Impact of the Arab Spring on business globally

Wednesday, June 22, 2011 | Posted by: Grant Thornton

What impact has the recent political unrest in the Middle East and North Africa had on businesses around the world? Which regions or political groupings have been worst affected, and which the least?

The latest research from Grant Thornton’s International Business Report shows the global negative impact of the Arab Spring , and also asks how likely PHBs are to continue to do business in those regions. Read on for key findings and some advice for those looking to invest in or expand into the Gulf states…

Bubble chart showing impacts of the Arab Spring

For this survey, conducted as part of the Grant Thornton International Business Report, interviews were conducted in May 2011 with 2,700 CEOs and other senior executives from medium to large privately held businesses worldwide.

We wanted to find out the impact six months on from the start of the so-called Arab Spring, the wave of demonstrations and protests across the Middle East and North Africa (MENA) which began in Tunisia in December 2010 and recently spread to Syria, Libya and Yemen.

Graphic key of regions affected

  • APAC (Asia-Pacific): Australia, Hong Kong, India, Japan, China (mainland), Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand, Vietnam.
  • ASEAN (Association of Southeast Asian Nations): Malaysia, Philippines, Singapore, Thailand, Vietnam.
  • BRIC: Brazil, Russia, India, China (mainland).
  • EU (European Union): Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Poland, Spain, Sweden, UK.
  • G7: Canada, France, Germany, Italy, Japan, UK, USA.
  • Latin America: Argentina, Brazil, Chile, Mexico.
  • Nordic: Denmark, Finland, Sweden.
  • North America: Canada, United States of America.

Main findings

  • More than a fifth (22%) of privately owned companies globally say that the unrest has had a negative impact on their business.
  • This figure is highest in the North America region where a quarter (26%) of businesses reported a negative impact; Turkey was the country most affected (53%).
  • In Europe, businesses in Denmark (30%) and Spain (29%) claim to have been most negatively affected, followed by the UK and Ireland (both 24%).
  • In the UK, a quarter (24%) of companies say they have seen a negative impact on business as a direct result of the conflict, but just 6% say this will prevent them from doing business with the MENA region in the future.
  • Confidence has been dented in the region, but only 10% globally said they are now less likely to do business there.
  • BRIC economies displayed the biggest dip in confidence with 17% less likely to do business in MENA countries; 22% of companies surveyed in mainland China, for example, said they were now less likely to engage.

MENA’s long-term opportunities

Despite the upheaval, Grant Thornton believes that the region should be viewed by businesses as one with real opportunities for the future.

Scott Barnes, CEO Grant Thornton UK LLP, said:

“Given historic growth rates and how well the MENA region recovered from the recession pre-Arab Spring, it’s clearly an important place for businesses to be. However, businesses should not expect significant returns in the short term.

“UK businesses looking to invest in the region for the first time should carefully consider which market they choose as a launch pad. Focusing on the stable states in the Gulf is a good place to start, but for those prepared to take calculated risks there are many attractive pricing options in areas still affected by political unrest.

“A large majority of the Gulf states have committed to improving social welfare and as such are planning increased investment in infrastructure. Healthcare in particular is a key focus, though the regulatory environment is still a challenge.”

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