In every setback, there are the roots of bigger and better opportunities. It is important, however, to put the Gulf economic setback in its proper perspective. The real size of it has nothing to compare with the international mediatic projection that was made.
The Arab wealth and the leading role it gave to the area in economic and political terms, were not popular. All the countries involved had little infrastructure. The fabulous contracts of national scale from telecommunications to desalination plants, from roads to entire new city quarters, further projected the Middle East golden years.
At one time or another — price of oil up or down — the Middle East had to take a more normalised economic course. For the media, it was a typical case of presenting the situation as the half empty glass, or the half full glass.
The negatives (lower oil price, budget deficit, slowing down of national projects, reducing expatriate work force), were the highlights, with little weight given to the positives (massive oil reserves, substantial financial reserves, mostly wisely placed, in-depth industry development, less spectacular than infrastructure projects but, in the second stage of countries’ expansion still, as important).
As an advertising agency present on the field in all the markets for over a decade and a half, closely in contact with the commercial, industrial and banking communities throughout the area, we have witnessed these factors:
■ Countries that were superlatively wealthy, became just “rich”.
■ States reacted swiftly to face and adapt to new economic prevailing situations.
■ In trade, the cleaning up process took place. Companies of opportunistic nature, or operating with undue bank credit, closed or were absorbed.
■ Well-managed companies prospered, market conditions reinforcing their sound objectives pursuit even if for a short lapse of time, turnovers did not increase.
■ Similar prosperous rends were happening to well-backed brands that enjoyed sound distributors in-market activities and good marketing. To the detriment of a multitude of brands that in the golden years ate up market share as blind consumerism, was the name of the game.
In all areas, the work force remuneration level adjusted itself. Economic normalisation brought to a stop both staff poaching and financial packages reaching unreasonable levels.
■ In the field of advertising, the same factors applied equally. Well managed ad agencies — especially those with regional structure and means — benefited from the economic normalisation with some of them not having to even suffer from the short term. In Intermarkets, for instance, although billings showed in the years of 84-86 little improvement, it translated into improved bottom lines.
The main reason being the change from a buyer market to a seller one.
Growth, although timid, had resumed, independently despite the global political climate. With the ceasefire in the Iraq-Iran war, a major additional element has come about, of which, reborn confidence is not a negligible aspect. “The local market will witness the return of many of the investments that had run away in the past 8 years. A lot of new projects will be started and the market will once again expand,” said Mr. Abdul Mohsen Al Haneef, under-secretary of the Kuwaiti Ministry of Finance to the Kuwait newspaper ‘Al Qabas’.”
In this optimistic outlook shared by all concerned, the advertising industry development is looking optimistic because of the change of conditions and atmosphere. But also because of variety of reasons: from the new media opportunities (Saudi and Oman commercial TV, Arab-Sat soon) to the increasing client/agency marketing relationship.
The golden years – while a nice time to have been – were nevertheless not ideal in the buildup of the nations concerned as solid balanced states. The economic normalisation, including the tough time of the lower years, will prove for the countries’ history, a blessing in disguise.
Erwin Guerrovich is president of Intermarkets
Orignally published in ArabAd, December 1988