The light is visible at the end of the tunnel and it might be a glorious sunshine awaiting the region – but there is still reason to be cautious.
A variety of sources, including the IMF, think the economic view is looking pretty good for the region, with Middle East and Gulf companies doing relatively well post the economic global crash. Optimists amongst us have suggested an oncoming boom in the telecommunications industries alongside simultaneous investment – and improvements – in infrastructure and transportation, particularly across the Gulf. All of which will inevitably lead to increased prosperity, stability and more jobs in the Middle East region.
And more jobs are obviously a good thing, if not an absolutely essential thing, because the Middle East region now has one of the world’s youngest demographics, with almost 70% of the population aged thirty or under. This makes Middle East countries an attractive long term investment for those looking for an abundant source of enthusiastic young people to drive their businesses forward. But what else does the region have to offer? And are the projections of good times ahead really something we can bet on?
Well, it might just be the case that we can. Despite the fact that popular opinion seems to be that oil, and its affiliated industries, is the obvious, if not only, option for business investment in the region the truth is somewhat different. The numerous countries in the MENA region (which spans from the Gulf Emirates of Abu Dhabi and Dubai to the shores of Egypt and Morocco in North Africa) offer an abundant choice of opportunities and resources to investors, with diverse investment choices depending upon what the geography, industry and politics are in any given country. Gulf countries, the UAE, Saudi and Qatar in particular, are endeavouring to adopt a longer term outlook by using their wealth to increase diversification in state economies. This can be exemplified by the recent announcement by Abu Dhabi of five huge projects worth DH 200 billion. And not one of them related to the oil industry.
A recent report produced by Mergermarket (in association with the legal firm Blakes) on the GCC Investment Outlook shows that senior business executives in the region are expecting to see the most rapid growth in the telecoms industries and also those concerned with infrastructure and transportation. Telecommunications are also regarded, by the same business executives, as being the industry that is most likely to see investment and lending from banks. And talking of the financial markets, although they are still recovering from the battering they received in 2008/9, the Sukuk market (or Islamic bond market) is looking increasingly stable, with high hopes that liquidity will increase over the next couple of years.
But, despite all the good news – and there is good news – a note of caution should be sounded. The Dubai debt (a problem which has yet to be resolved) caused great suffering across all the Middle East markets and highlighted problems within the region overall concerning lack of adequate financial regulation, dodgy lending tactics and poor corporate governance. Reform is badly needed, if not essential, in order for new investors to feel confident enough to take the plunge.
Of course, the economic future of the region is still intrinsically linked with the stability and prosperity of the world economies, particularly those of China, India and Western Europe. And the EU, which has only recently staggered to its feet still in a daze after the economic crash, is now bearing witness to Greece and Portugal tottering on the edge of another financial abyss.
But all things considered, and if reform is fast and effective, there might be real opportunity here for the region, and the Gulf in particular, to lead the new markets that emerge post global crisis. And given the fact that there is an estimated need for one hundred million jobs in the Middle East in the coming years, due to its growing population, a boom cannot come soon enough.
Sarah O’Connell, Gulf Jobs Market, 3rd May, 2010