By Dave Robinson
CEO, Hill & Knowlton Middle East

As the Middle East region continues to gain significant profile globally through the combination of fast paced development, aggressive outward investment programmes and continuing high oil prices, one would expect there to be greater understanding of the region. But experience shows that this is not necessarily the case with misperceptions, misunderstandings and myths continuing to exist.

“The Middle East” is a simple term popularised by the British around 1900 to describe the lands further east of Europe but not as far away as the “Far East”. Here in the “Middle East” the term has no meaning and no relevance – not just because the geographical perspective is lost, but because the homogeneity implied is simply not accurate.

But whatever you call it, this is a region which is featuring on the agendas of governments, corporate boards and leisure travellers more than ever before in modern times.

We will look at just three areas which are most often confused and least understood - diversity, democracy and development.

The energy boom, the need for modernisation, diversification and expansion and the shift in the centre of gravity of the world economy have all contributed to an immense economic diversification focus in the Middle East region and in particular in the Gulf states. This diversification has bred diversity. Dubai, one of the seven Emirates of the United Arab Emirates, is home to more than 180 nationalities. Around 5 million people of Saudi Arabia’s population of 22 million are non-Saudis – coming from other Arab countries, the West and from Asia. Only an estimated 20-30% of those living in Qatar are Qatari nationals, while again the rest of the population are from other countries. This “melting pot” status brings a wide variety of backgrounds together with an inevitable rich array of culture, cuisine, mindset and ways of doing business.

Religion in the region is also more diverse than many people imagine. The Middle East is the starting point and origin of the three monotheistic religions of Islam, Christianity and Judaism – and all three co-exist in the region today. While Islam remains the largest religion in the region, other faiths are not only widely practised and tolerated, but also make up a significant proportion of the demographics of Arab countries. For example, Coptic Christians represent around 12% of the Egyptian domestic population and Lebanon recognises 18 different religious groups in its constitution including Judaism, multiple sects of Christianity and Islam and of course the Druze – native to Lebanon and numbering around 500,000 worldwide. Generally across both the Gulf States and the Levantine countries, as well as North Africa, religious tolerance and freedom is firmly established.

Less established, but certainly making its mark, is democracy. Most of the Middle East has evolved from tribal and feudal societies. The Bedouin of the Gulf countries still feature prominently in political and social life, and while some tie up their livestock in the back of an urban apartment building in winter, many continue to live nomadically across the desert plains of the region.

However, tradition aside, modern cities and states require modern administrations. As populations swell dramatically (Dubai doubled its population between 1995 and 2005 and is set to do so again by 2015 or earlier) so do the strains placed upon the traditional forms of leadership which have been in place for thousands of years.

2007 saw the UAE hold its first democratic political election with the election of 50% of the seats of the Federal National Council (FNC) with a public vote. Moreover, the proportion of women on the FNC is higher than any elected body in Europe. And while on matters female, the UAE boasts a female Minister of Economy – Sheikha Lubna Al Qasimi - who not only is a prominent politician but also a very successful businesswoman. At the other corner of the Gulf region, Kuwait passed a law on May 16th, 2005, allowing women the vote and boasts perhaps the most democratic structure in the Gulf. Vying for that position also is the Kingdom of Bahrain whose democratically elected parliament sees a power share between Sunni and Shi’ia Muslims of whom the island kingdom boasts a population in excess of 50%. Even conservative Saudi Arabia carried out democratically structured municipal elections in 2005.

Perhaps most remarkable though is development.

Striking contrast of the Sheikh Zayed Road in Dubai, taken from the same angle - in 1991 and then in 2005

The Middle East is popularly characterised as being entirely energy dependent. While energy remains a very large component of the economies of Saudi Arabia, Kuwait, Qatar and the Emirate of Abu Dhabi, its contribution to GDP is decreasing - despite the high prices of oil over the last three years. Other states have shifted away from their reliance on hyrdocarbons more quickly – Dubai being one of the most remarkable examples.

In 2006 oil contributed just 5% of Dubai’s GDP despite extraordinary high prices. Moreover, the economy of Dubai has been growing at an average of 12-13% annually for the last five years and. The GDP of Dubai is set to continue to grow in double figures for the next five years and is forecast to grow by more than 190% by 2015. (Compare that with 8-10% YOY growth for economies like China and India).

This diversification away from energy has been fuelled by investment in areas such as logistics, transport, hospitality, real estate, banking and finance, as well as the service industries. These industries have grown rapidly in the liberal, tax free, business-friendly environment of Dubai and the strategy for development – often referred to as “the Dubai Model” – is being adopted across the Middle East.

And it needs to be . . .

Moreover, Foreign Direct Investment (FDI) in the Gulf states has grown significantly. The UAE leads in terms of total investment at $12 billion US in 2005 and marking a CAGR of 78% between 2001 and 2005 – Saudi Arabia and Qatar follow close behind.

While inward investment is growing at an impressive rate - a 40% YOY increase in 2006 for the Gulf Co-operation Council (GCC) countries – so too are populations in the region.

The total population of the Middle East region is set to double between now and 2030 while people under the age of 25 already make up 42% of the GCC population with unofficial figures suggesting that unemployment in the 16-24 age group is at 35%.

All of this puts a huge strain on infrastructure, the education system and places a burden on resources.

But while there are some very tough challenges ahead, the region appears to recognise not only the dangers but also the opportunities. Investment and economic diversification are crucial to meeting the future with optimism – and both are heading in the right direction.

In the words of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai: “In the race for excellence, there is no finishing line.”