Twelve billionaires hold one fifth of the UAE’s wealth

01 August 2018 Consultancy-me.com

The Boston Consulting Group have just released the 2018 edition of the Global Wealth Report, this year titled ‘Seizing the Analytics Advantage’. The report identifies 18 percent of the total wealth held by individuals in the United Arab Emirates is owned by just 12 people.

The report which focuses on the worldwide growth in individual assets has identified that personal wealth grew in 2017. The majority of global wealth continues to be held by North Americans (40 percent) and the United States has a third of the world’s upper and ultra high net worth individuals (above $20 million).

In the Middle East, individual wealth grew by 11 percent over the past year after having been relatively flat between 2012 and 2016. The drop in oil prices at the beginning of 2016 was one of the largest factors which stagnated Middle Eastern wealth. Since last year, oil prices have recovered to upwards of $80 a barrel, prompting a growth in individual assets to $4.1 trillion.

This recovery saw an extra $400 billion added to wealth in the Middle East in 2017. The growth is roughly in line with the global average of 12 percent. Global wealth in 2017 grew from $180 trillion to $201 trillion.

Global Wealth in US Dollars Grew by 12 percent in 2017

In the UAE, 139 millionaires with assets over $100 million – referred to in the BCG report as ultra-high net worth individuals – hold 8 percent of the country’s wealth. A further 18 percent is held by just 12 billionaires.

According to the Forbes rich-list, the UAE’s billionaires own and administer a number of businesses outside of the oil sector, including in real estate, malls, hotels and import rights. The country’s richest man is Abdulla bin Ahmad Al Ghurair and his family, who are worth an approximate $5.9 billion.

Beyond the billionaires, the largest group of people in the UAE was those whose wealth is between $0 and $100,000. Those with assets in this category are said to number close to 7 million people, alluding to a grossly unequal distribution of wealth throughout the country.

North America Is the Clear Leader in Wealth per Capita

This can be seen throughout the whole Middle East as a trend with wealth per capita sitting at $18,000. Whilst that is significantly higher than Africa, Latin America and Asia, it’s still less than half the global average.

BCG Senior Partner and Managing Director, Markus Massi said; “Typically, in more mature markets you will see a more equal split, but not such a pronounced one where there are ultra-high net worth individuals holding 18 percent of the total wealth.”

“If you have family conglomerates driving a lot of the private sector growth here, then you will see a natural inclination where, if you have a got a country structure where certain families are holding a significant part of the private sector, that this also relates to wealth held by a few people in the country,” he said.

Affluent individuals personal wealth in percentage of region

Massi believes that in time, the divide between rich and poor will become less defined as markets mature. This is demonstrated in the BCG report in the chart showing affluent individuals – with a net worth of between $250,000 and $1 million – predicted to rise by 14.1 percent between 2017 and 2022, the highest rate of anywhere in the world.

This indicates the growing middle class across the Middle East, which while it is still premature in comparison to other markets like China or India, is nevertheless a sign of progress.

Regionally, Saudi Arabia has the highest concentration of personal wealth in the Middle East with roughly 22 percent, although that figure has shrunk since 2012 from a mark of over 25 percent. Turkey is also booming, with an increase of total Middle Eastern wealth from 11 percent to 12.4 percent.

According to the report, the UAE, Kuwait, Qatar, Bahrain will all loose a fraction of their portion of Middle Eastern wealth as other countries in the region begin increase their share.

Do consultants have a legitimising effect in the Middle East?

19 April 2019 Consultancy-me.com

Do the often kowtowing international consultants operating in the Gulf simply grant legitimacy to local rulers? The answer’s not so simple says regional expert Calvert Jones, who has conducted a fascinating research study on the local consulting industry.

Now valued at $3 billion annually in the GCC alone, the Middle East management consulting industry has exploded since the global financial crisis, growing at a heady 20 percent clip up until 2014 when the dive in global oil prices and attendant austerity measures briefly applied the brakes; ‘brakes’, in this context, meaning growth which at its lowest point in 2015 dropped to around 6 percent.

The slow-down was brief. With the plummet in oil prices spurring regional governments to act on economic diversification – captured in a range of ambitious national transformation agendas – together with the emergence of a range of digital advances now sweeping the public and private sectors, fresh impetus was given to the local consulting market; this year forecast to return to double-digit growth.

Of that $3 billion consultancy price tag – with close to half of it handed over in Saudi Arabia – the public sector accounts for approximately a third of the take, the vast majority of that paid to foreign consultancies and in particular the advisory wings of the Big Four and global strategy giants such as McKinsey and BCG. Scrutiny of these practices – especially in the wake of the Khashoggi killing – has also increased.

Copping much of the media flak, McKinsey for its part has backed itself as a force for good in the region, contributing greatly toward local economic, education and healthcare development. But the question remains, even if making a positive difference, do international consultancies confer legitimacy on authoritarian governments – “helping to prop up and even strengthen repressive, illiberal regimes?”Does the Middle East consulting industry have a legitimising effect?One person well-placed to address that question is Calvert W. Jones, an Assistant Professor in the Department of Government & Politics at the University of Maryland and author of ‘Bedouins into Bourgeois: Remaking Citizens for Globalization’. Jones spent 19 months between 2009 and 2017 conducting field research in the region, including into the consulting industry and the notion of conferred legitimacy.

According to Jones, some of the consultants she interviewed themselves expressed this concern, particularly when due a range of market factors they may have grown less inclined over time to voice too strong of an opinion. Yet, whether this is indeed the case is not so clear. Among other findings and areas of research, Jones conducted several experiments on the subject of legitimacy at universities in Kuwait, involving some 650 students.

“Conventional thinking about experts in politics suggests not only that experts rationalise governmental decision-making, but also that they confer legitimacy – meaning that the public may be more likely to support government initiatives when experts with the relevant knowledge, training, and experience are involved. In the Gulf, both experts and ruling elites tend to think along these technocratic lines,” she states in an article for the Harvard Business Review.

Experiments

While not addressing potential international legitimacy or other geopolitical or business and trade issues, Jones sought to test the idea of conferred legitimacy as to public opinion in the local polity. For the experiments, she asked participants to imagine that their country’s leaders were launching a major reform to improve either education or infrastructure, exposing them to a variety of mock news articles outlining the likely benefits from the government initiative.

In the first experiment, half of the reports featured reference to a team of top international experts assisting with the hypothetical reform, including their credentials and extensive experience elsewhere, with this detail absent from the remaining half. She found that subjects who read that experts were involved were far less likely to support the reform – indicating the ‘involvement of experts’ may have led to a significant drop in legitimacy. The results, however, are somewhat murky.

In the second experiment, Jones explored the impact of nationality on opinion, with otherwise identical reports on expert-advised infrastructure reform referring to either American, Chinese, or Kuwaiti advisers. She found two surprising results. Support for the reform did not differ significantly whether led by Chinese or Kuwaiti experts, but did however for the American-led reports, with subjects expressing significantly lower support.

The Chinese were also considered far more capable than their American counterparts, which may in itself provide a clue. “It’s not necessarily evidence of profound anti-Americanism, let alone a new love for Chinese experts,” Jones cautions; “Most likely, it reflects Kuwaitis’ longer experience with American experts, which includes their frustration with the lack of progress on various reforms.” The Kuwaitis, she suspects, are just far less familiar with Chinese consultants.

“This experimental evidence raises doubts about the ability of experts to rationalise and legitimise authoritarian rule,” Jones concludes. “Indeed, my research suggests that international experts can actually undermine legitimacy, potentially reducing domestic support for autocrats and weakening their regimes… In my experience, residents of these countries are increasingly critical of their governments paying hefty fees to foreign experts and consultants for little in return.”