The year 2019 was a year marked by uncertainty, like 2017 and 2018 before it. While markets remained largely settled, many predicted a slide that has so far yet to manifest. These predictions were based on many things; trade disputes that cast a shadow over free trade, subtle shifts in geo-political alliances that were hard to chart, and sanguine assessments of valuations versus fundamentals as technology companies continued to dominate our biggest indices. Ultimately they were shaped by unprecedented regional, digital and geo-political transformation that eluded easy definition. In particular, the rhythm of technology is still a beat that’s misunderstood by many, and 2020’s phenomenal early growth numbers, from Tesla’s surging share price to Bitcoin’s climb past $10,000 threw commentators and only created more questions. While the broad trajectory of Industry 4.0 may be clearer than when the term was first coined, the volatility it will create along the way continues to defy prediction. But based on what we know from 2019 and the early months of the new year what can we expect to see in 2020, and how will the Gulf region respond?
In a 2019 report UNCTAD reported foreign direct investment had sunk to its lowest level since the global financial crisis. Bahrain bucked this trend with a six per cent rise, suggesting that while globally competition is fierce and those crafting expansion strategies are cautious, strong growth is still possible for markets that put forward a compelling proposition, and regions that demonstrate real regulatory innovation. This will continue in 2020. In the World Bank’s Doing Business 2020 report, Saudi Arabia, Kuwait and Bahrain were among the biggest improvers thanks to comprehensive reform programmes. In Bahrain a new bankruptcy law, a nationwide cloud first policy, and new central bank rules around cryptocurrency and blockchain helped create a business context that can accommodate the uncertainty thrown up by new technologies and act as a ramp for fast growth companies. It may be that we see more established businesses opening second offices in markets that prioritise enabling legislation.
The GCC is home to a large youth-population – with those under 25 reaching 65 million by 2030. To serve this demographic, new business models are emerging all the time, and rapidly scaling and failing. This frustrates attempts to make sense of the currents flowing under the regional economic situation, particularly as this is a generation that is fusing culture with business more than ever before. The growth of 5G will support the rise of gaming which has seen explosive growth across the region – a 14-year old Bahraini girl made the news this month when she announced she had earned $50,000 playing Fortnite. As well as new business models, there are new business leaders. According to the 2019 Global Startup Ecosystem Report 18% of Bahraini tech startups are founded by women, beating internationally recognised hubs such as Silicon Valley (16%) and London (15%). While women have occupied senior leadership roles in this region for many decades, today’s female Gulf leaders are part of a new vanguard challenging orthodoxy and changing the business conversation in ways not seen before. This will consolidate in 2020.
The dominant theme of the early global gatherings of 2020, environmental and social governance is rising up the agenda. While governments from west to east to are exploring progressive policy positions, the world’s biggest companies are now bigger than many country economies, and corporates are now expected to lead as well as governments. Social risk assessments must be integrated into the due diligence of boards of directors and C-suites to inform policies, strategies, and enterprise risk management, in the same way that countries have to consider these factors. For Gulf countries that have risen on oil wealth this presents a challenge – one that can be addressed through smart investments, application of technology, economic diversification and strong leadership. This will take time to play out, but 2020 will be a year when the Gulf countries deepen their commitment to a shift from hydrocarbon economies to knowledge economies, with sustainability considerations playing their biggest ever role. At a time of profound transformation, this will be one of the most scrutinised transformations of all.