Leading entrepreneurs urge regional governments to provide opportunities to deploy any available capital

They urged Governments to provide opportunities and deploy capital held by sovereign wealth funds amongst other entities to stimulate regional economies. The creation of public-private partnerships and other stable investment opportunities to help various sectors was agreed to be a key priority for Governments in the current economic climate.

They called upon regional governments to safeguard the corporate sector from ripple effects of the global financial turmoil by injecting more liquidity and by proactively providing economic stimulus packages.

Fouad Alaeddin, Managing Partner of Ernst & Young Middle East and moderator of the roundtable, said:

"Regional governments need to anticipate the effects of the downturn rather than react to them. They need to put in place mechanisms and incentives to hedge off dramatic impacts that destroy confidence amongst consumers, investors and businesses as we are witnessing in the major economies of the world today. In the battle of fear versus confidence, they need to create conditions in which confidence will win. For this, our Governments could tap regional sovereign wealth funds that are not yet deployed. Our recent Ernst & Young ITEM Club report on global patterns of wealth forecasts that sovereign wealth Funds assets would increase to $12-15 trillion over the next five years."

Public-private partnerships in energy, infrastructure, utilities, education and telecoms sectors were recommended to reduce the Governments' financial and administrative burdens.

The entrepreneurs said that Governments could adopt a three-pronged approach. The first was to salvage renowned brands and companies through liquidity injection. The second was to create public-private partnerships in infrastructure projects rather than postpone or cancel them. The third was the enactment of financial legislation and controls to prevent fraud. These approaches would keep regional economies and confidence afloat, address employment and resource challenges and allow stable, least risk returns to investors and sovereign funds in a climate where such investment opportunities are required.

The entrepreneurs, all finalists for the awards this year, were unanimous in the view that the downturn would have an impact on regional economies and business growth and would hit more sectors than just property and finance.

To preserve liquidity, a majority of entrepreneurs agreed that companies could look at revaluating liquidity profiles of institutions and sectors in terms of Credit, Market and Operational Risks. Investors and businesses could make their investments based on relative immunities of some sectors and adopt liquidity enhancing tactics such as temporary deferral of dividends paid to shareholders, and keep salaries and overheads frozen or at current levels.

Coming up with suggestions for the present climate, the entrepreneurs said that companies in the region needed to focus on sustaining cash flows and improving liquidity rather than booking higher profits. "Strategies to ride out the storm focusing on long-term recovery than improving profitability need to be adopted. Companies need not cut their headcount so much that they find themselves not being able to take advantage of the recovery when it happens. In this environment, banks need to be encouraged to extend repayment periods while adopting the principle of flexibility in their staffing," added Fouad.

Cooperation, partnership and mergers and acquisitions between companies that operate in the same sector are tactics that can be explored by companies to deal with the crisis of confidence. Strong relationships with customers are seen as the best bet to thrive beyond the downturn. Most entrepreneurs recommended government bailouts to forestall the shock of bankruptcies and layoffs only when all else fails. "Bailouts need to come with terms that force the industry to change and increase competitiveness in the long run," concluded Fouad.

Entrepreneurs who participated in the round table discussion include:
• Abdullah M. Mazrui, Chairman, Mazrui Holdings
• Akram Al Agil, CEO, Jarir Marketing Co.
• Elia C Nuqul, Chairman, Nuqul Group
• Eng. Fathallah Fawzy, Chairman, Mena For Real Estate Investment
• Isam K Kabbani, Chairman, Isam K Kabbani Group
• Joseph Ghossoub, President & CEO, THG
• Khalid Abdul Rahim, Chairman, Cebarco Bahrain SPC
• Maqbool Al Saleh, Chairman, OHI Group
• Mehdi Amjad, President & CEO, Omniyat Holdings and Almasa Holdings
• Nadia Aldossary, CEO & Partner, Al Sale Company
• Omar R Shallah, Managing Director, Rakha Co.
• Rami Khalid Alturki, President, Saudi Readymix
• Eng. Sobhi Batterjee, President & CEO, Saudi German Hospitals Group
• Walid Kayyali, Managing Director, Al Haya Medical Co.
• Yasseen Mansour, Chairman & CEO, Palm Hills Developments
• Yousouf Al Darwish, Chairman, Al Darwish United.

Disclaimer: Opinions expressed in this communiqué originate from the round table panellists themselves and Ernst & Young ME does not take responsibility for their statements.