How the Middle East Can Survive Global Trade Turmoil

Afshin Molavi

A few months ago, a devastating hurricane tore through a stretch of beach in the US state of Florida, destroying homes in its path – with one exception. One house stood tall amid the wreckage, virtually intact with a few bruises here and there. It was no accident. When the media hordes came to the site, they inevitably turned to the homeowners, who described their meticulous efforts to build a home that “could survive the Big One.”

Countries, cities and companies in the Middle East and North Africa region should take similar precautions today in a precarious global economy whipsawed by geopolitical uncertainty. This is not to suggest that we face a devastating hurricane over the horizon, but the winds will be fierce through 2019, especially on trade, and we are never far from a hurricane. In this environment, four issues will be critical: scale, diversification, geographical reach and innovation.

DP World, the Dubai-based global ports operator, offers a good example. The world’s fourth-largest ports operator announced a 1.9 percent increase in container volume in 2018, despite the trade headwinds emanating from a China slowdown, the US-China trade dispute, the Qatar dispute within the Gulf Cooperation Council and a sluggish Europe. Sultan Ahmed bin Sulayem, the DP World chairman, announced strong growth in Turkey, the UK and Canada for the ports operator, shielding it from slowdowns elsewhere.

Spread across 40 countries and six continents, DP World owns or operates 78 marine and inland terminals from southern Africa to Latin America, from the Indian Ocean to the South China Sea. It just recently bought a majority stake in one Chile’s leading ports. It has the scale, diversification and geographical reach that will help it weather both heavy rains and a potential hurricane. While no company, country or city can survive a hurricane-like financial or economic crisis intact, it is important to build the architecture to “survive the Big One,” while being able to ride the next wave.

While many private-sector companies may not be able to afford the kind of expansive growth DP World has experienced, they can learn another lesson from the ports operator: always be at the cutting edge of innovation. On two recent trips to the UAE, I visited Jebel Ali, the flagship port of DP World. On both visits, I toured the facilities and visited with private companies operating from the port, and the message was clear: innovate or die.

As one veteran shipping man with port experience across the Middle East told me: “Jebel Ali does not rest on its laurels. They are constantly pushing to upgrade their systems and infrastructure and keep pace with the latest technology, and even drive the newest technologies.” There’s a reason that Jebel Ali Port has been named best seaport in the Middle East for 21 consecutive years at the Asian Freight and Supply Chain conference organized by Cargo News Asia.

The United Arab Emirates also seems to be engaged broadly in an attempt at geographic diversity. On a recent visit to Dubai and Abu Dhabi, I spoke with a wide range of executives and officials about future economic trends, and two names kept coming up: China and India.

From the Abu Dhabi Investment Authority and Abu Dhabi National Oil Company to the Dubai Multi Commodities Center and Dubai Chamber of Commerce, UAE entities are rapidly building their China and India portfolios. While Asia’s economic influence on the UAE is not new, it has accelerated over the past five years, particularly in the political realm. While economists look at capital, human and investment flows, it’s important to look at senior-official and head-of-state flows as well. On that score, growth has skyrocketed between the UAE and India and China.

North African countries need to imbibe the lesson of geographic diversity. Too many of them are still far too dependent on European growth for their exports and European travelers for their tourist industries. If Europe continues on its sluggish path, the effects will be felt from Casablanca to Cairo. North African countries are particularly well-suited to serve as a bridge to sub-Saharan Africa, the youngest and fastest-growing region in the world. As of now, sub-Saharan Africa – despite significant commercial success stories – faces a massive problem of youth unemployment and migration northwards to Europe, via north Africa.

Sub-Saharan Africa’s demographic burden can also be a demographic gift to countries, cities and firms able to tap that growth.

Conversely, for a stark lesson on how not to thrive in today’s environment, there is a clear example: the United Kingdom. The Brexit mess continues to spiral one of the great commercial and economic success stories of the modern era downward. Global carmakers and investment banks are announcing pull-outs from the UK amid policy uncertainty, and some of the UK’s most talented civil servants are wasting their talents on an extrication process from their most valued trading partner, the European Union.

The lesson here is that geographic diversification, scale, innovation and geographic reach will support your company, city or country in turbulent times. As the sun sets on the UK, it will rise on those companies, cities and countries that embrace these lessons and implement them vigorously.

Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies and editor and founder of the New Silk Road Monitor.