I have been asked by Sara to write the blog entry on the last Arete event, which happened at the Army & Navy Club in St James’ Square on November 18, and which involved two excellent speeches, by Lord Paddy Ashdown and private equity executive Susan George, on the weighty topic, ‘Why the world will never be the same and where we go from here’.

The discussion was under ‘Arete rules’, so I can’t quote or summarise what the speakers said, so instead I’ve been asked to share any thoughts of my own that were prompted by the discussion.

The discussion hinged, quite rightly, on two key crises that face us today – the Credit Crunch, and the Environmental Crunch. One of these crises is all-too-familiar, the other is somewhat more rare, and harder to prepare for.

I’m a 32 year-old financial journalist, and I’ve already lived through several financial bubbles and their aftermaths. I don’t quite remember the 1989 crash, but I certainly remember the 1998 emerging market crises, the 2001 bursting of the dot.com bubble, and of course the present crisis.

All the decades I have been alive, markets have become increasingly deregulated, banks have grown bigger and more powerful, and speculative crises have become more frequent and more severe. And still the banks get away with it – they still get to keep their profits, and socialise their losses. When the system is so rigged, you’d surely be a fool to be in any other business.

This latest crisis has been a wonder to behold, in that it has affected almost the entire world – I say almost, because there are still countries lucky enough to be ‘off the grid’, such as Turkmenistan or North Korea, and who have therefore been little affected by the crunch. But most of the rest of the world has been affected – proof of the increasing interdependence of our societies, as Lord Ashdown pointed out.

But some parts of the world are coming out of the crisis quicker than others. GDP is forecast to be above 7% in China and India this year. Brazil is also booming. Turkey is looking strong. Saudi Arabia is well-poised to recover. These countries have had a good crisis. They have emerged as key parts of the G20, which has itself emerged as the principal global decision-making body in the post-crisis world.

We can safely make the prediction, as was made during the dinner, that the credit crunch heralds the end of the West’s centuries-long monopoly on power, and the rise of Asia. But what kind of ideology will rule? At the moment, China is run by a communism in which few still believe, while the West is run by a free market capitalism in which even fewer have faith. What sort of philosophy will we live by in the future?

One could suggest both free market capitalism and Marxist communism are doomed to the scrapheap of history, because they are philosophies based on unlimited industrial growth, and we are now coming up against the limits of that growth – which brings me to the second of our era’s crises, the Environmental Crunch.

The ghost at our dinner was the Reverend Thomas Malthus, who warned two centuries ago what happened when population exceeded resources. The food price shocks of 2008 gave us a brief but unsettling glimpse of how quickly order breaks down when people do not have enough to eat.

So what is the way forward? Perhaps we can develop all the available arable land to the maximum efficiency. Perhaps there is a role for private capital to play, as well as multilateral and local government capital. Perhaps there is an important role for new technology to play in developing, or synthesising, new food types.

But the predictions we are now hearing from scientists as to what the world will be like in 70 years time – in other words, within some of our lifetimes – are so catastrophic as to be bewildering. They make the business of prediction extremely difficult. Look at this image (above) in a recent copy of the New Scientist, which shows scientists’ predictions of what the world will look like in 2100, and which parts of it will be habitable if the world is four degrees warmer.

Where is Asia? Almost completely uninhabitable. So how we can speak of the rise of Asia? Where is Africa? Almost completely uninhabitable. So how can we speak of the rise of African markets? Where is habitable? Russia, the UK, Scandinavia, Canada, and Antarctica. These, according to the New Scientist, are the areas of the world where it will still be possible to live in just under 100 years. Somehow, 9 billion people are going to have to fit into these countries. Will it happen peacefully? Will we join together and sing a hymn to interdependence? I’m afraid not.

However, perhaps the lesson we receive from the Environmental Crunch will be so severe, so damningly obvious, that we emerge from the ashes with a genuine realisation that we are all in this together and we have to live responsibly and sustainably. Perhaps.

But maybe I am being overly pessimistic, or at least, overly credulous of the scientific consensus. The future is never exactly as we think it will be. Scientists are rarely as wise as they think they are. We may yet escape this unfortunate destiny. An opportunity is approaching in a few weeks time, at the climate conference in Copenhagen, where the world’s leaders can gather together, and prove to this hardened cynic that enlightened interdependence is still possible.

If I may, I will tell you a little about myself to give you a bit of context for my impressions on the evening. My interest in this topic has developed from my work. I have for the last year or so been involved in what began as a mentoring programme for young British Muslims in deprived urban areas. The idea was to bring these youths in contact with inspiring and successful British Muslims, who have often come from same or very similar communities themselves. We aim to raise their aspirations – show them that they can do it too, that the options are there – and provide the right opportunities. We have been very fortunate to have received an overwhelming amount of support from some of the most interesting individuals I have had the pleasure of meeting. Our focus is currently in the UK but there is a ripple effect as those that we deal with invariably almost always have friends and relatives living in the Middle East. When so much of my day job is about encouraging the entrepreneur (or a more enterprising nature) in young people, the importance of this topic is for me growing daily.

When I think of enterprise in the Middle East my mind immediately turns to Dubai with its buildings springing up at a mind-boggling rate. The never-ending construction that leaves the roads a constantly changing jigsaw puzzle to navigate your way around, its palm island, indoor ski slopes, the list goes on. I do not think that I am alone in this but it reveals a great difficulty. Put this alongside some of the many expanses of desert in Egypt where none but the hardiest of Bedouin tribes exist and the problem of comparison reveals itself. There is such wonderful diversity throughout the Middle East that it is arguably hard to contain it as one entity, this ‘Middle East’. In much the same way, at work I often and repeatedly reject the term ‘Muslim community’ – closer to the truth is to talk about the many Muslim communities around the world and even within the UK alone. While the religion is a common identity, it is one that is as unifying as it is divisive both within and beyond its own boundaries. But I digress. The entrepreneurial climate and challenges being faced from region to region in the Middle East will therefore be varied and nuanced, but some general themes can be (and were) drawn out.

I am not going to merely summarise what was said, I realise this is not allowed under Areté Club Rules and also not necessarily thought-provoking. What I would like to do instead is use some of the points discussed as a starting point to pose more questions. I do not presume to know enough to put forward solutions to such important issues, and I strongly believe that the best discussions do create more questions than they offer answers. There is no doubt it was a good discussion, so here I go!

The title for this dinner intrigued me but has since troubled me. I am aware that I may approach it much like a university student might an essay but it is only a few years since I was a student and I have not had to apply my mind to something like this since then.

“Entrepreneurial culture in the Middle East: 1) is it compatible and 2) what is the future for youth employment?”

1) So is entrepreneurial culture compatible with the Middle East? Undeniably so, otherwise there would not be the history of enterprise and level of commerce we are able to see today.

2) What is the future for youth employment? Without a crystal ball nobody can answer that for sure.

So the question should be answered with a “yes” and “who knows”? Hardly. What can be considered and suggested are those elements that will influence enterprise in this part of the world.

The question that therefore ties these two together is “what are the factors challenging the establishment and development of enterprise and the entrepreneur in the Middle East?” This reveals current incompatibilities as well as shaping the way we look at how things are to develop in coming years, hopefully in a practical solution-seeking way. From what could have been a very negative topic came many positive ideas – more is the pity that the night’s esteemed company should not be in these Middle Eastern regions to deliver these solutions.

A significant problem today in many parts of the Middle East appears to be the level and type of training and it’s misalignment with the job opportunities and training required by industry. The education/training : opportunities ratio, if I may put it that way. If we are to accept that a country’s industry and economy start with the infra-structure creating, physical labour-demanding and ‘industrial phase’, progressing on to secondary and then tertiary industries, the mismatch here, I would suggest, has come from Middle Eastern countries glancing to the West without taking into account historical progress and desiring to fast-forward these key early stages of this process. Expectation has leapt ahead of reality. What I find heartbreaking about this situation is that the energy, intelligence and drive of those I have met from the Middle East (the number of which went from minimal to a few hundred in the last 6 months) puts to shame our Western counterparts. So much energy and ability with little opportunity for real application…

So should expectations be lowered, or opportunities be manufactured? I am in no way saying that those in the Middle East should discontinue their education, but there does need to be a solution to this mismatch. Disharmony is often seen within societies when this gap is filled by the quickest compromise – immigrants willing to do these lower-skilled, less educated jobs at a fraction of the price. Dubai has a huge Indian population now; Emiraties are now outnumbered by foreigners in such huge numbers that they only make up approximately 40% of the total population. One might say that this is a sign of Dubai’s success, as it has become so appealing that millions have flocked there, but that is scraping the barrel for a silver lining. In reality it is a sad truth, as those remaining often have little chance of success themselves and as a result almost no role in carving the path of Dubai’s future.

Defining what it means to be an entrepreneur would not only be difficult but unwise – it is a term that encompasses so much and allows for many forms to come and is a great strength. To provide a nugget of clarity, however, I will refer briefly to Wikipedia’s definition: “an entrepreneur is a person who has possession of an enterprise, or venture, and assumes significant accountability for the inherent risks and the outcome”. That seems close enough for me, although I would like to broaden the net to consider the ‘entrepreneurial nature’ instead, as something that drives people to start something, to push it forward, to make things happen. The possibilities are endless; long live the entrepreneur.

If enterprise can take almost any form, are there types of enterprise that can be identified?

Social entrepreneurship is something I only became aware of in recent years, and has since become very close to my heart as it combines both the business world with the social conscience – a win:win situation by all accounts surely. To call on that tome of knowledge Wikipedia again, “social enterprises are social mission driven organisations which trade in goods or services for a social purpose”. I would tentatively suggest that social entrepreneurship as a principle is in fact better suited to the Middle East than it is even in the West. The reason I say this is because of the roots of Islam that reach into almost every aspect of life in most of the countries in the Middle East. My knowledge of the Qu’ran is limited, and the Prophet’s teachings too. What I have learnt this past year and a half is about the responsibility placed upon the individual by his or her Islamic faith, as steward on earth, and the duty towards one’s community (in particular traditionally vulnerable groups – women, the young, and the old).

If social enterprise sits so comfortably alongside the values of Islam, and many of those characteristics of earlier capitalist enterprise contribute to the tensions with the ‘immoral’ West, perhaps this is the route that should be taken.

http://www.foxnews.com/search-results/m/25687339/sheikh-tarik-al-abdullah.htm

For a day job I work in the Oil and Gas industry as a Commercial manager but am an Arabist by background. Having grown up in Saudi Arabia and the Gulf I have a real passion for the Middle East; it is a ‘region’ I instinctively feel at home within. The decision to study the language and politics of this fascinating, beautiful and complex (and therefore often misunderstood) mélange of peoples was an easy one and I have since spent many happy hours discussing politics and football down the back streets of many Arab cities whilst sucking on a delicious Apple nargileh. A life in the Energy world has enabled me to employ my passion and as I write I am organizing my first trip to Iraq where we are in the process of setting up two Joint Venture operations based in Erbil. Therefore the recent dinner: “Rebuilding Iraq: Lessons Learned from Security, Business and Political Perspectives” was of great interest to myself.

So what are the lessons to be learned? Personally and sadly I believe the Iraq story has a long way to run and that there are many lessons we have still to both identify and learn.

The security issues surrounding Iraq have been often gruesome to watch in recent years. It appears to me that lessons learned from previous conflicts have taken a long time to be heeded in Iraq. For a country to grow then people must feel safe and be allowed to go about their daily lives without disruption and in full separation from insurgents. Simple non? To do this the security services must engage, live-amongst but most importantly listen to the local population. It seemingly took 3 years, until the influence of Generals Petreus and Odierno, before this strategy came in to full effect. The amount of civilian participation seems to have been pitifully small in the early days of ‘occupation’ and at what cost. The civilian population must understand what we are doing, why we are there and have confidence in the security which a fairly elected government puts in place. No doubt the western world lost a great deal of respect for its ‘kill’ attitude early on particularly in the Muslim world which it should have been trying so hard to court post 9/11. But today at least the recorded figures suggest that the violence is in retreat. Fewer civilians were killed in May of this year than in any month since 2003.

The politics of Iraq will continue to be complex in the medium term and fraught with insecurity amongst Iraqis themselves. As Sara has mentioned, the longer the Iraqi government stalls in incorporating Sunnis as well as Shiites into government and security services the greater the danger that tens of thousands of tough, armed Iraqis will stray. This will be a particularly tough problem to deal with. The troubles of Iraq have been witnessed across the Middle East often bloodily many times before and sometimes without solution. The Arab peoples are hard to unite at the best of times, just look at the Arab league who often struggle to organise the location of a meeting let alone make a decision. There are several internal and foreign influences at play here and it will be a real test of resolve for the Iraqi government to stay together in the next few years and we must support them in any way we can but without prejudice. If they lack this resolve and cannot provide a unified and cross-sectarian government then the chances of civil war become ever more likely. And what future for Kurdistan?

The lessons in doing business in Iraq will be learned thick and fast in the coming months. The obvious favours granted towards American firms and the lack of engagement with local talent was a mistake in the beginning and caused resentment all round the world not just in Iraq. Not a way to win hearts and minds. The lack of nation building legislation in place did not help this of course, but hopefully this will firm up as troops withdraw and the Iraqi government begins to fend for itself. This is key to economic recovery, investment and most importantly domestic stability.

So now the immediate future as I see it:

A crucial general election is due in January 2010 upon which the world will watch with keen eyes. President Obama will be desperate to witness a peaceful poll leading to a stable government so he can complete his election promise of withdrawal. In accordance with the Status of Forces Agreement, the US military has recently withdrawn from Iraq’s cities. This pull-out however has been accompanied by a pick-up in violence, raising concerns amongst policy makers and generals at the ability of the Iraqi military to uphold security. Hopefully this is just a spasm (which was predicted by many analysts) but what to do if it isnt?

A surprisingly competitive but sadly disputed Kurdish election has also taken place recently. Masoud Barzani was comfortably re-elected as the region’s president but the KDP and in particular PUK grip on power may be weakening. Jalal Talabani, the PUK’s founding leader, who has been Iraq’s national president and a proponent of compromise in the region, looks likely to lose his job next year to a Sunni Arab. Kurdish independence therefore looks no closer and indeed increased instability within the region itself may be likely. Not good. Surely Nouri Al-Maliki must explore the possibility of ties across sectarian divisions if Iraq is to have any sort of future?

Iraq’s greatest prize and I believe a fundamental key to domestic stability – oil – was hardly fought over recently. The first bidding round for eight large oil and gas fields, led to no agreement on seven of the fields on offer. (However, the one deal agreed should boost Iraqi oil output by 2m barrels/day and therefore its bottom line). Oil revenues are key to boosting to social and economic spending and despite this mixed success first up, foreign Oil firms will continue to follow Iraqi progression with interest. But make no mistake they can survive without it in the medium term. Naturally risk averse they will not invest in an area that has high security risk and an unstable legislative framework. Offshore Brazil and Norway can swallow IOC investment dollars for the next 10 years at least. Real GDP growth is forecast to slow in line with the world recession and god help us if the oil price starts to drop again.

So where does Iraq go from here?

Very briefly and to my mind the powers that be in Iraq must be brave and continue with foreign troop withdrawal. They must actively pursue legislative reform, and quickly, to increase investment in the near term. Most importantly those in government must reach across the sectarian divide and try above all to rise above their ingrained fears of each other and surrounding influences. Only with this can the Iraqi people feel safe and rise from this nightmare. This is the end game.

I am finance lawyer with a city law firm who has been engaged in various capital market raisings in the Middle East. I am also currently seconded to a government agency assisting with financial stability matters. So I attended the event in June with interest.

It appeared as though the crux of Tuesday’s night discussion was the difference between financial systems that promote efficiency and those that promote concepts of social justice. There is an astounding amount of petrochemical dollars floating from the Middle East and the role of Islamic finance in today’s financial system. Perhaps this suggests that sovereign wealth funds and Shari’a financing do not have pure investment incentives such as other forms of investment vehicles, but may have underlying political objectives? This has yet proved or denied until we see something that is a radical movement on accepted norms of market behaviour, but I could stand corrected if any one has examples of this.

The legal founding of Shari’a financing systems demonstrated the western world’s ignorance for the understanding of Islamic finance concepts. Perhaps this is true, but being a finance lawyer myself I am astounded by the lack of understanding shown by professionals and individuals within banks and other financial institutions as to the legal structuring and terms of conventional western finance. This was obviously evident in the criticisms of the banking industry in light of the use of CDOs and securitisation structures, but arguably in my view even extends to plain vanilla forms of debt and equity instruments.

Moving back to the dichotomy of the efficiency vs social justice concepts, Islamic finance promotes the basic tenets of Sharia law and ensures the compliance with one’s moral obligations even in the commercial realm. My question, even thought I did not get an opportunity to discuss this, was whether any soft revolution in Islamic culture (if it is in fact true that there is a change in thought for the modern Islamic generation) would still allow such a system to persist or that leanings towards the western model of efficient trade would promulgate.

The paradigm of western finance is efficiency and the minimisation of transaction costs. Theoretically, this should allow markets to transact efficiently and with maximum knowledge. It would seem that the concepts of corporate social responsibility extend the principles of western finance to reach the desired social outcomes of Islamic finance. There was some focus around the origins of the banking trade and the fundamental principles of the Abrahamic religions. Furthermore, it was suggested that Islamic finance was a showpiece to demonstrate superiority to rival cultures, which if indeed true probably does not differentiate itself largely to any push of other ideals by western society.

The fundamental question on everyone’s minds though is the actual intention of those sovereign wealth funds investing in western corporations. The obvious example discussed was the US objection to the ownership of some US ports by the Ports of Dubai Authority. Some parallels were drawn with what has been termed as “China’s other nuclear option” referring to massive Chinese investment in US treasuries. Maybe a contributing factor to the global financial meltdown seen recently could be the money poured into the US Treasuries from foreign funds.

So, if there are lingering doubts over the motives of sovereign wealth funds, how do countries or multinational bodies act to moderate any behaviours or concerns in regards to sovereign wealth funds? Can we regulate sovereign wealth funds and how? And if that is the desired intention, how do we align any such regulation with free market capitalism?