May 17th 2010

Business Confidence Up in Gulf States

by James J. Zogby

Dr. James J. Zogby is the President of Arab American Institute
DUBAI: Ed Koch, the colorful and often controversial former Mayor of New York City, made it a practice as he walked the streets of his city to stop and ask average citizens "How am I doing?" in an effort to learn how they viewed the performance of his administration and its delivery of services. Asking and listening are always useful exercises. Sometimes the results can be surprising. More often then not the results of such an effort affirm what we have assumed to be true, providing data to validate our assumptions as well as additional valuable insights. A recent survey of business executives in the Arab Gulf countries is a case in point.

Conducted by Zogby International (ZI), the survey found that optimism has returned to the business community in the Gulf, a sign that the region may have turned a corner following the global economic downturn of 2008-2009. Overall six in ten executives now say that business conditions have improved in their countries, with over eight in ten expressing confidence that conditions will improve even further in the next two years.

These are but a few of the findings from the survey of "C-Suite" executives in Saudi Arabia, UAE and Qatar, which ZI carried out for Oliver Wyman (an international management consulting firm with a strong presence throughout the Middle East). It is the second in a continuing series of semi-annual measurements of business confidence in the Gulf region.

The mood was positive in all three countries covered in the survey, with the most notable changes occurring in the UAE. Business leaders in that country were especially hard hit by what one prominent Emirati businessman referred to as the "bursting of Dubai's utopic bubble." It is significant, therefore, that while in our October 2009 survey 57% of respondents in the UAE reported that their economy was in decline, today that figure has dropped to just 39%; and while in October only 45% of business leaders in the UAE anticipated an improvement in business conditions in the country during the next two years, now 74% are optimistic.

Overall, the executives expressed some satisfaction with their governments' response to the 2008-2009 crisis with those in Saudi Arabia, Qatar and Abu Dhabi indicating strong confidence in their governments' performance. Only in Dubai was there a somewhat negative mood with over 50% reporting that their attitude toward government had been undermined by its handling of the crisis.

When asked to identify the areas that provided the greatest opportunities for the Gulf Cooperation Council countries to improve competitiveness, almost one-half of the surveyed business leaders pointed to the region's need to diversify its economy. And four times as many executives saw greater opportunity in deepening ties with the emerging economies of China and India than with their traditional partners in the developed West. Some indicated that they saw China's dramatic growth and the relative ease of doing business in that country as obvious attractions, especially in the face of the uncertainties now facing Europe.

In the April survey, as in our earlier October effort, labor and education reform were once again identified as both the most immediate and long-term challenges to the region's competitiveness. Other problem areas the business executives pointed to as requiring government attention included: improving transparency (especially noted in Dubai and Saudi Arabia's Eastern Province) and reducing bureaucracy (a major concern in Abu Dhabi). Another major concern noted in all three countries was the difficulty associated with starting new businesses - pointing to excessive regulations and problems obtaining loans at reasonable rates.

The utility of surveys of this type is that they provide business leaders with an unofficial sounding board from which they can identify concerns. The results also provide governments with indices by which they can measure the mood and needs of a critical sector of the society that will be the driver of future growth and development.

And so getting back to answering the New York Mayor's question, in the Gulf it would be "quite good". The bottom line here is that business confidence is up, and significantly so when compared to many other regions of the world, including the U.S. And no wonder. The region weathered a difficult world-wide downturn with governments wisely using reserves both to insure stability and promote growth.

Nevertheless, concerns remain in important areas. Singled out for attention were: the region's dependence on foreign labor; the challenge of modernizing the educational system (especially in the areas of primary education, basic math and science skills and technical training); and easing the way for entrepreneurs to start new businesses - a key to needed job creation. These are issues that the business leaders say must be addressed to insure both future competitiveness and continued prosperity.

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