Page 85 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

Here to Stay: GCC Market Attractiveness and Risks 69

consumerism in order to build credit card and personal loan busi-
nesses. According to a study by McKinsey & Co., loans to individ-
uals in the GCC surpassed $100 billion in 2005 (37 percent of total
lending), but this market still has a large potential to grow as con-
sumer loans (including mortgages) represent only 17 percent of
GDP in Saudi Arabia, compared with upward of 70 percent for
major Western nations. 15
A concern of leading bankers today is that the “credit culture”
may have gone too far in the GCC, as borrowers are known to be
spending lavishly or sometimes even investing borrowed cash in
highly volatile stock markets. As consumer lending and credit cards
are fairly new to the GCC market, many borrowers are inexperi-
enced with borrowing and quickly find themselves in over their
heads. Companies naturally offer high-end goods to middle-class
GCC consumers as “aspiration” products—consumers, for their
part, need to know their limits and exercise discretion. If interest
rates were to rise, we would likely see an unprecedented level of
personal bankruptcy and even foreclosures on homes. One billboard
on a busy road in Dubai encourages consumers to “own the home of
your dreams” with 100 percent financing. Like their counterparts in
the United States and elsewhere, these homeowners risk waking up
to a nightmare if they are unable to sustain the monthly payments.

Attractive Demographic Shifts

The second element in the GCC’s Opportunity Formula is the
attractive demographic shifts taking place in these markets. The
GCC countries are experiencing population growth, increased liter-
acy and quality of life, and an expanding middle class—all of which
are helping make these markets more attractive to multinational
companies.
Figure 3.3 provides an outlook on population growth in the
GCC. The vertical axis indicates the total expected population
growth from 2006 to 2050; the horizontal axis indicates the current
average number of live births per woman.
The first observation to be made about population growth is
that the UAE, Kuwait, Qatar, and Saudi Arabia are expected to
nearly double in population between now and 2050. Ahigh number
of births, extended life expectancy, and significant migration can all