world economic forum on the middle east 2007

World Economic Forum on the Middle EastPutting Diversity to WorkDead Sea, 18-20 May 2007

Report

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Other specific information on the World Economic Forum on the Middle East, Dead Sea, 18-20 May canbe found at the following links:

Meeting News www.weforum.org/middleeastSession Summaries www.weforum.org/middleeast/summaries2007Photographs www.pbase.com/forumweb/middleeast2007Programme www.weforum.org/middleeast/programmeInterviews www.weforum.org/middleeast/indepthPartners www.weforum.org/middleeast/partnersVideos www.weforum.org/middleast/videos

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reflect those of the World Economic Forum.

Preface

Page 4

Summary

Page 6

Industries of the Future

Page 10

Peace, Stability and International Relations

Page 14

Society and Change

Page 18

Putting Diversity to Work in the WorkSpace

Page 21

Acknowledgements

Contents

2 | World Economic Forum on the Middle East


Preface

The World Economic Forum Annual Meeting in Davos inJanuary warned of the increasingly “schizophrenic” globaleconomy, with strong growth being threatened by sharpimbalances and high risks. The same characterization couldbe applied to the Middle East in this crucial year for theregion. An unprecedented and sustained oil boom is beingleveraged to bring about dramatic growth and development,focused in the GCC countries, but spilling across much ofthe region. And yet, this astonishing economic success storyis playing out in the shadow of, and often in close proximityto, the staggering violence in Iraq, a breakdown of lawand order in the Palestinian territories and the growingtensions concerning Iran.

How can we understand and reconcile these two facesof the Middle East? What are the current risks mitigationstrategies being pursued by the regional and globalleadership? How can the diversification of the region’seconomies be better understood? How can cultural,national and religious diversity be turned from a source oftension into a source of strength?

Such questions were at the heart of the discussions duringthis year’s World Economic Forum on the Middle East,which took place under the theme “Putting Diversity toWork”. The record number of participants themselvesencapsulated this theme, being drawn from 56 countries,and including government, business, civil society and religiousleaders, and youth. The programme was structuredaround three sub-themes: Industries of the Future; Peace,Stability and International Relations; Society and Change.

The rapidly changing business environment in the regionwas reflected in a series of sessions that focused on theemerging high-growth and high-potential sectors. Theseinclude Islamic Finance, Insurance, Green Energy and IT.The discussions offered an insight into how the economiesof the Middle East might look in 10-15 years time, as oilreserves diminish and diversification becomes key toeconomic survival, as it is already in many parts of theregion. How to diversify successfully, led by the privatesector, remains an important question for the region.

The meeting took place against the background of renewedviolence in the Palestinian Territories to the West, andcontinuing bloodshed in Iraq to the East. Jordan hasarguably more at stake in promoting peace and stabilitythan any other country in the region. As His Majesty KingAbdullah II mentioned in his opening address: “We, in Jordan,are doing all we can to build the momentum for peace. Weknow success is not, and will not be, easy. But we also

know peace is attainable.” His Majesty paused the questionthat will be at the centre of attention for the coming decade:

“What about the day after peace?” asked H.M. KingAbdullah Ibn Al Hussein of the Hashemite Kingdomof Jordan

These words resonated through all of the discussionsthat took place at the Dead Sea. The Forum fulfilled itspurpose as a neutral platform for dialogue at a particularlysensitive time for the region. The participation of theIranian government in discussions on Iraq and otherissues at a senior level was a significant breakthrough.Senior Israeli and Palestinian representatives discussedthe immediate needs of the situation on the ground. Andthe US was represented by a delegation of Senators andCongressmen who were offered the chance to exchangeviews face to face with leaders from the region.

Learning to live together in a diverse region applies to theinternal workings of societies in the Middle East as muchas it does to international politics. The importance ofeducation and the role of youth was once againemphasized. While the establishment of the SheikhMohammed Bin Rashid Foundation with a US$ 10 billionendowment took the headlines, important work was alsoadvanced at the grassroots level through the activeparticipation of organizations such as Injaz and groups ofArab students from across the region.

Participants came away not only with a sense of optimismfor the region, but also with the awareness of the needfor sustained commitment to progress. Never has theForum’s role in bringing communities and countriestogether, promoting understanding, and celebratingdiversity been more vital for the future of the Middle East.

The World Economic Forum would like to thank the Co-Chairs of the meeting: Hans-Paul Bürkner, President andCEO, The Boston Consulting Group; Fadi Ghandour,President and CEO, Aramex International; Khaldoon AlMubarak, CEO and Managing Director, MubadalaDevelopment Company; Saeed Al Muntafiq, ExecutiveChairman, Tatweer; Linda Rottenberg, Co-Founder andCEO, Endeavor Global; R. Seshasayee, ManagingDirector, Ashok Leyland; Sir Martin Sorrell, Group ChiefExecutive, WPP.

Sherif El DiwanyDirector, Middle East

Daniel DaviesAssociate Director,Middle East


The World Economic Forum on the Middle Eastreturned to its home in Jordan, where the meetingwas first held four years ago. More than 1,200business, government and civil society leaders from56 countries convened by the shores of the Dead Seato discuss how to turn the region’s diversity – long asource of conflict and confusion – into a powerfuladvantage to achieve peace, stability and growth.

Jordan’s King Abdullah Ibn Al Hussein called onparticipants to begin thinking about “the day afterpeace” when the Middle East will need to addresssuch pressing issues as water management,infrastructure development and, most importantly, thecreation of jobs for the 200 million people of theregion who are under the age of 24. “I urge you tostart the dialogue, a dialogue of action, that caninspire and lead our region forward,” the King said. “Iurge you to ask yourselves: what about the day afterpeace?”

Participants took His Majesty’s profound challenge toheart. In sessions that focused on industries of thefuture – private equity, technology, Islamic finance,renewable energy – they discussed how the MiddleEast could diversify its economies and create newwealth-generating opportunities beyond oil.Participants also examined the social changes playingout in the region, particularly those driven by theburgeoning ranks of young people, the emergence ofentrepreneurs and the empowerment of women.

By focusing on the future and the great potential ofthe days after peace, participants put the politicalissues – the lingering disputes and the seeminglyintractable conflicts – in proper perspective. These stillpose tremendous challenges of course but if there isthe will and desire to achieve what all the people ofthe Middle East want, then they can be surmounted.Concluded Klaus Schwab, Founder and Executive

Chairman of the World Economic Forum: “I see theWorld Economic Forum on the Middle East assignalling to the world that the leaders from the regionare ready to take their fate into their own hands.”

They must. While dialogue can take time, the regiondoes not enjoy that luxury. The plain fact is that acrossthe region, people are dying from needless violence,destruction and disease. Action is of the essence. AsKing Abdullah put it: “This is our year of opportunity –opportunity to end violence, opportunity to makepeace, opportunity to build the regional economicpowerhouse of tomorrow. The future begins here andnow.”

The theme of the 2007 World Economic Forum on theMiddle East was “Putting Diversity to Work”. Sessionsand workshops were organized under three sub-themes: Industries of the Future; Peace, Stability andInternational Relations; and “Society and Change”.


The Middle East is at an inflection point as severalbusiness trends are reshaping the economies of theMiddle East. These include the growth of the Internet,the expansion of private equity investment, and theemergence of entrepreneurs who are drivingdiversification away from oil.

• The future of the Middle East will depend on itspeople not on its oil. The key to the region’ssuccess will be the creation of new jobs for themillions of young people entering the workforce. Theregion will need entrepreneurs and small companiesto promote the growth of new, dynamic industries.

• Educational reforms are essential to programme inimportant socioeconomic change that reduces thedominance of governments and family-runconglomerates.

Executive Summary

I see the World Economic Forum onthe Middle East as signalling to theworld that the leaders from the regionare ready to take their fate into theirown hands.

Klaus Schwab, Founder and Executive Chairman, WorldEconomic Forum

“ “


• The current oil boom, while generating spectacularwealth and swelling government coffers, is alsofuelling the region’s transformation. Investment iscoming into the region, not flowing out of it as in thepast.

• But many of the new jobs being created are low-skilled and labour-intensive, while too much newinvestment is going into real estate. The Arabworld’s commercial culture remains stunted, basedfor the most part on patronage rather than merit.

• The growth of information technology, private equityinvestment and Islamic finance could pusheconomies in the Middle East to become moreefficient and more equitable.


It is impossible to discuss the Middle East withoutaddressing its thorny politics. The Arab-Israeli conflict,the infighting among Palestinians, the civil strife in Iraqand Lebanon, and other clashes in the region havebolstered perceptions that the Middle East is inturmoil.

• The Arab League’s reaffirmation of the Arab peaceinitiative in Riyadh, Saudi Arabia last March, signalsa fresh attempt by Arab nations to offer a unifiedproposal for settling their conflict with Israel. AnIsraeli response could lead to progress innegotiations.

• The emergence of Iran as a more influential player inthe region may usher in a call for a comprehensivesecurity regime that reflects the new balance ofpower.

• The uncompromising political posture of paramilitarygroups such as Hamas and Hezbollah poseenormous challenges to governments and peacenegotiators on all sides of the Arab-Israeli conflict.

• Time is of the essence. If conflict continues,moderate voices will lose ground, allowingextremists to gain popular support.

• The Middle East must look beyond its conflicts anddisputes and consider plans and ambitions for thecrucial days after peace. The region must turn itsdiversity into an advantage and follow the path ofsuccess that many emerging nations in Asia havefollowed.

Society and Change

Social change in the Middle East has often beenundermined by fundamentalism and even extremism.To secure its future in the world of globalization, theregion must progress towards more openness,tolerance and freedom.

• The Middle East cannot become economically openwhile remaining socially closed. With a youngpopulation, economic inclusion and socialempowerment of women, youth and those ofdiverse cultural backgrounds are critical goals.

• All societies in the region must set themselves freefrom dogma and religious radicalism.

• Businesses must play a more active role indefending pluralism.

• Business, government and civil society actorsshould make fuller use of the region’s indigenousleadership to empower its women and its youth.

• Greater investment in education and initiatives tosupport youth are essential to create newopportunities and promote the social transformationof the region.

I urge you to ask yourselves: whatabout the day after peace?

H.M. King Abdullah Ibn Al Hussein of the HashemiteKingdom of Jordan

“

“


The rapid growth of Islamic finance is just one ofseveral business trends reshaping the economies ofthe Middle East. The explosion of Internet-enabledcellular phones among the region’s predominantlyyoung population, as well as the disciplines imposedby private equity investors, is fuelling the rise of anArab entrepreneur to challenge the dominance of theoil sheikh.

“The Middle East is at an inflection point,” said ShirishSaraf, Managing Director at Abraaj Capital Limited, aprivate equity firm based in the United Arab Emirates.“The first was during World War I when the region’sboundaries were defined. Today we’re looking at aninflection point where social and economic change isgoing to take centre stage.”

That the Middle East must diversify away from oil is nosecret. “The future of this region will not depend onoil,” said Rachid M. Rachid, Minister of Trade of Egypt.“Oil will be the curse of this region; the future of thisregion will be its people.”

More specifically, people with jobs. Renewable energy,tourism, call centres: all have been mentioned aspossible alternatives for creating the 100 million jobsthe Middle East needs by 2020. Whatever industriestake root, the region will need entrepreneurs and smallcompanies to make them grow. “We have to reallyhave a strong focus on entrepreneurship, on creatingthe infrastructure for innovation,” said GordonGraylish, Vice-President, Intel Europe, Middle East andAfrica, Intel Corporation (UK), United Kingdom.

Educational reforms offer a politically palatable way toprogramme in such socio-economic change. But thenext generation of skilled job entrants is destined fordisappointment if reforms are not accompanied bychanges in the way information and capital flow. In theMiddle East, this means reducing the dominance ofgovernments and family-run conglomerates.


If the Middle East is going to play arole consistent with its wealth, itneeds to employ some of thetechniques that have been employedby private equity in the West andmake its companies and economiesmore efficient. If it fails to do so, thenI’m afraid the Middle East will not playthe role it deserves to play in the 21stcentury economy.

David M. Rubenstein, Co-Founder and Managing Director,Carlyle Group, USA

““

The role of Islamic banking is tocreate value in society. It’s aboutventure capital, about makingfinancing business opportunities intomore meaningful economic activities.

Rasheed Al Maraj, Governor of the Central Bank of Bahrain

“ “

7 | World Economic Forum on Latin America

Patronage networks must be supplanted bycompetitive financing so that wealth is allocated moreefficiently and the disenfranchised are givenopportunities to become part of a new middle class.

This transformation is already underway thanks to theregion’s current economic boom. High oil prices andgrowing trade are generating spectacular wealth.Unlike in the last oil boom, much of that wealth isstaying in the region, swelling government coffers andgenerating jobs that have pulled the unemploymentrate down to 11% from 14% five years ago. “In thepast, investment was going outward, but nowinvestment is coming inward,” said Khaldoon AlMubarak, Co-Chair of the World Economic Forum onthe Middle East; Chief Executive Officer and ManagingDirector, Mubadala Development Company, UnitedArab Emirates. “It’s a dramatic change.”

But even as average incomes have risen by 75%across the Middle East in the last five years, progresshas been uneven. Many of the new jobs being createdare low-skilled, labour-intensive jobs. Too much newinvestment is going into real estate. Inflation is highand inequities are growing.

The Arab world’s commercial culture remains stunted.For many jobseekers, therefore, the civil service stilloffers the best option, reinforcing a sense ofentitlement and sapping the region’s work ethic. “Thiswhole notion of corporate culture requires the creationof an Arab cultural value system based onmeritocracy,” said Saeed Al Muntafiq, Co-Chair of theWorld Economic Forum on the Middle East; ExecutiveChairman, Tatweer, and Chairman of the Board,Young Arab Leaders, United Arab Emirates, “ratherthan where you come from and who you are.”

Information technology has proved a great leveller ofthese kinds of divisions. And in the past six years, theMiddle East has experienced among the world’sfastest rates of Internet adoption. But overall Internetusage remains below 20% and most Internet usersare under 25 years of age. Arabic content on the Webis limited and governments routinely block contentthey deem politically or religiously objectionable. Somecall for governments to promote Internet adoption byrequiring students to have a personal computer or bysubsidizing access.

Others say the region is likely to bypass the PCaltogether in favour of Internet-enabled cellularphones. In some countries, cellular penetration isalready over 100%. “We see a leapfrogging takingplace in faster growing markets through mobiletechnology,” said Sir Martin Sorrell, Co-Chair of theWorld Economic Forum on the Middle East; GroupChief Executive, WPP, United Kingdom.

Islamic Banking Market Share by Country/Region

Source: Standard Chartered

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GCC countries expected to play prominent role in Islamic banking

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Another catalyst for change comes from the privateequity funds being lured to the Middle East by thelatest boom. Once mistrusted as corporate raidersfrom the West, private equity firms found fewopportunities in a region where families andgovernments were loath to sell for fear of losing face.Now governments are more receptive to privatization.And family-run conglomerates can use private equityfirms to spin off non-core assets or navigate thetransition from one generation of ownership to thenext. Whatever the company, private equity firms canhelp it introduce more professional management orexpand into unfamiliar markets.

Most importantly, private equity firms provide a sourceof funding whose only prejudice is profitability. “If theMiddle East is going to play a role consistent with itswealth, it needs to employ some of the techniquesthat have been employed by private equity in the Westand make its companies and economies moreefficient,” said David M. Rubenstein, Co-Founder andManaging Director, Carlyle Group, USA. “If it fails to doso, then I’m afraid the Middle East will not play therole it deserves to play in the 21st century economy.”

Private equity has another advantage: unlike bankfinancing, its direct investment approach jibes wellwith Muslim restrictions on usury. Shariah forbidspaying or earning interest, so conventional bankinghas been off-limits to many Muslims. In the pastdecade, though, the advent of savings accounts andbonds that yield returns without interest has created aUS$ 400 billion industry growing roughly 20% a year.Now Islamic institutions are also moving into privateequity.

Islamic Nations' Stock Market Returns

Source: Analysis based on data from Datastream and Bloomberg

800

700

600

500

400

300

200

100

0

Jan2003

Oct2006

Jul2006

Apr2006

Jan2006

Oct2005

Jul2005

Apr2005

Jan2005

Oct2004

Jul2004

Apr2004

Oct2003

Jul2003

Apr2003

Jan2004

Saudi Arabia (Tadawul All Share Index)Malaysia (KLCI composite)

The Saudi market has had some success but gave back gains in 2006

Indonesia (Jakarta SE Composite)

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In the past, investment was goingoutward, but now investment iscoming inward. It’s a dramaticchange.

Khaldoon Al Mubarak, Co-Chair of the World EconomicForum on the Middle East; Chief Executive Officer andManaging Director, Mubadala Development Company, UnitedArab Emirates

“ “ We see a leapfrogging taking place infaster growing markets throughmobile technology.

Sir Martin Sorrell, Co-Chair of the World Economic Forumon the Middle East; Group Chief Executive, WPP, UnitedKingdom

“ “

The GCC Countries and the World: Scenarios to 2025

Gulf Cooperation Council (GCC) countries are reaping benefits from oiland gas reserves that have generated considerable wealth from 2001 to2007. Yet, with this wealth comes a host of challenges that could divertGCC countries off the path of sustainable prosperity. A new WorldEconomic Forum report examined these internal and external pressuresand presented the results in three scenarios – not predictions –representing possible paths for the GCC through to 2025. The scenariosare the utopian vision of the Fertile Gulf, the more realistic Oasis (with itsbuilt-in regional instability) and the grim Sandstorm.

Participants in the World Economic Forum on the Middle East examinedThe GCC Countries and the World: Scenarios to 2025 in an interactivesession. They were asked the same two questions which formed the basisof the study: 1) Can the GCC develop and implement a vision to steeritself towards economic diversification and sustainable prosperity? and 2)Can the GCC integrate effectively into the global context? The answers tothese questions were examined against the backdrop of regionalinstability, and governance and reforms in the economies of Bahrain,Saudi Arabia and United Arab Emirates.

From the best-case to worst-case scenario, they considered educationreform fundamental to address the GCC’s weak skill base and its low levelof R&D and innovation, as well as its dependence on oil. They alsoanalysed the challenge of regional instability: How to best avoid pitfalls asthe GCC passes through a potential “chaotic transition to uncertainty.”

Khaldoon Al Mubarak, Co-Chair of the World Economic Forum on theMiddle East; Chief Executive Officer and Managing Director, MubadalaDevelopment Company, United Arab Emirates, said that GCC educationreform will determine the region’s future. There is a concerted effort tocreate a transparent and competitive economy, noted H.E. SheikhMohammed Bin Essa Al Khalifa, Chief Executive, Bahrain EconomicDevelopment Board, Bahrain, and Young Global Leader. “Across theregion, strong efforts are pushing diversification and investment. The morewe link with the international economy, the more it will reduce our securityconcerns. We need to compete together as the GCC to show the worldwe don’t live in a war zone. The purpose of development is to improvepeople’s quality of life. Education gives people the tools to adapt and tomake the right decisions to get there,” he said.

The report is the result of an 18-month research process involving over300 experts from the Gulf countries, and beyond, led by the WorldEconomic Forum in partnership with the Economic Development Board ofBahrain, the Executive Affairs Authority of Abu Dhabi and the OlayanFinancing Company in Saudi Arabia.

The Gulf Cooperation Council (GCC)countries and the World:Scenarios to 2025

Islamic finance is also promoting the Muslim middleclass by popularizing Islamic insurance products thathelp free savings for more productive uses. Takentogether, Islamic finance is helping to allocate capitalmore efficiently in the Muslim world. By hewing toKoranic virtues of enhancing social equity, therefore,Islamic finance stands to level the playing field in amore constructive way than the jihad ever could. “Therole of Islamic banking is to create value in society,”said Rasheed Al Maraj, Governor of the Central Bankof Bahrain. “It’s about venture capital, about makingfinancing business opportunities into more meaningfuleconomic activities.”

The future of this region will notdepend on oil. Oil will be the curse ofthis region; the future of this regionwill be its people.

Rachid M. Rachid, Minister of Trade of Egypt

“ “




It is impossible to consider the future of the MiddleEast without delving into its thorny politics. Passionsrun high on all sides. This was certainly evident at theWorld Economic Forum on the Middle East wheresome sessions were marked by fervent debate overthe situation in the Palestinian Territories, the role ofIran, and US policy and management of the war inIraq. Yet, even as participants amply demonstratedthe value of open and constructive if oftenimpassioned discussion, violent conflicts raged acrossthe region – in Gaza, in Iraq, in Lebanon. Bloodshedtoo is not in short supply in the Middle East.

There were many opportunities for lively diplomacy atthe Dead Sea – the gathering of the G11 middle-income developing nations, an informal meeting ofpolitical and economic leaders, and various sidelinebilaterals that are part of any World Economic Forummeeting. Still, it was evident that the region’sinternecine politics remain its biggest challenge. TheArab-Israeli conflict on all its fronts, the infightingamong Palestinian factions, the civil strife in Iraq sincethe American-led invasion, and the Lebanesegovernment’s clashes with militant Islamist groups – allthese troubles make graphic headlines around theworld, bolstering perceptions that the Middle East is inturmoil, if not chaos.

Amid the gloom and despair, can the Middle Eastresolve its conflicts and achieve stability? Wishfulparticipants put a great deal of hope in the Arabpeace initiative that was based on Saudi Arabia’sproposal in 2002 and reaffirmed by the Arab Leagueat its summit in Riyadh in March 2007. The proposalcalls for Israel to withdraw from disputed territories, torecognize an independent Palestinian state with EastJerusalem as its capital, and to agree to a “justsolution” for Palestinian refugees. In exchange, the 22Arab League countries would recognize and normalizerelations with the state of Israel.

“Arab countries have adopted a unanimous andcollective initiative offering the hand of peace toIsrael,” said Amre Moussa, the League’s Secretary-General. Israeli Vice-Prime Minister Shimon Peres,who was on a plenary panel with Moussa, announcedthat Israel would respond “as soon as possible” to theArab plan. “We are ready to sit down with whomeveryou want – the Saudis, the Arab League – and weshall try to air out the differences between us,” Peresdeclared. But, he added, “you cannot send us adocument and say take it or leave it.”

Arab countries have adopted aunanimous and collective initiativeoffering the hand of peace to Israel.

Amre Moussa, Secretary-General, League of Arab States,Cairo

“ “ Iran was and is always a part of thesolutions to the crises in the region.We are not talking about theelimination of any nation or country.

Manouchehr Mottaki, Minister of Foreign Affairs of theIslamic Republic of Iran

“ “

There were other pointed exchanges that highlightedthe urgency of a substantive dialogue to find thecourse to stability throughout the region. Someexpressed concern over the role of Iran and morespecifically its position on a two-state solution to thePalestinian-Israeli conflict, Tehran’s influence withmilitant groups in Iraq and other countries, and itsrelations with its neighbours across the Gulf were alsomatters of strenuous debate. “We want neither anAmerican hegemony nor an Iranian hegemony,” saidAbdulaziz O. Sager, Chairman of the Gulf ResearchCenter in the United Arab Emirates. “Iran is a countrywithout aggression,” Iranian Minister of Foreign AffairsManouchehr Mottaki maintained. “Iran has alwaysbeen part of the solution in the region.” At themeeting, Mottaki proposed that Gulf countries join in aregional security arrangement. He also said that Iran iswilling to share its atomic energy technology with itsneighbours to allay fears that the nuclear programmeis for anything other than civilian purposes.

Chief Palestinian negotiator Saeb Erekat put the starkchallenge as passionately as anybody. Warning thatthe prolonged conflict was tearing apart thePalestinian social fabric, he stressed that the lack ofprogress in the peace negotiations was quickly andseverely undermining the authority and support of

moderates such as Palestinian Authority PresidentMahmoud Abbas. “Get rid of the occupation if youdon’t want to see Al Qaeda and extremism,” Erekatadvised. “If we leave things in this region to conflictand war and try to resolve issues through guns, thenthis region is doomed, and we will go through the 21stcentury in darkness.”

But that grim fate need not be inevitable. Jordan’sKing Abdullah Ibn Al Hussein pointed out onepowerful and irrefutable truth: the people of the regionwant peace. He proposed a bolder, more compellingapproach to solving the decades-old political puzzlesthat have prevented peace. “Israelis and Palestiniansfrom all walks of life tell us they need and want an endto violence,” said King Abdullah. “There is a newinternational will to resolve the crisis; it is no longerjust a regional problem. It is in the interest of this entireregion – and indeed the world – that we succeed. Aswe look to that day, we need to begin asking a newquestion: what about the day after peace?”


We are ready to sit down withwhomever you want – the Saudis, theArab League – and we shall try to airout the differences between us.

Shimon Peres, Vice-Prime Minister of Israel

“ “ If we leave things in this region toconflict and war and try to resolveissues through guns, then this regionis doomed, and we will go through the21st century in darkness.

Saeb Erekat, Head of Negotiations Department, PLO,Palestinian National Authority, Palestinian Territories

“ “


Indeed, it is perhaps by looking beyond peace that theregion will achieve it. Peace should not be an end buta beginning. And neither should its elusiveness be anobstacle to social and economic progress. Newindustries and enterprises are emerging that aredriving the diversification and restructuring ofeconomies and creating new opportunities forentrepreneurs and young people who want changeand openness rather than the status quo andstubborn radicalism. These developments are themain source of the optimism that led manyparticipants to predict that, despite the conflicts, theMiddle East is on the verge of renewal. Rather thandwell on the clashes that arise from diversity, theycontend, many are turning diversity to their advantage.

Meeting Co-Chair Sir Martin Sorrell, Group ChiefExecutive, WPP, United Kingdom, reckoned that theMiddle East has not reached the point where themomentum of economic progress is irreversible.China, India and other emerging markets such as

Russia and Brazil have achieved such a take-off, withno way to go but forward, he argued. “In the MiddleEast, I’m not sure we’ve got there yet.” Sorrell’sprescription: more optimism and ambition. “It’s aboutwill and desire,” he concluded. In much of Asia, whileenmities from history may still lurk in every corner, thewill and desire for economic growth, peace and order,and the eradication of poverty have for the most partoverwhelmed the poison of politics. Can the MiddleEast follow the same path to success?

We could not have been able toachieve what we have in Afghanistanin the last five years without thepresence of the internationalcommunity and the cooperation of ourneighbours

Hamid Karzai, President of Afghanistan

““

Our Palestinian brothers have to stopfighting not just with each other; Iwould also call them to stop fightingIsrael with military methods. It is ashame that we point our wrath andanger at our fellow Arabs and Muslimsin a more deadly manner than we doat our enemies.

H.R.H Prince Turki Al Faisal Al Saud, Chairman, King FaisalCenter for Research and Islamic Studies, Saudi Arabia

““

For the first time, the Arabs havetaken control of the peace agenda.The Israelis should understand thatthe Palestinians do not represent athreat to them. It is the Arab statesthat hold the key to security in Israel.

Marouf Bakhit, Prime Minister and Minister of Defence of theHashemite Kingdom of Jordan

“

“


World Economic Forum Launches Israeli-Palestinian Business Council

The World Economic Forum launched the Israeli-PalestinianBusiness Council in a special ceremony at the World EconomicForum on the Middle East at the Dead Sea. The Council,consisting of some of the foremost business leaders in Israel andPalestine, will advance the relationship between the two businesscommunities and, ultimately, assist the region to move towardsdurable peace and coexistence.

“The World Economic Forum has always believed that socialprogress goes hand in hand with economic development – thetwo are inextricably linked. Bringing business communitiestogether in this region is a crucial step in helping to bring aboutand cement peace in the longer term,” said Sherif El Diwany,Director and Head of Middle East at the World Economic Forum.

“We are mindful of the deep rift and difficulties governing therelationship between Palestinians and Israelis. However, thebusiness community has a lot at stake if a political stalematecontinues,” said Walid Najjab, Palestinian Co-Chair of theBusiness Council. “Our people expect us to continue investing inour national economy and create more jobs; we have social andeconomic responsibilities, we cannot ignore our responsibilities,and we will highlight these responsibilities to our partners in theCouncil and the international community at large via the WorldEconomic Forum,” added Najjab.

“The business community in Israel is sensitive to all issues in ourenvironment. As business people, we are not dealing with politicalissues and solutions, yet we feel an urge to be positive elementsof change and hope. If the World Economic Forum helps us tocontinue to be more active on the world stage, our messageshould not then be ignored or belittled,” said Amos Shapira, IsraeliCo-Chair of the Business Council.

The Business Council consists of 10 Founding Members fromboth the Palestinian and Israeli business communities. It isexpected to attract a wider membership base of business leadersfrom both communities in the weeks and months ahead.

Middle East@Risk report released at WorldEconomic Forum on the Middle East

The Middle East is a focal point for global risk and its mitigation. Thisis true of geopolitical risks, but also other risks that define our era –energy security and climate change – and of risks relating to globaleconomic imbalances. Participants examined the impact of globalrisks at the Middle East meeting. The new Middle East@Risk report,released by the Forum’s Global Risk Network in collaboration withthe Gulf Research Center, provided the basis of the discussion at theDead Sea.

The report looks at potential consequences of several major globalrisks on the Middle East and deep dives into four: a global assetprice collapse, a Chinese economic hard landing, a retrenchmentfrom globalization, and geopolitical and geostrategic instability. Noneof these are predictions, but plausible scenarios for the future.

While a global asset price collapse might negatively impactcommodities markets, Mustapha K. Nabli, Chief Economist andDirector, Middle East and North Africa, World Bank, Washington DC,argued that it is unlikely that such a collapse would be precipitous,nor would it have a significant impact on domestic markets.Domestic markets in the region would even survive if the dollarcollapsed. However, increasing inequality between and within MENAcountries poses a real but under-observed threat.

China’s economic health impacts that of the region as a whole, saidAbdulaziz O. Sager, Chairman, Gulf Research Center, United ArabEmirates, and others. The panel agreed that China and India’sgrowth, along with increasing oil consumption, is good for the MENAcountries. But there was worry over a sudden slowdown hurting theregion.

Certainly, the geopolitical problems posed by the conflicts in Iraq andthe Middle East, along with US-Iranian tension, threaten to stuntMENA growth. Mahmood Sariolghalam, Professor of InternationalRelations, National University of Iran, Islamic Republic of Iran,downplayed his country’s extraterritorial intentions and claimed thatthe so-called “Shia Revival” is often overestimated. Any tension withthe US, he claimed, would largely be played out in Iraq, and notextended to other countries in the region.

The region’s primary risk is a “triple deficit,” said Sundeep V.Waslekar, President, Strategic Foresight Group, India. A deficit ofdemocratization combines with a deficit of development and all leadto a dignity deficit, often manifested in instability and violence.

COMMITTED TOIMPROVING THE STATE

OF THE WORLD

Middle East@Risk

A Global RiskNetwork Briefing

in collaboration with the Gulf Research Center


Society and Change

Too often in the Middle East and North Africa, societalchange has met with resistance, and resistance hasquickly devolved into ideological radicalism. For theregion to enjoy peace and prosperity in an increasinglyinterconnected world, it must progress towardsopenness, tolerance and freedom.

“It is not enough to look over the developmentindicators each year and to exclaim in surprise at theregion’s situation and the fact that it ranks among thelowest positions at the international level,” said H.H.Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the United ArabEmirates, Ruler of Dubai. “We have to arm ourselveswith courage and work quickly and seriously, to tacklethe reasons that put our region behind the rest of theworld and our era.”

The Middle East cannot become economically openwhile remaining socially closed. Most of the region’speople are under age of 30, most are female and,increasingly, many are immigrants. Therefore, theeconomic inclusion and social empowerment ofwomen, youth and those of diverse culturalbackgrounds remain vital goals. “We are on the brink

of new Middle East – new, young, entrepreneurial,empowered,” said Khaldoon Al Mubarak, Co-Chair ofthe World Economic Forum on the Middle East; ChiefExecutive Officer and Managing Director, MubadalaDevelopment Company, United Arab Emirates. “Thesocial fabric is changing.”

Yet, many changes still need to occur. Open societiesbegin with open minds. The converse of openness,radical Islam, at times seems ascendant. While someparticipants drew from Islam’s history to prove that thefaith can accommodate progressive thought; otherscalled on leaders to resist the lure of religiousnationalism. “If society is not secular, it is unhealthy forreligion,” said David Rosen, President, InternationalJewish Committee for Interreligious Relations, USA. “Ifyou do not have freedom of choice, then the religionitself is not worth the principles upon which it was

It is not enough to look over thedevelopment indicators each year andto exclaim in surprise at the region’ssituation and the fact that it ranksamong the lowest positions at theinternational level. We have to armourselves with courage and workquickly and seriously, to tackle thereasons that put our region behind therest of the world and our era.

H.H. Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the United Arab Emirates,Ruler of Dubai

““

Multiculturalism needs more than anudge, and multinational corporationsare well positioned to give a shove.Doing so is not just morally correct –although it is – but is also profitable.

H.M. Queen Rania of the Hashemite Kingdom of Jordan,Member of the Foundation Board of the World EconomicForum

“ “


founded.” Olivier Roy, Senior Researcher, CentreNational de la Recherche Scientifique (CNRS), France,agreed: “In a pluralistic society, social equality shouldbe based on citizenship.”

The economic benefits of inclusive societies aremanifest, and the private sector must play an activerole in defending pluralism. “Multiculturalism needsmore than a nudge, and multinational corporations arewell positioned to give a shove,” said H.M. QueenRania of the Hashemite Kingdom of Jordan, Memberof the Foundation Board of the World EconomicForum. “Doing so is not just morally correct – althoughit is – but is also profitable.”

Business, government and civil society actors mustalso make fuller use of the region’s native labour pool.MENA countries have the world’s highest rates offemale and youth unemployment. According to an AlArabiya survey, 71% of Arab youth are forced to lookabroad for job opportunities. For the region’s women,40% of whom are illiterate, development indicatorshave recently inched forward – with the notableexception of Iraq; but retrograde gender attitudesstunt real progress. Still, a few brave women hold outhope – and some already see change.

“It’s happening so fast, it’s breathtaking,” said Nimah I.Nawwab, Poet and Writer, Saudi Arabia; Young GlobalLeader. “Not many people know about it; it is notbeing reported in the media. But it’s happening.”

As was the case at the 2006 World Economic Forumon the Middle East, participants expressed consensusthat the MENA youth bulge represents the largestchallenge – and the biggest hope. 180 million youngpeople trump even the Gulf’s hydrocarbon reserves asthe region’s most impressive – and volatile – resource.“They are the new roots of everything that is growingin the region and we need to involve them ineverything we do,” said H.R.H. Princess Lolwah AlFaisal, Vice-Chair of the Board of Trustees andGeneral Supervisor, Effat College, Saudi Arabia. Sadly,Al Faisal added, “young people are looking at deathinstead of life.”

Youth Employment is a Global Issue

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If society is not secular, it is unhealthyfor religion.

David Rosen, President, International Jewish Committee forInterreligious Relations, USA

“

“

Optimism, urgency and a sense ofresponsibility are sentiments I walkaway with. This is our opportunity totake this optimism and try to dosomething about it.

Saeed Al Muntafiq, Co-Chair of the World Economic Forumon the Middle East; Chairman, Tatweer; Chairman of theBoard, Young Arab Leaders, United Arab Emirates

“ “


The biggest challenge of all will be to fill the predicteddeficit of 80-90 million jobs over the next twodecades. Increasingly, those young people who havethe ability to leave go to the West; those who cannotemigrate are often left in hopeless poverty andexplosive frustration. “Young people want to meettheir basic needs, like buying a house, gettingmarried: but even this is not being achieved,” saidAbdullah Al Fouzan, University Professor, King SaudUniversity, Saudi Arabia. “We are facing a time bomb.”

The World Economic Forum on the Middle East inJordan yielded several thoughtful strategies – and apair of royal commitments – to harness the potentialof the region’s youth. While consensus emerged thatregional educational facilities need to be improved andmade more business-friendly, many participants calledfor the next step: connecting young people with jobsthat keep them at home.

Rick R. Little, President and Chief Executive Officer,ImagineNations Group, USA, explained one suchmodel in South Africa. There, his organization, throughlocal partners, has set up what he called “one-stopshops” throughout the country, where young peoplecan be advised by a counsellor, and assisted in findingsuitable jobs. Young entrepreneurs can even accessmicrocredit. Such a programme, Little said, would beideal for the Middle East, where a survey showedemployment is youth’s top concern.

Putting a good deal of his money where participants’mouths were, His Highness, Sheikh Mohammed binRashid Al Maktoum announced the establishment ofthe Mohammed Bin Rashid Al Maktoum Foundation.The US$ 10 billion dollar initiative – the largest of itskind in the Arab world – will fund research universitiesand centres, provide scholarships to worthy students,and support media and publishing in the region.

Finally, closing the meeting, Bassem Awadallah,Director of the King’s office and Deputy Chairman,King Abdullah II Fund for Development, announcedthe creation of the King Abdullah II Award for YouthAccomplishment, which the King will first bestowwhen the Forum returns to the Dead Sea in 2009.

“Optimism, urgency and a sense of responsibility aresentiments I walk away with,” concluded meeting Co-Chair Saeed Al Muntafiq, Chairman, Tatweer;Chairman of the Board, Young Arab Leaders, UnitedArab Emirates. “This is our opportunity to take thisoptimism and try to do something about it.”

Yemen 48.7West Bank/Gaza 46.1Iraq 41.4Saudi Arabia 39.1Syria 38.3Jordan 38.0Oman 37.2Egypt 35.2Iran 32.6Libya 31.3Lebanon 29.6Bahrain 29.2Israel 27.9Qatar 26.6Kuwait 26.1UAE 25.8

Source: The World Bank

Youth and Opportunity(% of population under 15)

Education and Youth

With 180 million youth, the human reserves of the MiddleEast are even more impressive than the hydrocarbonreserves. Yet, to harness the potential of this resource,leaders stress that considerably greater investment ineducation and employment opportunities must be made.

Two answers to these calls were made during the WorldEconomic Forum on the Middle East at the Dead Sea.

The first was the groundbreaking announcement by HisHighness, Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the United Arab Emiratesand Ruler of Dubai. In a special address to participants, helaunched the Mohammed Bin Rashid Al MaktoumFoundation, a US$ 10 billion initiative to promote humandevelopment and provide hope and opportunity by investingin education and the development of knowledge in theregion. The Foundation will source and manage researchprogrammes and centres and provide scholarships,leadership programmes and research grants. “TheFoundation’s mission is to invest in knowledge and humandevelopment focusing specifically on research, educationand promoting equal opportunities for the personal growthand success of our youth,” said His Highness.

The second answer was the creation of the King Abdullah IIAward for Youth Achievements in the Arab World. “Theaward embodies His Majesty King Abdullah Ibn Al Hussein ofJordan’s vision to enhance the potentials of the Arab youthand support their innovations, excellence and creativity,” aRoyal Court statement said. The first award will be presentedto the winners at the World Economic Forum on the MiddleEast in 2009 at the Dead Sea. It will then be awarded on anannual basis. A board of trustees – including Klaus Schwab,Founder and Executive Chairman of the World EconomicForum; Khalid Toukan, Jordanian Minister of Education,Higher Education and Science Research; Arif Naqvi, Vice-Chairman and CEO of Abraaj Capital; Al Muntafiq, CEO ofTatweer Saeed; and Carly Fiorina, Chairman of the FiorinaFoundation – will determine the winner.

Photo: http://www.pbase.com/forumweb/image/79002979http://www.pbase.com/forumweb/image/78973712 ORhttp://www.pbase.com/forumweb/image/78973751



Putting Diversity to Work in

theWorkSpace

The WorkSpace – the workshop with a difference –draws out the collective intellect and creativecapabilities of participants to explore concreteopportunities for improving the state of the world.

At the World Economic Forum on the Middle East thisyear, participants in the WorkSpace were given thechance to think outside the box, stretch boundariesand “put diversity to work” in a series of fourworkshops. Participants were encouraged to explorenew ways to approach some of the most pressingissues they face in the region: becoming betterleaders amidst diversity, encouraging anentrepreneurial spirit, and nurturing the talent oftomorrow. They were also asked to envision theMiddle East in 2015.

What is in store for the day after peace in theMiddle East?

Among the highlights from the WorkSpace was thebreakthroughexperience of designingand filming a session fitfor television. The WorldEconomic Forum, incollaboration with BBCWorld, designed andran the workshop “ANew Middle East – Is ItPossible?”, which wasfacilitated by the BBC’sMain Presenter Nik

Gowing. The session was filmed for future broadcastto the network’s 200 million viewers. In co-designing aWorkSpace session instead of the usual debate, BBCWorld encouraged the free flow of ideas andexchange among peers in an informal and uncensoredenvironment. Gowing pushed participants beyondtheir comfort zone not only to imagine a Middle Eastof 2015 that would be steady and thrivingeconomically, but also to explore the things they coulddo differently now to reach that goal. Participantsworked in breakout groups to define their vision of thefuture of the region for 2015 in the political, economicand social arenas. After sharing their group work andengaging in a dynamic discussion with Gowing,participants agreed the unique process wasworthwhile, highlighting that they appreciated having“a chance to dream a little and think of steps on howto implement the dream.”

A High-Stakes Negotiation

In a dynamicsimulation exercise inthe WorkSpacesession “Leadership inDiversity”, leadersfrom business, politicsand society exploredthe emotional dynamics of negotiations to gaininsights into leading more effectively in a diverseworld. Participants were divided into groups, or“clans,” and then entered into a negotiation to find a

solution to save theworld. Therepresentatives of eachclan vigorouslydefended theirpositions, but afterthree rounds ofnegotiation, they failed

to reach an agreement. During the debrief,participants analysed their experience from anemotional perspective, discovering the need toacknowledge and address not just feelings in conflictmanagement but also the strategies that can helpresolve conflictsmore effectively.

You have 50million dollars in cash. Which idea will you investin?

What does it take to kick-start an entrepreneurialinitiative in the MiddleEast? Participantsaddressed this questionin the interactiveWorkSpace session“Empowering

Entrepreneurs”. Participants created new venturecapital (VC) companies in their breakout groups beforeevaluating several business cases and makinginvestment decisions. The viability, sustainability andindustry of a business were the most popular criteriaused by the VCs to evaluate potential investments. Asa group, participants discussed the importance of theecosystem of entrepreneurship, in particular theimpact of entrepreneurs as role models and thesignals that VCs send to society through theinvestment choices they make. The moment of great

We have to beresponsible for whatwe can do in our ownspace. I’ll go back andtry and do a bit moreabout making the worlda better place.

“

“

We have the ability tohurry history and nottake 100 years to gosomewhere.

“ “

If in a silly game theworld explodes thenwe are in deeptrouble.

“ “In a negotiation,reason is not enough.“

“

We need smart VCsjust as much as goodentrepreneurs.

“ “

surprise occurred when participants found out that theentrepreneur from one of the cases they evaluated

was among them. Hisparticipation gave thegroup the uniquechance to discuss thereal implications ofentrepreneurship in theregion, complementingtheir experience duringthe scenario exercise.

It is the year 2020 and the Middle East has thebest education ecosystem in the world.

In the highly interactive WorkSpace session “TheFuture of Talent”,business leaders,education ministers,educators and studentsengaged in a scenario-driven exercisedesigned to encouragenew thinking on waysto improve education inthe region. During the

workshop, participants were thrown into the futureand asked to imagine a time when the Middle Eastranked the highest in the World Economic Forum’sGlobal Competitiveness Report on Education.Encouraged to “think big and dream,” participantsworked in groups to describe this bright future fromdifferent perspectives of education levels and stagesof development of the education system. The groupsalso reflected on possible ways to reach this futurevision, discussing the main barriers and the strategiesto overcome them. In the final group discussion,participants brainstormed the critical success factorsrequired to move towardstheir vision for 2020. Theyagreed that a criticalmilestone will be toovercome the challenges tothe implementation ofproposed strategies. By theend of the session, thegroup had bonded over theircommon passion foreducation, and together they strongly urged for astrong commitment, across the Arab world, ofgovernments and other leaders to place education atthe top of their agendas.

Trying things out isimportant. Allow forsome things not towork and then tryagain.

“

“

Our destiny dependson strengtheningeducation in theMiddle East.

“ “

Our future system willprepare a bettercitizen, a globalthinker.

“ “

The World Economic Forum wishes to thank the following companies as Partners or Supporters of the WorldEconomic Forum on the Middle East, Dead Sea, 18-20 May 2007:

Strategic PartnersABN AMRO BankBahrain Economic Development BoardBooz Allen HamiltonBTThe Boston Consulting GroupCACiscoDubai HoldingHPIntelKudelski GroupLehman BrothersMcKinsey & CompanyMerrill LynchMicrosoft CorporationNikePepsiCoSaudi Basic Industries Corporation (SABIC)SiemensSK GroupUBSWPP

Regional PartnersAbraaj CapitalAgilityAlghanim IndustriesArab BankThe Carlyle GroupEFG-HermesEmaar PropertiesNational Bank of KuwaitThe Olayan GroupPADICOSaudi Oger

Meeting SupportersAlshaya GroupAramex InternationalConsolidated Contractors Company (CCC)International Bank of AzerbaijanOrascom Telecom Holding

Official CarrierRoyal Jordanian Airlines

Acknowledgements



Contributors

Peter Torreele is Managing Director of the World Economic Forum. Sherif El Diwany is Director, Head of MiddleEast, at the Forum. The World Economic Forum on the Middle East was under his direct responsibility, withDaniel Davies, Associate Director, Global Leadership Fellow, Middle East; Denise Burnet, Principal, Head ofEvents and Meeting Coordinator; Amal Mbarki, Community Relations Manager, Middle East.

Samantha Tonkin, Senior Media Manager at the World Economic Forum worked with Wayne Arnold,Alejandro Reyes and Benjamin Skinner to produce this report.

The World Economic Forum would like to express its appreciation to the summary writers for their work at themeeting. Session summaries are available at www.weforum.org.

Associate Principal, Editing: Nancy Tranchet

Design and Layout: Kamal Kimaoui, Associate Principal, Production and Design

Photographs: Bashar Bakhit, Zahran Zahran, Atallah Mousa, Nader Daoud

The World Economic Forum is an independentinternational organization committed to improvingthe state of the world by engaging leaders inpartnerships to shape global, regional andindustry agendas.

Incorporated as a foundation in 1971, and basedin Geneva, Switzerland, the World EconomicForum is impartial and not-for-profit; it is tied tono political, partisan or national interests.(www.weforum.org)

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