See slow start to year, M&As will move to middle mkts: EY

Below is the transcript of Mark Weinberger's interview with Menaka Doshi on CNBC-TV18.

Menaka: How would you characterise the mood here in Davos?

A: Well, the mood here this year seems to be pensive. If I could think of a couple of words that come to mind in a lot of our discussions, it would be fragility of the economy, the divergence of different economies of the world going in so many different directions politically, economically and that causes some concern which leads to the real underlying theme which is uncertainty.

Menaka: So are you saying that 2015 will not be the year that corporations start investing? We have been waiting for this for a long time now.

A: Well, we saw an increase n investment last year so we did see IPOs start to come back a little bit. We saw some big mergers and acquisitions around the world. This year we are seeing a slow down in some of that front, the IPOs are slower this year than we were projecting through 2015. The M&A will move to the middle markets as companies do try and get more growth. I would like to see some investment. Now, for example we are going to hire 65,000 people around the world this year. We are investing heavily in technology and things that will help us grow for the long term. That type of investment will occur but I don’t think you are going to see massive growth in the companies around the world.

Menaka: So what would you say are some of the top challenges facing business leaders like you? I know slow economic growth obviously tops the list but there are issue like currency volatility, we saw the Swiss national bank do what it did last week and now there is talk that other European countries might resort to the same.

A: Absolutely. You have got certainly the oil, gas, the energy prices, which the volatility there makes it difficult, you have got the major concerns about monetary policy for the for the first time moving in different direction where you will see the United States and maybe the UK start to restrict or maybe raise interest rates, where the European Union (EU)is going to enter some quantitative easing. Japan is still providing for very liquid funds and so the monetary policies moving in the different direction will affect currency significantly. And then you have the geopolitical issues, nationalism. Lot of the concern about slow growth over time has led countries to put up walls and new regulations which make it hard for global organisations to really operate seamlessly cross borders. Those are some of the challenges in the next year we seem to face.

Menaka: The USA it seems is going to come back to pole position as the engine of growth for the global economy. What would you count as the next few countries that you see business leaders here interested in investing in?

A As I look it across, we are still investing in lots of different markets, India is one example of a market that there is a lot of confidence in. You have seen the stock market move up. It is in a great position with low oil prices, being the real big importer of oil and not facing some of the challenges that many of the other emerging markets face. ASEAN, if you have a trans-pacific partnership agreement that they are talking about where the TPP would include both ASEAN, Canada, United States, Japan , that can really open up some opportunities in the ASEAN Markets. So you are seeing there. Mexico with some of the challenges they face, some of the reforms of denationalizing the energy market creates opportunity. So, there are pockets around the world where there is great investment still going on.

Menaka: I know Ernst & Young (EY) has a great presence in India but are your clients now ready to invest in India because I know the mood has changed definitely. It had taken a U-turn but are they ready to put their money?

A: We are seeing more interest certainly moving into India and part of it relativity with the other markets being more difficult, India is increasingly more attractive plus the confidence that Narendra Modi really is going to start opening up the markets. The only way some of the differences at the state level, getting the goods and service tax in place, that could be a real opener.

Menaka: Fingers crossed on that?

A: Yes that is a biggie. We are seeing clients really investing for the longer term in India.

Menaka: So this divide between the rich and the poor, countries wanting more revenue, how do you see tax policy across the world evolving here?

A: This is a great question because the tax systems around the world were built for a different time. They were built for mortar and bricks and domestic transactions. Now we have a global economy and you can click a mouse and transfer goods across the world.

The real challenge here is how do these systems come together to tax a global organisation in a way so one, they are not double taxed but two, they do not escape tax. That is where you are seeing the G20 and the OECD focus on with their big projects this year, trying to bring some more modernization to the tax system. That is not going to be easy because they all have different interests, because they all want that same dollar of revenue. With regard to the USA, while these Presidential proposals have been put out there, I am not sure there is a lot of optimism they are going to get enacted this year. We have been waiting for tax reforms for a long time .You may see that come on the business side even before the individual tax changes which the President talks about.

Menaka: What are you looking forward to most here in Davos?

A: This interview of course.