DUBAI: The Middle East is at the epicentre of five ‘megatrends’ transforming the world, according to professional services firm PwC.
In the firm’s first regional megatrends report, it identifies the five factors as demographic and social change driving both prosperity and instability, a shift on global economic power putting the Middle East at the centre of the world’s fastest-growing markets, rapid urbanisation, climate change and resource scarcity, and technological breakthroughs.
“The Middle East today sits at the epicentre of megatrends that are reshaping our world; our ‘new normal’ era of low oil price and squeezed liquidity has therefore created the impetus for urgent action and that is something we wish to come through loud and clear in this report,” said Hani Ashkar, PwC Territory Senior Partner, Middle East.
“While it is true that the urgency of the transformation currently underway is a reaction to the sharp drop in oil revenues, the direction of change — and its complexity — is an inevitable response to these multiple global forces.”
The report, Middle East Megatrends: Transforming our Region, predicts the region’s population, which has already grown 70 per cent since 1990, will grow another 50 per cent by 2041.
While 40 per cent of the population is aged under 25, and youth unemployment is one of the highest in the world at 28 per cent, the report predicts that by 2050 20 per cent of the GGC’s national population will be elderly, compared to 2 per cent now. The global average is 16 per cent.
The report points to Dubai’s success in managing chaining trade patterns to become a hub in aviation, tourism and logistics, with Dubai International Airport contributing as much as 30 per cent of the emirate’s GDP.
Investment is rising in the UAE, which account for half the flows into the GCC, the report notes, but investment flows into the GCC as a whole have fallen to $20 billion (Dh73.4 billion) in 2014 from around $80 billion in 2008
Rapid urbanisation brings problems, the report says, with Cairo — now the world’s 10th largest city with a population of 20 million — facing massive infrastructure and development needs. The problem is less in the GCC, where the largest city, Riyadh, has a population of 6 million, but many cities still struggle to manage populations that have doubles in the last two decades.
Nevertheless, the urban growth is slower than Africa and India, and governments are focusing on how to make cities function optimally. Sustainability — particularly water security — should also be a focus for municipalities, the report said.
Until 2015, the Middle East lagged far behind on developing renewable energy sources, but the report highlighted that Dubai tripled its renewable energy target to 15 per cent of production by 2030, with other polities following suit.
Nevertheless, the report warns governments must consider the future: “The population of the GCC will have tripled in 50 years, but there will not be enough water and perhaps no oil — so what do we need to do now?”
The region’s young, tech-savvy population and high smartphone adoption — 78 per cent in the UAE — means the region is ready to take advantage of new technologies, but businesses are lagging in innovation and R&D. R&D expenditure in Saudi Arabia and Abu Dhabi is less than 1 per cent of GDP, compared to an OECD average of 2.4 per cent, the report notes.
Stephen Anderson, the firm’s Middle East Clients and Markets Leader, said, “Governments know they need to cut subsidies, expand their fiscal base and bring private investment and corporate practices into state entities. But they also know they need to keep building infrastructure and enable technology and innovation.
“Governments and businesses alike can translate an understanding of these megatrends into practical guidelines for future strategy and through this report’s insights, we hope to enable them to do just that.”