Oil profits create world-class firms

The UAE and other Gulf countries are an international force to be reckoned with, creating world-class companies such as Emaar Properties, Jumeirah Group, Emirates airline and Sabic using their windfall profits to diversify away from oil, a top Middle East consultant said.

"Unlike the previous oil booms of the 1970s and 1980s this time the region is investing in its own economy and its own future. I think they do recognise that they are dependent completely on oil and gas so they are trying to shift away," said Dubai-based Jean-Marie Pean, managing director of Bain and Company Middle East, who advises family-owned businesses in the Middle East.

"You are going to see more and more global leaders emerge from this region and the sovereign wealth funds are going to become a major force but they will be good corporate citizens and gradually the governance and transparency is going to become more open," he added.

Pean said $1.9 trillion (Dh6.9trn) worth of investments were either on the way or had been announced for the next seven years in the Gulf Co-operation Council (GCC) countries.

A key driver for branching out and investing in other industries, he says, is the need to create jobs for a young population of 35 million people, 25 million of whom are in Saudi Arabia and two thirds of whom are under 30.

Despite their oil wealth the Gulf countries have failed to invest over the past 15 years in their own infrastructure and only realised the requirement to do so only recently, he said. "They had not invested all that time in the refineries, in their petrochemical plants or more importantly in the utilities such as energy, water distribution and water desalination.

"So there is a huge shortage of energy which is surprising in a place like the Middle East. There is a huge shortage of water and desalination," he said. He said the Dubai-based luxury international hospitality Jumeirah Group is another project aimed at initiating growth, he added.

"They [Jumeirah] are looking at 100 acquisitions with a view of making 30 acquisitions in the future… Jumeirah is going to become a major brand in the upmarket hospitality business."

He said Emirates, the seventh biggest airline in the world, will overtake some other airlines with all the capacity it adds in the future.

He said Emiratis have established new companies and they have built the capability to support them, expand and serve customers to very high standards.

He said Gulf policy is to go beyond the local and regional GCC market.

Commenting on Gulf sovereign wealth funds (SWF), he said the fear is misplaced. These funds, with trillions of dollars at their disposal, are pragmatic – not political – in their investments.