High-growth, oil-exporting Middle East markets are now top of the agenda of global business and competition in these and other buoyant emerging economies is growing rapidly.

Speaking at the 8th Arabian Hotel Investment Conference (AHIC) on 29 April 2012, co-founder of the CEEMEA Business Group Nenad Pacek named Saudi Arabia, Qatar, the UAE, Kuwait and Algeria as offering the best prospects in 2012 and 2013. Jordan and Lebanon were in recession and growth in Turkey was slowing. He said business prospects in Egypt, Iraq and Iran depend on uncertain political trends.

Pacek said that competition was now a critical factor in emerging economies “To accelerate your growth you need to embed speed and urgency into your response to the competitive challenge in high-growth emerging markets in Mena and elsewhere. Speed is of the essence.

Out-performing the competition

“The ultimate guiding principle for companies operating in emerging markets is how to out-perform the competition,” Pacek added. “The second principle is how can they make their businesses in emerging markets sustainable. If you don’t have deep roots in high-growth markets, you will suffer a competitive disadvantage.”

Pacek expects the oil-exporting economies of the Middle East to grow robustly in 2012. “These markets are doing well by global standards. Middle East oil-exporting countries have savings of about $2.2 trillion; a phenomenal amount of money. Their fundamentals are good.”

The region cannot be described as one entity and should be divided into several sub-groups, Pacek said. “Saudi Arabia, at the moment, for our corporate clients is one of the fastest-growing markets on earth…we are seeing growth in some Saudi businesses of more than 30 per cent. This is where your business should now be flowing; into Saudi Arabia.”

The UAE will grow by about 4 per cent in real terms in 2012 and perhaps this year and next we may see a return of some of the investments that have been planned and postponed in Abu Dhabi. Dubai has recovered, although its debt is larger than its GDP. There’s been some debt restructuring and Dubai is being helped by the phenomenal growth in tourism.”

Elsewhere in the GCC, while there is a $150bn spending plan in Qatar, good growth in Kuwait is hindered by low investment.

Growth factors

In North Africa, he said that there are strong prospects in Algeria, although Morocco is suffering because of drought, which is hitting GDP growth figures hard. “Morocco’s economic prospects depend heavily on agriculture and this in turn depends on the weather,” said Pacek.

“Tunisia was in a recession last year and is still recovering from the economic impact of the political change that took place in 2011. But this market should go through this transition without too much difficulty.

Libya is recovering from civil war, which halved its GDP last year. “It should recover it all this year. The problem is the challenge the National Transitional Council is facing in restoring order. We have to wait until we have proper elections in 2013, so no major projects will be announced in Libya in the next 12-14 months,” Pacek said.

“Presidential elections are due in Egypt in three weeks and there are four candidates. It’s difficult to know who will win. The military is due to step out of the picture by 1 July, but there is still a lot of uncertainty.”

Jordan is struggling and is going into austerity, Pacek said. In Lebanon, prospects have slowed, due to falling political, consumer and investment confidence.

“The Turkish economy is also slowing down and going through a soft landing,” Pacek said. “The trouble with its very high growth rates was that it was not sustainable. The government will want to slow down imports and corporate buying from abroad. It will try to engineer the Turkish lira down. The main problem is the current account deficit. Still, many companies continue to prioritise Turkey.”

Iraq is growing by almost 10 per cent a year, he said, but 70 per cent of companies in the country saw no business growth last year because of political issues and the fact that the oil money has not found its way into the wider economy. “The main risk is political risk. But if politics stays calm, this market should grow by 9-10 per cent a year,” Pacek predicted.

“The latest talks in Istanbul between Iran and Western negotiators went surprisingly well,” Pacek said. “It seems that things may be calming down…this could mean that some of the tough sanctions that have been imposed may be lifted. At present, it is in operational terms the most difficult market in the region.”