GLOBAL ENTERPRISE SURVEY REPORT 2010 THE GULF A UNIQUE ANNUAL INSIGHT INTO THE COMPETITIVENESS OF GULF BUSINESSES AND DEVELOPMENTS IN GLOBALISATION INSPIRING CONFIDENCE icaew.com/enterprise
2 Global Enterprise Survey 2010 Gulf Report Welcome
WELCOME TO THE ICAEW GLOBAL ENTERPRISE SURVEY REPORT 2010 THE GULF The ICAEW Global Enterprise Survey provides a timely, revealing and unique picture of the opportunities and challenges that face businesses across the world: the Gulf, the EU, the US, Asia-Pacific and Africa. It draws upon the expertise of our members who work at the heart of business in positions such as chief financial officers, finance directors and senior management. A key finding from this year s ICAEW Global Enterprise Survey is that businesses in the Gulf are more likely than those in nearly all other global regions, to say that in the last year their competitiveness has been adversely affected by changes in access to finance. However, they are also more likely to anticipate that changes in access to finance will have a positive impact on their business over the coming year. Overall, there are many positives for the Gulf region in the ICAEW Global Enterprise Survey Report 2010, suggesting that Gulf-based businesses are, on the whole, well placed to exploit fully the emerging global economic recovery. Amanda Line Regional Director, Middle East Welcome icaew.com/enterprise 3
CONTENTS EXECUTIVE SUMMARY 5 MAIN FINDINGS 6 Chart 1: Planned annual turnover growth for the next two years Chart 2: Factors affecting organisations competitiveness over past year Chart 3: Factor expected to have most positive / most negative effect on business over next year Chart 4: Anticipated impact of globalisation Chart 5: Main barriers to international expansion (Critical or strong barriers) Chart 6: How business friendly is your country s regulatory and taxation environment? TECHNICAL APPENDIX 12 FURTHER DETAILS 14 4 Global Enterprise Survey Report 2010 The Gulf Contents
EXECUTIVE SUMMARY Key findings at a glance Over 80 of businesses surveyed in the Gulf are planning turnover growth over the next two years. The growth expectations of businesses in the Gulf have not increased as much as those in other regions. Among those regions that were included in last year s survey, the Gulf is the only one not to show a significant increase in the proportion planning turnover growth. Businesses in the Gulf were more likely than those based in most other regions to say that their competitiveness had been adversely affected by changes in access to finance over the past year. But they were more likely than their counterparts in most other regions to anticipate that changes in access to finance will have a positive impact on their business over the coming year. Businessses in the Gulf are more likely than those in several other regions to feel that continued globalisation will have a positive effect on their business over the next five years. 70 of businesses in the Gulf say that they plan to expand into, or increase their market share in, other countries in the next two to three years. Most businesses planning to expand are targeting countries close to home, primarily other countries in the Gulf and Middle East. They are more likely than businesses in other regions to target Africa. Businesses in the Gulf are more likely than those in several other regions to have a positive view of the regulatory and taxation environment in their country. Executive Summary icaew.com/enterprise 5
MAIN FINDINGS Businesses in the Gulf plan growth Over 80 of businesses surveyed in the Gulf are planning turnover growth over the next two years (see chart 1). Around two-thirds are planning growth of 6 or more a year, and more than 40 are planning growth of 11 or more, significantly higher than in globally-engaged businesses in the UK 1 and businesses in other EU countries. The growth expectations of businesses in the Gulf have not increased as much as those in other regions. Among those regions that were also included in last year s survey, the Gulf is the only one not to show a significant increase in the proportion planning turnover growth. CHART 1: PLANNED ANNUAL TURNOVER GROWTH FOR THE NEXT TWO YEARS 100 90 80 70 60 50 40 30 20 10 0 88 10.1 51 23 8 UK globally engaged (664) 82 12.0 50 32 11 Other EU (101) 91 13.1 60 41 14 88 14.0 14.3 16.7 15.0 71 46 12 Asia-Pacific (390) 88 70 48 12 Hong Kong Singapore Malaysia (237) 84 65 44 13 88 76 56 14 Any growth Growth of 6+ Growth of 11+ Growth of 30+ +20+11 +2 +2 +15 +15 +1 NC +11 +8 +17 +5 +8 +11 +10 NC +7 NC +9-5 Average growth by those planning to grow turnover US (96) Gulf (97) Africa (50) Showing change since 2009 (+/-) Base: All responding 1 In this report we have focused on those UK businesses that are considered globally engaged, as the overall UK sample has been selected in a different way to the sample for regions outside the UK and globally-engaged UK businesses provide a better comparison with these other regions. The data for UK businesses is weighted to represent the UK economy by value, whereas the sample for regions outside the UK is based on a random sample of ICAEW members in those regions. Global engagement is defined as having operations or activities, outsourcing business activities or functions, selling to customers, making acquisitions or adapting products or services to countries outside their home country. 6 Global Enterprise Survey Report 2010 The Gulf Main Findings
Changes in access to finance have been a negative influence on the competitiveness of businesses in the Gulf Businesses in the Gulf were more likely than businesses in nearly all other regions to say that their competitiveness had been adversely affected by changes in access to finance, with around half reporting this (see chart 2). For most of the other factors under review, businesses were split on whether the impact had been negative or positive. CHART 2: FACTORS AFFECTING ORGANISATIONS COMPETITIVENESS OVER PAST YEAR NET Changes in access to finance 51 11-40 Interest rate changes 27 23-4 Raw material cost changes 25 14-11 Exchange rate movements 23 17-6 Oil / petrol cost changes 19 23 +4 National government measures 16 24 +8 Positive Energy cost changes 15 15 0 Negative Base: All Gulf respondents: 100-60 -40-20 0 20 40 Main Findings icaew.com/enterprise 7
But changes in access to finance are expected to benefit businesses in the Gulf next year Businesses in the Gulf are more likely than businesses in most other regions to anticipate that changes in access to finance will have a positive impact on their business over the next year (see chart 3). Within the region there are some differences of opinion on what factors will impact competitiveness over the next year. Businesses in Dubai are more likely than those in the rest of the region to expect national government measures to have a negative impact (22). Outside of Dubai, there is a greater expectation that changes in the cost of oil / petrol will have a positive impact (28). CHART 3: FACTOR EXPECTED TO HAVE MOST POSITIVE / MOST NEGATIVE EFFECT ON BUSINESS OVER NEXT YEAR Any effect Changes in access to finance 26 9 9 44 National government measures 12 5 10 27 Oil / petrol cost changes 14 5 7 26 Interest rate changes 7 1 14 22 Most positive only Exchange rate movements Raw material cost changes 4 5 1 4 9 13 18 18 Both most positive & negative Energy cost changes 3 Base: All Gulf respondents: 100 1 0 10 20 30 40 50 4 Most negative only Businesses in the Gulf are positive about the impact of continuing globalisation Businessses in the Gulf are more likely than globallyengaged businesses in the UK and businesses in other EU countries and Africa to feel that continued globalisation will have a positive effect on their business over the next five years (see chart 4). Of those businesses in the Gulf that are of the view that continued globalisation will have some kind of impact on their business, half mentioned increased access to new markets as a positive way in which it would impact them. But one in four mentioned increased competition in their main overseas markets as a negative way in which globalisation would impact them, significantly more than say this in globally-engaged businesses in the UK and businesses in the US and Asia-Pacific. 8 Global Enterprise Survey Report 2010 The Gulf Main Findings
CHART 4: ANTICIPATED IMPACT OF GLOBALISATION UK globally engaged (705) -3 5 60 +4 Other EU (101) +4 7 62-8 US (100) N/C 3 67 +1 Asia-Pacific (402) Hong Kong / Singapore / Malaysia (243) +2 7 6 72 74-6 Positive Negative Gulf (100) +2 8 76 +7 Showing change since 2009 (+/-) Africa (50) 10 60 Base: All respondents -20-10 0 10 20 30 40 50 60 70 80 The majority of businesses plan to enhance their product offering to compete more effectively in world markets Over the next five years, in common with those in most other regions, a majority of businesses in the Gulf plan to produce higher value-added products or services, adapt their products and services to other markets, and increase the number of countries they sell to. Businesses in the Gulf states other than Dubai are more likely than those in globally-engaged businesses in the UK and businesses in most other global regions to be planning to adapt products or services to markets in other countries (59). More than two-thirds of businesses in the Gulf have international expansion plans 70 of businesses surveyed in the Gulf say that they plan to expand into, or increase their market share in, other countries in the next two to three years. Most of those looking to expand their international presence are looking close to home in terms of where they plan to expand or increase market share. Just over half (53) are looking to other countries in the Gulf and Middle East in particular, Saudi Arabia (23). Businesses in the Gulf are more likely than their counterparts in other regions to nominate Africa as a target for international expansion (34 compared with less than 10 of businesses in other regions). Around a third are also interested in the emerging countries of Asia-Pacific, especially China (19). India is also a target for some (19). Main Findings icaew.com/enterprise 9
Administrative, regulatory and legal considerations and corruption are most commonly listed as barriers to international expansion for businesses in the Gulf Among those businesses in the Gulf that already have an international presence or are considering developing one, the barriers to international expansion are similar to those experienced by businesses in most other regions (see chart 5). Overall, more than half cite administrative, regulatory or legal issues, corruption and the existence of effective legal systems regarding commercial agreements as strong barriers to international expansion. Corruption is seen as more of an issue for businesses in the Gulf than globallyengaged businesses in the UK and businesses in the US. CHART 5: MAIN BARRIERS TO INTERNATIONAL EXPANSION (Critical or strong barriers) UK globally engaged (558) Other EU (91) US (86) Asia-Pacific (346) Gulf (86) Administrative, regulatory or legal issues 38 34 55 56 56 Corruption 33 43 34 49 56 The political environment 35 37 41 54 43 Existence of effective legal systems 30 38 38 54 52 Availability of local management 26 27 27 39 29 Skills of local workforce 24 26 26 35 31 Availability of internal resources 24 37 20 36 33 Uncertainty regarding exchange rates 21 20 14 32 17 Access to finance 16 30 19 23 28 Information on markets, competition 20 22 21 33 24 Local staff recruitment 19 18 15 31 27 Language issues 14 10 14 19 13 Cultural differences 16 16 10 23 9 Availability of credit insurance 12 10 5 15 8 Base: All with / considering international operations / activities 10 Global Enterprise Survey Report 2010 The Gulf Main Findings
Businesses in the Gulf view their regulatory and taxation environment as business friendly Businesses in the Gulf are more likely than globallyengaged businesses in the UK and businesses in the rest of the EU and Africa to have a positive view of the regulatory and taxation environment in their country, with around 80 considering it to be business friendly (see chart 6). CHART 6: HOW BUSINESS FRIENDLY IS YOUR COUNTRY S REGULATORY AND TAXATION ENVIRONMENT? 100 80-5 N/C -6 60 40 20 0-20 -40-60 -2 +1 6 45 34 12-1 +1 10 45 32 12 +6 16 57 18 8 35 42 20 4 +1 52 38 8 2 +6 39 42 10 7 10 50 28 12 Very Fairly Not very Not at all Showing change since 2009 (+/-) -80 UK globally engaged (705) Other EU (101) US (100) Asia-Pacific (402) Hong Kong Singapore Malaysia (243) Gulf (100) Africa (50) N/C No change Base: All respondents On most aspects of regulation and taxation, businesses in the Gulf are more likely to be positive than businesses in the EU and US. Some aspects of regulation and taxation are more likely to be seen as a help rather than a hindrance to their business s operation and development notably, corporate governance requirements, financial reporting requirements, health and safety regulation and environment law. Businesses in Dubai tend to be less positive than businesses in the rest of the region on a number of aspects of regulation and taxation. Just under a third see corporate governance requirements as a help to their business compared with over half in the rest of the region. Businesses in Dubai are more likely to regard health and safety regulations and planning regulations as a hindrance compared with businesses in the rest of the region. Main Findings icaew.com/enterprise 11
TECHNICAL APPENDIX This report outlines the key findings for businesses in the Gulf region represented in the Global Enterprise Survey Report 2010. Businesses in the Gulf were included for the first time in 2009. The UK Enterprise Survey is now in its fourteenth year but, with an increasing focus on the globalisation of world markets, the survey was extended in 2008 to take a broader global view, including interviews with members in other key global economic regions. The purpose of the study was to look at the following issues that impact upon businesses today and comment on any trends emerging: business growth, objectives and influences the impact of globalisation on business and plans for expansion regulatory issues for business. Between 31 May and 9 July 2010, we conducted 1,000 telephone interviews with ICAEW members working in business in the UK and 753 with members working in business in key regions outside the UK. In the UK we conducted the interviews with a cross-section of ICAEW members working within industry in the UK. Broad quotas were set to ensure sufficient response in key sub-cells by region, industry sector and size of business. The findings of the UK survey were subsequently weighted by company size (number of employees), industry sector and region so as to represent the UK profile of businesses by value in the economy (Gross Value Added). All the data shown in the charts and referenced in the text reflects weighted totals. We have published the findings in a detailed report: the UK Enterprise Survey Report 2010. 12 Global Enterprise Survey Report 2010 The Gulf Technical Appendix
In the Global Enterprise Survey report, and where comparisons are made in the Gulf report, we have focused on those UK companies that are considered globally engaged 1. The overall UK sample was selected in a different way to the sample for regions outside the UK, and globally-engaged UK businesses provide a better comparison with these other regions. The data for UK businesses is weighted to represent the UK economy by value, whereas the sample for regions outside the UK is based on a random sample of ICAEW members in those regions. Comparisons should therefore be treated with some caution. Details of the interviews conducted in businesses outside the UK are outlined below. 100 in the Gulf, comprising 50 in Dubai and 50 elsewhere (other UAE 19, Bahrain 17, Oman 1, Qatar 5, Saudi Arabia 8): 35 (35) are in SMEs, 65 in larger businesses. 101 in a spread of other EU countries, representing Belgium (11), Cyprus (6), Czech Republic (3), France (10), Germany (10), Greece (2), Hungary (5), Ireland (10), Italy (10), Luxembourg (2), Netherlands (10), Poland (10), Romania (1), Slovakia (1), Spain (10): 43 (43) are in SMEs (up to 250 employees), 58 in larger businesses. 100 in the US: 36 (36) are in SMEs, 64 in larger businesses. 402 in Asia-Pacific countries: Australasia (80) (Australia 65 and New Zealand 15), China (30), Hong Kong (81), Indonesia (11), Japan (16), Korea (1), Malaysia (81), Singapore (81), Thailand (16), Vietnam (5): 142 (35) are in SMEs, 260 in larger businesses. 50 in Africa, representing Botswana (1), Ghana (2), Kenya (10), Mauritius (10), Nigeria (1), South Africa (20), Tanzania (3), Uganda (1) and Zambia (2): 31 (62) are in SMEs, 19 in larger businesses. Members in Australasia, the group of other 2 Asia-Pacific countries and Africa were included in the survey for the first time this year. nb Data based on sub-samples of less than 100 should be treated with caution. 1 Global engagement is defined as having operations or activities, outsourcing business activities or functions, selling to customers, making acquisitions or adapting products or services to countries outside their home country. 2 Other Asia-Pacific countries include China, Indonesia, Japan, Korea, Thailand and Vietnam. Technical Appendix icaew.com/enterprise 13
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