Globalisation is entering a new phase as companies try to navigate widening geopolitical fault lines. One of them is Siemens, the German conglomerate with operations in more than 190 countries.

The chairman of Siemans’s supervisory board, Jim Snabe, argues that talent, not labour costs, will define the next phase of globalisation. In this new paradigm, “speed will beat size”, he tells fDi on the sidelines of the 10th Congress of the World Free Zones Organization unfolding in Dubai from September 23–25. This, he argues, gives nimble, innovative countries a better chance to punch above their weight when it comes to attracting trade and investment. 

Q: How is Siemens navigating the current trade and investment disruptions? 

A: I fundamentally believe that global trade is not only necessary in order to keep friendships among countries, but also in order for the world to progress economically. Now for domestic political reasons, we see a tendency to argue the opposite, and I'm not sure those people understand the economic implications of reducing global trade.

I’m arguing for more global trade, but in a different way. We used to do global trade in order to benefit from labor arbitrage, which is cheap labor in another country. I believe you can only do that so far, and we’ve seen how that led to a world where very large factories are placed in low-wage countries.

I think the next globalisation is one of talent. So not about the cost of labor, but the quality of labour, because we moved to a world of rapid innovations with advanced technologies. 

Q: What are the implications of this new globalisation? 

A: Instead of a few countries playing big roles in global trade, what if we could have many countries doing the same? Sure, supply chains will get more complex, but with today’s technology, we can deal with a complex supply chain.

Besides, in that way, supply chains will get more resilient because there will be more choices. Instead of one big factory, companies could have 10 factories in 10 different countries, which means nine new countries play a role in that global trade. Among other things, that also means that we create local opportunities, which in turn means we can have lower migration and everyone can benefit from global trade.

That’s the direction I’m arguing for, and that’s how we run our company as well.

Q: Has this led Siemens to regionalise more its supply chains? 

A: We increase resilience by having more alternatives and invite more countries to participate. It’s not regionalisation because they still participate in global supply chains. In the past, it was difficult to achieve this because the factories only got economic economies of scale through size. Today’s factory is largely automated, so a factory doesn’t need to be that large to be producing at the most efficient level. 

Q: In this context, the speed of a country can beat its size. What does that mean for site selection? 

A: There’s no doubt that when we choose not only business partners, but also countries, we look at the ability to move forward fast. So, when I argue that, it doesn’t mean that a country cannot be big; rather, that it cannot compromise on speed.

Take Singapore as an example. It’s a very small country with very few natural resources other than people and talent. They have had incredible economic growth. Both SAP, where I formerly worked [for 17 years until 2014, the last four as CEO], and Siemens have research labs in Singapore because of the talent.

Q: It’s also a country with a very top-down form of governance, which hardly aligns with the idea of liberal democracies.

A: I think that as a company, we cannot choose governance models in countries. That is not our role; it’s the citizens of a country that should do that.

What we can do is go into countries with our value system, and we can make sure that people who work for us work under our value system — one that is very fair, offering equal opportunity and paying well for talented people. Through that, I think we create opportunity.

So we don’t judge political systems, but we act in a very responsible way in each of the countries we go to. And through that, I think we improve countries independent of their government. 

This interview, which took place on September 24, has been edited for clarity and brevity.

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