Let’s get one thing straight: doing business in the Middle East is not about enhancing profit margins or improving your skills base.
Unlike emerging markets in Asia and Eastern Europe, this region does not have a ready supply of well-trained, hard-working people – nor are employees cheap – so if outsourcing’s your game you’d better look elsewhere. The reason? In oil-rich states around the Gulf coast government handouts and a ‘not what you know but who you know’ business ethic have removed incentives to work hard or take risks as an entrepreneur.
Of course, in a region as vast as this the opportunities will vary from place to place. In North Africa and Israel, where oil is missing, you are more likely to come across technical knowledge and cost savings.
The Middle East is home to seven top oil-producing nations who have become incalculably wealthy by punting their natural resources. This is great in principle, but it restricts what UK businesses can do there, and over-reliance on one export is stirring up problems down the line.
State perks have resulted in the distortion of oil-rich economies by encouraging population booms, while massive unemployment, a stifled work ethic and production skewed towards a finite commodity have all added to the mix.
Kuwaiti males, for instance, get huge cash sums at 21 and are furnished with yet more for getting married and having children. The country enjoys big oil reserves and a relatively tiny population, so wealth is assured regardless of effort.
The average Saudi national is just 21 years old, and nearly two thirds of the population is yet to reach that age. The unemployment rate is somewhere between 20% and 30%, while immigrant labour accounts for 88% of the private sector workforce – the jobs pay too little to tempt most nationals.
It’s almost as if the oil boom has made normal business rules irrelevant. Extreme wealth has rubbed out the need to gain qualifications or make shrewd business decisions.
But attitudes are changing and countries have resolved to diversify economies and improve education and training opportunities in order to head off future problems.
A spurt of development contracts is the result. Westerners who have entered markets in the Gulf coast states describe a business environment that is frenetic, surreal and unlike any other in the world.
Even though parts of the region are extraordinarily wealthy, many of the opportunities are more regularly associated with countries in the third world. Schooling, infrastructure projects and communications all present openings for foreign firms.
David Lloyd of the Middle East Association says education and training is a buzz industry in the Middle East, because of the growing emphasis on technical skills over religion in formal study.
“All the Gulf Cooperation Council states have mature economies, but of course everything is relative,” he says. “If you compare them to new knowledge economies in India, China and Western Europe, they’ve got a long way to go because they rely on immigrant labour from grass roots right through to senior management.
“You’ve got foreign workers filling jobs, in spite of a relatively low indigenous population. GCC universities teach Koranic studies and that means many graduates who enter the labour market can’t find the jobs they expect.”
High rates of immigrant labour and relatively low levels of relevant training makes hiring staff unattractive on the whole, but the fact that demand for training facilities is increasing presents opportunities in itself.
You may be surprised to learn that the British education system is much admired in the Middle East, and that companies from over here are already offering training courses covering the whole spectrum of occupations.
Matt Drinkwater, a Middle East specialist at research group FreshMinds, describes the potential for this service as “absolutely huge”, arguing that vocational learning has gained much ground in recent years.
“The Anglo-Saxon education system has an incredibly good reputation over there and United Arab Emirates is looking to establish alliances with foreign universities and is encouraging new learning facilities from abroad,” he says. “In Egypt there’s a big drive to set up training, especially in vocational industries.”
Construction is booming too – albeit less universally than education – and nowhere encapsulates progress more comprehensively than Dubai in the UAE, a country that is home to some of the Middle East’s more eccentric projects.
John Pragnell, managing director of Camtec, a manufacturer of hi-tech applications, has just come back from his second trip to the region; which took in Dubai, Abu Dhabi and Oman.
REACH FOR THE SKY
Pragnell, like others before him, was surprised by the frantic growth of the area. Dubai in particular is growing vertically at a rate of knots, with a legion of new hotels, shopping malls and, wait for it, man-made islands sprouting in the architectural equivalent of the blink of an eye.
“Dubai itself hasn’t got much oil, so it’s trying to become the Florida of the Middle East,” he explains. “They’re throwing up the tallest buildings in the world, the biggest shopping mall – complete with an indoor ski slope, whole new islands and underwater hotels.
“They’re building a Formula One track because they want to take it away from Bahrain. They decided to build a marina because they think it’s posh, and of course they need a new airport to bring all the extra visitors in.”
He describes Abu Dhabi as the ‘parent’ to Dubai’s ‘petulant child’. It is also developing quickly, but there is a sense that it is trying to be sensible about it.
Saudi Arabia, the world’s primary oil tap, produces more than nine million barrels of oil every day, and it has plans to up production to 12 million to accommodate increasing demand from gas guzzling bases in Asia and the US.
