9-11 Impact on Middle East Economies
The UAE Minister of Economy, Her Excellency Sheikha Lubna Al
Qasimi, has described the terrorist attacks of September 11th as
a turning point for the economies of the Middle East.
Speaking to McKinsey Quarterly, the business journal of the
global management-consulting firm McKinsey & Company, she said
that anxiety about travelling, freezing assets, and the extra
scrutiny of people entering the United States made a lot of Gulf
businessmen more inclined to invest at home.
That change in attitude has meant that recent revenue surge
created by high oil prices has been invested in the Middle East,
unlike previous booms when the region's wealth has more commonly
been invested in the West.
"We are investing in ourselves by rebuilding our infrastructure so
that we can create an environment for economic growth and attract
outside investment," she told the journal.
Even when investing overseas, Middle Eastern businesspeople are
focusing on developing nations close to home. UAE money, for
example, is pouring into Qatar, Saudi Arabia and Oman. Beyond the
GCC, projects are being funded in Egypt, Morocco, Jordan, and
Pakistan, explained Sheikha Lubna.
Foreign direct investment (FDI) is also flooding into the Gulf. The
UAE, alone, has seen FDI increase from just over $1 billion in 2002,
to $12 billion in 2005.
And that investment is not just coming from the traditional
superpowers of the United Stated and European Union. "It is coming
from all over-the United States, Europe, and Asia-which is a good
sign, as no one area is dominating," suggested Sheikha Lubna.
The UAE economy certainly benefits from foreign investment - growing
28% in 2005 - but it is even more dependent on foreign workers. A
study by the Economist Intelligence Unit in 2003 found that only 1%
of workers in the private sector were UAE nationals.
Sheikha Lubna has no objection to foreign workers in the UAE, but
does not accept that UAE nationals should lose out as a result.
"Expatriate workers will obviously continue to play a vital role in
our economy, but it is unacceptable that 22,000 nationals are either
unemployed or underemployed. The private sector therefore cannot be
left unregulated," she said.
However, she recognises that the UAE policy of Emiratisation - where
certain types of jobs have quotas for the use of nationals - cannot
succeed without improvements to education and training for the
There must be "adequate educational and training programs geared
toward creating skills among nationals to suit the demands of the
private sector," she asserted.
At heart, Sheikha Lubna is not an interventionist, and hopes that
the private sector will recognise the benefit of hiring and training
Those same instincts colour her thinking on trade. At present, the
UAE, as part of the wider GCC, is in discussions for free trade
agreements (FTAs) with several countries and economic blocs
including China, Pakistan, Australia, Turkey, Japan, and Singapore.
The UAE is also negotiating on its own FTA with the United States -
a process that Sheikha Lubna says enigmatically is "half way
through."The negotiation is "complex," and is now "reaching the
critical issues," she admitted.
Sheikha Lubna is optimistic about the future for the UAE and the
wider Middle East, although she concedes that there may be
Political stability and labour issues are key to ongoing growth and,
while not taking either for granted in such a complex region, she
notes that governments and businesses have become adept and thriving
throughout the troubles of recent year.