Multibillion-Dollar Questions as Middle East Moves Beyond Crisis

The population has doubled in the region and a tentative peace has been established, pundits believe this might be the time to make inroads

Published: Oct 8, 2009

Huge oil reserves bolstered much of the Middle East during the global recession, but Thunderbird Professor Paul Kinsinger said in Scottsdale, Ariz., that challenges remain for the region as it moves beyond the crisis.

“Middle Eastern countries have taken a dip, but they haven’t taken a dip into the negative,” Kinsinger said during a keynote panel discussion at Frost & Sullivan’s Growth, Innovation and Leadership Global Congress.

Paul Kinsinger, a clinical professor of business intelligence who spent 20 years with the Central Intelligence Agency
Paul Kinsinger, a clinical professor of business intelligence who spent 20 years with the Central Intelligence Agency
The panel examined factors that will drive growth over the next five years in China, Latin America, India and the Middle East. Kinsinger, a clinical professor of business intelligence who spent 20 years with the Central Intelligence Agency, focused his comments on the Middle East.

Overall, the region has doubled from 180 million residents to 360 million residents in 30 years, and Kinsinger said another 150 million people will be added in the next 20 years. Many of these people will be young, unemployed and looking for work.

Kinsinger said the “tidal wave of population growth” has created several multibillion-dollar questions that need to be answered.

Will guest workers still have jobs?
Guest workers have carried the workload for decades in the oil-rich countries of the Middle East. Only about one-third of workers in Kuwait, for example, are Kuwaiti.

“The other two-thirds are visitors of one sort or another, who are doing nearly all of the work,” Kinsinger said. “You have this tremendous imbalance between who does the work and who lives off it.”

Kinsinger said this imbalance could change as Middle Eastern countries face pressure to put their own people to work. Many guest workers from Southeast Asia could lose jobs, along with millions of Arabs from nonoil-producing countries such as Egypt, Jordan and Syria.

Kinsinger saw one example in May during a visit to Saudi Arabia, which has implemented a policy of “Saudization” to find jobs for its young workers.

During a two-week workshop, which Kinsinger taught at a large family-owned business in Jeddah, he met one participant who had recently lost his job as a banker. The man was a Pakistani citizen born in Saudi Arabia, and his parents had lived in Saudi Arabia for about 40 years.

“He recently had been ‘Saudi-sized’ out of his job,” Kinsinger said.

What role will women play?
New opportunities for women also could emerge in the Middle East.

“Parts of the Middle East are wrestling against the more conservative Islamic parts,” Kinsinger said. “They are starting to recognize that there is tremendous human capital that is not being drawn upon in terms of the female workforce.”

King Abdullah in Saudi Arabia, for example, has made a major commitment to supporting career opportunities for women.

“A tremendous number of young women are becoming educated and entering the workforce,” Kinsinger said.

Who will educate young workers?
Many Western universities and business schools, including Thunderbird, have found new opportunities in the Middle East as oil-rich countries scramble to educate their surplus of young workers.
Kinsinger said wealthy countries in the region have invested $50 billion in higher education in the past five years, and the trend will continue in the near future.

“That is one of the sectors of opportunity,” Kinsinger said, “which is why you’re finding many higher education institutions locating in the region.”

Will the region find political stability?
Kinsinger said Middle Eastern countries worried about the future must continue to confront political issues of the past.

“This is an area of the world that has not cast its history aside,” Kinsinger said. “As much as they try to deal with human development against this tidal wave of population growth, they still must look at things through the lens of the various conflicts that are ongoing in the area.”

Kinsinger attributed some of these problems to the autocracies that exist in virtually every Arab country. “The people have a very limited voice,” he said. “Power is concentrated among a very few.”

Kinsinger said this means foreign companies doing business in Saudi Arabia must stay abreast of local and regional politics.

“You need good local partners,” he said. “And you need patience. While a lot of these clocks are ticking very quickly, it doesn’t mean that the policies that drive them are going to move as quickly. It still takes time to get things done.”

Other panelists at the event included James H. Zukin, senior managing director at Houlihan Lokey; and Mario Martinez, general manager of Central and South America at Smith & Nephew. Vinnie Aggarwal, chief economist at Frost & Sullivan and a professor at the University of California at Berkeley, moderated the panel.

California-based Frost & Sullivan, which has 35 offices worldwide, provides clients with research and best practice models to drive growth.

[This article has been reproduced with permission from Knowledge Network, the research journal of Thunderbird Global School of Management]

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