richard thompson presentation final
TRANSCRIPT
Middle East Seminar Scottish Development international
Glasgow, 22 April 2015
#MEEDMiddleEastTrends
Russia sets sights on Middle East – WSJ 21 April Iraq pushes Isis from Ramadi – BBC 21 April US sends carrier to Yemen – Reuters 21 April Oil collapse changes everything – CNBC 21 April The Middle East is in flames – CNN 20 April China’s Middle East tightrope – FP 20 April
22 April 2015
Kuwait considers new tax rates – MEED 21 April Egypt opens wind farm bids – MEED 21 April People are problem for Arabtec – MEED 21 April Project finance deals rise in Q1 – MEED 21 April UAE Companies Law misses target – MEED 19 April UK role grows in Dubai aviation – MEED 19 April
GCC eyes medical tourism – MEED 16 April
22 April 2015
One of world’s fastest growing markets Driven by visionary policy and capital investment Challenges include population growth, oil dependence, poor infrastructure, lack of capacity, state-driven economy, energy and water scarcity Oil markets rise and fall but strategic goals are fixed
22 April 2015
350m people in 22 countries, and many more cities
Opportunities in every market, along with unique challenges Know your target market and stay focused Understand your customers’ needs Be committed, patient and adaptable
22 April 2015
22 April 2015
20% global oil supply and 40% reserves Economy to double to $2tn by 2020 Growth factors:
• Oil and gas
• Economic diversification
• Population growth
• Globalisation Non-oil sector now main growth driver led by banking & financial services, real estate and retail sectors will drive growth in coming years
22 April 2015
0.0
20.0
40.0
60.0
80.0
100.0
120.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
World Advanced economies MENA
projection
Opec basket oil price ($/barrel)
GCC growth
Source: IMF; OPEC
22 April 2015
Oil prices have fallen 52 per cent in 9 months since June 2014 Biggest annual oil price fall in history Oil delivers about 46% of the GCC GDP, 75% of exports and 84% of govt revenues
OPEC meeting 27 Nov
Brent oil futures 12 months ($/barrel)
22 April 2015
22 April 2015
Middle East Seminar Scottish Development international
Glasgow, 22 April 2015
#MEEDMiddleEastTrends
Oil prices
Regional geopolitical instability
Global economy
Leadership changes/succession
22 April 2015
• 350 million to 602 million by 2030
Significant challenges
• Youth bulge, more than 50% under
25, 67% under 30
• Need to create jobs and develop skills
• Meeting expectations of living standards
• Closing wealth gap and maintaining social cohesion
• Role of women
22 April 2015
• Heart of regional policy for decades
• Dependence on oil is unsustainable
• Region driving new industries
• Manufacturing, tourism, finance, logistics, ICT
• Private sector is key
• Entrepreneurs are key 22 April 2015
• Rising population and growing industrial base increasing demand for energy
• 34% increase in generation capacity 2020
• 2.2 billion gallons a day of desalination capacity is required by 2020
• Current supply cannot meet demand • New sources needed – renewables, nuclear, EOR
• Energy efficiency – new approach
•
•
•
•
•
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• Skill up local workforce to compete – academic and vocational
• Knowledge transfer a priority
• Support diversification, jobs, retain talent and self sufficiency
• Drive investment - $21.8bn projects in GCC
• Also education reform - maths, sciences, and critical thinking
• Dubai, Abu Dhabi and Qatar aim to be regional hubs for higher education
• Saudi Arabia pushing technical training
• Major challenge for policy makers
• Youth bulge – 67% under 30
• 4 million jobs needed in KSA in 5 years • Saudi unemployment - 12%
• Private sector has only 1 million
• Almost half unemployed have degree
22 April 2015
22 April 2015
0
20
40
60
80
100
120
12
13
14
15
16
17
18GCC oil production (m b/d)
Oil price ($/barrel)
Peak?
22 April 2015
145.8
137.2 132.6 130.2 129.7
113.2 109.4
73.6 65.3 62.8
0
20
40
60
80
100
120
140
160
180
200
Libya Iran Algeria Bahrain Iraq Oman SaudiArabia
UAE Qatar Kuwait
Breakeven oil price ($/barrel)
2014 215 2015* na
$65/barrel
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0
50
100
150
200
250
300
350
400
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GCC current account, 2002-13 ($ bn)
$2.1tn GCC current account surpluses since 2001
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0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Val
ue
of
con
trac
ts a
war
de
d (
$m
)
Value of Contracts awarded 2007 - 2012 Budget of contracts to be awarded 2013 - 2017
Comparison of future project contract awards pipeline against awards over the past five
Source: MEED Projects
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0
10
20
30
40
50
60
70
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
22 April 2015
Source: MEED Projects
• Major challenge for markets with high debt and limited hydrocarbons – Dubai, Egypt, Jordan
• Regional banks highly liquid and prepared to lend
• Region looking for innovative financing solutions Sovereign bond issues Private finance models e.g. PPP Equity raising through IPOs Export credit agency support Contractor finance
22 April 2015
• State main driver of growth and jobs for decades
• Unsustainable -Expensive and inefficient
• Roll back the state and stimulate the private sector
• Reforms will be needed
• Open up for private sector – PPP
• Stimulate entrepreneurship
• Taxation – diversify state revenues 22 April 2015
• 60% of UAE GDP in 2011 and 92% of companies
• Businessses relocating to Dubai as hub - Logistics, tourism
• Start ups rising - Most in retail, services and manufacturing
• Initiatives to increase access to capital and reduce costs
• Big family firms dominate and benefit from patronage
• SMEs differentiate on quality but drives up cost
• New regulations – proposed SME law and new companies law
• Red tape, licences and visas 22 April 2015
• 77 million people
• World’s biggest gas reserves
• Region’s second biggest economy
• Trade and investment opportunities But
• Impact on energy prices
• Tense geopolitical relations
22 April 2015
• Oil prices will stay low • Geopolitical tensions will remain high • Governments will rein in spending • Business has lots of questions But this is normal • Don’t lose sight of what is driving regional policy • These 10 trends are key but many other drivers • Many challenges but the opportunities are great
Strategic conclusion • Stay focused and consistent • Understand your customer’s needs • Remain committed • Be flexible
22 April 2015
