Feb 12, 2020, 1:18 AM ETConference Presentation, Panel

Morning Program - Opportunity in the Middle East: A Road Less Traveled

The Milken Institute MIA Summit in Abu Dhabi marked the beginning of a high-impact year for the GCC, featuring the G20 presidency in Saudi Arabia and Expo 2020 in Dubai.
The region is actively pivoting from a commodity-centric model to a knowledge-based economy, necessitating a transition where renewable energy and innovation replace hydrocarbon dominance.
The UAE ranked 5th globally in the "Readiness Index" (2019) among 140 countries, specifically ranking 1st in government strategic planning and horizon scanning.
The UAE's economy is projected to face significant structural challenges as oil depletes, requiring a shift in governance from state-operated assets to a regulatory framework that fosters private sector competition.
Demographics in the GCC present a unique advantage: approximately 60% of the population is under 30, contrasting with the aging populations and lower labor productivity seen in the rest of the world.

US Ambassador John Ricolto Jr. identified four pillars of the US-UAE partnership: a common language (English), people-to-people connections, fiscal fairness, and a willingness to assist in times of need.
The Ambassador prioritized a "deep strategic review" of the bilateral relationship to define the partnership's trajectory over the next 10 to 50 years beyond current security and energy cooperation.
Eight key areas for future US-UAE economic cooperation were identified: early-stage technology, financial services, energy efficiency, education, healthcare, and water management.
A critical prerequisite for attracting foreign direct investment (FDI) and innovation is the establishment of a robust legal framework protecting intellectual property rights.
The UAE's "Year of Tolerance" included the historic visit of Pope Francis and the announcement of the "Abrahamic Family House," designed to co-locate mosques, churches, and synagogues.
The UAE ranks among the leaders in gender representation, with 28% of cabinet members and 50% of the National Federal Council being women.

Bahrain CEO Khaled El-Romehi cited the 1920s collapse of the pearling industry due to cultured pearls as a historical parallel to the current risks facing the oil-dependent economy.
Bahrain's 2004 deregulation of the telecommunications sector serves as a model for moving from a state-operated monopoly to a competitive market.
Following the introduction of competition (Zain, STC) in 2004, the telecom sector grew by 70%, consumer mobile prices dropped by 50%, and employment opportunities expanded for nationals.
The success of Bahrain in attracting Amazon cloud computing infrastructure was directly attributed to the competitive, deregulated environment created by the state sacrificing its own national telecom profits.
Leadership courage is required to navigate the initial volatility and job losses associated with deregulation before the market realizes long-term efficiency gains.

Mohamed El-Ardi (Invescorp) identified four mega-trends driving the region: geopolitics, demographics, urbanization (GCC average >80% vs. global 50%), and accelerated technological progress.
While the Middle East remains geographically volatile due to regional tensions and global power competition, investors continue to enter the GCC because projected rewards consistently outweigh the priced-in risks (e.g., higher insurance and financing costs).
The GCC has demonstrated resilience over the last 50 years, maintaining stability and growth despite shocks such as the 1990 Iraqi invasion of Kuwait and recent tanker attacks.
The private sector faces the challenge of adapting to rapid social changes, including the introduction of entertainment, music in schools, and new cultural councils in Saudi Arabia.

Abdullah Zamil (Zamil Industrial) noted that while Vision 2030 faced skepticism initially, the private sector showed recovery signs by late 2019, with cement sales up 24-25% and the non-oil purchasing manager index at a multi-year high.
The IMF's projection that Saudi Arabia would "run out of cash by 2020" was refuted by actual fiscal performance, indicating that linear economic assumptions failed to capture the impact of transformation initiatives.
Opportunities in Saudi Arabia include the "Umrah Plus" program aimed at increasing annual visitor numbers to 30-40 million by integrating pilgrimage with cultural and tourism sites.
Structural reforms include the privatization of non-core government services (e.g., medical imaging, labs, long-stay hospitals) rather than public hospitals themselves.
Youth unemployment in Saudi Arabia has decreased from roughly 12.9% to 12%, though challenges remain in creating "quality" long-term jobs versus short-term retail or tourism roles.
The NEOM project is a central pillar of Vision 2030, aiming to create a new ecosystem for clean energy, logistics, and technology, with the Public Investment Fund (PIF) acting as a necessary catalyst to attract private follow-on investment.

Governments face the difficult task of restructuring budgets as oil prices stabilize in the $40–$60 range due to US shale production and global technological shifts.
Removing subsidies on utilities and gas prices forces the private sector to become more efficient but risks immediate growth slowdowns if not managed carefully.
Mohamed El-Ardi advised against relying solely on taxation to generate non-oil revenue, warning that aggressive tax hikes could cause capital flight; instead, "rationalization" of spending and the elimination of corruption are suggested first steps.
A key structural challenge is the need to transition the government from the primary employer of graduates to a regulator, ensuring the private sector can absorb the "youth bulge" with skills relevant to new industries.
Vocational education is identified as a critical gap, requiring a cultural shift to value trade skills alongside academic degrees to fill the gap in engineering and technical sectors.
The region must navigate US-China tensions by positioning itself as a neutral hub, leveraging Chinese infrastructure investment (Belt and Road) and US innovation/creativity simultaneously.
The private sector's role is expanding into education, healthcare (including health tourism), and entertainment, with the state acting as a catalyst to de-risk initial investments before handing over to private operators.