Business leaders remain confident despite problems

Business leaders in the Gulf are confident about the economy, argues James Zogby

Despite declining oil prices, business leaders in the Gulf remain confident in the economy. Satish Kumar / The National

Despite a steep decline in oil revenues, continuing conflicts in the region and concern with Iran’s agenda, business leaders in the Gulf remain confident about the economy.

This is one of the findings from a survey conducted by polling group Zogby Research Services (ZRS) for Oliver Wyman, a management consulting firm.

The ZRS/Oliver Wyman collaboration began during the 2008 global economic meltdown in an effort to see to what extent the downturn had shaken business confidence. Since then, we have conducted semi-annual surveys of business leaders in Saudi Arabia, the UAE, Qatar and Kuwait to measure confidence, identify trends and pinpoint reform priorities.

These four countries have a combined GDP of $1.5 trillion, placing them right after Canada and ahead of Australia and South Korea. Even with the decline in oil prices, their economies have remained strong.

In earlier surveys, we examined areas that required reform, focusing on topics such as: the need for skilled labour, changes in the educational system, problems encountered in implementing programmes to meet hiring quotas for nationals, labour reform and difficulties in securing start-up capital for small and medium enterprises. In our first survey of 2015, we focused on how executives currently assess business conditions and prospects in the region’s volatile environment.

Given the multiple challenges facing the region, it is remarkable that an overwhelming majority of the business leaders who were surveyed said that business conditions in their country had improved in the past year. Executives in the UAE and Kuwait were especially bullish, with 93 per cent responding positively. The high level of confidence in this country is noteworthy since it marks the sixth year in a row that confidence levels have risen.

There was also good news from the Saudi and Qatari business communities. In both countries, we had witnessed a steady decline in confidence from nearly 80 per cent in early 2012 to 55 per cent at the end of 2014. This year, however, the confidence of business leaders in Saudi Arabia and Qatar rose to 79 per cent and 89 per cent respectively.

Looking forward, three-quarters of the executives believe that conditions will improve even further in the next two years. Where do they see investment opportunities for growth? It appears that for the region’s business leaders, the most promising arenas are in developing countries. There are some noteworthy exceptions, with Saudis still seeing their major opportunities in the West and business leaders in the UAE finding their best prospects for growth at home.

What do they perceive as the biggest threats to business conditions? More than half of the executives in Saudi Arabia and Qatar, and even those in Kuwait, point to “internal changes in leadership”. In the UAE, two-thirds of executives expressed concern about the dangers posed by an “outside macroeconomic shock”. Interestingly, there was only scant mention of declining oil prices, terrorism and internal tensions.

Overall, about one in seven executives did point to the broader region’s conflicts as a problem that could pose a threats.

In this context, we asked the business leaders for their assessment of the value of the GCC acting as a unit. While there was across-the-board support for the GCC, it was mostly tepid.

The only country where we found strong support was in the UAE, where two-thirds strongly agreed that there was value in the Gulf countries operating as a unit. In the other three countries, only one-in-seven gave the GCC strong support.

When asked about the effect that the opening of the Iranian economy might have on the GCC, the executives took a rather pragmatic view. Overall, a substantial majority saw it as a positive development.

Three-quarters of those surveyed said they looked forward to Iranian investment in the region, while two-thirds said they would welcome the prospect of being able to invest in the Iranian economy. Of those who felt that the opening of Iran to the region would be negative, equal numbers expressed concern that this development would increase political instability.

There were interesting differences among the respondents from the four countries. UAE and Qatari executives said that the main benefit of opening the Iranian economy to the region would lie in their ability to invest in the country, while Saudi and Kuwaiti executives regarded Iranian investment in the region as the main benefit.

In the end, these findings reveal a business leadership that is confident and resilient in the face of multiple regional crises while, at the same time, demonstrating the capacity to be pragmatic and creative.

James Zogby is the president of the Arab American Institute

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