How to stop the economic winds from blowing your house down
Afew months ago, a devastating hurricane tore through a 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 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 Chinese slowdown, the US-China trade dispute, the Qatar dispute and a sluggish Europe.
It has the scale, diversification and geographical reach to weather most economic hurricanes.
While many private 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. I toured the facilities and visited private companies operating from the port, and the message was clear; innovate or die.
As one veteran shipping man told me:
“Jebel Ali does not rest on its laurels. They are constantly pushing to upgrade their systems and infrastructure and drive the newest technologies.”
The UAE, in general, is engaged in geographic diversity. On a recent visit to Dubai and Abu Dhabi, I spoke with a wide range of executives and officials about economic trends, and two names kept coming up: China and India.
From the Abu Dhabi Investment Authority and Abu Dhabi National Oil Co. 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. While economists look at capital, human and investment flows, it’s important to look at senior official and head-of-state ties as well. On that score, growth has skyrocketed.
Conversely, for a stark lesson on how not to thrive in today’s environment, there is a clear example: The UK. The Brexit mess continues to devastate one of the great commercial and economic success stories of the modern era. Global carmakers and investment banks are leaving, and the UK’s most talented civil servants are wasting their talents on an extrication process from their most valued trading partner, the EU.
The lesson here is that geographic diversification, scale, innovation and 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.