Time to build on the positives

Wasn’t 2006 great? As far as I can tell pretty much every major business sector in the region experienced some kind of growth. Well, almost.

Property boomed and continues to boom with the region’s major developers redefining the words ‘mega’ and ‘ambitious’ with a plethora of monumental projects announced. It’s safe to say that in the next 25 years the Middle East will have some of the most awe-inspiring properties and modern landmarks around.

The downside: that house and rental prices are rising faster than most apartment blocks can come up.

Talk of a crash may have been dismissed for now but is on the horizon in just over 12 months' time. 2006 verdict: Exceeded expectations and can only get bigger in 2007.

Tourism and hospitality saw unprecedented numbers of visitors log onto travel websites on their home PCs to find the best deals to fly to the Middle East. Dubai may be leading the way for now with even more glorious five-star hotels and attractions coming up, but the other emirates and nations around the region have now finally decided to try and match the UAE and show the rest of the world what they have to offer. Abu Dhabi is rising up fast and proving its attraction as a capital city, while major plans in Kuwait, Jordan, Bahrain, Qatar, and Egypt as well as inspiring projects in Lebanon will inevitably spread out the growing number of holidaymakers across the region. 2006 verdict: The region again played catch-up with Dubai but its pace will intensify and larger numbers of tourists will be driven to travel across undiscovered parts of the Middle East.

The pressures in the aviation market have been and continue to be immense. The threat of terrorist activity has risen year on year since 9/11 and new security methods are costing businesses millions; fuel prices continue to hammer away at company revenues as well as increase the pressure on airlines to comply with environmental standards; while competition is becoming increasingly fierce with the budget airline market growing in popularity across the region, Air Arabia leading the way, and routes such as Dubai/London being contested by a mass of mega-carriers. Robust regional airlines however, bucked the trend in 2006 and managed to withstand a barrage of external pressures. Emirates once again dominated, Etihad took a slice and poached Gulf Air’s CEO James Hogan, Abu Dhabi pulled out of Gulf Air in February leaving it with only Bahrain and Oman and talks of a takeover, while British Airways and Virgin stepped up their efforts in the region.

2006 verdict: The dominant players, well, dominated and things won’t change in 2007. Etihad will expand even further and challenge Emirates at the expense of smaller carriers. New licences in Saudi will open up an untapped market and Airbus will face compensation claims over the delay of its A380. Expect more turbulent times in aviation.

The financial services sector in 2006 has undergone a revolution in retail, private and investment banking with home-grown finance houses experiencing outstanding growth in local markets using Islamic finance to their strengths. And the international institutions haven’t done badly either, gradually entering the majority of countries in the region and rapidly expanding their product portfolios by converting more conventional Western banking products into Sharia-compliant instruments. The West has shown its hunger for Islamic finance products and why not, it is one of the fastest growing markets on the planet and they want a slice. This can only be good news for the early adopters. Over the next decade a host of local banks will either open new Islamic banking subsidiaries or decide to convert from conventional to Islamic operations.

Dubai Bank will convert next year, while Dubai Holding will launch Al Noor Islamic Bank. Islamic banking will become a global phenomenon in 2007 with local banks leading the way. 2006 verdict: Home-grown banks rightly took advantage of the sector’s huge growth potential and saw both profits and the number of Islamic products rise dramatically. This will double in 2007 and intensify the need for more international players to get in on the act.

I have dedicated the majority of this page to the positive side of the last 12 months for a reason. These are the things we should celebrate and encourage, however, we also have to be aware of the issues that could and will inevitably stall some of this progress. Record lows in the region’s stock markets, soaring oil prices and increasing political tension and conflict in Lebanon, Palestine, Iraq and Afghanistan as well as serious ongoing diplomatic issues with Iran, and further afield, North Korea, have blighted 2006 and will continue to do so in 2007.

So, as we enter 2007, let us not forget the pressure points but equally value and build on the positives that 2006 brought to the region. A Happy New Year to all our readers.