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Thu 9 Jun 2011 01:00 PM

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Ethnic tensions key threat to Saudi businesses, says poll

Top executives say social tensions as among largest risks to companies in Gulf’s wealthiest state

Ethnic tensions key threat to Saudi businesses, says poll
(Getty Images)

Simmering social and ethnic tensions are among the biggest threats to businesses in Saudi Arabia, a survey of senior executives in the Gulf’s wealthiest economy said.

Some 22 percent of executives cited ethnic hostilities as the top risk to their business in a poll by Oliver Wyman and IBOPE Zogby International, up from three percent in December 2010.

In neighbouring Gulf state Qatar, four percent of executives saw political unrest as a threat to business, a number that rose to 10 percent among UAE respondents.

The world’s No.1 oil exporter has rushed to sidestep the wave of Arab Spring revolts that swept parts of the Middle East, ousting rulers in Tunisia and Egypt.

King Abdullah has pledged to spend $130bn on education, housing and social welfare and ordered the creation of hundreds of jobs for Saudi nationals – steps that have helped ease concerns of unrest in the Gulf’s most populous state, the survey found.

Only seven percent of Saudi-based executives said they believed an internal change in leadership is a major threat, compared to 21 percent who highlighted the issue in December.

The fear of unrest in the world’s biggest oil exporter helped propel oil to a two-and-a-half year high and any further price hikes risk a serious headwind to the global economy recovery, Cesar Perez, chief investment strategist for JP Morgan Private Bank EMEA told Arabian Business.

“[Saudi Arabia] is vital. More disruption in Saudi and I see the oil price will go to $150 or $180,” Perez said. “Do you worry then about inflation? No, I worry about recession… If Saudi goes the way of Libya it could trigger another global recession. That would be the nightmare scenario.”

A blanket ban on protests in the Gulf’s wealthiest state and a heavy police presence in key cities has, to date, quashed rumblings of unrest in the kingdom.

Despite concerns over the impact of the Arab Spring, respondents were broadly confident business conditions were set to improve. In Qatar, 92 percent of those questioned predicted the business environment would improve over the next two years, up from 83 percent in December. In the UAE, it stood at 65 percent, down slightly from 70 percent six months ago and in Saudi 81 percent forecast a rosier two years ahead, up from 76 percent in December.

“Longer term confidence seems mostly untouched by recent regional events. Fear of contagion appears limited,” the report said.