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Antal market update: Middle East continues to grow

Posted on from Antal International

Despite the global economic crisis, the Middle East is faring better than Europe and North America. This can be contributed to consistently high oil prices and investment in infrastructure due to a significant rise in the population.

Recruitment activity & rising population

Recruitment activity in Saudi Arabia has experienced a notable boost over the last three months, with 73% currently hiring at a managerial or professional level, and 67% planning on doing so in the near future. Hiring within the United Arab Emirates has also increased: 54% are hiring at top level with 56% expecting to hire at this level next quarter.

Each year, immigration causes the population to rise by 8-9% across the Gulf states and the number of residents is expected to reach the 50-million mark by 2020. Dubai is one of the world’s fastest-growing economies in the region, which it achieves through a deregulated system, allowing substantial labour immigration. This accounts for 75% of the city’s population.

The rising population has created a need for development in domestic infrastructure across the Gulf states, which has been made possible due to heavy investment because of high oil prices.

Innovative infrastructure projects

These high oil prices are having a direct impact on growth in oil-exporting countries in the Middle East, funding renewed investment in infrastructure, particularly in the UAE and Saudi Arabia. Urban infrastructure is one of the greatest challenges of the 21st century. The Middle East is setting an example by investing in innovative infrastructure projects to create major urban cities of the future, while balancing the needs of the expanding population, economy and the environment. Social housing, hospitals, universities, waste management facilities, and a metro rail system from within the UAE, Saudi Arabia, Kuwait, Qatar and Bahrain are all currently under construction. In the UAE, 71% of construction and engineering firms are currently hiring at managerial level.

As a result of this activity, sectors which are currently performing well include IT, telecommunications, civil engineering and construction. In Qatar construction rose by 22% in the first quarter of 2012. There is also huge investment in infrastructure in Saudi Arabia and Kuwait. Across the Gulf states they are developing a new train network as well as road networks and civil infrastructure which has created a particular demand for rail and road engineers.

The boom in construction has also prompted a noticeable rise in sectors like copper, aluminum, and steel, who provide supplies to the industry.   

Developing food-processing industry

A reliance on imports makes food supply very vulnerable and highly dependent on the world food market. To combat these threats, governments across the Gulf region are now offering funding and subsidies to businesses in a bid to develop the food-processing industry within the Middle East. As such, several international companies have already set up food-processing plants in the UAE and Saudi Arabia. Throughout the Middle East, 70% of organisations in the manufacturing industry are currently hiring at top level.

The rising population makes it feasible for factories to operate locally. Before, the economies of scale made it more efficient for goods to be imported. However, we are now seeing an increase in production of FMCG in the region as well food processing plants.

Retailers in the Middle East

The Middle East has long been an attractive proposition for retailers because of the rapidly growing wealthy consumer base. British retailers such as House of Frasier, WH Smith and Waitrose are rushing to open new stores in Saudi Arabia, Kuwait, Bahrain and Oman to cater for an expanding expat community while escaping weak sales at home. Sales of clothing goods are expected to exceed £7 billion in the UAE and Saudi Arabia this year. Despite this, just 25% of retail companies are currently hiring at top level which may be an indication that this sector has peaked.

Energy boom

The Middle East accounts for 53% of the world's oil reserves, with Saudi Arabia alone responsible for 19% of the total. Historically, economic growth in the Middle East has relied almost solely on oil reserves and today and the principal export of Middle Eastern countries continues to be oil.

The traditional energy sectors are currently experiencing a boom, with 90% of companies in the area hiring at managerial and professional level and 88% expecting to do so in the coming months. Businesses are once again investing heavily in exploring oil fields and extracting oil as high prices have increased interest in this lucrative area.

As oil revenues decline, the Middle East will need to explore new directions for growth to sustain and develop the region. However, the climate and geography of the Middle East make it a potential world leader in the development and production of solar energy in a post-oil economy.

The Gulf region is continuing to grow swiftly. Dubai airport is the busiest in the world with 50 million passengers flying through each year, and the fourth terminal is currently under construction. Despite a heavy focus on oil, the United Arab Emirates has a highly globalised economy that embraces new industry and generates 63% of its income from commerce and tourism. The signs are positive that by investing revenue from oil in improving the domestic infrastructure of the area, we can continue to develop an economically sustainable market.  

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