Human Capital is the single most important factor for sustained growth, says Moutamarat's ABIR report

Nearly 80 percent of the respondents said that career development programs are likely to help retain key staff, while 65 percent admitted their workforce would stay if offered higher wages.

The ABIR gauges the opinion of almost 600 chief executives, chairpersons, presidents and government ministers in the Arab world. It comprises a series of in-depth studies that cover 18 countries and nine industries. The research and analysis contained in the ABIR make it a vital decision-making and strategy tool, allowing senior executives to understand the Arab world's business climate and trends.

The second annual Arab Business Intelligence Report was carried out in 2006 by Moutamarat, a pan-Arab business knowledge initiative and PricewaterhouseCoopers. It is billed as the Arab world's most comprehensive independent business survey.

The first report, published in 2005, led to the Arab Economic Confidence Index Score, a benchmark system based on the USA equivalent. The second ABIR's findings, which show a strong focus of Arab business leaders on human capital, have led to the establishment of Domestic and International Labor Market Indices - a first for the Arab world.

The second ABIR indicates that the region's corporate leaders rank human capital as the most significant challenge for the future of Arab business, as well as a key factor for sustained growth. Most senior executives even list 'improving people' ahead of 'customer satisfaction' when it comes to being competitive.

Not surprisingly, business leaders also said that a lack of available or sufficiently trained talent was one of the biggest hurdles to success, coming in ahead of 'increased competition', 'political reform' and last year's biggest threat to business, 'global terrorism'.

Khalid Malik, CEO of Tatweer and Moutamarat said: "This year's Arab Business Intelligence Report strongly indicates that Arab business leaders are most concerned by the lack of sufficiently skilled staff in the region. Because of this overwhelming focus on Human Capital, we have addressed these issues by creating two new indices, which will shed further light on Arab labor markets and will allow for deeper examination of the key concerns faced by Arab business leaders. Furthermore, they will offer a point of reference for comparison with the international labor market."

Mike Stevenson, a Senior Partner at PricewaterhouseCoopers in the Middle East, says the index will become an essential gauge to benchmark the quality of the region's workforce. "The Labor Market Indices will present an even more valuable opportunity to assess the region's business world. They will act as sophisticated and accurate tools for both Arab business leaders and CEOs on a global scale."

Stevenson describes the concept of the Arab Business Intelligence Reports as a revolution in business and economic strategies for the Arab world. "It is an incredible achievement to have produced these reports, and PricewaterhouseCoopers has been privileged to partner with Moutamarat, a joint venture between Tatweer and the Saudi Research and Publishing Company, on this project. Khalid Malik, the recently appointed CEO of Tatweer, has been instrumental to its success."

Training is a priority
According to the Labor Market Indices, UAE business leaders rank the quality of their local skilled workers tenth in the Arab world, while they rank their international skilled workers fifth in the Arab world. In contrast, Saudi Arabia ranks fifth on the local index and first on the international index. More troubling perhaps for the UAE is the fact that despite the low ranking of the quality of the local workforce, the UAE was one of the few countries where business leaders ranked training opportunities as their lowest priority.

Business leaders across the Arab world ranked the quality of the domestic labor supply much lower than that of the international labor supply. A large number of companies are recruiting from overseas, prompting some business leaders to say that this isn't economically sustainable and that there exists an urgent need to improve the quality of domestic labor markets.

The report says that business leaders are shifting their concerns from importing foreign skills to recruiting, developing and retaining homegrown talent. 'Raising education levels within the workforce' is now cited as the top priority by 92 percent of Arab executives, overtaking 'improving infrastructure', which ranked top in 2005.

Around a third of the respondents said the cost of skilled labor, particularly in the financial services, energy, mining and utilities, and travel and tourism sectors, was expected to be 'substantially higher' than in the international labor market, mainly because of a lack of locally available talent.

Confidnece still high
In last year's report, senior executives predicted an improvement in economic conditions. This year, they confirmed this prediction, with four out of five senior executives saying that economic conditions are better than 12 months ago. They expect conditions to improve even further over the next year.

Saudi Arabia and the UAE are listed as the two major growth markets, and although the Lebanon conflict had a negative impact on some Arab economies, business confidence in the GCC is still higher than before the war.

The survey showed that 'Alliances and Joint Ventures' were seen as the main strategies for driving growth, with 55 percent of the executives listing them as the optimal way forward, overtaking last year's frontrunner, 'Organic Growth'. The key benefits were to gain 'market access and technical expertise', which again ties in with the emphasis placed on retaining and recruiting a superior workforce.

Despite continuing foreign investment, 'Mergers and Acquisitions' were rated less highly than last year, and less than a quarter of business leaders listed 'Outsourcing' as an economically positive step for their business.

The key findings of the first Arab Business Intelligence Report focused on confidence in the region, and provided an accurate barometer of the economic climate at the time and a gauge of future trends. This year's report shows that high confidence levels in the GCC are being mainly driven by Saudi Arabia, Qatar and Oman, and that despite the continuing investment in the UAE, confidence has dropped.

Oil still critical
Nearly half of the executives said oil price movement was the main issue to address in the next six months, with 49 percent listing it as 'critical'. Four out of five in the UAE said it was a potential threat to their business. Only 27 percent said the same of stock market volatility, despite some significant drops in local stocks over the past year.