Let's be careful with numbers

I'm sure many of you will have been struck by the prediction from Barclays Wealth earlier this month that FDI inflows into the UAE will exceed $100 billion by 2011.

The claim came from the latest edition of Insights, an occasional report produced jointly with the Economic Intelligence Unit (EIU).

The statistic that caused such excitement was hidden away innocuously on page 41 of the report, beneath a discussion of the GCC as a "market to watch".

Unlike several other key predictions and findings mentioned earlier (such as China coming third in the Household Wealth Index prediction for 2017), the UAE figure was not headlined or highlighted. Nonetheless, it was heralded as breaking news by regional news sources.

Except it wasn't. An investigation into the source of the statistics reveals they are in fact old news. They can be found in a freely available report published last September by the EIU and the Columbia Program on International Investment, titled World Investment Prospects to 2011.

At the bottom of page 211 you will find predicted estimates for FDI inflows to the UAE up to 2011. If you add them all together, and stick a further $6.2 billion to the total (the estimated figure for previous inflows), you come to the magic number of $108.2 billion.

"So what?" you might ask, "They're just predictions anyway". In a way, yes. Except there are two issues here. First, take that original date, September 2007 (the 5th, to be precise). Do you remember anything significant happening around that time? If you happened to be in a cave, then perhaps the word "subprime" might jog your memory.

At the time of publication, markets had only just started going haywire. The press conference for the launch of the report saw the authors bravely attempting to play down the extent of the crisis. Laza Kekic of the EIU said he thought the global economy was "in for a soft landing, not a hard landing", and the report's base assumption was that "the real economy will not be affected all that much". The first question from the press was whether or not the report took sufficient account of the extent of the rapidly breaking crunch.

Worthless

I'm not sure that it does. However, don't take my word for it. Here's what the report says: "The host of economic risks to our baseline range from overleveraged financial institutions to the impact of commodity price volatility. Turmoil in financial markets could be sharper and more prolonged than assumed; the slowdown in the US could be steeper than expected; there could be the need for a more aggressive monetary policy stance by central banks in response to higher inflationary pressures. A sharp, sustained downturn in global equity markets would, for example, put paid to the growth in M&As that underpins much FDI".

Whoops. Essentially, by the report's own reckoning, its predictions are now worthless. We were in a different world economically last summer - if you don't believe me, check the EIU's forecasts for oil prices and the dollar/euro exchange rate (somewhat lower than $60 a barrel, and no more than $1.36). So, how can these FDI figures be trailed unchanged?

My second point: There is too much alchemy presented as science in the GCC. Maybe FDI will reach $100 billion by 2011, but unless the government publishes figures, no one will know anyway. The current environment encourages a certain recklessness with figures on the part of private institutions. In the long run, this may be very damaging.

- The writer is Oxford Business Group's regional editor in the GCC.