Consumer Economies in MENA: Customised, Convenient and Creative MENA Vol. 3-2020 - HSBC Egypt
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Consumer Economies in MENA:
Customised, Convenient and Creative
MENA Vol. 3-2020
Th eg u l fi nte l l i g e n ce .co m
101
Contents
02 Foreword: Hold steady, opportunities await
By Priyanthini McNair, Regional Head of Client Coverage, Commercial Banking, HSBC MENAT
04 Digital Transformation: In numbers
06 Industry Survey: Outlook to 2030?
How the traditional operating model is turning the MENA region inside out
08 The easier, the better: Mega convenience will be king in 2020s
By David Plowman, Managing Director, Global Head of Consumer & Retail Investment Banking,
Global Banking, HSBC Bank Plc
CHAPTER 1 Master the financial landscape – and fast
12 Diversifying economies: pros versus cons?
By Dr. Margareta Drzeniek-Hanouz, Managing Partner, Horizon Group & Lead Author,
Arab World Competitiveness Report 2018
14 Major reorganisation
By William Guéraiche, Professor in the Masters of International Relations, University of
Wollongong Dubai (UOWD); Author of The UAE: Geopolitics, Modernity and Tradition
CHAPTER 2 Light the economic spark of young intellect
16 Knowledge pays – literally
Interview: Dr. Thumbay Moideen, Founder & President, Thumbay Group
18 The future of education?
By HSBC
20 Innovation needs youth and digital fluency
Interview: Mouayed Makhlouf, Former Managing Director MENA, International Finance Corporation
CHAPTER 3 Diversity means holistic growth – embrace it
22 Sustainable healthcare
By Rakesh Suri, MD, DPhil, CEO, Cleveland Clinic Abu Dhabi
24 The future of cities: Middle East, North Africa and Turkey
By Professor Greg Clark, Head of Future Cities & New Industries, HSBC
*All content & statistics sourced by quoted Author
Foreword
Hold steady, opportunities await
BY PRIYANTHINI McNAIR
Regional Head of Client Coverage, Commercial Banking, HSBC MENAT
A new economic game plan is in play across “Yes, times are tough for many
the Middle East and North Africa (MENA), with
consumer industries front and centre. But of course, amid the global pandemic. But
the schedule of progress needs rethinking amid
the sudden disruption triggered by the Covid-19 every downside has an upside;
pandemic and the subsequent economic strain. every storm must pass. Even
Consider that these two major hurdles come atop
an already challenging outlook, with consumer amid today’s slowdown, there’s
industries needing to adapt to the energy transition
towards a lower carbon future and growing
preparatory work to do. When
populations. When you combine all these pressure the global economy inevitably
points, it’s not surprising that three words stand out
as priorities for the year ahead: resilience, agility picks up, consumer industries
and collaboration.
Looking further afield, beyond today’s upheaval,
must be ready to pounce upon
investing in consumer industries is one of the opportunities.”
golden tickets on this multifaceted economic
train that is accelerating the region’s journey on
the global stage. They offer great potential, great population is set to grow by more than 2.5% a year
appetite and healthy risk reward outlooks. for the next decade.¹
We find that emerging countries will account for That tells us two things. One is that MENA,
roughly 50% of global GDP by 2030 – a seismic positioned at the heart of the Old and New Silk
shift from half of that in 2000. China will continue Road from Asia to western Africa, can leverage
to be the single biggest contributor to global
growth, but another five Asian economies will be
prosperous neighbouring regions to quickly bolster
market share in consumer industries. And secondly,
“By 2030, Africa will have more working age people than China. Its working age
among the world’s six fastest-growing economies the bullish era of emerging economies is a golden population is set to grow by more than 2.5% a year for the next decade.”
– Bangladesh, India, Philippines, Pakistan and window for MENA to accelerate progress through
Vietnam. And by 2030, Africa will have more partnerships and joint ventures that are focused on
working age people than China. Its working age innovative and scalable projects and policies.
It also makes sense to make it easy for residents speedometer of progress. And while this has
in the UAE to invest in a region that is home undeniably been hugely disrupted by the impact of
The eager response from aspirational national populations and to some of the world’s highest levels of Gross the pandemic, we do expect this positive sentiment
Domestic Product (GDP) per capita with large to return. The global economy could stabilise in
the large number of ambitious expatriate workers was certainly disposable incomes. For one, the emergence of the next twelve months, with the International
revving the speedometer of progress in the MENA region. And the UAE’s “golden residency visa” for talented and
affluent residents speaks volumes, as does Saudi
Monetary Fund (IMF) saying 5.8% growth is
possible in 2021.²
while this has undeniably been hugely disrupted by the impact of Arabia’s plans to open its doors to international Today’s challenging situation does not void all
tourists. the opportunities that existed before the global
the Covid-19 pandemic, we do expect this positive sentiment.” The eager response from aspirational national pandemic. It simply postpones many and tweaks
populations and the large number of ambitious a few. Huge potential awaits. In the meantime, be
expatriate workers was certainly revving the patient and stay safe.
¹https://insights.hsbc.co.uk/content/dam/hsbc/gb/wealth/pdf/world-in-2030-update.pdf
² https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020
2 3
In Numbers
Economic outlook: What’s next? Young minds matter
-3% +5.8% 49%
99.3mn 0-24 4 2.0 14.5mn 3,200
residents make Egypt the year olds (children areas identified by the education reform in students will be in the more schools will be
contraction in the global recovery in the global rise in the population of 484,175mn most populated country and young people) World Bank as holding Egypt means embarking GCC education sector in required in the GCC
economy is anticipated economy in 2021 if the MENA to 723,624 million people live in MENA, in MENA, according to account for nearly half back education in MENA on a system-wide 2022, from 12.9 million alone by 2022, according
in 2020 by the IMF amid pandemic fades in the by 2050, according detailed the UN. This UN data.5 of the MENA region’s are credentials and skills, transformation using in 2017. This marks a to Alpen Capital. Most
the toll of the global second half of 2020, to the UN, means population – a third population, according to discipline and inquiry, technology to deliver, 12% climb in five years, will open in Saudi
pandemic. 2 according to the IMF. 2 consumer economies the size of China’s UNICEF. 1 control and autonomy, support, measure and according to Arabia.5
must enhance population – must be an and tradition and manage the learning Alpen Capital.4
efficiencies, including the economic accelerator, modernity. 2 of teachers, the World
roll out of digitalisation. 3 not a burden. 4 Economic Forum (WEF)
detailed. 3
Logistics of living well Growing tourism hotspot
13% 9.5%
73% 12.55%
$20.03bn 1st 22.35 87mn $77bn 20mn
of global revenue for is the expected value Heart Safe City project years have been added rise in the number of international tourists of the total arrivals were increase in leisure was generated by passengers can now
healthcare products in of the UAE healthcare in Saudi Arabia is a new to the life expectancy hospitals and clinics arrived in the MENA in the Middle East, with tourism spending international tourism be accommodated at
MENA are represented market by 2020, initiative that aims to of the Saudi people, in the last five years, region last year – 10% the remaining 27% (spending by Saudi receipts in MENA in Oman’s new Muscat
by the Gulf Cooperation according to the US-UAE increase survival rates from 52.7 years in according to the Saudi higher than in 2017 landing in North Africa, Arabia’s residents and 2017, the UNWTO International Airport,
Council (GCC) alone this Business Council. 7 from sudden cardiac 1970 to 75.05 years Embassy in Washington, – according to the UNWTO data showed. 7 internationals on leisure reported – 6% of the the airport said, in the
year, reported Frost arrest – a leading in 2015, according to US, is a major driver of UN World Tourism trips within Saudi Arabia) global total.9 sultanate’s bid to bolster
& Sullivan. 6 cause of death in the Saudi Embassy greater longevity in the Organisation (UNWTO) between 2009 and international tourism.10
MENA – reported health in Washington, kingdom. This progress this year. 6 2018, with the market
technology partner US. Investments in must be replicated value reaching $26.4bn
Philips. 8 healthcare clearly pay across MENA.10 in 2018, according to
off. 9 Seera. 8
Sources: Sources:
1. https://www.imf.org/en/News/Articles/2020/05/28/sp052820-opening-remarks-at-un-event-on-financing-for-development-in-the-era-of-covid-19 1. https://www.unicef.org/mena/reports/mena-generation-2030#:~:text=Children%20and%20young%20people%20(0,their%20part%20in%20reaping%20the
2. https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020 2. https://www.worldbank.org/en/news/press-release/2018/11/11/a-new-education-approach-is-needed-to-prepare-mena-youth-to-shape-the-future
3. https://data.unicef.org/resources/middle-east-north-africa-generation-2030/ 3. http://www3.weforum.org/docs/WEF_Schools_of_the_Future_Report_2019.pdf
4. https://www.unicef.org/mena/media/4141/file/MENA-Gen2030.pdf 4. http://www.alpencapital.com/industry-reports.html
5. https://www.unicef.org/mena/media/4141/file/MENA-Gen2030.pdf 5. http://www.alpencapital.com/industry-reports.html
6. https://ww2.frost.com/media/press-releases/ 6. https://bit.ly/3fUgWmL
7. https://www.usuaebusiness.org/2019-uae-healthcare-sector-report/ 7. https://bit.ly/3fUgWmL
8. https://www.philips.sa/en/a-w/about/news/archive/standard/news/press/2019/20190129-mecca-saudi-arabia-hosts-first-global-project-for-heart-safe-city.html 8. https://www.seera.sa/wp-content/uploads/2019/12/Seera-Skift-Report.pdf
9. https://www.saudiembassy.net/health-social-services 9. https://bit.ly/3fUgWmL
10. https://www.saudiembassy.net/health-social-service 10. https://www.muscatairport.co.om/en/news/muscat-international-competes-for-worlds-best-airport-title
4 5
Middle East and North Africa Survey
Outlook to 2030?
How the traditional operating
model in the MENA region could
be turned inside out
Consumer industries in the MENA region are certainly progressing and have
bold growth ambitions. But there is still a long way to go before the region
solidifies the global influence that it seeks. Drivers of positive – and profitable
Which consumer industry is most ripe for digital Digitalisation will transform the way MENA consumers
– disruptive change that can accelerate progress include the region’s large disruption in the MENA region? discover, evaluate, purchase and use products and
millennial population and digital credentials. Unknowns abound but one point services. Will this undermine the “build it and they will
come” physical hub strategy that some regional states are
shines true for all: change or be changed. This survey* – answered by 100 senior 36%
Retail attempting to establish?
industry experts in MENA – reveals how the region is currently performing and
24%
what it needs to do next. Education
14% 15% Banking
Tourism 11% Healthcare
Yes No
68% 32%
There is a digital revolution in global consumer Which of the following will drive the biggest change in
industries. How prepared is the sector in the the MENA consumer sector through to 2030?
MENA region? New patterns of personal
consumption
Technological
Changing face of advancements The consumer companies that survive in the region over MENA has a large millennial population with the highest
24% the consumer
the next ten years will be the ones that embrace the rate of youth unemployment worldwide. How will these
Sleeping: lagging behind
empowered consumer and disruptive technologies. conflicting factors impact the pace of digital adoption by
global standards
regional consumer industries?
20%
20%
37%
2%
21%
Pioneering: 21%
ahead of the
digital Structural industry shifts 85% 15%
adoption
curve Agree Disagree Accelerate it Slow it down
55% 74% 26%
Average: treading water
Evolving geopolitical dynamics
*Survey methodology – survey questions distributed by Gulf Intelligence to targeted subscriber database & social feeds – minimum sample size 100; Subscriber database 500.
6 7
HSBC Opinion Editorial
Digital acceleration
The easier, the better: The 4IR: one of the biggest disruptors to
Mega convenience will be
consumer economies and a key propellent of
mega convenience in the 2020s. The value
of digitalisation is visible in every trend over
king in 2020s
the next decade (and many more). Consumer
economies have only explored the tip of the
digital iceberg; potential abounds. AI, predictive
analytics, big data and robotics are the digital
tools that will have the greatest impact in the
short-term. Already, Amazon can apply AI and
predictive analytics to a shopper’s purchases
to curate what items are next shown on their
screen. In time, instead of ordering items,
you could receive a box at home of what a
company has predicted you will need based
BY DAVID PLOWMAN on your online profile, i.e. spending habits for
Managing Director, Global Head of Consumer & Retail Investment Banking, birthdays, holidays, seasonal weather and so
Global Banking, HSBC Bank Plc on. Or perhaps Starbucks will use digitalisation
to prepare your order so that it’s waiting, piping
hot, on the counter as you pop in. Digitalisation
can mean ultra-convenience: no queues,
I want it now. That is the battle cry of modern- no fuss. This would bode well for consumer
day consumers. An ever-rising demand for mega
“Speed and ease will be more economies, for a relaxed shopper is a more
convenience will be the overarching theme of critical than ever in the 2020s. generous shopper.
consumer economies over the next decade.
Customers’ lives are getting busier and their A relaxed shopper is a more
expectations are getting higher, yet many budgets are
not getting bigger. So, consumer economies must
generous shopper.”
walk a fine line between sustaining affordability while
providing an increasingly tailored and rapid service – a 2050
tough balance to master. What to watch out for in 2020 mobile phone displaying the location, available will see half of
and beyond? sizes and colours of items in the shop in real-time the countries in
(potentially reducing the need for shopkeepers). A MENA experience
SPEED MATTERS – A LOT rudimentary version of this process is available in food population
Next day delivery is no longer good enough; more and supermarkets, with self-scanning products (but there increases of at least
more consumers want same-day delivery. So far, China, is not information on availability yet). Clearly there 50% from their
the world’s biggest consumer economy, can leverage is plenty of room for growth in the 2020s. Greater 2015 levels.
cheap labour and put products in customers’ hands in ease and speed along the logistics chain deepens Source: UNICEF
mere hours. The effort pays off; consumers created 78% customers’ loyalty, which is highly coveted in intensely
of China’s GDP growth in the first nine months of 2018, competitive consumer economies.
according to McKinsey. Alibaba has been crowned
the most valuable brand in China for the first time in a THINK GREEN
leading annual ranking, having grown its brand value by Sustainability matters, with 33% of consumers in
59% year-on-year to $141bn, detailed the BrandZ Top a recent Unilever research study choosing to buy
100 Most Valuable Chinese Brands.1 But the rest of the products from brands that honour the environment and 271mn
world has some catching up to do. social responsibility. 2 And in a global survey by Nielsen, children,
Consumers also want an accelerated delivery of 81% of global respondents also felt strongly that adolescents and
an increasingly tailored service. For example, fashion brands should help improve the environment, a belief youth (0-24 years)
brands are thinking about how a shopper can use their shared from millennials through to baby boomers.3 will live in the
mobile phone to view their ‘digital wardrobe’ online and But consumers’ beliefs will take time to filter through MENA region
order clothing safely (cybersecurity remains a threat) to their actual buying habits. For many, sustainability by 2050. This
for next day delivery (at the latest). A digital wardrobe is still only a priority behind convenience, brand and provides significant
– still to be fully developed – involves being able to value. opportunities for
‘try’ a retailer’s items on a 360-degree digital view of a The Paris Agreement and the global transition consumer markets
shopper’s body, i.e. an image of their size, height and towards a greener world is adjusting the way consumer that promote
hair colouring. This enables the shopper to have a one- economies operate (i.e. the UAE aims to reduce landfill affordability and
stop shop on their mobile phone in real-time and helps waste by 75% by 2021).4 This push is not entirely new sustainability (the
them purchase with more confidence, saving them (coffee shops have long had wall displays detailing latter will rise in
time. It also cuts retailers’ cost of post and packaging the sustainable production of their coffee beans). importance in
for delivery and returns. A win-win for all. But it will hasten; a shift that will largely be driven by coming decades).
This level of convenience could extend to a shopper’s companies. For example, Unilever aims to have 100% Source: UNICEF
1. BrandZ Top 100 Most Valuable Chinese Brands (https://www.brandz.com/China)
8 9
HSBC Opinion Editorial
Seeking individuality
Some young consumers are also seeking ‘unique and different’ shops
and food and beverage (F&B) spots. Many use social media to put a
spotlight on the ‘best new spot’, rather than a ‘faceless chain’. But
actually, the brands they perceive as independent may not be. This is
not a negative, because smaller companies that keep their name but
roll their operations under the umbrella of a bigger brand get more
back office and buying power. What may seem a diversified high
street will more likely be a series of consolidations and mergers and
acquisitions (M&As). This is a welcomed safety net for the smaller
retailers that are unable to compete, especially with the digital
behemoth that is online shopping.
“Consumer economies must stay on their toes. A growing population
will only demand more convenience, more speed, more choice and
more competitive prices.”
32-50%
growth in
millennials in the
of its plastic packaging being reusable, recyclable or market of billions of people, including emerging global personal
compostable by 2025.5 And Nestlé plans to achieve economies. But as global momentum for green growth luxury market by
zero net greenhouse gas emissions (GHG) by 2050. gains pace, investments in sustainable options (i.e. 2025. Such growth
Impressively, a third of Nestlé factories (143) are recyclable packaging and clothing) will also climb. In will bode especially
already using 100% renewable electricity. 6 time, the gap will narrow and being sustainable will be well for Arab Gulf
Comparatively, through a consumer’s prism, an easier decision pricewise for all. countries, home to
supporting sustainability is important if the brand is For now, consumer economies must stay on their some of the world’s
strong and the price is competitive. Some, higher toes for the outlook will only get trickier. A growing largest malls, many
earning consumers will pay a premium for sustainable population will only demand more convenience, more packed with luxury
products (think organic and free-range eggs versus speed, more choice and more competitive prices. As goods.
cage-fed hens). But lower income earners almost we embrace the dawn of a new decade, are you ready Source: Boston Consulting
Group (BCG) and
certainly will not, and they represent a vast buying to answer the battle cry? Altagamma.
2. Unilever (https://www.unilever.com/news/press-releases/2017/report-shows-a-third-of-consumers-prefer-sustainable-brands.html)
3. Nielsen (https://www.nielsen.com/eu/en/insights/article/2018/global-consumers-seek-companies-that-care-about-environmental-issues/)
4. UAE Government (https://www.moccae.gov.ae/en/knowledge-and-statistics/wastes-and-chemicals.aspx)
5. Unilever (https://www.unilever.com/sustainable-living/reducing-environmental-impact/waste-and-packaging/rethinking-plastic-packaging/)
6. Nestle (https://www.nestle.com/media/pressreleases/allpressreleases/nestle-climate-change-commitment-zero-net-emissions-2050)
10 11
CHAPTER 1 Master the financial landscape – and fast
Diversifying economies: “Can the ‘Dubai model’ be successfully applied
in the cavernous malls – have been under
pressure to sustain growth.
You could say that some of these everywhere in the region? Is a policy of ‘if
pros versus cons?
consumer sectors have peaked and are
facing disruption on a big scale. For you build it, they will come’ economically and
example, the traditional concept of mall environmentally sustainable, or desirable?”
excursions is under pressure from online
countries in 2019 against 2.1% for overall retailing, while the property market is
GDP. 1 But the production and sale of oil plagued by government-fueled over-supply
and gas and the government services are ahead of the Expo 2021 event. where Saudi Arabia has been culturally own right, to improve the living standards
still the dominant activities in all of them. Dubai policymakers seem to have inhibited throughout its history. Likewise, and wellbeing of citizens and residents,
Oil and gas, or government activities, realised that the model needs some the Vision puts heavy emphasis on health and as an engine for diversification. But
BY DR. MARGARETA DRZENIEK-HANOUZ account for almost 90% of GDP in Saudi alterations, and to this end, a series of and education, both as a way of improving on its own, it will not solve the challenges
Managing Partner, Horizon Group & Arabia and 72% in the UAE. In the region, measures have been introduced to help citizens’ lives, and as economic sectors that presented by countries trying to move
Lead Author, Arab World Competitiveness Report 2018 this share is the lowest in Qatar at 55%, the facilitate long-term sustainability. “Golden can drive non-oil growth. away from a rentier economic system. A
IMF said.2 visas” for talented and affluent residents, In education in particular, there is longer term, more sustainable approach is
The only economy not dependent on as well as changes to the corporate enormous potential, partly because Saudi required.
There is no doubting the importance of whether consumer economics – on its own the energy sector, to a greater or lesser ownership structure to allow foreign Arabia is starting from such a low base. It
consumer economies for the countries of – is sufficient to drive through the ambitious degree, is Dubai. But in many ways, Dubai ownership of businesses outside free currently spends nearly double the global
the MENA region, and especially the Gulf. and permanent economic transformation was always a special case. It never had zones, are among the measures recently average on education, as a proportion
Policymakers have prioritised tourism, these countries hope to achieve. the vast energy reserves of its neighbours; introduced. of GDP, according to the IMD Business
retail and leisure as drivers of economic Can the “Dubai model” be successfully it always lived as a commercial trading In Abu Dhabi, the authorities have School. 3 These are ambitious goals, and #7
activity. They have also identified health applied everywhere in the region? Is a centre and there was always more of an launched a series of measures to kick- you have to conclude the kingdom is on the is Dubai’s ranking as the most visited city in
and education as important sectors, both policy of “if you build it, they will come” entrepreneurial business culture than in start the flat economy and revive the right track. the world, beating Istanbul, Kuala Lumpur
for national populations and for the large economically and environmentally other parts of the region. diversification strategy. Saudi Arabia has made frequent mention and New York.
number of aspiring expatriate workers sustainable, or desirable? There has In many ways, Dubai was ready for But if the business-friendly UAE, of the Dubai model in its policymakers’
they seek to attract to participate in their certainly been some progress in the last consumer-led economic expansion in and Dubai in particular, cannot get the statements, but the challenges of that
economies. dozen years or so, since the trend of a manner that others were not – and transformation right, other places, like approach are highlighted in the kingdom.
In some cases – notably in Dubai – they economic diversification really took off in may never be. Even the Dubai model is Saudi Arabia, Qatar, and Bahrain, which “Build it and they will come” becomes
have been successful. The Emirates has the region. But what is really striking is now facing challenges in its birthplace, are less nimble in terms of business unviable in an economy that has relied
used its consumer economy to attract how little the economic fundamentals have and policymakers are rethinking the culture, face even bigger challenges. hitherto on foreign labour, but which 8.8%
visitors – DXB is the world’s busiest airport changed. fundamental strategy. also has a significant problem of youth is the proportion of GDP that Saudi Arabia
for international passengers – and to The economy has kept on growing since SAUDI ARABIA GAINS PACE unemployment. Its big population and spends on education – double the world
generate economic growth in the business FOSSIL FUELS REMAIN KEY the global financial crisis, but for the past The kingdom is in the early stages of its its cultural traditions present unique average.
sectors that support consumer industries. True, the non-energy sector is growing couple of years there has been a malaise Vision 2030 strategy, which aims to reduce challenges for which the Dubai model may
These include real estate, construction, faster than the rest of the economy in Gulf at its core. Key sectors like real estate and oil dependency and to empower citizens. not be suited.
Sources: Euromonitor International: Top 100 City
industries and infrastructure. oil-exporting countries. The IMF projects financial markets have been falling, while A great emphasis of the strategy is in the Development of the consumer elements Destinations 2019; IMD Business School Geneva.13
But it is also appropriate to question that non-oil GDP will grow at 2.9% for GCC others – tourism, hotel occupancy, footfall consumer areas, like leisure and retail, of Gulf economies is both desirable in its
1. October 2019 Regional Economic Outlook, Middle East & Central Asia, IMF: https://www.imf.org/en/Publications/REO/MECA/Issues/2019/10/19/reo-menap-cca-1019 3. Arab News: https://www.arabnews.com/tags/international-institute-management-development-imd
2. October 2019 Regional Economic Outlook, Middle East & Central Asia, IMF: https://www.imf.org/en/Publications/REO/MECA/Issues/2019/10/19/reo-menap-cca-1019
12 13
CHAPTER 1 Master the financial landscape – and fast
“Beyond the recruitment
of local students, Dubai,
Abu Dhabi and Qatar
jockeyed to become the
higher education hub
of the Gulf. As a result,
there are 125 universities
in the UAE – compared
to just 50 in Australia.”
University in Dubai and New York
University in Abu Dhabi) and the others
will widen.
HEALTH CLIMBS THE AGENDA
The healthcare industry presents
a similar scenario, with a few key
differences. As with education, federal
and local governments were behind the
development of the sector. Oil revenues
enabled the development of medical LET’S TALK LEISURE to replace quality, especially with the
infrastructure. At the turn of the century, The leisure industry is at the heart of organisation of the Universal Exhibition,
there were 115 health centres (hospitals, the UAE business model. The Maktoum ‘Expo 2021’ in Dubai. But the question
clinics, etc) in the UAE. With opening up family, namely Sheikh Rashid and after remains: what will be on the agenda after
to the private sector, they proliferated him, Sheikh Mohammed, the current 2021?
to 4,352 in 2015, according to the Ruler of Dubai and Prime Minister of These sectors obey the law of the
Major reorganisation
UAE Public Policy Forum.1 The health the UAE, envisioned the development market, but the Emirati authorities have
of the Emirati population improved. of Dubai in the 1980s. With depleted oil nonetheless been the main driver of
Programmes targeted specific diseases revenues and learning from mass tourism development. When financial conditions
and offered a better standard of care, for around the Mediterranean Sea, the rulers are more difficult for them, these sectors
free. In parallel, the government of Dubai of Dubai identified high-end tourism lose momentum. Hence the changes that
The UAE’s ambitious bid for economic diversification is paying off, explored the possibility of developing as a major vector of development. The we are witnessing can be understood as
a niche activity popular in some Asian Dubai Tourism, Commerce and Marketing both a market adjustment and a return to
but what lies ahead? countries (Thailand, the Philippines, etc): Department (Ministry of the government reality.
medical tourism. With state-of-the-art of Dubai) used the principles of nation
economy, to be branded a ‘knowledge equipment and highly qualified doctors, branding to promote Dubai. When he
economy’. Beyond the recruitment of resources were put behind the project. succeeded his father in 2004, Sheikh
local students, Dubai, Abu Dhabi and The UAE has not (yet), however, Khalifa bin Zayed Al Nahyan did the
Qatar jockeyed to become the higher become a destination for patients. As same for Abu Dhabi with Brand Abu
BY WILLIAM GUÉRAICHE education hub of the Gulf. in education, Emirati authorities have Dhabi. Cultural tourism was identified
Professor in the Masters of International Relations,
University of Wollongong Dubai (UOWD);
Since 2018, the education market cut expenses in the health sector, as a priority sector of development. 80,000
has adjusted. Many expats have left promoting prevention campaigns and High-end tourism drew in the wealthy new students and 76 new school
Author of The UAE: Geopolitics, Modernity and Tradition the country, and companies have cut a better use of public funds as defined from neighbouring Gulf states and openings in Dubai over the last seven
benefits – beginning with the school in the UAE National Agenda and Vision European visitors curious about the latest years reflects the Emirate’s booming
The UAE economy, Dubai’s in particular, TWO PARALLEL PATHWAYS fees in the expatriate packages. With a 2021. It remains to be seen why Dubai innovations and wanting a sunny and demand for education.
is undergoing a major reorganisation, The development of education in weak Pound sterling, some families send and Abu Dhabi have so far failed to safe environment.
notably in the fields of education, Dubai, from kindergarten to university, their children to Britain before university. become medical tourism destinations. In The model has not faded but the
health and leisure. These sectors were achieved two objectives. The first was the In higher education, tough competition this sector, reputation is a major factor. rise of similar models, in Qatar for
driven by federal and local authorities provision of a good standard of education for a shrinking market has put many Emiratis themselves, including the élite, instance, and probably yet again the
keen to diversify their activities in a for Emiratis of all ages. The Emirati universities close to the edge. The time go abroad for treatment. Establishing political uncertainty in the region, have
post-oil economy. Since 2014, external authorities reached this goal, but at a of easy profits and degrees of dubious unwavering trust in local institutions diverted high-end tourists from Dubai 25mn
constraints, namely low oil prices and high price (the recruitment of qualified quality is over. The UAE authorities have would be the first step towards the and Abu Dhabi. Following a geopolitical visitors are expected at Expo 2021 within
involvement in the Regional Security staff from overseas, the construction imposed more stringent standards for creation of a new market. In theory, reorientation towards Asia, Chinese 6 months – nearly three times the size of
Complex around the Red Sea, led to of topnotch infrastructure, etc) – all accreditation. In the near future, the gap the major components (technical and tourists are now more likely to visit Dubai the UAE’s population.
drastic budget cuts that affected these acceptable with high oil revenues. The between the best universities (American professional) are already in place. and Abu Dhabi. Quantity is supposed
Sources: World Bank; UAE Government
sectors. second objective was to create a niche University in Sharjah, Wollongong
1. The State of UAE Healthcare Service Delivery: Public Perceptions- Preliminary Insights Jan. 2018: https://www.mbrsg.ae/getattachment/9e9f451a-5d2f-4080-a510-e3232e55df36/The-State-of-UAE-
Healthcare-Service-Delivery.aspx
14 15
CHAPTER 2 Light the economic spark of young intellect
Knowledge pays – literally
the need to constantly invest in the We are committed to building a strong
“The key challenge latest technology, the expansion of scientific base through education and
for players in these facilities and the costs to fund research, research, which will ultimately benefit
usually demand heavy investments. the society socially and economically.
Why are the health and education sectors sectors is to constantly Being essential services, the pricing of Research is one of our most important
in the MENA region growing so fast?
The visionary leaders of MENA have
innovate and introduce educational and healthcare services has
to be such that it ensures affordability,
functional areas, and most of our research
undertakings are particularly on themes
identified education and healthcare as freshness in the services while guaranteeing high quality. and issues directly relevant to the region.
priority sectors. MENA countries are Innovation is one of our core principles and
A Q&A WITH DR. THUMBAY MOIDEEN diversifying their economies and gradually they offer. Education How important are issues like climate is nurtured throughout all our businesses.
Founder and President of the Thumbay Group discusses
innovation and knowledge-based “smart” societies that are
moving away from oil dependency, has to undergo change and sustainability for your
looking to boost sectors that hold promise business model? How will health and education look by
key to diversifying economies in the MENA region. for future growth. Besides, the region constant updates Corporate Social Responsibility (CSR) is 2025? Which countries have the best
an important part of our business. Issues chances of success?
and transformations like climate change and sustainability are Health and education are two sectors that
to produce the very much a part of our CSR initiatives, are riding high on positive forecasts of
creating awareness by leading from phenomenal growth and advancement.
professionals of the front. Both the staff and students of The education and health sectors are
Gulf Medical University (GMU), as well increasingly giving more control to the
tomorrow.” as the staff of Thumbay hospitals and consumers, giving them access and
clinics, organise and participate in events choice, which were never available, say 20
attracts professional talent from all over like Earth Hour, beach cleaning drives, years ago. This trend will strengthen in the
the world. Most MENA countries also plastic-free initiatives, minimising the use coming years. Consumers will enjoy more
attract tourists and are combining their of paper, and so on. We believe that like choice and more personalised services,
tourism potential with healthcare, driving companies in any field of business, we too not to mention the benefits of the great
the growth of medical tourism in a big have the shared responsibility of ensuring technological advancements these sectors
way. Above all, the excellent air travel the planet’s long-term sustainability and are experiencing at the moment.
connectivity and the investor-friendly wellbeing. Any country that thinks and acts beyond
policies of these countries are also the traditional concepts of education and
attracting investments. What are your recruitment policies? healthcare, and is willing to innovate, is
Which global markets provide the best able to reap the benefits of the massive
Is there a limit to the growth in the trained and best value staff? growth predicted for these sectors. The
region? We have our own recruitment division, countries of the Middle East, especially the
The economies of the region are relatively which sources talent from all over the world UAE, are attracting students and patients
young and vibrant, with a strong on the basis of experience, qualifications in large numbers, driven by the rising
foundation open for diversification. and compatibility with our ideals and standards of education and healthcare in
The region has a friendly policy towards principles. The basis of our recruitment the region, as well as the growth of medical
investors and has several initiatives process is merit, devoid of any other tourism.
in place to promote the ease of doing considerations like religion, race, gender
business. Things can only get better for or nationality. Thumbay Group boasts a
investors. workforce comprising of more than 5,000
individuals from over 25 countries, which is
Increased competition brings its own projected to increase to 25,000 by 2023. 5,000+
challenges in these sectors. What are people work at Thumbay Group from
they? How important is digitalisation for you? more than 25 countries. This is projected
The key challenge for players in these Digitalisation is one of our priority areas. to increase to 25,000 people by 2023 – a
sectors is to constantly innovate and GMU, for example, makes optimum use five-fold growth in four years.
introduce freshness in services offered. of digitalisation and Artificial Intelligence
Education has to undergo constant (AI) in training. The Virtual Patient
updates and transformations to produce Learning (VPL) technology developed
the professionals of tomorrow. Graduates by GMU for training its students is the
must be ready to take up responsibilities only patient simulation with high fidelity 61%
as soon as they leave universities. In and authenticity. GMU also has digital is the expected growth rate of the UAE’s
healthcare, the challenge is to always classrooms and a host of other digital education market, from $4.4 billion in
stay ahead of the times, in terms of technologies for the benefit of students. 2017 to $7.1 billion by 2023.
technology and expertise. Patients’
convenience has to be at the core of How can you support regional
healthcare reforms. governments’ vision to be knowledge-
based and “smart” societies?
What are the financial issues in health Our strategic vision and objectives are 90%
and education? aligned with the vision and programmes of Dubai and Sharjah students, and 65%
Health and education are two sectors of the UAE Government, as well as other of Abu Dhabi students, are currently
that benefit in terms of being essential countries in the MENA region. Building enrolled in private schools.
services, so consumer spending is steady. knowledge-based and smart societies is
From a business owner’s perspective, an objective we wholeheartedly support. Sources: Thumbay Group; Boston Consulting Group (BCG).
16 17CHAPTER 2 Light the economic spark of young intellect
The future of education? “In 2019, global of learning, the sector as a whole needs
to look beyond virtual meeting apps and
universities. Zeina Hojeij, Assistant Dean
for students’ affairs at Zayed University in
education technology instead consider AI and other cutting-edge Dubai, said it has already brought about
The Covid-19 pandemic has shaken up traditional models of learning in technology to enhance the delivery of a reluctance to study away from home
investments reached learning. among Asian students, who make up
schools and universities. Although online learning has so far proven to
$18.66 billion and the Sahar Cooper, CEO, Aldar Education large percentages of student populations
provide certain benefits, this method of learning also presents challenges. suggested that “those who have invested in certain universities in the US and
overall market for online early in the technology have an advantage”, Australia.
As such, educators need to find a middle ground. but educators “needed to make sure this They may now be put off studying
education is set to reach is not just purely reactionary” and that abroad by the threat of more travel
Covid-19 has disrupted education at both $350 billion by 2025”* the integration of technology in education restrictions, she said. “At this point, we
school and university levels and brought “must be ubiquitous across schools and do not know the extent to which it will
BY HSBC
about widespread transitions to online future focused to support our students' cause colleges and universities to close,
learning, causing institutions to review long term learning outcomes.” blend or merge,”she detailed.
whether blended models of online and THE ED-TECH SPACE There is also a challenge to the mindset
traditional teaching may be the future. While the pandemic has both accelerated THE ONLINE-OFFLINE DEBATE of traditional four-year degree courses,
During the inaugural HSBC Virtual the debate about online versus traditional There is a need to balance the benefits of with some experts suggesting that there
Boardroom series, sector leaders focused learning and forced schools to test the online learning with the fact that some could be a market for “nano” degrees.
on the future of education in the region. viability of the ed-tech space, ed-tech is not students do not see equal monetary value These shorter, more dynamic offerings
They reached a consensus that schools and able to replicate classroom learning entirely between “online” and “offline” degrees, could be tailored to be far more relevant
universities had seen successes in adapting with all its benefits, the experts agreed. according to research by strategy to the working world.
to digital learning, integrating change and Hugh Martin, Registrar and Chief consultants EY-Parthenon. Higher education also faces challenges
adapting to a new environment in both the Administrative Officer at The British Navin Valrani, CEO of Arcadia Schools, that are broader than Covid-19. There
K12 and higher education sectors. University in Dubai, does not believe the cited the $7 trillion global education sector, was widespread agreement that
For HSBC, education is a crucial pillar pandemic will accelerate the demise of of which only 5% or $160 billion, universities need to create a continuous
in the socio-economic development of the physical universities. “The reality is that is accounted for by the digital market.3 discussion with schools and employers to
region, as education plays a fundamental students want the face-to-face experience, “If you do away with bricks and mortar, ensure they were teaching students skills
role in the development of nations. As the and there is always going to be the blended what happens to that $7 trillion? Moving – such as entrepreneurship, leadership,
region transforms and adapts in the post requirement where students need to into the online space would be a major resilience and management – for the
Covid-19 world, educational institutions be in labs for disciplines like medicine, blow to an industry which is a large part of workplace of the future.
at all levels have a golden opportunity engineering and life sciences,” he said. GDP,” he said. “HSBC has a key role to play in
to leverage the power of technology to Good schools and universities have, for While the digital or online learning this, with our focus on education,
create what many consider, changes to the centuries, survived because of the success market may be a fraction of the overall employability and financial capability.
traditional norms within the sector. and value they create, such as the networks sector, it will see faster growth, according All of which fall within our future skills
formed and long-term connections built to a report by Business Live ME. The agenda, a core part of a sustainability
PANDEMIC DISRUPTION that can determine the future of students online segment will see a compound strategy for the way the bank does
HSBC’s Virtual Boardroom convened who go there. annual growth rate (CAGR) of 15,2% until business in the Middle East. One way
experts from across the education As a result, the traditional model of 2023, compared with 10% for the wider we support this agenda is through the
ecosystem to discuss the future of learning learning will not erode through a storm. education sector.4 Tatawwar programme,” said Gemma
following the disruption caused by the Rather, it will adopt the necessary changes Ivor McGettigan, Partner at Al Tamimi & Wild, Sector Head, Education at HSBC
Covid-19 pandemic. to enhance student experiences relative to Company, said his clients across the region Bank Middle East Limited. Tatawwar
Education as a sector grows ever more courses. This means that educators need in other sectors were considering moving means ‘development’ in Arabic and was
important in the region; it is a key driver to embrace and harness the disruption away from bricks and mortar as a result launched in partnership with Potential.
of growth thanks to its young population. brought by technology. of the Covid-19 outbreak, but a different com to bring together students, parents,
Reports shows that Gulf states alone will Omar Farooqi, Founder and President model was required for education. schools and the business community to
have a K12 student population of 12 million a result of the pandemic, has highlighted there were positives to remote learning. of Coded Minds Global, said that the “They have looked at the data and innovate for a shared future.
by 2022.1 Rising income per capita is also benefits such as increased parental Parents in China, where schools are now use of technology in education is still at have seen that they are working most Wild added: “HSBC is committed to
boosting take-up of private education, so involvement. starting to reopen after months of closures, an early stage. He cited widespread use efficiently from home. But in education, supporting the whole education ecosystem
it now plays a critical role in driving the The experts attending the discussion supported some aspects of it, she said: “In of “low-tech”, such as meetings apps people are saying a blended model, in the region. Technology and innovation
learning agenda in the region. agreed that remote learning (introduced senior grades, parents will now expect a Zoom and Microsoft Teams, but said that traditional school and ed-tech is the are fundamental to the long-term success
The demand for higher education is in the UAE in early March) provided more degree of e-learning and will not be happy “high-tech” like AI, and how it impacts the future,” he said. of the sector, and HSBC can use its global
likely to continue to grow, thanks to the tools and different ways of delivering the if that is taken away. They now have a good role of the teacher, remains to be seen. The pandemic will have a role in networks to support the development of
wider Middle East’s large youth population curriculum. The consensus was that this insight into what their child is doing each He emphasised that to look at the future shaping the future demographics of the next generation in the region.”
– 42% will be under 25 by 2030.2 This would not be a replacement for traditional day, and they do not want to lose that.”
makes it imperative to build on the existing learning and that the social dynamics of The general consensus reached amongst
development of quality education in order learning through the traditional system participants was that physical schools
Sources:
to foster regional growth. wouldn't easily be replaced. Similarly, will remain, but a balance of enhancing * https://www.globenewswire.com/news-release/2019/12/17/1961785/0/en/Online-Education-Market-Study-2019-World-Market-Projected-to-Reach-350-Billion-by-2025-Dominated-by-the-United-
Educators worldwide have long debated memories and relationships are formed by classroom learning with tech - including States-and-China.html
the need for change in the way future having a social element to learning, which pre-recorded sessions, live online classes https://www.researchandmarkets.com/reports/4876815/online-education-market-and-global-forecast-by?utm_source=dynamic&utm_medium=BW&utm_code=nvzl68&utm_campaign=1334853+-
generations learn. While traditional schools may remain with students for the rest of and live in-classroom options – is the right +$350+Billion+Online+Education+Market:+Global+Forecast+to+2025+by+End+User,+Learning+Mode+(Self-Paced,+Instructor+Led),+Technology,+Country,+Company&utm_exec=chdo54bwd
provide clear socio-economic benefits their lives, and this is not easily replaced by space to move towards. With a more 1. Alpen Capital GCC Education Industry Report: https://argaamplus.s3.amazonaws.com/9e55ad53-477f-48f0-b202-2c2f03d6a03d.pdf
in terms of structure, discipline and just having online learning. connected world, further disruption is likely 2. PWC – Key Trends Shaping Education in the Middle East, 2019 https://www.pwc.com/m1/en/blog/key-trends-shaping-education-me-2019.html
friendships, the development of education Meanwhile, Beatrice Cernuta, Education over the coming years, so adoption of new 3. https://www.holoniq.com/2030/10-trillion-global-education-market/
technology (ed-tech), and its adoption as Practice Director at EY-Parthenon, said practices by the sector is now key. 4. Business Live ME – GCC Education Ecosystems, A Brief Overview https://www.businessliveme.com/gcc-education-guide-2020-2/
18 19CHAPTER 2 Light the economic spark of young intellect
Innovation needs youth
and digital fluency
middle class, the majority of whom
were born in the 1980s and 1990s.
A Q&A WITH MOUAYED MAKHLOUF Entrepreneurial Arab youth are also
Former Managing Director MENA, International Finance driving the e-commerce boom in the
Corporation (IFC), on how MENA’s youthful population region. According to a recent report by
and big tech changes are creating a sustainable economic HSBC Private Bank, the Middle East
and social framework. is home to the highest proportion of
millennial entrepreneurs in the world,
with 63% of the business owners
How important is the consumer accounting for 64% of the population. In they screened in the region aged 35
economy for the MENA region, some parts of the region, penetration is or under. Based on more than 2,800
compared to more traditional higher. For example, in GCC countries, active business owners, worth between
segments like energy, trade, and over 77% of the population are mobile $250,000 and $20 million, the research
manufacturing? subscribers, with Bahrain, Qatar and UAE also suggests the region has the
Countries in MENA have faced difficulties having subscriber penetration rates of youngest average age for entrepreneurs
diversifying their economies for years, 80% or above, which places them among at 26 years old. its Operating Principles for Impact
resulting in uneven progress across the the most penetrated markets in the world. The region’s growing young, educated “The GCC and Egypt account for 80% of the Management in April, with 60 global
region. Some economies like Egypt, We see too that the growing connectivity and technologically connected population e-commerce market and they have been growing investors coming together to adopt
Jordan, Lebanon and Tunisia have levels is pushing the growth of new sectors. presents an unprecedented opportunity them. These investors collectively hold
of diversification that compare well to Recently, tech-based entrepreneurship has to foster development. Yet challenges to at an annual rate of 30% – more than twice as over $350 billion in assets invested for
others at their level of income, while started to blossom in MENA. For example, achieving this remain. Most economies in impact, which they commit to manage in
others still lag. Overall, GDP growth Bain & Company estimated the value of the region still need to implement a range fast as the rest of MENA.” accordance with the principles.
in MENA is expected to continue at a the MENA e-commerce market at over of reforms to encourage the development
modest pace of 1.5% this year. This is $8.3 billion in 2017, with significant room of a more dynamic and sophisticated an ecosystem that nurtures innovation How important are issues relating to
led by oil importers like Egypt, which for further growth. The GCC and Egypt private sector. Job creation in the context and encourages the private sector to Environmental, Social and Governance
accounts for roughly 8% of MENA’s GDP. account for 80% of the e-commerce market of high global economic integration and flourish and grow. (ESG) for policy-makers dealing with
For oil-exporting countries, traditional and they have been growing at an annual rapid technological change requires Increasing access to finance is also consumer economies in the region?
oil and gas will continue to dominate rate of 30% – more than twice as fast as both governments and the private vital. According to a study by the Environmental changes and the rise of 63%
exports. For oil importers, growth in the rest of MENA. sector to make continued investments in International Financial Corporation (IFC), transparency make issues related to of Arab business owners are under the
tourism will be key, especially in Egypt Recent research by Crimson Hexagon education, innovation, and connectivity. there are between 1.9 million and 2.3 ESG key. Consumers are increasingly age of 35.
and Tunisia. In this context, much of the on consumer trends in the MENA million formal small and medium-sized empowered by technology and often
hope in the region will rest on supporting region has also shown that the region’s What are the challenges facing MENA enterprises (SMEs) in the MENA region. make their choices based on their values,
a more dynamic and entrepreneurial consumers continue to prefer established consumer economies? Although more than half maintain bank favouring smarter, cleaner and healthier
private sector, which can offer strong local competitors. That was well The key question is whether MENA will accounts, most do not have access to products and services. We see many
employment prospects for the region’s demonstrated by Careem, for example, be able to develop a new, sustainable credit. Businesses and entrepreneurs companies around the region moving $8.3bn
youth. and provides hope for the growth of more economic and social framework. The need financing to start up, grow their from an increasing awareness of ESG to a was the value of the e-commerce market
successes born in the region. social contract in much of the Arab world businesses and hire more people. more proactive stance. in MENA in 2017.
What are the macro-economic forces has relied on state-provided employment. The catalyst for this thinking is coming
driving consumer trends in the Middle How important is the youthful This is unsustainable over the long-term. What difference will recent changes to from investors and stakeholders. They
East? How do they vary between demographic of the region in Nearly half the population is aged residence conditions make for long- are focused on making sure that boards
regions – Gulf vs Levant vs North determining consumer patterns under 25 and a quarter of those are term consumer economics? effectively address issues of climate 2.6%
Africa? compared to the aspirations of the unemployed. Add the biggest gender These are steps towards providing a more change, waste, pollution, water resource
We live in a time of change, both globally rising middle classes and the wealthier gap in the world to this mix and it’s stable environment for foreign investors, depletion, working conditions, human
and in the region. The rise of the digital senior population? clear a new framework is needed. The which could help attract more investment rights, employee diversity, gender growth in GDP is expected in the UAE
economy, in particular, is disrupting Arab millennials currently form the region needs to capitalise on its unique and boost economic conditions in the inequality, board diversity, ethics and this year.
many traditional sectors. By mid-2018, majority of the region’s consumer strengths, including the young and non-oil sector, particularly. executive pay.
there were 381 million unique mobile base. Many companies are starting to entrepreneurial population, and continue The IFC, together with leading global
Sources: HSBC Private Bank 2017; Bain & Co.; World Bank.
subscribers across the MENA region, increasingly focus on the Middle East’s with reforms and other efforts to create investors and policymakers, launched * All unreferenced data points to be sourced to: IFC
20 21You can also read
