Instability in countries such as Lebanon and Sudan is no longer the determining factor in shaping business confidence as the Arab world rewrites the rules for large scale investment, according to a new report launched today.
The findings were released at a special session during the Arab Strategy Forum where Moutamarat unveiled the second CEO Arab Confidence Index (CEO ACI). This indicator is based on the same methodology as the USA Conference Board Measure of CEO confidence. Moutamarat, a joint venture between Tatweer and the Saudi Research Group, had teamed up with leading consultants PricewaterhouseCoopers, creators of the US Index, to compile the data for the CEO ACI.
One of the surprise packages of the second CEO Arab Confidence Index was Lebanon, where confidence levels at 62 per cent had hardly budged from the previous year’s 64 per cent. Remarkably, this is well in advance of business confidence levels in the US, where it has been calculated at 44 per cent this year, a 21 per cent decline from previously.
The survey began a month before the war in Lebanon and continued after the ceasefire on August 14, so it was able to accurately assess the impact of the conflict. “The survey results show that the war had a limited impact on levels of confidence in the Arab world,” said Khalid Al Malik, CEO of Moutamarat, during the briefing at the Forum, held in Dubai’s Madinat Jumeirah.
The stability in overall confidence in Lebanon was reflected in the general regional picture, where almost eight out of ten senior executives who took part in the recent Arab Business Intelligence Report survey, which provided the data for the Index, said economic conditions had improved in the past 12 months. A further 81 per cent said business would improve again in the coming year.
The region’s 2006 confidence score came in at 76, on a par with the previous year and well ahead of the US, for example, at 44 per cent.
The results of the new, extended survey show that confidence among business leaders in the Gulf region is running at 80 per cent. Mr. Al Malik added: “Confidence remains high among the region’s business leaders and this is a good indication not only of the past year but of expectations for the coming 12 months. It is increasingly apparent that what we have with the CEO Arab Confidence Index is a highly accurate tool which year on year can predict future economic performance.
“The extraordinary optimism among the Arab business community, conveyed through the previous ABIR, is confirmed this year. This is even more remarkable in the context of a challenging year for the Arab world and offers proof of the Index’s ability to measure confidence.
“With 81 per cent of those surveyed saying they expect even better conditions next year, we can be confident that ABIR III will be worth waiting for.”
While the level of economic confidence has remained stable the breakdown of the figures shows some clear indicators of emerging trends. The high GCC confidence level, for example, is not uniform but is being driven by Saudi Arabia where confidence is running at the astonishing rate of 86 per cent. Qatar, at a level of 83 per cent, is only marginally behind KSA, while Oman is close behind on 81 per cent.
Yet despite the strong evidence of optimism, the report identified a shortage of human capital as the main threat to growth and one that is increasing - up to 33 per cent this year from just 20 per cent previously. The report said: “The lack of available talent is felt acutely across all parts of the regions.
“The quality of labour supply in the domestic market is considered lower than in the international market and many believe this is not economically sustainable. Arab countries need to improve the quality of their domestic labour.
“The focus is therefore shifting from importing labour to recruiting, training and developing home-grown talent. The potential shortage of key talent combined with the extensive growth that many companies are expecting has created a major challenge for business leaders.”
Michael Stevenson, Senior partner of PwC Middle East, said: “The Confidence Index, with the Arab Innovation and Labor Market indexes provide even deeper insights into the most relevant Arab world business issues. These three indices combine to form a sophisticated and accurate tool for both Arab business leaders and CEOs on a global scale.”
