PwC's man in the Middle East says governments in the Arabian Gulf need to be extra careful in the wake of the euro-zone fallout but their fiscal reserves will help to see them through
Fouad Alaeddin is the managing partner for the Middle East at PricewaterhouseCoopers (PwC), a global accounting firm. Based in Jordan, he spends much of his time in the Arabian Gulf and elsewhere in the region. Here he gives his perspective on the broad themes affecting business and economy.
You recently attended the World Economic Forum (WEF) in Istanbul. What did you take away from the meetings there?
It was a bigger meeting this year because it took in Eurasia as well as the Middle East and North Africa. It was good because more people attended and you got a wider range of views. But the issues are different for different regions. We had some good private sessions on infrastructure and talent, both of which are very big concerns for the Middle East but, of course, are viewed very differently in Europe. The bilateral meetings are very important though and allow you the chance to network and get some real business done. That was the real value of the WEF.
Do you think participants were distracted by the euro-zone crisis?
What came out for me was the contrast in the way the US and Europe approached the fallout from the economic crisis. In 2008-2009, the Americans decided just to throw money at the problem and they achieved decent recovery in a few months. In Europe, it's lasted much longer and the economies of the euro zone and the rest of the world have been affected. To that extent, it was a distraction but, of course, it's of vital interest to the Middle East, where imports and exports are so oriented to the euro zone. Just as important for the region is the effect on oil prices. When they're falling, as they have been during the euro-zone crisis, the psychology takes over for the Gulf region and governments have to be more careful. It's a good thing they built up financial reserves over the past couple of years, that will help see them through.
Employment and talent are big issues for the Middle East. Can you explain how PwC sees the future here?
They are very big issues indeed, with the need to find 70 million new jobs over the next eight years. We've completed a region-wide study of employment and some of the trends are surprising, and a little worrying. There are challenges everywhere. For example, female employment in the Middle East is around 21 per cent, against 40 per cent globally. The region is exceptional in other ways too. Some 31 per cent of employees surveyed said they'd like to work for themselves, rather than a boss. And 14 per cent said they'd like to work 'virtually', rather than from an office or plant, compared with 7 per cent worldwide. Is it reasonable to expect that many people to be entrepreneurs and 'virtual' workers? Maybe not. More than 50 per cent of young employees said their managers found it difficult to relate to them, and a big proportion are looking for new opportunities. There isn't the loyalty factor in employment any more. At PwC we don't mind too much if there's a high level of 'churn' of young employees because they become ambassadors for the firm and will retain their connections to it.
How can policymakers approach the issue of youth unemployment?
It's a difficult question. We need to look at why this imbalance is happening. There is a lot of labour supply coming over the next few years but we need to match it to demand. So businesses have to make an investment in local and national employees. But maybe we should think about the supply side, too. I'm not suggesting anything as dramatic as the Chinese model of population control but maybe more education. It's a huge political and religious issue, and is not uniform across the region. Look at the falling national population in the UAE, for example, compared with the soaring local population in Egypt.
Do you think it's desirable for regional governments to get more involved in business and the economy?
Governments are obviously a huge player in business, especially in the GCC, and there are some advantages. Governments can think strategically and get things done quickly. But they are not always very efficient. In principle, it's good, even for cash-rich governments like we have in the GCC region, to get the private sector more involved.
You've seen a boom in restructuring business in the region, especially in Dubai. What's your view on the emirate's current situation?
Dubai is in a strong position, with lots of infrastructure advantages, for example, over somewhere like Bahrain. That's why financial firms are moving to Dubai. Tourism and retailing are back in a big way, so the Dubai model has a lot in its favour. But there are still legacy issues, especially in property and finance. I believe they are getting through it slowly but in an organised manner. It's not such a big risk any more.