AMMAN — According to the latest edition of the
EY Global Capital Confidence Barometer (CCB), 81 percent of business executives
surveyed in the MENA region expect the Middle East to be a preferred investment
destination.
اضافة اعلان
This will generate the most growth and
opportunities for their companies in the next three years, Ernst & Young
(EY) said in a statement recently.
Though 90 percent of MENA respondents
experienced a decline in revenue due to the COVID-19 pandemic, most companies
feel satisfied with their performance during the crisis.
In addition, 71 percent of those
surveyed expect to see revenues return to pre-pandemic levels by 2022 or
earlier, while 69 percent anticipate a return to normalized profitability
within the same timeframe.
Prompted by the pandemic, almost all
executives (98 percent) conducted a comprehensive strategy and portfolio
review, and they plan to focus on investing in customer-centric digital and
technology capabilities.
Mergers and acquisitions (M&A)
will be the preferred strategic option as companies look to accelerate growth
in the post-pandemic world, with 37 percent of MENA companies planning to
actively acquire in the next 12 months, the statement said.
Matthew Benson, EY MENA strategy and
transactions leader, said in the press release that “reduced travel, social-distancing,
remote-working, and low oil prices” had a disproportionate impact on corporate
earnings. Despite this, MENA businesses have remained “nimble and resilient”,
Benson said, adding that there are several sectors with opportunities for
consolidation.
Corporate strategies
focus on resilience and accelerating digital transformation
The CCB report found that 87 percent
of MENA companies are undertaking substantial business and technology
transformations to stay relevant and accelerate growth. The statement added
that the application of technology in the workplace due to COVID-19 has made
MENA businesses more productive, resulting in many sectors following suit.
The respondents cited a specific focus
on digitizing customer experiences and business processes. Digital solutions to
increase customer interactions and ways to reduce labor costs through
automation are also being explored, the statement said.
To support their transformations, 76
percent of MENA companies plan to increase investments in technology and
digital, while 64 percent will focus more on innovation.
Growth plans rely on
bolt-on acquisitions and domestic assets
Eighty-four percent of MENA
respondents planned smaller acquisitions to increase their market share and 55
percent of those planning M&A activity were seeking assets domestically
rather than internationally.
The CCB report stated that 94 percent of
executives were anticipating greater competition of assets, primarily from MENA
region private capital.
The top five investment destinations
in the MENA region, including both domestic and cross-border M&A
activities, are the Kingdom of Saudi Arabia, the United Arab Emirates, Kuwait,
Oman, and Egypt.
The segments most likely to actively
pursue acquisitions in the next 12 months are automotive and transportation (45
percent), advanced manufacturing (41 percent), financial services (39 percent),
real estate and construction (36 percent), and oil and gas (28 percent), the
statement said.
MENA governments and foreign
direct investment
To encourage economic activity,
governments in the region are enacting regulations that are more friendly to foreign
direct investment, both on a corporate level (e.g. foreign ownership of assets,
easing of capital market norms, and simplifying the ability to invest in local
capital markets) and a citizen level (e.g. elongation of visa periods, citizenship,
among other incentives), the statement concluded.
At the same time, governments
are trying to promote liquidity in the capital markets via mandatory listings
for certain types of organizations and secondary markets for medium-cap
companies.
.jpg)
.jpg)
