YEAR-AHEAD PREDICTIONS 2020

Source: ATKEARNEY GLOBAL BUSINESS POLICY COUNCIL (GBPC)

Prediction #1 Generational wars will heat up as battle lines are drawn: Older generations continue to hold positions of authority, while younger generations are becoming more vocal about their concerns regarding climate change, debt, and social injustice. Across the European Union (EU), roughly 40 percent of workers under the age of 24 are in temporary jobs, compared with just 6.6 percent of those over 55. Similarly, more than half of South Africa’s young people are unemployed. And Chinese Millennials are starting to struggle with high rents and limited job prospects. A majority of people in the United States, Japan, Mexico, Kenya, and Western Europe expect that today’s young people will grow up to be worse off than previous generations.

These generational wars will heat up in 2020 as climate change concerns persist, the US presi­dential election moves into full speed, and both young and old struggle financially in a cooling global economy. Global climate protests will continue next year. The massive protests that erupted in 2019 in countries such as Lebanon and Chile, fueled by disgruntled young people tired of the old elite, will continue. Politicians will have to determine how to balance the concerns of older and younger generations—or pick a side in the battle.

Prediction #2 A wave of water crises will spur innovation: Floods, water scarcity, and unclean drinking water crises are on the rise. Global decision-makers have ranked water crises among the top-five global risks for eight consecutive years. And more than 40 countries representing a third of the global population are dealing with water scarcity. India is a stark example of this reality with many cities hit by recent fatal flooding and at least 21 cities expecting to run out of groundwater by 2020. Other countries such as Malawi, Iran, and Nepal have also faced deadly floods in 2019, leading to billions of dollars in damage. The global scale of the threat posed by unaffordable and undrinkable water is aston­ishing as well. The World Health Organization (WHO) estimates that at least 2 billion people use a drinking-water source contaminated with feces and 785 million people lack even a basic drinking-water service. These issues are not limited to emerging and frontier markets. Currently, more than a quarter of Americans drink water from systems that fail to meet safety standards. Water crises will continue to proliferate in 2020, and governments and companies will innovate to address them.

Prediction #3 The evolution of cities will accelerate to meet infrastructure and climate challenges: Affordable housing shortages, food insecurity, poor transportation systems, and pollution are among the most pressing challenges plaguing cities around the world today, and they are all related to two significant political issues: inequality and climate change. As property has increasingly been turned into an investment vehicle, an oversupply of luxury housing in many emerging-market cities is now equaled by a lack of affordable housing for the lower and middle classes. And as urbanization persists across the world, arable land is being used for devel­opment purposes, raising new risks of food insecurity. Urban transportation infrastructure issues are also a pervasive problem, with the urban poor disproportionately affected when a shortage of reliable and affordable transit options inhibits their ability to work. While cities are significantly affected by climate change, they also contribute to the problem. Indeed, cities consume more than two-thirds of the world’s energy and account for more than 60 percent of greenhouse gas emissions. Many cities will accelerate their attempts to manage these infrastructure and climate challenges in 2020 as mayors step up to address key policy issues. Some cities, however, will be more successful than others. Governments and the private sector will develop more social housing units and repurpose vacant property. Governments will continue to deploy innovative transportation solutions. In response to calculations that global greenhouse gas emissions must peak by 2020 to limit the global temperature rise to 1.5 degrees Celsius, more cities will join Austin, Lisbon, Athens, and 30 others in reaching peak greenhouse gas emissions. To achieve this goal, cities will implement initiatives such as cycle hire schemes, restrictions on single-use plastics, and the deployment of electric buses.

Prediction #4 A new disaster economy will emerge as catastrophes become more frequent and severe: Although post-disaster aid continues to be delivered primarily through non-profits and international organizations, the business case for private sector investment is growing. Start-ups are therefore beginning to emerge as sources of disaster relief. Some companies are working to develop infrastructure in flood prone areas, including products that prevent home flooding and easy-to-assemble portable homes that serve as temporary housing. Others are creating technology platforms that help authorities locate people in need during extreme weather events and building offline products that allow users to locate affected infrastructure when they are unable to connect to the Internet. In addition, some companies are using artificial intelligence (AI) and machine-learning tools to predict where a disaster will have the most impact within a city, help authorities find affected individuals faster, and appraise property damage. This new disaster economy will expand in 2020. The global incident and emergency management industry is projected to exceed six percent annual growth in the coming years and will surpass $114 billion in value in 2020. Some estimates predict that the number of people displaced by extreme weather will grow by 50 percent within 10 years. The demand for relief technologies and services will therefore continue to rise. Governments and international organizations will start relying on the private sector to support those affected by natural disasters. Start-ups and more established companies will continue to leverage AI and other emerging technologies to create new relief products, while simultaneously deploying existing technologies—such as locators for people in need—more widely in humanitarian aid efforts. Successful deployment of these new disaster economy technologies will elicit more attention and investment and spur additional technological advances. Disaster economy start-ups will scale up and become more popular with the public sector, consumers, and investors as their products become more widespread and well-known. These relief innovations will not only help those in need but will also boost company revenues in this emerging sector as natural disasters become even more frequent and severe.

Prediction #5 The halal consumer market will exceed $2.5 trillion globally: Muslims comprise almost 25 percent of the world’s population and form a significant portion of the global consumer market. They spent an estimated $2.1 trillion in 2017, up from $1.6 trillion in 2012, representing 4.5 percent of the 2017 global consumer market. There is therefore substantial business opportunity in the global halal market, which consists of products that are acceptable according to Islamic law and align with Muslim culture and beliefs. There are six main sectors of this market: food, travel, fashion, media and recreation, pharmaceuticals, and cosmetics. Food is by far the largest segment, accounting for almost 62 percent of the total global halal market . Halal fashion is another fast-growing sector that is rising in popularity against the backdrop of the broader fashion industry’s efforts to appeal to an increasingly diverse consumer base. And in response to Muslims being one of the fastest-growing segments of the global travel industry, the halal tourism sector is thriving as hotels and tour operators race to meet the Muslim traveler’s dietary and religious needs. In 2020, the global halal consumer market will exceed $2.5 trillion for the first time and will continue to grow to $3 trillion by 2023. This market will continue to be concentrated in countries with the largest Muslim populations. Indonesia is the most notable of these markets, as it is slated to become a global halal hub in 2020 following the October 2019 implementation of a law mandating halal labeling on consumer products. Given Indonesia’s market size, this certification process could help kick-start more standardization in the global halal market in the year ahead. There will also be significant growth in major Western markets, with the greatest market opportunities continuing to come from the halal food sector.

Prediction #6 The United States will encounter challenges in the race to 5G: Countries are racing to be the first to develop and deploy 5G. Beijing has made 5G development a major priority, announcing the rollout of commercial 5G networks in October 2019. Huawei and ZTE also released 5G-compatible phones and handsets in the Chinese market. South Korea, Japan, Singapore, and the EU are racing toward 5G deployment as well, although the EU is moving the most slowly. In the United States, the private sector is leading the expansion of 5G in broadband networks, and US mobile carriers have begun selling 5G compatible phones. Headwinds have emerged, though, amid local opposition and NIMBYism. These concerns are in part the result of the dissemination of misinformation about health risks associated with 5G. Some residents, too, are frustrated by the sheer volume of towers needed for installation in their neighborhoods. In addition, there is no US telecommunications equipment manufacturer that can compete with China’s Huawei, exacerbating the challenge of 5G deployment. Plus, much of the frequency spectrum in the United States is reserved for defense agencies, leaving little available for commercial carriers. As a result, US companies must fight for small parts of the telecoms spectrum for 5G, which has slowed commercial 5G rollout. As larger launches begin worldwide, 2020 will be a pivotal year for 5G, but the United States will face more challenges in this race. Although Apple will introduce a 5G smart phone and telecommunications companies will expand 5G coverage in cities such as New York, Chicago, Los Angeles, and Houston, rural areas will remain underserved. And local opposition to 5G infrastructure development will become even more heated, delaying the installation of 5G cells in some cities, particularly in California, Colorado, Oregon, Indiana, and parts of New England. Fighting among companies over spectrum auctions will intensify, with US policymakers attempting to mediate. Elsewhere, Japan’s 5G networks will expand, but most of the country will still lack 5G access by the end of 2020. South Korea will continue deploying small-scale launches, and Singapore will also complete four 5G launches. The US government will attempt to fund European telecommunications manufacturers to compete with Huawei to speed 5G development there. But the big winner will be China, which will launch 5G on the broadest scale in 2020, boasting the largest numbers of subscribers globally.

Prediction #7 Data privacy rules will proliferate as EU regulations set the global standard. Data privacy remains a top concern worldwide as technology companies face growing scrutiny from politicians who publicly chide them for not prioritizing user privacy and from users who have become more aware of—and more troubled about—the use of their data. The EU has led the way in data privacy regulation through its General Data Protection Regulation (GDPR), which came into effect in May 2018, and the European Commission’s ongoing scrutiny of technology companies . Many local and national governments worldwide followed suit on privacy regulations in 2019. Nigeria introduced new regulations on data privacy and protection, the United Arab Emirates is considering a data protection bill, and India continues to debate draft legislation. In the United States, Washington and New York were among a handful of states that tried—but ultimately failed—to pass new data protection rules in 2019. Data privacy laws will continue to proliferate in 2020. New data protection laws are already set to go into effect in Brazil, Thailand, and the US state of California. Ecuador will also approve a data privacy proposal, while India and Kenya will continue debating draft legislation. The US states of New York, Washington, and Maryland will reintroduce proposals and pass rules based on the GDPR and California’s law. The US Congress will also consider introducing federal legislation. With the US presidential election in full swing, however, data privacy will move to the back burner as healthcare, the economy, and other kitchen-table issues dominate the national discussion. Without serious competition from the United States, the EU will solidify its position as the world leader in data privacy regulation as lawmakers around the world continue to look to the EU for guidelines on designing such rules—particularly since the GDPR already affects so many companies globally. The bloc will also remain aggressive in enforcing its data privacy rules under the guidance of EU competition commissioner Margrethe Vestager, who has a reputation for being tough on technology companies. Companies will face greater pressure worldwide to ensure compliance with European data regulations as the GDPR becomes the global norm.

Prediction #8 Northeast Asia will become an even more profound geopolitical hotspot: Tensions between Northeast Asian countries are on the rise. Trade is breaking down between Japan and South Korea as historical grievances weigh more heavily on their relationship. Indeed, the value of bilateral trade dropped by about 10 percent in the first six months of 2019, during which time the number of Japan’s direct investments in South Korea also declined by 20 percent. The dispute is having an outsized impact on Korean smartphone manufacturers, which are experiencing delays of weeks or even months in receiving crucial Japanese components such as integrated circuits and telecoms transmission equipment. Other regional players are ramping up their arms development and testing. China and Russia have unveiled hypersonic weapons, which can travel at least five times the speed of sound and are extremely difficult to detect and track. And North Korea has revealed a new submarine-capable ballistic missile that could allow the country to launch missiles far beyond its territory. Hostility between the country and the United States is also escalating as a result of North Korea’s rejection of continued negotiations following a breakdown of bilateral denuclearization talks in Stockholm. In addition, tensions are rising between Beijing and Taipei, while pro-democracy protests in Hong Kong are damaging the economy and threatening political stability there. Geopolitical tensions in Northeast Asia will continue to intensify in 2020. The Japan–South Korea relationship will deteriorate further as tourism, trade, and security relationships between the two countries continue to unravel and as their mutual ally, the United States, remains inwardly focused on its presidential election. This dispute will weigh on export volumes and economic growth in both countries. It will also have broader implications for the global technology sector, including reduced production of semiconductors and an increase in prices for memory chips that will be passed on to smartphone consumers. North Korea will conduct more missile tests throughout the year, adding to the level of insecurity in South Korea, Japan, and beyond. In addition, the deployment of hypersonic weapons in the region will make many countries feel less secure, raising the risk of a hypersonic weapons arms race and eventual conflict. Following Washington’s tentative approval of the sale of $2 billion in military hardware to Taipei, the island’s tensions with Beijing will escalate. And Beijing and Hong Kong will have to deal with the long-term ramifications of the 2019 protests—a process that is likely to be politically fraught.

Prediction #9 US dollar appreciation will continue: The value of the US dollar continues to remain strong, with the Broad US Trade-Weighted Dollar Index reaching an all-time high of 131.57 in September . This situation is much to the chagrin of the Trump administration, which vocally favors a weak dollar to boost US exports and improve the country’s trade balance. The Federal Reserve has made small cuts to U.S. interest rates this year to prevent a potential recession, moves that would typically weaken the dollar relative to other currencies. But the dollar has nevertheless continued to appreciate, driven by loose monetary policy in several other large markets and a few key events in the global economy. First, weak economic growth throughout much of the world is boosting the relative strength of the US dollar since it is still the world’s primary reserve currency. Second, Beijing has allowed the value of the yuan to fall in an effort to maintain its foreign reserves stockpile and stimulate its economy. And finally, the deepening downturn in the eurozone spurred by weak economic growth in Germany is strengthening the greenback’s relative value. The US dollar will remain strong and potentially even strengthen against major currencies in 2020. Given a weakening global economy, US interest rates may be cut a bit further but will be offset by central banks across Asia and Europe also practicing easy monetary policy. Indeed, Bank of Japan Governor Haruhiko Kuroda has announced that it will maintain extremely low interest rates at least through the spring of 2020, and the European Central Bank has similarly signaled that it will keep rates low through the first half of 2020 and possibly beyond. Further boosting its relative value, the US dollar will continue to be seen as a safe-haven currency. This US dollar appreciation will improve the competitiveness of exports from China and other emerging markets. The result will be heightened rhetoric about currency wars—and possibly associated jitters in the financial markets—but the US government will not cross the line of artificially weakening the US dollar to boost exports given the anti-interventionist sentiment among top-level cabinet members.

Prediction #10 Commercial and national interests will collide in a more crowded outer space: More and more entities are venturing into outer space. India and Israel both launched lander missions to the moon this year, and Iran, which first reached low earth orbit (LEO) in 2009, resumed its launch program. With support from the EU, Canada, Japan, and Australia, the United States is charging ahead with the Lunar Orbital Platform-Gateway (LOP-G), a crucial element in its crewed lunar mission plan, Artemis. China and Russia are collaborating on a joint lunar exploration mission, and Russia is helping China develop satellites to improve its detection of intercontinental ballistic missiles—just as the United States is doing. The space race in the private sector is expanding as well. Many companies—including Amazon, SpaceX, China Aerospace Science and Industry Corporation (CASIC), and OneWeb—plan to launch many LEO satellites. Managing space traffic and avoiding collisions is therefore becoming a more urgent challenge; a European Space Agency satellite almost collided with a SpaceX satellite this year. And although many governments have advanced plans to address space debris, much work remains. Space will become even more crowded in 2020 as both companies and governments expand their celestial activities. SpaceX will expand its Starlink project to make significant progress in providing Internet service, provoking fierce competition from companies with similar ambitions. And test passenger flights will venture to the edge of space as a handful of companies prepare for commercial launches. Although a major collision is unlikely to occur in 2020, these activities will prompt governments to begin discussing the regulatory challenges that arise from private-sector space exploration. The UN Office for Outer Space Affairs will focus on space debris and traffic management, and the UN Committee on the Peaceful Uses of Outer Space (COPUOS) will work on laws governing the rights of entities mining bodies beyond Earth. These talks are not likely to lead to new international rules in 2020. Following the 2019 establishment of the US Space Command and France’s announced plan to arm satellites, more countries will establish or expand military forces in space in 2020.