Siemens CEO bullish on US, sees China recovery

Peter Loescher tells Arabian Business that economic growth in US, China will boost sales
Siemens CEO Peter Loescher.
By Massoud A. Derhally
Sat 19 Jan 2013 11:56 AM

Infrastructure development in emerging markets and a quickening of economic growth in the US and China will help boost Siemens global business, said Peter Loescher, CEO of Europe's largest engineering conglomerate.

Though their economies have slowed down, China and India's governments are spending heavily on the development of their countries and there are still untapped markets in Asia, Loescher said in an interview with Arabian Business.

"China has not recovered. We could say we early signs [of recovery]," Loescher said. "I would anticipate that the growth pattern as we go forward for the second half of 2013 will probably be stronger than what we have seen in the past. I clearly anticipate that the new leadership of China, which will be officially in place by March, will put measures in place which will continue to support growth and infrastructure development programmes."

China, the world's second-largest economy, saw its economic growth slow last year to 7.8 percent from 9.2 percent in 2011.

The country's economy is projected to expand 8.2 percent this year, according to the International Monetary Fund. India, the third-largest economy in Asia, is set to expand to about 6 percent this year after slowing to 4.9 percent in 2012 from 6.8 percent the year before.

On the US Loescher said he is "quite bullish”, but that the fiscal cliff must be resolved.

"Americans are famous for being pragmatic, so if there is a solution we certainly will probably see growth resuming at a slightly higher level than last year from 2 plus percent to 3 percent," he said.

"We see Europe... needing a couple of years to resolve the imbalances which have happened, particularly in the southern part of Europe. Germany continues to be strong," Loescher added.

“We'll see differentiated growth opportunities for a big global company like Siemens, but the environment will continue to be more volatile than the last five years and offering opportunities for high technology leading edge infrastructure companies like ours, who are able to participate globally on this growth pattern."   

Munich-based Siemens, which operates in 200 countries and employs more than 360,000 people, is banking on its global presence to tap into pockets of growth that are becoming apparent as emerging nations modernise their infrastructure in line with population growth.

"Infrastructure requirements are continuing to be a growth driver impacted by the global debt crisis and financial crisis, so the issue of financing and financing support of infrastructure programmes is very important," said Loescher.

“We have applied for a banking licence for our Siemens financial services business and we have focused our financial services activities in support of our big infrastructure projects.

"You have to take advantage of differential growth opportunities in the world. From this context this will continue to be in investment mode, we will continue to localise, to work strategically with partners on the ground and move beyond from just a supply relationship."

Saudi Arabia - the Arab world's largest economy and biggest oil producer - is spending more than $600bn on infrastructure, education, healthcare and social programmes.

This month, Abu Dhabi announced it would be allocating $90bn towards social-spending projects. Qatar, the world's biggest exporter of liquefied natural gas, is set to spend US$150bn on infrastructure ahead of the 2022 FIFA World Cup.

Libya, which has Africa's largest oil reserves, is also looking to spend billions on revamping its oil and gas industry and infrastructure damaged by the uprising that toppled the regime of Muammar Gaddafi. 

"The economies are transforming themselves in terms of industrialising, population growth, forward-looking government policies in place for infrastructure, energy and healthcare," said Loescher.

“This is a perfect match and perfect fit for company-versus-country requirements. We are very bullish about the region and I think this will be a centre for growth, not just for the coming years, but also the decades to come."

Economic growth in the Middle East and North Africa reached 5.3 percent last year, with Libya's economy projected to expand about 122 percent after contracting 60 percent in 2011, according to IMF estimates.

Each of Saudi Arabia, Qatar and Kuwait's economies were estimated to have grown more than 6 percent last year. Growth in Iraq topped 10 percent and is set to reach about 15 percent this year. 

The 160-year-old Siemens is "extremely well positioned" to take advantage of the shift towards generating electricity from gas, Loescher said.

“We are a global market leader, [we] have the most energy efficient gas turbines of the world. We have just globalised the footprint of the gas turbine from Germany.

"We moved a big site to Charlotte in North Carolina, we are setting up another one in Saudi and we are setting up as we speak in Russia. Siemens is extremely well positioned... to take advantage of this new paradigm shift which is happening globally."

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