Arab News, Saturday, Dec 03, 2022 | Jamadi Al Awwal 9, 1444
Why corporate optimism in Saudi Arabia and UAE remains widespread despite global economic headwinds
Saudi Arabia:
A new survey of business leaders in Saudi
Arabia and the UAE reveals widespread corporate optimism in the two countries
about the coming year, despite the uncertainties and challenges that have
plagued the global economy in 2022.
Overall, 70 percent of 250 decision-makers
representing a wide range of sectors expressed optimism about the prospects for
the global economy in 2023, with 46 percent declaring themselves to be very
optimistic.
The survey was carried out for Gedeon Mohr &
Partners, a newly formed Dubai-based consultancy focused on the retail,
entertainment, destinations, and hospitality sectors, all of which are set to
play an increasingly important role in transforming the economies of the Arab
Gulf region.
“It is hugely positive to see a majority of
business leaders across the UAE and KSA being so optimistic about the future of
the economy, recognising the vibrant business ecosystem and opportunities in the
region,” said Maria Gedeon, CEO and founder of Gedeon Mohr & Partners.
There were, she said, several reasons for the
robust picture of regional optimism that has emerged from the survey.
“Obviously, we’re lucky to have had an increase in
oil prices, so naturally the economy is in better health than anywhere else in
the world right now. Also, geographically the region is far from the
Russia-Ukraine war, and less affected than Europe by higher prices and so on.
“But overall, I think the sentiment is better
because of the amount of work that the two governments are putting into
developing the economies, increasing quality of life, and attracting foreigners
and expatriates to this part of the world.”
The survey also showed that overall 29 percent of
business leaders in the two countries — 22 percent in the UAE, rising to 37
percent in Saudi Arabia — were slightly or very concerned about what the new
year might bring.
“I would assume that these are probably working
for global organizations, because they’ve had layoffs and a lot of financial
issues, and slowdowns in growth, and so on,” said Gedeon.
Businesses in the two countries are drawing
guidance and confidence, she said, from the ambitious blueprints set out by
governments.
“Both of these countries have published their
visions, the Kingdom for 2030 and the UAE for 2031, and in Saudi (Arabia)
especially the mega-projects, such as NEOM, the Red Sea project and Qiddiya, and
the massive investments in infrastructure, are tremendous economic catalysts.”
In November the International Monetary Fund
predicted that GDP growth in Saudi Arabia would be 7.6 percent for 2022, placing
it among the top five high-growth economies in the world.
Gulf Cooperation Council policymakers as a whole,
said the IMF, had “managed to quickly mitigate the economic impact of the twin
COVID-19 and oil price shocks.”
Even though global commodity prices had surged, it
added: “The outlook is more positive for GCC countries, with new challenges
linked to Russia’s invasion of Ukraine and tighter global financial conditions
expected to have a limited impact on GCC economies.”
The IMF also offered a cautionary note, warning
that even as the GCC states benefit from “higher, albeit volatile, oil and gas
prices, numerous risks still cloud the outlook — notably, a slowdown in the
global economy.
“In this context, the reform momentum established
in previous years should be maintained … to ensure equity between generations
and a smooth energy transition out of fossil fuels.”
This, said Gedeon, was exactly what was happening,
as Saudi Arabia works to diversify its economy and open up its society. As a
senior manager with the UAE’s Majid Al-Futtaim Group, the malls to hotels,
retail and entertainment giant, she had direct experience of the ongoing program
of social and economic reforms in Saudi Arabia when she worked on the
introduction of the group’s Vox Cinemas chain in the country.
Both of the Gulf states “will keep investing in
oil, but they are keen to diversify,” she said, and one clear way ahead is
“driving significant tourism to very beautiful countries.”
One thing that emerges strongly from the survey is
that climate change and sustainability issues are rising to the top of the
agenda for businesses in both countries. Asked how important sustainability was
to their business, 90 percent of respondents in the UAE and 85 percent in Saudi
Arabia said it was very important. Overall, only 2 percent said it was not
important.
Climate change was also seen as the biggest threat
to business in 2023 by 11 percent of respondents in the UAE, and 18 percent in
Saudi Arabia.
However, more surprising, and concerning, says
Gedeon, is the attitude that emerges from the survey in both countries toward
the thorny corporate issue of ESG, or environmental, social and governance, a
metric increasingly valued by investors and consumers as a measure of how
companies impact upon, and interact with, society and the environment.
In its recent 2022 Social & Governance Report, PwC
Middle East concluded that “embedding environmental, social and governance
principles across all areas of economic and social evolution is essential to
realizing the ambitions of our region, enabling it to become a leader on the
global sustainability stage.”
In the new survey, says Gedeon, “sustainability
and business growth top the agenda, yet what is clear is that while leaders care
about climate change, there is still a great deal of work to do around ESG,
which provides an opportunity for sustainable growth.”
The bottom line, she says, is that increasingly
“consumers want to purchase from and be associated with brands that have a solid
purpose, and that are doing good for the planet and the organization.
“Consumers will no longer buy a product from a
company or brand that is not respecting all of these sustainability and ESG
pillars, and companies that aren’t doing so will just become obsolete if they’re
not transparent about their policies and procedures, about how they’re
offsetting their carbon footprint.”
Again, government initiatives are likely to force
the pace. The staging of COP27 in Egypt last month, and the fact that the next
Conference of the Parties will take place in the UAE next year, has put
environmental and social responsibility issues front and center in the thinking
of governments, businesses and individuals throughout the region.
It is also hugely significant that the UAE and
Saudi Arabia, two of the world’s biggest oil producers, have committed to
achieving net-zero carbon emissions by 2050 and 2060 respectively — ambitious
targets that will demand the collaboration and cooperation of businesses across
every sector, and will almost certainly be legislated for.
One issue of concern that slightly overshadows the
overall confidence identified by the survey is the recruitment and retention of
the talent necessary for companies to perform at their best.
While overall 62 percent of business leaders felt
they had the right talent in their business going into 2023, there were
significant concerns about workforce challenges in the year ahead. Overall, 18
percent were worried about being able to attract talent, and 10 percent about
retaining the talent they already had.
Despite the generally positive experience of
remote working during COVID-19 lockdowns, a quarter of all respondents also saw
hybrid working as a challenge in 2023. One reason, said Gedeon, was because of
the unique nature of many of the big projects underway, especially in Saudi
Arabia.
“A lot of these projects are truly remote and you
need to be there, watching the project grow,” she said.
“If you’re developing on the Red Sea, it’s going
to be very difficult to manage the project operating from New York, London, or
even Dubai.
“So, there’s an eagerness to have people on site
at projects such as NEOM, and they are building staff accommodation and even
schools, making it exciting for people to work so far away from the capital and
other cities.”