For its 14th Annual Global CEO Survey, PwC interviewed 1,201 business leaders in 69 countries around the globe in the last quarter of 2010. Below is a wrap up of the Middle East results by Warwick Hunt, Middle East managing director, and Fouad Alaeddin, Middle East managing partner, markets at PriceWaterhouseCoopers (PwC).
Amid growing enthusiasm for a full recovery following the recent economic crisis, Middle East CEOs renew their confidence in emerging markets as their way out and the growth opportunities that the Middle East promises, seem all the more obvious and unique.
Prevailing confidence among our Middle East CEOs points to a common trend in businesses that is evident; their evolving strategies in this multi-speed recovery phase of post crisis. Furthermore, their strategy change is demanding new approaches to governance, risk, growth, technology, human capital and talent as well as innovation.
Partnerships with government toward the greater good, corporate social responsibility and environmental consciousness are also avenues for such changes, but the overall theme is one of optimism toward the future of the region and the opportunities of growth that lay within it — with 68 percent of Middle East business leaders extremely confident of their company’s prospects for revenue growth over the next three years — far exceeding CEOs polled in other regions.
Overall, despite the recent political unrest and changes in the Middle East, the market continues to be attractive to foreign companies specialized in infrastructure, energy, utilities and consumer products as these changes should increase activities in these sectors in the medium term.
However, the changes occurring in MENA are being examined and overall are seen as a consequence of the lack of employment opportunities for a burgeoning young population. Unemployment rate in the Middle East averages over 10 percent across the region. For Saudi Arabia, Egypt, Jordan and Syria, the youth unemployment rate is approximately 30 percent.
The soft infrastructure, including education and workforce ready skills is crucial. There is an increased call for a shared agenda with governments in areas deemed critical for business growth. For example, concerns how to improve the talent pool available and bettering infrastructure are seen as being best achieved through a sustained collaboration between public and private sector.
Business leaders foresee the need to provide different forms of incentives to attract and retain younger talent (with a focus on non-financial rewards to motivate staff). They also see the need to change their policies in order to attract and retain more women and encourage them to reach more senior levels
Economic growth over the past decade has not made any dent in the high regional unemployment rates as the working age demographics swamp even very strong and above average economic growth. In addition, governments’ traditional control of large swaths of the economy, through either close associates or government-linked companies, has restricted competition and opportunities for new entrants, while general business environments remain overly bureaucratic and anti-enterprise. Some regional countries have realized that economic diversification will only occur if they can attract FDI and that in turn requires a favorable business regulatory environment.
Good examples of this include Dubai with its extensive free zones and Saudi Arabia with its “10x10” competitiveness program. In fact, over 50 percent of CEOs declare that their business strategies had witnessed change over the past two years while a third claimed colossal and fundamental change, indicating that this emerging post-crises era is redefining business dynamics.
However, more needs to be done to truly engender a vibrant Small and Medium Sized Enterprise (SME) culture and environment. Across the region starting and running a business is not easy. Procedures take a long time and the process is tedious and inefficient, discouraging entrepreneurs from setting up new businesses. Meanwhile, on other aspects fundamental to SMEs, such as getting credit and closing a business, the region trails behind international best practices. Moreover, governments in the region need to reform regulatory frameworks to remove obstacles and costs of starting, running and, when necessary, closing a business; and encourage actively greater entrepreneurial activity through appropriate skills training, mentoring and cultural acceptance of business risk taking and the possible failure that comes with that.
Bottom line — companies will not only be affected by this multi-tiered recovery; their targeted investments will help shape the path of globalization. There are great opportunities ahead for those who anticipate how business is changing and creatively search for value in new markets.
