The Arab world can make a big difference to emerging markets, according to Marvin Zonis, professor emeritus of Busess Administration at Chicago Booth School of Business.
In his talk entitled “The Middle East & North Africa: Deepening Ties with Other Emerging Markets”, he said that while global economic growth was returning, emerging markets were expanding more rapidly.
He told his audience that the Arab world, especially those countries in the Gulf, had the capacity to play a far larger role in the future of other emerging markets and the global economy as a whole.
He added, “This is necessary, too, if the Arab world is to offer greater opportunities to its own citizens – especially young people. But it is also necessary if international partners are to make progress on shared challenges, from assisting fragile and post-conflict states, to promoting peace, to addressing climate change.”
Professor Zonis was the first professor at Chicago Booth to teach a course on the effects of digital technologies on global business. He also acts as a consultant to corporations and professional asset management firms throughout the world, helping them to identify, assess, and manage their political risks in the changing global environment.
A leading Western authority on the MRNA region, and the former director of the Centre for Middle Eastern Studies at the University of Chicago, the professor was talking at Credit Suisse’s first Middle East Speaker Series in Dubai, arranged in collaboration with the University of Chicago Booth School of Business and INSEAD Business School.
Zonis – co-author of the book, The Kimchi Matters, which provides a method for assessing and managing political risk – added that, until the recent financial meltdown, the emerging markets were the centre of political risk.
“Now almost every country at least offers the prospect of political risk. For that reason, the GCC states need to diversify their global involvement.
“Whereas the United States and Europe were once central to Gulf interests and, more recently, the Middle East itself, diversity is now the most risk eff ective strategy. Emerging Asia and Africa, in particular, should attract the attention of Gulf businesses as well as investors.”
The Credit Suisse event, held in May at the Emirates Towers, attracted signifi cant interest from investors, clients, government officials and professionals from the region’s fi nancial community. Subjects ranged from the future of global banking, corporate governance in family businesses and ties between the Middle East and emerging markets.
Brady W. Dougan, chief executive officer of Credit Suisse, told the seminar, “Banks are the key facilitator of global economic integration. They act as an intermediary between old and new economies. Global fi nancial services providers play an important role for wealth creation and increasing prosperity around the world, but they also bear a signifi cant responsibility by providing governments, companies and individuals with access to capital, evaluating risks and ensuring that capital is deployed in the most efficient way.
“However, the fi nancial crisis has also demonstrated a need for further strengthening the global fi nancial system as a whole – in order to ensure that in the future the economies around the globe can rely on a robust, stable financial and operational environment. The foundations for these changes are being laid right now − in the aft ermath of the crisis.”
He added that in addition to globalisation and technological development, emerging markets had been the most important drivers of growth in the past 20 or 25 years, and would remain so in the future. “Dynamic markets such as the Middle East are clearly one of the most important strategic priorities.”
Stanislav Shekshnia, affiliate professor of entrepreneurship at InSEAD, spoke on corporate governance in the family business context. he cited the separation of ownership and management in the hands of key personnel in the organisation system as one of the important characteristics of a successful family business.
The tension between meritocracy and blood posed a challenge in managing a family business, he said. “We have a tendency to associate meritocracy with professional management and family with loyalty and engagement and ownership attitude. The best companies are ones that manage to combine both.”
Speaking on “The Future of Banking”, Robert Z. Aliber, professor emeritus of international economics and fi nance at Chicago Booth, said that the “future” would be influenced by a number of factors, prime among them being the continuation of credit cycles and costs triggered by regulatory changes.
He added that the outlook for banking would depend on whether credit cycles continued or abated. If cycles continued, the political response to the budgetary costs of failure of large fi nancial institutions was likely to be an increase in regulation. This would in turn seek to limit the trading and other activities of traditional banks.
“The costs of regulation reduce the rates of return that banks can pay on their IOUs. Th e result is that the production of the IOUs is likely to move toward the legal jurisdictions that have the least severe regulation. Thus, banks headquartered in countries that have the lowest interest rates, or lower costs of capital, will be able to pay the highest interest rates on their deposits.”