Guest Blog

Jere Sullivan, Executive Vice President Edelman on the recent World Economic Forum meeting in Sharm el Sheikh:

Times are good in the Middle East
This year’s World Economic Forum in Sharm El Sheikh, Egypt provided a similar cast of characters as last year’s forum in Jordan, but there were a number of subtle differences. In general businesses and leaders from the Middle Eastern countries walked with a bit more of a swagger as a direct result of the continued economic boom the region is witnessing. It’s no surprise with oil creeping toward $150 a barrel that the fossil fuel rich nations are enjoying the good times. But what was also interesting was others in the region less endowed with energy resources are doing well. Egypt, the host country, is reporting 7% growth as is Pakistan (although not technically part of the Middle East) during a time of significant economic turmoil. Telecom, technology and banking are all playing a role in their prosperity. And of course those nations in the Gulf Region are having a field day with soaring oil prices.

An Education Deficiency
But while the economies in the region are expanding so is the gap between the haves and the have not’s. This was the subject of much debate at the WEF and many of the panels discussed what exactly needs to be done to span this widening chasm. One particular panel and broached the question, “is the Middle East translating gains of the oil boom into long-term growth for the entire region?” Mustapha Nabil, an economist from the World Bank argued that not enough of oil profits are being put back into local economies to create employment and educational opportunities. The panel made up of experts from government and the private sector debated the issue and seemed to arrive on one common point – access to education is critical. The region still relies heavily on the expat community from the west to support its soft labor needs in the form of bankers, architects, engineers and communications consultancies. Similarly they are turning to Asia for all of their hard labor needs to support the expanding infrastructure. U.S. universities have established a beach head in the region with Georgetown, Harvard and MIT all boasting sister universities. In fact I sat next to the President of a leading U.S. business school on the flight in and he was there for discussions with Kuwait, Qatar and UAE about the location of a satellite school in the Gulf Region. So for the education community it is a seller’s market with many of the regional powers vying for them to settle in their market.

Two Presidents and a KingThe keynote speakers again provided the star power one comes to expect from the WEF. President Mubarak opened the discussion as the host. Naturally, he made his pitch for Egypt sighting a growing economy, reduced unemployment and a diminishing deficit. But he also talked about the intermingling of global issues that impact the developed and developing nations alike – rising energy prices, water shortages, soaring food prices, global warming and economic slowdowns. He called for increased dialogue between the developing and developed worlds to address these issues to minimize future impact.

King Abdullah from Jordan picked up where he left off last year talking about the conflict in the Palestinian area. Eloquent as usual he managed to tiptoe around a delicate issue without pointing fingers – directly – and offending any one party. Truly a diplomat, but he provided little in the way of substantive solutions.

Then came W. George Bush made his first appearance ever at the World Economic Forum and was as eloquent as I have ever seen him and that leaves a lot of room for error. In true Bush style there was no mincing of words. He addressed the challenges of the region but also praised the countries for their progress on the economy and partnering with the west. He also reiterated his call for a two-state solution and stressed the importance of woman in government, education sector and the economy. And, with one last salvo he chastised Hezbollah, Syria and Iran for their support of terrorism and undermining local governments. No surprise when he finished a third of the crowd stayed seated, but no one in the building missed his speech including the wait staff that were lined up on the perimeter of the room. Like or dislike his politics it made for great theatre.

A call for sustainability
Tony Hayward, the CEO of BP, headed up a panel discussion on the energy challenges and the potential solutions. He made a very interesting point that during the British industrial revolution we saw the increased need for energy and it involved 50-100 million people, the American industrial revolution involved about 100-150 million people and the current Asian industrial revolution involves between 1-2 billion. I thought this put in perspective the huge demands that we all must manage as we see China, India and other parts of Asia grow and provide goods to the rest of the world. The strain this increased demand will reach beyond energy costs. We are already seeing increased food prices as rising middle classes demand more energy intensive forms of protein, the need for more water and the energy required to deliver it from desalinization to delivery will continue to rise exponentially and the resulting impact on each of our pocketbooks will be felt by all of us. Joining Hayward were a group of industry and government representatives including Dr. Sultan Al Jaber, our client from Masdar – the $15 billion Abu Dhabi investment into developing future energy solutions. Masdar was one of the hits of the forum because of their forward looking plans to create one of the first fully sustainable cities.

The Right Soundbite goes a long way
As a veteran of two of these forums, I noticed that the right point at the right time can provide you with your 15 minutes of fame. Connie Hedegaard, Danish Minister of Climate and Energy called for the end to subsidizing fossil fuel citing it as the cause of climate change and voting in favour of wind and biomass solutions. Repeatedly you could find such politically correct – although not necessarily scientifically unsubstantiated — claims being batted about the forum. Another common cry was that biofuels were the reason for the current food shortage – usually made by Middle Eastern energy ministers who ignored the impact of high energy prices on the current food crunch. This makes for good theatre, and usually resulted in rounds of applause followed by a mad dash by the ministers to meet with the venture capital firms (of which there were many) in the networking section. Conversely, the wrong statement had an equal and opposite reaction. For example, the Energy Minister of Kazakhstan, Sauat Mynbayev, noted some intriguing stats around their energy portfolio. They own 3% of the world’s confirmed oil deposits, 3% of gas deposits, significant coal deposits and 10% of the current global uranium production (on pace to be at 30% by 2010). However, when he announced that because of the remnants of their Soviet era nuclear plants they have decided to refuel (bad word choice) their nuclear sector a deafening hush fell over the room. So you need to pick your moments carefully.

I need some water
How much Water do you Eat? was the theme of one panel and reinforced the growing demand, particularly in the Middle East, for clean water. This theme emerged last year, was overshadowed a bit this year by the food crisis, but will gain more prominence every year at future forums. The panel of government officials from Jordan, Saudi and Egypt reinforced just how crucial water is in the region now and historically. With the demand for water in the region expected to double by the year 2025 the related challenges from food to conflict (it has been the reason of many battles over the centuries) only stand to rise. The CEO of Coca Cola, E. Neville Isdell, called for the cooperation of government and industry as the only real cure siting the initiatives Coca Cola is taking to reduce, usage overall, return process water to native reforestation, working with suppliers on solutions such as sugar growers on sustainability programs. The governments to a one called on the important role of desalinization technology as the primary need in the region.

Invest it Forward
CNBC hosted a panel discussion with four government and business representatives from the region to answer two primary questions – is the region using the most recent oil boom to its advantage by investing it back into the region to create jobs and are they preparing the next generation to assume a leadership role in the global economy. A rather heated debate where some accused the leaders of investing in little more than tall buildings ended in a virtual tie with a little over half the audience voting that the oil profits were going into other sectors for development not just Swiss bank accounts. However, two-thirds of the audience felt education was being grossly underserved and pointed to the challenges that go with it – division between the haves and have not’s, social and political unrest and falling behind others in the global marketplace. In a separate session World Bank President Robert Zoellick reiterated the number one resource in which to invest should be human resources. He called for a collaborative effort between government and industry for the region to grow beyond the economic bubble of periodic high energy prices like we are now experiencing.

The big take aways

1.) You could almost smell the money. The biggest part of the WEF is the networking opportunity. Many of us at Edelman have experienced that second- hand when our CEO Richard Edelman begins sending e-mails the week after his return from Davos telling us to follow up with someone or another that he met at the Forum. This year it was very noticeable that many of the attendees were from venture capital funds and the financial sector. That would only make sense in light of the booming economy.

2.) A realization to invest in people. There is a growing realization that many countries are reliant on imported manual labor and more and more on high-level ex-pat consultants to fuel their economies. They recognize the need for training and education in the region for a host of economic, social and political reasons.

3.) Where are all the women? Despite a number of case histories and examples of women playing a leadership role in the region being trotted out during the forum the stark reality was the attendees and panel representatives from the region were 90% male.

4.) Iraq has become background noise. Last year a number of local leaders, including allies such as Saudi Arabia, called for the U.S. to get out of Iraq. But this year no such cry was heard. There was increasing tension about Iran’s growing influence in the region directly and indirectly and that was evident in many of side conversations by business and government representatives. Even liberal Democrat congressional representative I met with who had just returned from Iraq said, “It’s actually going quite a bit better.”

President Mubarak of Egypt opening the conference

[tags] Jere Sullivan, Edelman, World Economic Forum, WEF, Sharm el Sheikh [/tags]