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Ageing Populations in Gulf Portend Economic Challenges

Populations in the Gulf are getting older and increasing in size, with a big bulge in the number of teen-agers who will be entering the work force within the next 10 years. These trends are making its harder and more costly for governments to provide high-quality healthcare and schooling. At the same time, cultural and economic factors in the Gulf are constraining much-needed entrepreneurship and innovation, executives and educators said on Tuesday in Doha.

These changes will create opportunities as well as hardships, said the participants in the Doha Business Roundtable, sponsored by the Qatar Financial Centre Authority.

One beneficiary will likely by pharmaceutical companies and healthcare providers, said Tarek Rabah, President of AstraZeneca Gulf. Life expectancies are increasing in the region, from an average of 61 years in 1968 to 73 years in 2004. As more people live longer, they will demand better and more varied medical care, he said.

In one negative development, obesity and its related ailments such as diabetes and heart disease are bad and getting worse. The Gulf has one of the world’s highest rates of obesity; 27 per cent of all men and 40 per cent of all women are clinically obese. Within the next 10 years, Rabah said he foresees within the GCC region a doubling of cardiovascular illnesses and a quadrupling of diabetes.

Still, Gulf countries spend much less of their economic output on healthcare than many others nations. Gulf governments spend on average no more than 4 per cent of their gross domestic product on healthcare, compared to twice that amount in Europe and up to 15 per cent in the US. As a result, there is much room for growth, he said.

Schools in the Gulf, particularly those teaching business, are struggling to produce enough of the right type of graduate, other experts said. As in many developing parts of the globe, business schools in the Gulf need to develop leaders “who know how to build businesses that are both profitable and socially responsible,” Harvard Business School Professor Linda Hill told the roundtable.

Home-grown executives who are good at innovation, as opposed to basic management, are in short supply. This can be especially problematic for the Gulf’s many family-owned businesses, as they try to stay competitive in a globalising world, Hill said.

Economist and former academic Florence Eid went further, arguing that Gulf countries aren’t challenging university students to be sufficiently entrepreneurial. Without more entrepreneurs and start-up projects in need of funds, venture capital and other forms of finance in the region will remain stunted, she said.

Eid, Managing Director of Passport Capital, noted a bulge in the population of 15 year-olds throughout the Gulf. As these teens get older and start looking for work over the next decade, they will need many more jobs than the public sector alone will be able to provide. “There’s an urgency to the problem that’s going to become even more pressing over time,” said Eid.

Part of the challenge appears to be that the connection between economic risks and rewards is muddled in Gulf societies that historically have prized personal relationships as the key to doing business. It’s not what one knows and how good one’s ideas are, but rather one’s personal connections that have traditionally determined economic success, said Qatar University President Sheikha Abdullah Al Misnad.

Although Qatar, Bahrain and other states have invested heavily in higher education, Al Misnad wonders if there isn’t a deeper problem.

· bruce@khaleejtimes.com