Despite a precipitous decline in oil revenues, continuing conflicts in Syria, Iraq and Yemen, and concern with Iran's agenda, business leaders in key Arab Gulf countries remain confident about economic prospects for their region. This is one of the findings of a recent survey conducted by Zogby Research Services (ZRS) for Oliver Wyman, a global business management consulting firm. The ZRS/Oliver Wyman collaboration began in the midst of the 2008-2009 worldwide economic meltdown. The survey looked at how the downturn had affected business confidence and how executives felt their respective governments had performed in response to the crisis. Over the past six years, we have conducted semi-annual surveys of business leaders in Saudi Arabia, the United Arab Emirates, Qatar and Kuwait. We sought to measure business confidence, identify trends and pinpoint economic reform priorities and the concerns of business decision makers across the region. The four countries covered have a combined gross domestic product of $1.5 trillion — placing them directly after Canada and ahead of Australia and South Korea. Even with the decline in oil prices, their economies have remained strong. Governments have tapped into their substantial reserves to continue ambitious domestic projects that include developing infrastructure and creating jobs to absorb growing populations. The success of the economies of these countries is not only important for their own people, but for the millions of expatriates who work there, sometimes under difficult circumstances, and who annually send $50 billion to their home countries, making this region the largest source of remittances in the world. They face challenges and problems, to be sure, and 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 and crises facing the region, it is remarkable that an overwhelming majority of the business leaders surveyed said that current business conditions in their country had improved over the past year. Executives in the UAE and Kuwait were especially bullish, with 93 per cent responding in the affirmative. The high level of confidence in the UAE is noteworthy since it marks the sixth year in a row that confidence levels have risen in that country. Back in 2009, only 15 per cent reported that business conditions were improving. In 2010, the percentage jumped to the mid-40s. In succeeding years, the levels continued to rise to where they are today. There was also good news from the Saudi and Qatari business communities. In both countries we had witnessed a steady decline in confidence, from near 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 rose to 79 per cent, while in Qatar it was 89 per cent. Looking forward, three quarters of executives surveyed project that business conditions will improve even further in the next two years. Where do they see investment opportunities for growth? The most promising arenas are in developing countries, continuing a trend we have been observing of the region's investment focus shifting from the West to the East. There are some noteworthy exceptions, with Saudis still seeing their major opportunities in the West; business leaders in the UAE find their best prospects for growth in projects at home. What do they perceive as the biggest threats to business conditions? Not surprisingly, more than half of executives in Saudi Arabia and Qatar, and even those in Kuwait, point to “internal changes in leadership.” In the UAE, on the other hand, recalling the impact of the worldwide economic recession in 2008-2009, two thirds of executives were concerned 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 point to the broader region's military conflicts as a problem that could pose a threat to business conditions. In this context, we asked business leaders for their assessment of the value of Gulf Cooperation Council (GCC) states acting as a unit. While there was across-the-board support for the GCC, it was mostly tepid support. The only country where we found strong support was in the UAE, where two thirds strongly agreed that there was value in Gulf countries operating as a unit. In the other three countries, only one in seven gave the GCC strong support, with another three quarters saying they only somewhat agreed that the GCC had value in addressing regional challenges. When asked about the impact that the opening of the Iranian economy might have on the GCC region, executives took a rather pragmatic view of this possible outcome of the P5+1 negotiations with the Islamic Republic. Overall, a substantial majority saw it as a positive development, with only one in ten seeing it as negative (another 15 per cent were “unsure”). 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 or contribute to a further lowering of oil prices. 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 be their ability to invest in Iran, while Saudi and Kuwaiti executives regarded Iranian investment in the region as the main benefit. In the end, the ZRS/Oliver Wyman findings reveal a GCC business leadership that is confident and resilient in the face of multiple regional crises. At the same time, there is a capacity to be pragmatic and creative in finding solutions to vexing problems and identifying new opportunities for growth. The writer is president of the Arab American Institute.
