Prominent Arabic region magazine Trends did a special issue to accompany the MegaTrends conference where I delivered a keynote last week, incorporating interviews with the three major speakers: Nobel prize-winning economist Paul Krugman, His Highness Sheikh Sultan bin Tahnoon al-Nahyan, chairman of the Abu Dhabi Tourist Authority, and myself.
My interview is in the document here. I’ve also posted it as text below (pre-editing) as it may be easier to read.
TACKLING THE TRENDS
Ross Dawson, CEO of international consulting firm Advanced Human Technologies, talks to Ehtesham Shahid about the nature of the Middle East’s economic stability and systemic risk.
How did the crises affect your operations?
We are currently doing very well for a number of reasons. We help organizations shift how they work and take advantage of the opportunities created by technological change, which are still highly relevant. Also we are creating a number of new ventures in high-value content and online influence that are doing well.
It is important to recognize that economies are highly sectoral – whether the overall economy is going up or down there are always sectors that are thriving or doing poorly. Part of what we do is identify those sectors that are currently doing well and will gain momentum in coming months and years.
Where you expecting such a crises? Did you pass such expectation to your customers? How?
Frankly, no we didn’t specifically predict a financial crisis of such dimensions. However we certainly understood that the economic cycle is a reality. We believe that scenario planning is one of the most effective tools available to help organizations understand uncertainty and to respond effectively to crises. We certainly have built scenarios for banking clients that included a systemic global financial crisis.
The financial meltdown has hit many people very hard. Do you think the crisis is over? Are we at the bottom?
Economic cycles are notoriously difficult to predict! It certainly seems we have not reached the bottom of the economic downturn, given the likely flow-through of current activities such as large-scale layoffs. The critical question is the pace of recovery. We believe that strong global growth will resume at a rapid pace rather than be drawn out, however it may not be evident until mid-2010.
Do you agree with those who believe that it all started with Lehman Brothers, and we could have avoided the crises by saving Lehman Brothers?
No, this was a systemic failure. No single intervention would have changed the broader impact on the economy and financial system.
There is a great deal of suspicions now on the rating issued by rating agencies because they gave high rating for banks went bankrupt, how do you comment on that?
The major ratings agencies clearly played a significant role in creating systemic risk. One of the biggest issues arising from this is that investors will place less faith in ratings in future, meaning investors need to do more analysis themselves. It will also result in a shift away from highly complex financial instruments.
Banks that are supposed to support economy are becoming a burden on economy, first they were saved by tax payers money and now they are increasing their charges to public to compensate for their losses, do you see any correction coming to this trend? And how?
One of the key uncertainties moving forward is the degree of banking regulation and nationalization and its impact on the banking system. Banking regulation will absolutely increase. Talented young people will increasingly seek work in other sectors. Competition will arise from new sectors.
Do you see the service economy continuing to grow after the crisis?
The shift to the “weightless economy” is one of the most powerful long-term trends. We predict that the global economy will double in size within the next 20 years, and that the weight of goods produced will barely increase. High-value services will be predominant in the economy.
Most of gulf countries are investing their surplus oil income in sovereign funds; do you think this is wise? If not what do you advice them to do?
It is absolutely appropriate to invest national capital across opportunities in diverse countries and industries, focusing on major upcoming growth sectors including technology and alternative energy. The key issue is in governance of these institutions to ensure appropriate risk profiles and investment, while maintaining nimble decision-making.
Where do you advice your investors to invest now? And in what sectors?
We do not generally offer direct investment advice. Globally equities offer long-term value, with some sectors significantly undervalued. As importantly are finding mechanisms to invest in non-public companies. Some private equity companies will significantly shift their investment models towards less leveraged participation in private companies.
How do you see the international economy scene one year from now?
In one year from now there will overall be a significantly more optimistic mood globally, however that will depend heavily on the industry sector and specifc company. There will be a significant divergence in performance, with many companies over the next year going bankrupt or in severe difficulties, with others performing very well. There is likely to still be significant caution from many companies in investing and building up their workforce.
How do you see GCC economy one year from now?
The GCC economy – while very diverse – may lag in the global recovery, partly due to the recent significant role of construction and hospitality. However with appropriate investment and repositioning over the next one or two years, the flexibility of these economies could result in strong overperformance in the next boom.