An economic renaissance

It has been a great year for business in the Middle East and, for the inaugural issue of Arabian Business International, we decided that the best way to demonstrate the region's rising economic power was by showcasing our 2007 list of the 50 richest Arabs. With a combined net worth of US$239.74bn, which will undoubtedly continue to grow significantly, the 48 billionaires will stand a good chance of making the cut next year - but they cannot be complacent.

There are at least fifty other business leaders who are aggressively expanding their operations in the region and internationally, and, with the double digit growth in some Middle Eastern economies, the number of Arab billionaires is certain to hit 100 in just a few years.

Why are Arabs racking up the billions? Well, most of the economies of the region have awoken from centuries of slumber, and the race for modernity is on. Of course the oil producing countries are leading the way in development, growth, and wealth due to the meteoric rise in the price of oil. It is hard to believe that the cost of a barrel of oil in 2001 was US$22, while it is now closer to US$100. The influx of these petrodollars has transformed the six countries (Saudi Arabia, Qatar, Bahrain, Oman, Kuwait, and the United Arab Emirates) that make up the Gulf Cooperation Council (GCC) in a profound way.

On the ground cities are being transformed. Just about everyone has heard of Dubai, but older cities across the Middle East are also undergoing massive development - Saudi Arabia and Oman are building entire new cities from scratch. Man-made islands, mile-high skyscrapers, and shopping mega-malls are the transformations that are visible to the naked eye, but the economies are also undergoing deep structural reforms that can accurately be characterised as revolutionary.

The Middle East has historically been known as a region that not many global businesses would consider as a home for investments. Other than companies looking to extract wealth (oil and gas, consumer retail, and car manufacturers) the region was inhospitable to foreign investments. This led to the emergence of local conglomerates - many of whom are prominent on the rich list - but did not do much in fostering competition and transparency.

Today the scene is very different. Liberalisation is in full swing. Financial markets are becoming more efficient, and indeed Sharia-compliant assets (financial holdings that conform to Islamic law) will reach US$1 trillion by 2010. Everyone wants a piece of the pie, from Goldman and Google to Australian mining companies, global businesses have taken notice of the Middle East and are keen to take part in the growth.

But, as history shows, the Middle East is not a place that can be easily exploited, and those who enter must do so with caution. Foreigners interested in coming here need to understand the culture, religion, and even the language to be successful. It is no longer acceptable to live in an isolated compound in the heart of Arabia. To gain a footing in the region, companies need to invest in developing local talent, transfer knowledge and technology, and market their wares to the Arab consumer. The reason for this is simple: the rise in wealth is correlated to the rise in power. And the power is real.

The slump that Western banks felt last year was alleviated in some ways by a US$7.5bn investment that Abu Dhabi's sovereign wealth fund injected into Citigroup. This may seem like a lot of cash, but it is less than 1% of its portfolio. For the next 12 years, this one fund's managers will be looking at more than US$1bn in investible cash every week if the average price of oil stays above US$50 per barrel. The long predicted shift in power from West to East is happening now - and what better hedge is there than to be in the Middle?

Arabian Business magazine has been saying this for the past decade. Starting our international edition with a display of the wealth in the region, we aim to shine a light on the business scene and deliver tips that will help international players navigate the region. In the coming months, you will get to know the major leaders, the movers and shakers, and the up-and-coming Arab entrepreneurs. To paraphrase Robert Frost; I look forward to guiding you along the road less travelled, and I am certain that it will make a difference.

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