CEOs emphasise company survival rather than expansion

Dubai: With the global economic climate getting bleaker, top company CEOs around the world are scaling down their ambitions, expecting 2009 to be a tough year for business.

These thoughts appear to be more focused on preserving the gains made before the global financial crisis broke out last year than about expanding operations.

In an annual survey carried out by audit firm PricewaterhouseCoopers (PWC), just 21 per cent of CEOs said they were confident of revenue growth in the next 12 months, down from 50 per cent in the last survey.

The question of survival appears so high on the minds of executives that John Donahoe, president and CEO of the US-based global online marketplace eBay, remarked in an exaggerated way: "If I can get three good nights' sleep in the next 12 months, I will consider the next year to be a success."

Underlying the challenges for companies, he added that "it's necessary to strike a balance between fighting each day to ensure your survival, while keeping a strong hand on the tiller in order to steady the ship."

The impact of recession in some large developed economies is already hitting some export-led economies in Asia, dramatically resulting in falling global trade.

Although Gulf economies have escaped the worst effects of the crisis due to healthy fiscal surpluses, top executives have become more cautious.

Khalid Kalban, chief executive of diversified holding company Dubai Investments, told Gulf News that for local companies the focus will be more on maintaining a healthy cash flow than managing their bottom line.

He said how companies perform this year will depend on the general liquidity situation in the market.

DP World, one of the largest and geographically most diversified container terminal operators, said on Monday that it was reviewing all its expansion projects in view if the new global economic reality.

CEO Mohammad Sharaf told Gulf News the company is putting a freeze on recruitment and reviewing capital expenditure in order to conserve cash.

CEOs in the PWC survey were gloomy about longer term growth as well, predicting a slow recovery. Only 34 per cent said they were very confident of growth over the next three years, down from 42 per cent last year, when CEOs were just beginning to recognise the full impact of the credit crisis on the global economy.

The survey showed that pessimism prevailed across all geographic regions, business sectors and levels of economic development.

Only 15 per cent of CEOs in North America and 15 per cent in western Eur-ope expressed confidence about growth prospects for the next 12 months.

This compared with 21 per cent in the emerging economies of central and eastern Europe, 31 per cent in Asia Pacific, and 21 per cent in Latin America.

"The speed and intensity of the recession has rocked the psyches of CEOs and created a global crisis of confidence," said PWC's global CEO Samuel A. DiPiazza, Jr.

"CEOs are most concerned about the immediate survival of their companies. Even in once rapidly emerging economies, companies are now coping with issues like unavailable credit, sluggish capital markets, and collapsing demand," he said.

Nearly 70 per cent of CEOs said their companies will be affected by the credit crisis. Of those, 80 per cent said they faced higher financing costs, and 70 per cent said they would delay planned investments as a result.