The False Promise of The Market

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Gulf stock markets suffered severe losses during 2008 with a loss average of 45%, against the backdrop of the global economic crisis and its repercussions in the countries of the region. Gulf markets were affected by the crisis for two main reasons.  First, there is the sharp drop in oil prices, and second, the fragility of some of the Gulf stock markets in several respects.  

The Dubai stock market suffered the largest loss rate of 72% - and this happened as a natural adjustment to the unprecedented economic upheavals in the Emirate of Dubai for more than 15 consecutive years. The second loser was the Saudi market at a loss rate of 56% due to the absence of institutional trading and the excessive individual stock trading.  Individual trading makes up more than 90% of the amounts traded there, and the individuals have been gravely affected psychologically by the after effects of the global crisis. The Abu Dhabi market was the third loser at a rate of 48%, and was hit by the aftershocks of the Dubai economic earthquake, so to speak.

Economic performance in 2009, with four months already gone by, has vibrated between high and low in Gulf markets. The markets had an average negative growth rate of 3.6%.  The leading profit-making market has been the Saudi one at a rate of 14%, followed by Abu Dhabi market at a rate 4.5%.  The biggest loser was the Qatari market at a rate of 20.5%, and last year it suffered the least loss of 28% to reach the required correction toll, so it seems.

The second loser in 2009 was the Bahraini market at a rate of 11.5%, and it also followed the path of the Qatari market, to resume the required correction percentage. The Bahrain percentage was not completed last year, having reached 35%, the second lowest loss after the Qatari market during 2008. Data on the above mentioned markets was registered in 2009 through to 29 April 2009.

With respect to the expectations of the performance of the GCC financial markets for the remainder of 2009, on average, a positive performance was witnessed, especially during the second half of this year, which is positive enough to absorb most of the repercussions of the global crisis.  The repercussions were primarily psychological, and then turned economic in the form of declining oil prices, which began to stabilize only recently.

There is no doubt that the improvement will differ from one market to another according to the particular aspects of every individual stock market.

We believe that the Saudi stock market will top the list of profit-makers among other Gulf markets, for several reasons.  One of these reasons is the adoption of a standard government budget, which was announced in the midst of the oil price crisis late last year.  This meant a rise in consumer spending and investment which would soften the impact of the global crisis as much as possible, not to mention the potential of implementing development projects in various areas.

A modest positive performance or a slightly negative one is expected to occur in the markets of Kuwait and Dubai, where the Kuwaiti stock market suffers several negative effects.  The most important of these has been the bad performance of several listed companies, including large investment companies. This happened on a background of excessive borrowing, leading to large-scale vulnerability to the financial crisis. Add to that the considerable uncertainty over the performance of what has been termed "paper companies", which in large part lack good assets, management and technical crews. These companies have become a major burden on the Kuwaiti Stock Exchange due to their large number, which amounts to 30 companies out of 218 listed companies.  Moreover, the Kuwaiti market suffers a legislative, regulatory and control vacuum.

As for the Dubai market, we believe that it is still struggling under the pressure of the negative changes happening in the emirate.  Many large projects have been cancelled; counter emigration has stopped; in addition to the weakness of the financial solvency of the emirate- not to mention the big companies there which are suffering from the same problem. Nevertheless, Dubai is making fast and intensive efforts to address the complications of the financial crisis and to limit its consequences.  We expect these efforts to be successful, and to yield positive results by the beginning of 2010.

There is no doubt that one of the most important challenges in front of the Arab Gulf States - from our point of view - is the building of the Gulf citizen, in such a way as to make him/her a real development agent, and an important added-value to the national economy.  This is a major cause of concern for us at the moment, as more than half the life spans of the oil wells which have been active for more than seven decades now, have come to an end.  Time is running out, and any true alternative to the oil resources of the Gulf States has yet to be found.  Decision makers must take this into account.   And, as previously mentioned, a serious and productive Gulf citizen will be the most important future asset, if properly prepared to face the upcoming challenges.

There might be a glimmer of hope and an example to follow in the Oman model, as far as human resources management is concerned. The Omani citizen occupies all the different administrative and professional positions, from the lowest positions in the different employment hierarchies to the top ones. The "Omanization" experience, which means replacing foreign workers with Omani workers, has proven to be a huge success by all standards. The Omani citizen, whether male or female, performs the duties of  his job very well, no matter how small or downgraded it might be in the eyes of some. The reason behind the success of the "Omanization" experience is the determination and firmness of the political leadership of the Sultanate in dealing seriously with various challenges. One such challenge is the necessity of preparing the Omani citizens for the possibility of oil wells drying up, so that they may carry out their responsibilities in pursuing the developmental project, once all or some of the foreign workforce leave the country for whatever reason.

In contrast to the bright and successful Omani model, we find a dim picture in some Gulf countries including Kuwait, UAE and maybe Qatar too.  The individual in these countries is still complacent and spoilt to a large extent, falling back on a revenue economy, and on receiving a huge salary without making much effort.  This condition applies to a large number of citizens, but undoubtedly it does not apply to everyone.  There are positive people in such an unsatisfactory environment, who work hard day and night to plant the seeds of fruitful national work.  There is no doubt that these positive citizens need to be taken care of and to receive encouragement from the governments of their countries, in order to generalize the productive and positive model in such countries, and to reduce dependency and lack of a positive orientation in order  to meet the challenges of the future.

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