Analysis: Middle East in the midst of a quiet societal revolution
Moving away from the geopolitical volatility and instability of the region is essential for fresh perspective
After the tumultuous days of the so-called Arab Spring, the Middle East and North Africa region is now witnessing a quiet societal revolution that is a harbinger of rapid economic growth.
And Canadian businesses were told this week that ignoring this unfolding phenomenon would hurt their bottom lines.
“The engine powering this transformation is the demographic dividend from being one of the youngest regions in a world where major economies, including China, are aging fast,” said Bessma Momani, a professor at the University of Waterloo.
Speaking at a conference on business opportunities in the Middle East at the University of Toronto’s Rotman School of Management, she said moving away from the geopolitical volatility and instability of the region is essential for fresh perspective.
Momani, who is also a senior fellow at the Centre for International Governance and Innovation (CIGI), said the same young populations that fuelled the revolutions are now behind the broad patterns of change.
This includes fast growth in education levels and entrepreneurship, with women playing significant roles and economies moving away from the classic rentier models.
“The region is on the cusp of change towards becoming an innovative society,” she said. “And from the business point of view, it is where China was 10 to 15 years ago.”
Businesses in Canada should stop being U.S.-centric and not ignore the Middle East as they did with China in the early days because of perceived risks, said Momani.
“It is hard to ignore an increasingly cosmopolitan market that is attractive even from a lifestyle point of view. Just ask an executive where he would rather be, Missouri or Dubai, and see the reaction.”
With the region in a “build, build, build,” phase, growth potential for various businesses is enormous, she said and went on to list some areas.
These include financial markets, Islamic banking, mobile banking, infrastructure, downstream petro-chemical industries, renewable energy, hospitality & tourism, medical tourism and digital content. “And all of these would be needing support services like marketing and legal advice.”
‘UAE a force of good’
Emmanuel Kamarianakis, Canada’s Consul General in Dubai, couldn’t agree more on the attractiveness of the region in general and the United Arab Emirate (UAE) in particular for doing business. “The UAE is invested in attracting human capital by making it easy to live and work in the country.”
Kamarianakis said the UAE is of significant commercial importance to Canada. It is estimated that $30 billion plus of Emirati money is invested here. With $1.87 billion turnover in two-way trade, over 150 Canadian companies and organizations are engaged with the UAE.
And with around 40,000 Canadians living in this Arabian Gulf country, it is one of the largest such concentration of fellow citizens abroad, said the Consul General.
He said the happenstance of four G’s - Geology, Geography, Geopolitics and Governance - coming together has made the UAE “a force of good in a region that unfortunately doesn’t have many.”
Highlighting the enormous investments being made to make this Gulf nation the world’s biggest intermodal transportation hub, Kamarianakis said renewable energy also gets attention despite a plenty of cheap hydrocarbon reserves.
He said it comes from the implicit understanding that “in the same way the stone age did not end because of a lack of stone, so will the oil age.”
‘No Berlin Wall moment’
That the Gulf Cooperation Council (GCC) states, of which the UAE is part, is the lone bright spot currently in the MENA growth story was not lost on any one at the Toronto conference.
Speaking via Skype from Dubai, Nasser Saidi, a prominent economist and governance reform advocate, said the broader region is in transformation, transition and turmoil. “But lack of a road map, unified vision or leadership points to slow transitions. There wouldn’t be a Berlin Wall moment.”
Saidi said fundamentals remain strong but the growth paradigm must change to focus on job creation in the private sector.
“Post-conflict reconstruction in the region would need investment to the tune of $1.8 trillion. But speedy recovery can happen only through Private Public Partnership along with local capital market development and women’s empowerment.”
Currently, the annual shortfall in non-GCC infrastructure investment is pegged around $72 billion, Saidi said. Each $10 billion would create around 2.5 million direct, indirect and induced infrastructure-related jobs in the MENA region.
Détente with Iran
He said détente with Iran would also be a game changer for geopolitical and economic prospects. While the lifting of sanctions would benefit Iran in many ways, for the wider region it would mean greater trade and investment benefits along with the potential for economic integration.
All this goes to prove that while much is said about the rise of ISIS and the collapse of regimes across the Middle East, the fundamental changes happening across the region are being ignored, said Walid Hejazi, a professor of International Business at Rotman’s, who organized the conference. “It also makes it clear that there is no one Middle East.”
And about the enormous strides made by the GCC countries, Hejazi, who regularly takes his MBA students on tours of the region to understand how business is done there, quipped: “If they [the Gulf countries] had implemented Western financial models to achieve growth, they wouldn’t be what they are today.”
Saudi: ready to work with others to stabilize oil marketOil prices turned around to rally on Monday after the statement Energy
Oil prices trading below $43 in AsiaOil prices traded below $43 in Asia as U.S. markets took a break for Thanksgiving and Russia ruled out a military strike against Turkey Energy
UAE oil minister defends OPEC’s decision not to cut productionSuhail al-Mazrouei said he was confident the oil market would stabilize Energy
Markets nervously on watchWeak oil prices are keeping the GCC equity markets on the back foot Blogs
Long-term oil market fundamentals robust despite price drop, Saudi saysLong-term oil market fundamentals remain robust but prolonged low prices could threaten security of supply and pave the way for a price spike Financial Markets