Middle East earns 1% of global market research revenues
The entire Middle East region earned only a meager one per cent of the global market research revenues, which indicates the potential for market research that is prevalent in the region, Kuwait Financial Centre, or Markaz, said.
An investor monitors stock price at the Dubai Financial Market. The popularity of Islamic version of bonds, sukuk — whose issuance has surged in the past years — has aroused research activity, according to a report by Markaz. — KT photo
In a report, Markaz said significant investments into infrastructure projects, construction of economic cities, industrial clusters and establishment of worldclass universities fuelled additional demand for research.
In the GCC too, the need for research has intensified as the countries have stepped up on their efforts to diversify and align the economy more towards knowledge based developments, the report said.
“Lack of reliable data and credible research has stymied private sector investments from taking calculated risks,” it pointed out.
Research providers in GCC region include a host of international and national players.
Universities and academic research centres are knowledge intensive institutions where academic research work is constantly performed and disseminated.
Recently established King Abdullah University of Science and Technology which has the second largest university endowment in the world of $20 billion, second only to Harvard’s $32 billion, has the potential to spearhead research activity and establish itself as a major research hub in the region.
Academic research in GCC is majorly focused on alternate energy, sustainable urban development, advanced materials, environmental studies and biotechnology.
Central banks in GCC provide statistics on national accounts and state of finance in respective countries while national statistics authority provide with economic, social and demographic data.
Corporate information disclosed by Gulf organisations is meagre even in the case of public limited companies.
“The region lacks qualified analysts with requisite skills and professional certifications to interpret and analyse financial and economic data. The region has been dependent on expatriate workforces who often lack bilingual skills and has lagged behind in imparting the relevant analysis skills to its citizens,” said Markaz report.
“Dissemination of research can occur via innumerable ways such as media, press release, research reports, mailing lists, conference, hosting on websites, social media campaigns, lectures and roundtable discussions. Research could be done either in-house, outsourced or a combination of two could be adopted, wherein certain tasks for which the firm lacks in-house expertise could be outsourced. Access to wide range of resources at minimal costs is possible via outsourcing,” it said.
Considering the strategic importance of oil as an economic resource at a global level and the size of sector in GCC, it remains as the most researched and well understood sector.
Significant investments to develop the social and physical infrastructure with increasing budgetary allocation in state budgets have fuelled a need for research in infrastructure domain. Growth in services industry (financial service, telecom, trade & tourism) and increasing allocation in state budgets for development of social infrastructure such as educational & training institutions, healthcare facilities has spurred research activity in this segment.
Equity markets in GCC are predominantly retail driven and hence most of the equity research is carried out by sell-side broking firms. Lack of forward guidance and earnings estimates from the management and poor disclosures in annual reports hinders the quality of equity research. Current research on debt is minimal as debt market is nascent in GCC. This is due to minimal need for the GCC states to borrow while corporates rely on bank funding for their projects.
The popularity of Islamic version of bonds, sukuk — whose issuance has surged in the past years — has aroused research activity in this space. Leading regional investment banks produce fixed income research covering sovereign ratings; CDS spread values, interbank rates, yield curve for US and performances of benchmark bond and sukuk indices. Forthcoming issues and key news events regarding the issuer are also included in the report. Global players (S&P, Moody and Fitch) dominate the credit rating market in GCC.
GCC ecosystem for research and innovation is still in its infancy. Expenditure in R&D efforts has been minimal, GCC average stands at 0.3 per cent of GDP against 2.3 per cent for OECD countries.
International agencies such as IMF, IIF, UNDP and OECD carry out economic research and provide economic, financial and structural policy advice to effectively manage the economy, increase trade, investments, productivity and the social well-being of citizens.
“Their presence across countries and wide reaching network that spans across continents enables them to compare different systems and recommend appropriate policies. They set the tone for analysis by other players and influence decision making by stimulating public debate on current policy,” Markaz said.
Policy institutes and NGO’s ensure greater public participation by holding debates and garner opinions from wide spectrum of people. They influence the decision making process and often hold policymakers accountable for the decisions that they take by monitoring and evaluating policies. Infrastructure projects often characterized by their complex nature are technically demanding, and calls for competent resources with superior project management skills for their execution. Consultants armed with domain skills and immense networking power contribute in this endeavour by identifying and assessing potential partners, performing due diligence on them. They also help in feasibility studies, facilitate project management and advice on business strategy.
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