When you’re thinking about expectations for the year ahead, it’s interesting to look back before looking forward. This time last year, I shared my thoughts for 2022 and it’s interesting to compare predictions against what actually transpired.
On the first theme, ESG, I’m pleased to report that I got it right. It has become a key business driver in the region in 2022 and I’m absolutely certain that 2023 will see much more of the same.
The carbon neutral commitments made by the UAE and others at COP26 in Glasgow have gathered momentum and meaning, and, with COP28 happening here in Expo City Dubai next November, this will continue to be high profile in 2023. It is now a secular theme that I’m confident I could be writing about until 2050 and beyond.
The region is serious about decarbonisation and it’s in a hurry. Recently, I was in a meeting with a visiting foreign delegation and one of the largest sovereign wealth funds in the Middle East (and globally).
Top of the SWF’s agenda, before any talk of mutual trade and investment, was decarbonising their supply chain, with an understanding that the key industrial materials of cement, ammonia, polyethylene, aluminium and steel are where the biggest prizes and therefore main challenges lie. This is where great opportunities exist for foreign companies who can bring IP, technology and knowhow to the region to accelerate the transition.
This megatrend – and I think we can safely call it that – will also see the region’s Smart Cities initiatives gather pace. In reality, every city in the region needs to become smart to reduce its carbon footprint and remain fully liveable in a hot region and a warming world. Therefore, fewer headlines on eye-catching ephemerata such as flying taxis, and more on the increased share of renewables, applying AI to complex urban problems, and efficient use of water would be welcome.
Last year I didn’t foresee the flurry of IPOs in both Dubai and Abu Dhabi, and I do expect these to continue as a means of raising capital, increasing liquidity, and economic rebalancing. With the global travel rebound having been stronger than almost anyone predicted, might this be the window for Emirates Airline to go public? (And imagine the feeding frenzy if it does!)
For 2022, I wrote about the increasingly active and combative nature of FDI attraction in the region and this has also come to pass. Whilst this seems to be less by compulsion than before (the KSA headquarter mandate has gone quiet) it’s no less competitive as countries throughout the region roll out ever more compelling initiatives to attract and retain talent, capital and corporations.
Consider some of the changes we’ve seen here in the UAE in the last 12 months – starting with the shift to the Saturday/Sunday weekend (which we’ve all probably forgotten about now as ‘a thing’).
The biggest reforms have been on the talent attraction side with wholesale changes to the system around visas and immigration, and a plethora of new arrangements for foreigners to avail of, allowing people to come and search for work, study in the UAE and stay without sponsorship. These are all seismic developments relative to where we were a year ago, and have played a major part in the UAE’s post-Covid resurgence.
It’s hard to know what else is up the sleeve of governments in the region, but it’s also certain that we haven’t see an end of new schemes and that I expect to be commenting on these this time next year, even if I’m not brave enough to predict what they might be.
With global energy prices set to remain high for the foreseeable future, and certainty of supply in regions like Europe being unclear, the Middle East will continue to see resulting FDI flows from companies that need stability of power supply and predictability of pricing to manufacture and produce their goods. How this is balanced against sustainability requirements and the drive for net zero remains to be seen, however.
High energy prices are obviously the main driver of the current surfeit of both confidence and liquidity in the region and whilst there’s little expectation that these will decline in 2023, it’s also fair to ask whether the Middle East can remain immune to the economic headwinds much of the rest of the world is already facing.
Open, trading economies like those of the Middle East are, by definition, exposed to the rhythms of the global economy, and it may well be these extraneous factors that pull the region down much as the current rosy forecasts for GDP growth in 2023 seem to be accurate.
Having first arrived in Dubai in June 2008 at the very zenith of the credit boom I then saw, first hand, the brutal fall out of the subsequent onset of the Global Financial Crisis in the UAE at the end of that year, when reality finally came home to roost.
Much as I don’t think anyone is predicting such a tempestuous downfall this time around, it’s also a fair reminder that the region is impacted by global trends and can’t run on a completely divergent path.
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