense of liberty of thinking, a sense of questioning,” were welcomed, said

the Minister.

In Europe demand for engineers and scientists often exceeds supply. How could young people be

encouraged to acquire technical skills? “We perhaps need fewer lawyers that the state pays for,” the

Minister said.

Combine public and private funding

To maximise spending on innovation, executives should seek to combine funding from every

available source, said Steve Bolze, Senior Vice-President, GE & President and CEO, GE Power &

Water. In his business unit, annual innovation spending amounted to about 5% of revenues. When

building a new $50m GE technology center at Belfort, France, GE had been able to access support

from the local government.

The GE group also worked with venture capital investors, with whom it had created a joint $100m

fund. The aim was to ensure good ideas were not wasted. GE seeks ideas with large-scale potential

to develop worldwide, but in the process throws up excellent ideas which may be more suitable for

venture capital investors to pursue. “You have to tap ideas and funding sources from all over,” said

Mr Bolze. “Our view is that we want to focus on help solving some of the world’s biggest problems.”

Collaboration – with other companies, state bodies, educational institutes, and other organizations

can help fund and enrich innovation. Mr Pilenko said that a lot of Technip innovation was jointly

funded by clients such as Petrobras, which worked with Technip to develop new techniques to

extract oil trapped below pre-salt fields.

Focus public funds where they will do most good

Europe has many innovation support programs at both national and European Union level. Yet “It

can be very, very, difficult to find your way around the EU innovations programs,” said Mr Langer.

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Panelists also questioned whether public funds were always well targeted. Mr Pilenko singled out

French support for innovation in technologies to generate power through offshore wind-farms. He

questioned whether some such support should not instead be directed into fundamental research

that could have wider benefits. “We have moved too quickly into offshore wind in France. I think the

political power should rethink the allocation of funds.”

Mr Pilenko called for more research too into the potential of shale gas in Europe. Though a

progressive switch from fossil energy to renewables was desirable, oil and gas production would

probably continue longer than widely thought, and maintaining research could smooth the

transition.

Deepen European integration

CEOs, executives and public policy experts believe a stronger Europe is the way forward.

Strengthen European institutions

Professor Gunter Verheugen, former vice-president of the European Commission in charge of

industry and enterprise, summed up for many Panelists when he said: “We need more Europe. We

need to deepen European integration.”

Since no nation would be willing to give up its statehood, a United States of Europe would be

impossible to achieve. Rather, Europe needed “an additional and very substantial transfer of power

from national parliaments and governments to Brussels.”

Panelists believed that European monetary union was failing because it lacked central governance.

Europe must first overcome its crisis, whilst also making deeper integration a medium-term project.

Fix the present, build the future

There is a clear consensus among European business and commercial leaders that Europe needs to

consolidate budgets and create room for growth. The conference was clear that policy-makers

should not forget the medium-term agenda to make it easier to do business in Europe and enhance

regional competitiveness.

Completing the single market and removing barriers is only part of the challenge. Europe could also

promote trade with the rest of the world by intensifying efforts to fight against protectionism and

achieve free trade agreements.

Overall, as Professor Verheugen made clear: “Less Europe is not an option. More of the same is not

an option. More Europe based on more responsibility is the answer.”

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Taskforce workshops: Targeting the issues, suggesting

solutions

The second day of the World Investment Conference included four high-level symposia that

targeted vital attractiveness issues for Europe and provided recommendations to achieve the

outcomes Europe needs.

Each symposium was directed by an expert moderator and chaired by a senior business or public

policy leader. A panel of experts offered views and then responded to questions from an audience

of elite players from business, the public policy arena, and academia.

Workshop themes:

Workshop 1: New Products: R&D and Innovation in Europe

Workshop 2: Manufacturing and Assembly

Workshop 3: Is Energy Technology the New IT?

Workshop 4: New Talents, New Responsibilities

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Workshop 1/ New Products: R&D and Innovation in Europe

Moderator Delphine Manceau - Professor, ESCP Europe & Director, Institute for Innovation and Competitiveness Chair Christophe de Maistre – CEO, Siemens France & CEO, Siemens Cluster South-West Europe Panel

Michel Mariton – President, Horiba Europe

François Quentin – Chairman of the Board, Huawei Technologies France Christophe Veys – Director, Flemish innovation procurement program

The new products and new services upon which tomorrow’s European economy will be built stem from knowledge and ideas. Europe has a formidable scientific tradition, institutions, and talent, but a battle to attract R&D+I has developed worldwide. Intensifying competition encourages companies to locate innovation facilities close to customers to better understand and respond to their needs, but also alongside production plants so that innovation can more quickly be incorporated into products. In many sectors, corporate success hinges upon coming up with the best new products or services ahead of rival firms. That’s why, despite the economic crisis, companies are still investing heavily in innovation and patenting new ideas. The single European market - a big, harmonized market with common standards - helps motivate companies to invest because success brings a bigger payoff. It is important to remember the vital role of governments as customers. That is especially true in the defense industry, an innovation leader, because governments have a big influence on the innovations the industry delivers. Meantime policy-makers often focus on the role of small firms and start ups in innovation, but in reality bigger companies deserve more attention than they get, because they have the corporate infrastructure to turn winning ideas into global products or services far faster than small ones, however clever they may be. Innovation is a global contest, including in many fields where Europe excels. Many key areas for research, development, and innovation such as energy efficiency, healthcare, and urbanization confront global challenges in which successful ideas can – or should - win global markets. Recommendations Europe should develop a clear, Union-wide strategy for research and innovation, with the aim of focusing resources to increase the industrial relevance of research. More should be done to encourage large innovative companies to transform innovation into jobs, a role that complements the pioneering innovation of start-ups and SMEs. Companies that buy start-ups and rapidly globalize their ideas may be a force for good. Finally, policy-makers should use Public Private Partnerships and public procurement to leverage innovation, whilst simultaneously stimulating open markets and setting common standards throughout Europe.

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Workshop 2 / Manufacturing and Assembly Moderator Pascal Morand – Dean, ESCP Europe Chair David Appia – Ambassador for International Investment & Chairman and CEO, Invest in France Agency Panel

Alexis Karklins-Marchay – Partner - Emerging Markets Center Leader, Ernst & Young Akiko Ryu Innes-Taylor, Senior Operating Officer and Head of Public Relations Department,

Otsuka Pharmaceutical Co Ltd Peter Wolfmeyer – CEO, ZeniT Nordrhein-Westphalen Region

Globalization has caused companies to unbundle the value chain, locating each element, from research and procurement through manufacturing and sales, in the most cost-effective location. In many European economies, manufacturing now provides less than a quarter of gross domestic product. Even in Germany, Europe’s manufacturing superstar, a large proportion of production is outsourced to lower-cost countries in Eastern Europe or Asia. Yet an outflow of manufacturing jobs from Europe is neither inevitable, nor irreversible. Rising labor costs in China and other emerging economies will make manufacturing in Europe relatively more attractive over the next decade, provided European labor and non-labor costs are contained. Technology and market developments could underpin a revival of European manufacturing. A move from mass-production to mass-customization, including 3D printing, plus the increasing need for speed to market are adding to Europe’s appeal for manufacturing. However, the distinction between manufacturing and services is becoming artificial. The two are increasingly integrated as manufacturers may sell the service their products provide, rather than just the equipment (power instead of generators, for example) and both are driven by innovation. Further, companies prefer to manufacture near their markets, so promoting a healthy market may be the best way to attract manufacturing. Recommendations Companies should strive to help media, citizens and governments understand the ways in which manufacturing has changed, to ensure expectations about revitalizing manufacturing are realistic, and efforts effective. Companies and public authorities should collaborate to get ideas from laboratory to market faster, and policy-makers should simultaneously do all they can to speed action by public agencies that can help enhance competitiveness. Public authorities can also help by fostering smart regional specialization and clustering by companies, while encouraging synergies at the European level.

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Workshop 3/ Is Energy Technology the New IT? Moderator Patrick Gougeon – Director UK, ESCP Europe Chair Joachim Bitterlich - Ambassador (ret); Executive Vice President International Affairs, Veolia Environnement Paris & Chairman, Veolia Environnement Germany Panel

Igor Akhmerov – CEO, AVELAR Energy Ltd André Bouffioux – CEO, Siemens Benelux & CEO, Infrastructure and Cities South West

Europe Didier Houssin – Director, Directorate of Energy Markets & Security, International Energy

Agency

Thomas Kästner – Executive Director, Ernst & Young GmbH Europe has limited fossil energy resources: much of its oil and gas are imported, and the coal mines upon which its industrial revolution was built are mostly closed. Concerned about climate change, the EU targeted generating 20% of its electricity from renewables by 2020. But the drive to cut carbon emissions and improve energy efficiency is part of a Third Industrial Revolution that is springing from the convergence of information technology and energy use and management. The rise of distributed green power and the spread of electric vehicles will both require and facilitate the development of smart grids. This energy revolution gathering pace in Europe will require close collaboration between public and private sectors. Policy-makers must provide a strategic framework, standards and enabling legislation. Companies must invest and build the necessary infrastructure and applications. But the common European strategy appears undermined by the economic crisis and the nuclear accident at Fukushima, which notably caused Germany to plan an exit from nuclear generation. Moreover, the complexity and unpredictability of national regulations hamper private investment in the energy sector. Today, Europe needs international energy transmission ‘highways’ underpinned by storage capacity, which would together allow the fusion of producers and consumers into ‘prosumers’. Competition, giving rise to prices that vary with supply and demand, should encourage efficiency and lower costs for industry and consumers. The scope for dramatic change for the better in the energy industry is enormous: new technologies are emerging in energy efficiency, recycling, and eco-friendly processes. These require massive investment, but at the same time have the ability to create enormous numbers of jobs, both directly and in related activities which they will enable. Recommendations Europe urgently needs a common energy policy for the next decade with a master-plan for implementation underpinned by political impetus. This energy policy must be anchored in a drive to enhance energy efficiency, making the most of opportunities offered by new technologies. To invest the many billions of Euros that are needed to deliver the infrastructure and smart grids that Europe needs, investors must have the clarity of a stable legal and policy environment.

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Workshop 4/ New Talents, New Responsibilities Moderator Davide Sola - Professor, ESCP Europe Chair Hans Daems – Group Public Affairs Officer, Hitachi Europe and Vice Chair of the Board of Directors, CSR Europe Panel

Patrick Deconinck – Senior Vice President for Western Europe, 3M Srimathi Shivashankar - Associate Vice President – Diversity & Sustainability, HCL

Technologies Gerhard Kschwendt – Head of Business Excellence and Corporate Strategy, Alcoa

Increasingly, people want companies to help solve society’s problems, and expect them always to ‘do the right thing’. Social networks facilitate a dialogue in which companies, customers, other stakeholders, NGOs and policymakers interact. They also empower employees, so that the quality of talent in an enterprise is becoming ever more critical. And ironically, the most talented people seek out companies that demonstrate their values through effective corporate social responsibility. Today, corporate social responsibility is a route to competitive advantage: it enables companies to interact more effectively with key stakeholders. Because they understand better what customers want and society expects of them, companies with that assume corporate social responsibility will reduce risks and become more sustainable: they will be more competitive, attract talent, and create new business opportunities. In order to maximize access to talent, companies should recruit, promote, and respect people of both genders and of all ages and cultures. Indeed, the combination of a mixture of ages, gender, and cultural diversity is often more creative, and can therefore be a driver for innovation. Many companies have learned that getting involved with local communities is also a way to develop engagement with employees and bolster their job satisfaction and the amount of energy they devote to the company. Recommendations Companies of all sizes need to integrate corporate social responsibility into their business activities to help solve society’s problems, by listening to customers, employees, and other stakeholders. Policy-makers and employers should work together to reduce barriers to talents moving within Europe - and should seek to stimulate social mobility. We need better information so that stakeholders – including employees, potential recruits, and companies themselves – can assess whether enough is being done to promote gender and cultural diversity. The best way to achieve this improved transparency would be to promote the use of better report reporting tools that show us what is happening today.

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Switching to a sustainable economy

The world is entering a third industrial revolution driven by the convergence of communication via

the Internet and a switch to sustainable energy, visionary economist Jeremy Rifkin told the

conference in a keynote speech on Innovating in Europe.

The world’s first industrial revolution, in Europe, transformed education by introducing steam power

into printing; the second, in the 20th century, powered the telephone, radio, and television with

electricity, said Mr Rifkin, a lecturer at the Wharton School of the University of Pennsylvania and

advisor to the European Union.

Now, he said, we are in the throes of a third revolution in which lateral communication via the

internet will interacts with distributed generation and storage of electricity via smart grids. It is

simultaneously a shift from central generation from coal, gas, or nuclear power to fragmented

generation from renewables including solar, wind, and biomass. Five pillars will drive the change.

First, under the European Union’s 2020 plan, 20% of power generation must be from renewables by

2020. Second, converting the EU’s 191m buildings into partial green power plants will provide

distributed power and millions of jobs over 40 years.

Third, surplus power can be used to separate hydrogen from water, reconverted to power when

needed in a simple storage cycle. The Internet drives the fourth pillar, allowing transmission and

trading of small volumes of power, and in the fifth element, we use electric vehicles for transport,

and to store power.

The rising cost of fossil power, a contributor to the economic crisis, thus provides an opportunity for

companies, Mr. Rifkin said. As uptake of the new energy technologies increases, costs will fall. But to

implement the Third Industrial Revolution requires collaboration – between scientists, companies,

citizens, and governments at the local, regional, national and continental levels.

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Rejuvenating the European Dream

In a final morning of inspirational debates and presentations, involving people of all ages, the

conference explored what it means to be European, and sought ideas with which to kindle a new

vision for the future of Europe.

Memo-board for visionaries:

Never forget Europe is a miracle in terms of peace – Prof. Pascal Morand, Dean, ESCP Europe

Double the size of the Erasmus program which enables students to study abroad in Europe; teach

Europeans at least 3 languages; and teach European history in schools - Joachim Bitterlich,

Ambassador (ret) Exec Vice-President International Affairs, Veolia Environnement Paris & Chairman,

Véolia Environnement Germany

Europe is about freedom - Farid Tabarki, Founder and Director Studio Zeitgeist

Culture is about how your mind is built - Jiann-Yuh Wang, Director Victor Segalen Foundation

Solving the challenge of energy security is not just a European, but a global issue - Philippe

Boisseau, Member of the Executive Committee & President Supply & Marketing, Total

Innovation is a way to unite and inspire staff - Dan Clark, Head of Programmes, Aerospace UK,

Assystem

To invent the new dream you have to let go of the past. Europe really needs to think like a start-up

- Paul Deegan, Everest Mountaineer and Author

Governments must create the framework for entrepreneurship, and then get out of the way -Ashok

Rao, Serial Entrepreneur, Chairman TiE Global Board of Trustees and Chairman & CEO, Whodini, Inc

Aging, obesity, health, and wellness all underpin unmet healthcare needs in Europe and elsewhere

- Jean-Paul Kress, President & CEO, Sanofi Pasteur MSD

We have to decide what we want: an open society, or a return to the past and individual nations -

Guillaume Klossa, President EuropaNova

We have to return to the foundations of Europe: peace and solidarity - Alice Aguirregabiria,

Student, ESCP Europe

My dream of Europe is to be open. We can apply this philosophy to everything - Clément Delangue,

Student, ESCP Europe

Open to the outside but very united inside - Giovanni Ravina, Student, ESCP Europe

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A vision for Europe

Mark Otty, Area Managing Partner EMEIA, Ernst & Young, made the case for optimism about

Europe’s future and urged business to help make Europe a success. Edited highlights:

“It seems difficult to talk about a dream when so many people are experiencing economic despair,

yet there is a danger in Europe that we see all of the negatives. I think there is a reason to be much

more optimistic than we sometimes are.

I am a business leader and believe in the European dream. There is a tremendous opportunity, but

we need to seize that opportunity and make a difference.

What is the dream? The European dream is based upon the group, mutual rights, and collective

strengths. It is based on shared experiences but celebrates the power of collective vision.

The destination that I believe Europeans dream of is peace, prosperity, and preservation of their

distinctive way of life.

The means chosen to achieve this has been the creation of the European Union, a unique

experiment with countries coming together to pool their sovereignty, launching a shared currency,

and agreeing to make their market transparent.

The European dream has been phenomenally successful. The EU has delivered peace and prosperity.

Europeans have by most measures the highest quality of life. And 161 companies in the Global

Fortune 500 have their headquarters in Europe.

The current economic crisis is really testing the European model, possibly to a breaking point. Failure

to solve the crisis could see not only the failure of the Eurozone but also the fragmentation of the

EU.

Europe is at a crossroads. For the single market to work there needs to be greater integration.

Without an ability for all the economies in Europe to compete, we will never be able to hold the

Eurozone together.

Business needs to take responsibility for doing its part. The European dream needs both honesty

about difference and the scale of challenges we face today. I think there is a real danger that our

sentiment will create our economic reality. Each of us must make a commitment and assume

responsibility for making Europe a success.”

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A Cultural Conclusion

Today’s dream is not merely about Europe, said Jean-Pierre Raffarin, Former Prime Minister of

France and Vice-chair, French Senate. Looking beyond today’s economic hiatus, he said: “We have a

global dream; the bringing together of the European culture and way of life with an emerging and

very powerful Asia,” he said.

A generation ago, Europeans looked west. “In May ‘68 we were forged by a very strong American

culture. We wanted freedom, creativity, energy, and passion and this is what we saw coming from

the United States,” Mr Raffarin said.

“When I was 20 I expected that America would play a big part in my future.” Now young people

should ask what role Asia and China and their ideas will play in Europe’s future.

Whilst occidental culture focuses upon thesis, antithesis and synthesis, Chinese culture accepts

complexity and cohabitation through the ideas of Ying and Yang. Europeans, having integrated

American ideas, now have to integrate Asian ideas of complexity.

“The strength of European culture will be to forge connections with US and Asian culture, integrating

new ways of thinking, and a greater sensitivity to others.”

He urged Europeans not to fear Asia. Young Europeans should travel, and study Asia, he said, but

they should leave their mark on the world here, in Europe.

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Ernst & Young’s 2012 European attractiveness survey

Growth, actually

Foreign Direct Investment makes a critical contribution to Europe’s economy. This survey is based

upon an original two-step methodology that reflects Europe’s real attractiveness for foreign direct

investors, and the perceived attractiveness of Europe compared with rival regions. The 2012

edition was published at the World Investment Conference Europe.

Survey highlights

The reality of FDI in 2012

After a sharp dip in 2009, Foreign Direct Investment (FDI) into Europe has returned to growth. In 2011 there were 3,906 inward investment projects — an increase of 4%. The average project was markedly larger and FDI job creation surged 15% to 157,824. Companies from the US remained Europe’s biggest FDI investors, providing 1,028 projects, 26% of the total. German companies took second place, investing heavily in neighboring countries to take an 11% share, ahead of UK investors with 8%. Investors from BRIC countries are becoming more important, together creating 9,385 European jobs in 2011. The UK remains Europe’s top FDI destination, winning 679 projects, 17% of the total, bringing 29,888 jobs to a sluggish economy wrestling with the grim reality of austerity. But Europe’s economic powerhouse, Germany, again strengthened its appeal, overtaking France to secure second place with 597 projects, while the French total fell to 540. Perceptions of Europe in 2012 In terms of investor perception, Western Europe ranks the second most attractive region (33%) and CEE (21%) the third most attractive destination worldwide for FDI. In this year’s survey, 35% of investors rank Germany the most attractive country in Europe, and 13% see it as the most attractive country in the world for investment projects. The number of respondents ranking CEE the most attractive destination has slumped from 58% in 2006 to 21% in 2012. More than 80% of respondents to our survey are confident that Europe will overcome the ongoing economic crisis. Europe's future attractiveness Forty-six percent of investors say they come to Europe for its research and innovation capacity and 33% believe technology will be the engine of European growth.

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The reality of investment in Europe confirms Europe’s attractiveness for manufacturing, which created the second most projects and largest number of jobs (97,229) in 2011. Eighty-seven percent of investors interviewed expect to manufacture in Europe in the future, an increase of 17 percentage points from 2010. For Europe to remain an attractive investment destination, 38% of investors want more support to high-tech industries and innovation, 31% want better backing for small and medium-sized enterprises and 30% want Europe to improve education and skills-development systems.

Investors’ call for reforms The areas where investors believe Europe should concentrate its efforts are also those where they believe reforms are urgent. To help make Europe a leader in innovation, investors seek an improvement in education and training (47%) and call for a more innovative culture (32%) and tax incentives for innovative companies (29%).

1. Improving universities Nearly half (47%) of our survey respondents say that improving education and training in new technologies is the most urgent need to enhance Europe’s credibility as an innovation destination. The European Union is home to almost 40% of the 500 best universities in the world, according to the annual ranking by Shanghai Jiao Tong University, China. But the top end is dominated by the US. Policy-makers, business and academia need to strengthen links, prioritize quality and relevance in education, and ensure appropriate laboratory ideas become commercial products and services.

2. Promoting a culture of innovation 32% of our respondents want a more innovative culture in Europe. A weak spirit of innovation and entrepreneurship in many European countries and universities limits the growth of innovation and the success of university-industry partnerships and academic spinoffs. Better policies can create an environment for innovation to flourish.

3. Incentivizing innovation 29% of our respondents want more or better tax incentives for innovative companies. EU innovation policy has focused on competition — now it needs to motivate and facilitate.

ENDS