I’m sticking my neck out here but I stand by what I say. The last 12 months have been of more significance to the future of the Gulf region than any other on record. And it’s to do with much more than simply a $100 barrel of oil.
When people living in the GCC in 2017 look back a decade it will be remembered for two overarching trends: setting the benchmark for future growth and development and having to react to some very tough questions.
Let me put this into a personal context. For me, 2007 was very different to 2006, both in a positive and negative sense.
My job as a journalist became 100 times more exciting with more money flying around the region, more deals being signed than ever before and more people willing to talk about it. Music to my ears.
Billions more dollars were spent domestically on property and infrastructure investment; an 800km mega metro project in Dubai rose from the desert, talk of huge railway systems at last connecting all four corners of Saudi Arabia became a funding reality; new schools, universities and hospitals were built and planned for a population that will boom in future years; and a quintet of knowledge economic cities, shopping malls, theme parks, reclaimed islands, sports facilities, apartments, villas and low to mid income housing were either all blueprinted for development or are taking shape far quicker than anyone ever imagined.
The amount splashed out on foreign investment also soared with Asian, European and North American governments and companies ironically far more at ease in accepting an inflow of Arab wealth following painful signs of an economic slowdown and sub-prime meltdown in more established markets. The world was no longer scared of Arab investment, and despite the occasional multi-billion dollar banana skin – the Qatar-Sainsbury’s supermarket deal – cheque books continued to drawn and signed faster than most Western hotshot gunslingers on key foreign brand minority and majority stakes as well as on a series of strategic takeovers. This included the $11.6bn purchase of General Electric’s plastics business by Saudi Basic Industries (Sabic); over $100bn worth of aircraft and engine orders signed off by Middle Eastern carriers at the Dubai Airshow; Abu Dhabi’s $7.5bn (4.9%) stake in Citigroup making it the single largest shareholder in the world’s largest bank as well as its second US bargain, a $1.35bn, 7.5% stake in Carlyle, one of America’s largest private equity groups.
Stakes were taken in iconic brands and businesses in sectors as varied as banking, property, energy, infrastructure, healthcare and manufacturing including the US$965.3m purchase of British luxury carmaker Aston Martin by a consortium headed by Kuwait’s Investment Dar; and Borse Dubai’s ‘ongoing acquisition’ (the US Securities and Exchanges Commission is currently examining the deal with an outcome expected in January) of a 20% stake in US technology exchange Nasdaq.
My personal highlight was a trip to Milan on UAE national airline Etihad’s inaugural flight to the Italian city alongside HE Khaldoon Al Mubarak, head of Mubadala, the Abu Dhabi government’s investment arm. The 34 year-old leader invited journalists to see the city and the famous Monza Italian Formula One Grand Prix, but that wasn’t the best bit. On one early autumn evening Mubadala paid $1m to host an exclusive reception and dinner at Milan’s castle in the heart of the city where images of Abu Dhabi’s bedouin tribes, ancient heritage and modern landmarks were beamed onto the building’s ancient high ramparts and dish dash wearing emiratis mingled with Armani strewn fashionitas. Never before had Italy’s glitterati witnessed an Arab country’s top representaives within its castle walls, but then again if that country owns 5% of Ferrari, any Italian will welcome you. It was a sight to be seen and one that summed up the year for many a foreign country welcoming Arab cash into its coffers.
On a wider economic level, however it was the answers, responses and non-responses to a string of tough questions that made 2007 the most significant in the Gulf’s 26 year history.
The biggest of these was and still is the sliding US dollar – an issue that has enveloped everyone. Pegged to every GCC currency, bar Kuwait’s Dinar, Gulf Central Bank governers faced a barrage of criticism and pressure in the latter part of the year for the way this was handled. News of an imminent revaluation of the UAE Dirham spread quicker than most forest fires with one ArabianBusiness.com story sending the dollar to a 17 year high against the Emirates’ currency. But to no avail, no revaluation came, however the knock-on effects have been and continue to be enormous. Indian and South East Asian labourers on major building sites in the UAE, for example, laid down their tools and went on several strikes in protest at poor pay. It’s simple, the Rupee is worth far less (As is the pound Sterling – when I first arrived in January 2006 at 6.0 Dirhams compared to 7.6 Dirhams today) than it was 12 months ago and if you’re earning as little as $150 a month, every penny counts.
Inflationary rates reached new highs across the GCC with rents soaring and demand outstripping demand in Dubai, staple foods such as rice and bread rose to record levels leaving those who earn the least even more out of pocket, while fuel prices, although low in global comparisons also increased. Wages, however, remained stagnant in many sectors and expatriates of all nationalities now spend far less than they were a year ago as well as potentially also re-thinking their decision to live, work in the Gulf or leave their countries of origin for a place in the sun. These issues will have to be addressed in the early part of 2008 or the pain will almost continue to spread until certain people can take no longer take it.
Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai answered several of the region’s most important questions including calling the policy-making role of ministries and the co-operation between federal and local authorities “confused”, “lacking strategic planning” and suffering from deficiencies in the legeslative and regulatory framework. He even went as far as to say that federal institutuions were “slow-paced and that the justice ministry in particular was “20 years behind the times” – all this in front of 1000 of the Emirates’ top officials and most influential decision makers. If that wasn’t enough sustainable green building regulations for all new construction was introduced and the Ruler announced that journalists would no longer be sent to jail if they were found guilty of libel.
So it was worth sticking my neck out then. Eid Mubarak and Merry Christmas to you all, and I hope you all have a very happy New Year.
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