The Middle East - A region on the move (PDF, 766 ... - Roland Berger

VCW Tagung 15_04_2010.pptx 

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<strong>The</strong> <strong>Middle</strong> <strong>East</strong> – A <strong>region</strong> on the move 

by Alexander Keller and Friedrich Portner 

Essen, April 15, 2010


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Among the top 4 global consultancies in MENA, we developed a 

diverse client/ industry experience, used in this presentation 

Overview of Roland Berger MENA activities and selected clients 

RB & MENA FOOTPRINT 

SELECTED MENA CLIENTS 

• Roland Berger Strategy Consultants 

cover over 25 countries globally with a 

revenue of USD ~1 bn in 2009 

• In the MENA Region, we are among the 

top 4 global players covering a broad 

client and industry base 

• <strong>Middle</strong> <strong>East</strong> HQ in Bahrain, with offices – 

KSA, UAE and Qatar in formation 

• Casablanca covering the Maghreb 

• Project offices in Libya and Iran


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<strong>The</strong> MENA <strong>region</strong> – Extremely heterogeneous with major challenges 

ahead 

1. 

Economically and population wise heterogeneous, with an overly 

young population structure 

2. 

Generally resource rich, with expected capital influx exceeding 

absorptive capacity 

3. 

Economy will remains small compared to Europe even in 2025 – 

But attractive growth potential for firms exist 

4. 

Overall, promising future – Only if key limitations are tackled e.g. 

HR scarcity, education, infrastructure, regulatory

<strong>The</strong> <strong>region</strong> stretches over 4500 km from Morocco to Iran with a 

population of approx 365 m 

<strong>The</strong> MENA 1) <strong>region</strong> 

Morocco 

Tunisia 

Lebanon 

Israel 

Syria 

1) 

Iraq 

Iran 

Algeria 

Libya 

Egypt 

Jordan 

Kuwait 

Saudi 

Arabia 

Bahrain 

Qatar 

U.A.E. 

Oman 

Yemen 

1) Some MENA literature definitions exclude Iran 

Some of the following presenation descriptions do not consider the Levant Yemen and Libya 

GCC includes: KSA, UAE, Kuwait, Qatar, Bahrain, Oman; Maghreb includes: Algeria, Morocco, Tunisia 


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Source: EIU 2009, Roland Berger analysis 


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A significantly heterogeneous <strong>region</strong> in population, growth and 

wealth, building mainly three clusters – Extreme young population 

GDP P.C. [EUR k, 2009] 1) , POPULATION [M, 2009] AND 

CAGR [%, 2004-2009] BY COUNTRY 

POPULATION STRUCTURE 

GDP p.c. 

40 

35 

30 

25 

20 

15 

10 

5 

0 

10.7 Qatar 

7.0 Kuwait 

7.4 UAE 

6,2 

4,3 KSA 

Oman Bahrain 

4,9 Tunisia 3,9 Algeria 

Iraq 

4,9 

Morocco 

0 15 30 45 

1) Real GDP figures at PPP 2005 prices 

Germany 

1,6 

Egypt 

5,7 

6,1 

Iran 

60 75 90 

Pop. 

Population in scope ∑ = 299.2 m 

UAE 

Qatar 

Kuwait 

25% 

27% 

30% 

55% 

44% 

46% 

20% 

29% 

24% 

Oman 

Bahrain 

KSA 

Tunisia 

Algeria 

Morocco 

Iran 

Egypt 

Iraq 

42% 

35% 

42% 

43% 

43% 

42% 

42% 

49% 

54% 

40% 

41% 

37% 

32% 

35% 

32% 

33% 

29% 

29% 

18% 

24% 

21% 

24% 

22% 

26% 

25% 

22% 

17% 

Germany 20% 26% 

54% 

40 and up 20 to 39 Younger than 20

Region generally oil & gas dominated, with few countries living 

from manufacturing – $ 5-6 Tr GCC revenues in 2020 at oil $ 50-70 

GDP breakdown 1) by country 

13% 14% 

15% 

20% 

52% 

KSA- 

BAH- 

OMN 

21% 

15% 

50% 

UAE- 

QAT- 

KUW 

Manufacturing 

industries 

18% 20% 

21% 

12% 

49% 

Algeria 

3% 

23% 

54% 

Iraq 

Trade, finance, 

real estate, hotels 

39% 35% 

50% 

11% 

Iran 2) 

25% 

26% 

15% 

Egypt 

Service 

54% 

18% 

18% 

10% 

34% 

58% 

8% 

Morocco Tunisia 

Petroleum, gas, 

oil, quarrying mining 

25% 

14% 

25% 

36% 

Total 

CUMULATIVE GCC OIL 

REVENUES [USD trillion] 

5.8 

4.1 

3.2 

2.2 

2015 

8.8 

6.2 

4.7 

3.2 

2020 

Oil @ $100 

Oil @ $70 

Oil @ $50 

Oil @ $30 

1) All years are 2007 except for UAE, KSA, Bahrain, Kuwait, Algeria and Iraq it is 2006 

2) Trade, finance, real estate and hotels are included in services, as no breakdown available 

Source: Euromonitor; Central Banks, Roland Berger analysis 


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Historical expenditure and absorptive capacity indicate capital 

oversupply of the GCC of several USD trillions in 2020 

Gross fixed capital investment share of GDP 1993-2006; cumulative potential investments 

Gross fixed capital investment share of GDP 1993-2006 

37 

31 

28 27 

25 

Weighted average GDP 20% 

19 19 

18 

16 16 

15 

Cum. investments at 20% & 30 % GDP in 2020 

[USD tr] 

4.2 

2.8 

20% 

30% 

Cum. expenditure 1) at historical CAGR 6.2% 

[USD tr] 

3.3 

1.7 

China Singapore 

QAT 

UAE 

India 

USA 

KSA Russia OMA 

BAH 

1) Government expenditures of spending and capital investments 

Source: EIA; BP World energy report, Global insight, Business monitor international, Roland Berger analysis 

KWI 

GCC absorptive capacity is limited by its ability to provide 

equipment, material, skilled labor, efficient money allocation, 

inflation, etc. for the cash being invested 

2015 

2020 

Cum. capital oversupply @ oil 50/70 USD 

[USD tr] vs. expenditures 

Oil @ 70 

Oil @ 50 

2.4 

1.5 1.4 

2015 

2.9 

2020 


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Source: Roland Berger analysis 


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Major challenges ahead for richer & poorer countries to create 

sustainable economy & employment – Large state support needed 

SMALLER / RICHER 

COUNTRIES 

Opportunities 

• Almost unlimited capital 

resources (exception 

BAH, Tunisia) 

Challenges 

• Adequate investment 

opportunities 

• Limited domestic 

market 

• Limited domestic & 

willing workforce 

• Infrastructure 

availability 

Key to develop a 

sustainable economy 

LARGER / POORER 

COUNTRIES 

Opportunities 

• Mostly existing 

domestic market 

• Potential local workforce 

Challenges 

• Limited capital 

resources (exception 

KSA) 

• Not adequately 

educated population 

• High youth 

unemployment 

• Infrastructure availability 

Key to create jobs for the 

upcoming youth segment 

REFORMS AND ECONOMIC 

DEVELOPMENT 

• Deregulation & privatization 

– Deregulation and privatization wave supporting 

economic development e.g. "National Strategy" 

– Initiatives to reduce bureaucracy e.g. e- 

government and FDI support 

– Industrial development funds being created to 

provide financial assistance e.g. SIDF 

• Economic Cities/ Zones 

– Free zones and mega-city projects with 

industrial complexes being developed 

– Cities/zones are supported by governments to 

diversify local economies 

– "Clustering" programs being establish to 

develop competitive advantages 

• National education & hiring initiatives 

– Accelerated development/ support of foreign & 

local universities as well as training programs 

– Emphasis on workforce nationalization



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Governments are using different strategies, from subsidized loans 

& economic cities to EU/USA cooperation 

Government objectives and strategies 

GOVERNMENT OBJECTIVES 

• Spur economic growth (In KSA, SAGIA 

expects economic cities to contribute 

USD 150 bn to GDP by 2020) 

• Reduce dependence of the economy 

from oil 

• Attract foreign investors and tenants 

that bring new skills and resources to 

country 

• Create more jobs for local population 

directly and indirectly since population 

• Enhance competitiveness of industries 

by promoting industrial and skill 

upgrading as well technology transfers 

GOVERNMENT KEY STRATEGIES 

• UAE, Qatar, Kuwait, KSA and Bahrain governments 

seeking the diversification of their industry by 

subsidized loans, and governmental facilitations 

e.g. regulations in industrial zones – KSA furthermore 

uses economic cities to urbanize remote areas 

• Egypt in cooperation with the USA is building up an 

export driven economy often located in special zones, 

ensuring the development of a certain level of 

industrial independence 

• Maghreb countries mainly seeking the development of 

export related industries in cooperation the EU 

• Iran seeking economical and industrial 

independence by diversification of the industry and 

urbanization of remote areas 

• Iraq re-establishing industries in special zones to 

facilitate and accelerate the development / rebuild

Industrial zones establishment is accelerating, especially mega 

cities – KSA front runner 

Industrial zones overview 

NUMBER OF INDUSTRIAL ZONES BY COUNTRY 

Cumulative # of established 

industrial zones & mega cities in 

MENA by year 

Total industrial zone area 

411 kha 

12 

4 

3 

20 

% share of mega cities 82% 

126 

5 

7 

13 

4 

6 

78 

101 

109 

31 

13 

8 

21 

18 

3 

38 

34 

4 

73 

5 

95 

6 

17 

Before 

1981 

1981- 

1990 

1991- 

2000 

2001- 

2007 

Planned 

Industrial zones 

Mega cities 



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Source: Jazan economic city 


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Clear trend towards balanced or light industries exist – Aim to 

create sustainable diversified economies 

Residential & commercial cluster 

• Port, logistics, telecommunication, 

schools, hospitals 

• Residential, commercial and business 

centres... 

Oil, gas and utilities cluster 

• Power and desalination plant 

• Oil refineries and tank farms 

• Petrochemical and chemical industries 

• … 

Heavy industries cluster 

• Basic material e.g. steel, alu, cement 

• Automotive 

• Ship building 

• … 

Light & support industries cluster 

• Food processing, pharma & agro- tech 

• Plastics, textile and tech parks 

• Metal fabrication 

• …

Nevertheless, the <strong>region</strong>'s GDP in 15 years will only be roughly the 

size of Germany today, but with interesting 5% growth rates 

Macroeconomic comparison of MENA 2) to Germany 

Real GDP 2009 [EUR bn at 2005 prices] 

Real GDP 2025 1) [EUR bn at 2005 prices] 

GDP % of 

Germany 

100 47 30 8 10 

GDP % of 

Germany 

100 107 68 18 21 

CAGR 2009- 

2025 

5% 

2,271 

1,072 

682 

2,271 

2,433 

1,552 

522 

288 

346 

135 

92 

167 

174 

56 

91 

217 

185 

236 

448 

405 

230 

116 

476 

338 

138 

Germany 

MENA 

<strong>region</strong> 

GCC & 

Egypt 

Maghreb 

Iran & Iraq 

Germany 

2009 

MENA 

<strong>region</strong> 

GCC & 

Egypt 

Maghreb 

Iran & Iraq 

KSA UAE Egypt Other 

Algeria Tunisia Morocco Iran Iraq 

1) GDP Oman estimated based on KSA growth rate, GDP Iraq estimated based on GDP per capita in Iran 2) Excluding Libya, Yemen & Levant 

Source: EIU, (10/2009), Roland Berger analysis 


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Several crucial obstacles and limitations need to be addressed 

HUMAN RESOURCES 

& EDUCATION 

• Attraction of labor in competition to 

emerging market at reasonable costs 

• Reduction of public job attractiveness, 

encouragement of private employment 

• Reforming of education & curricula/ 

quality 

INFRASTRUCTURE 

& INTEGRATION 

• Development of adequate 

infrastructure e.g. utilities, sanitation, 

IT, technology, roads, ports, etc. 

• Regional integration allowing access 

to markets (scale), with greater export, 

competition, specialization, productivity 

BUREAUCRACY 

& TRANSPARENCY 

• Elimination of bureaucratic procedures 

& facilitating commerce e.g. e-gov't 

• Improving accountability/ access to 

info e.g. procedures, info asymmetry 

• Creating space for private sector and 

limiting public interference 

REGULATORY 

& FINANCIAL SYSTEM 

• Improving regulations & protecting 

investors e.g. property rights, free trade 

agreements, financial supervision, etc. 

• Strengthening rule of law/ apply equally 

• Maturing capital markets & credit 

facilitation, also for SMEs (micro credit)



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Chemical industry chance: <strong>The</strong> assessment of multiple chemical 

end-consumer show significant growth 

CHEMICALS CUSTOMER INDUSTRIES 

HISTORIC & FORECASTED DEMAND [EUR M, 2007 PRICES] 

CAGR + 5.8% 

CAGR 

'07-'25 

34.021 

2.751 

4.3% 

7.251 

4.1% 

CAGR +9.3% 

5.917 

5.7% 

Others… 

12.432 

1.280 

7.970 

3.491 

1.039 821 2.182 

1.547 

2.120 3.933 

2.443 

1.546 

12.450 

5.653 

6.6% 

7.5% 

2002 

2007 

2025 

Coating 

Cosmetics & toiletries 

Detergent & cleaners 

Plastic packaging 

White goods



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To be successful, three key factors cannot be neglected in this fast 

changing environment 

Key factors for sustainable market entry/ growth 

Partner-up 

• Timely and adequate market knowledge are essential 

as many decision are not made public or are pre-made 

• Local contacts and presence is crucial to gain attractive 

contracts or open doors, as trust is still a decision factor 

Examples 

Customize 

• <strong>The</strong> <strong>region</strong> is too heterogeneous to roll out one strategy 

that fits all – different demand needs must be considered, 

as well as resource availability, subsidies, etc 

Use Benefits 

• Governments are offering a multitude of benefits from 

interest rate less loans e.g. SIDF to one-stop-shop 

support e.g. SAGIA altering feasibility & IRR of projects 

• Technical knowledge is desperately being required

Source: Roland Berger 


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Overall, the <strong>region</strong> is on the move into a most probable promising 

future 

• A young population & heterogeneous economy/ government require a detailed 

country understanding, but also offer opportunities 

• "Richer and poorer" countries are both facing major challenges to diversify the 

economy and create needed jobs – Different government initiatives will continue 

supporting the transformation 

• Oil/ gas revenues will not be only invested at home, but expected capital oversupply 

will also be invested into the <strong>region</strong>/ globally – "poorer" neighbors will benefit 

• <strong>The</strong> <strong>region</strong> will grow at CAGR 5% over the next 15 years, nevertheless major 

limitations in education/ regulations/ infrastructure need to be overcome – <strong>The</strong> <strong>region</strong>s 

size will reach that of Germany today 

• Several chemical consuming industries are growing and catching-up quickly, 

offering an opportunity for chemical firms if they observe some KSFs


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Alexander Keller 

Partner 

Friedrich Portner 

Principal 

Tel. +49 211 43 89 2127 

Fax +49 211 43 89 2110 

Tel. +973 17 56 7972 

Fax +973 17 56 6703 

Roland Berger Strategy Consultants 

Karl Arnold Platz 1 

40474 Dusseldorf 

Germany 

Roland Berger <strong>Middle</strong> <strong>East</strong> W.L.L. 

Al-Moayyed Tower, 21st floor 

P.O. Box 18259 

Manama – Kingdom of Bahrain

The Middle East - A region on the move (PDF, 766 ... - Roland Berger

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