Legal Market Update for the Middle East 2015
It is, without doubt, interesting times when one looks at the Middle East.
Regional conflict continues unabated in some parts of the region, nullifying any attempts to create stable regimes which would provide the platform for economic growth. In other countries, namely the Gulf states, there remains hope and optimism that their relative stability will continue to underpin future economic development.
However, in the middle of this is also the current “oil price war” being waged by Saudi Arabia and other OPEC exporters in order to maintain and obtain market share (whilst ultimately attempting to reduce non-OPEC supply and hence increase prices to a sustainable global level). This reduction in income naturally has an effect on Middle East countries’ ability to re-invest and develop as they have historically relied on the petro-dollar to diversify their economies and investments away from oil in the long-term.
On the face of it, therefore, one would think that the region would not be on the “hot list” when it comes to growth or opportunities for lawyers or legal teams. However, despite the difficulties that the above issues pose, particularly in the energy sector, the region has a significant upside potential for the legal sector over the coming years.
The UAE is an excellent example of the benefits of continued diversification. Multinationals, locally based companies and government backed organisations continue to derive economic benefits from market reforms and further government investment. This has in turn encouraged the development of business and legal requirements, whether it is from in-house counsel as these organisations grow, or from external law firm advisors.
There is certainly good reason for optimism in Dubai's continued development into a leading international financial centre, the potential attached to holding World Expo 2020 and the UAE's growing link with markets such as Asia and Africa.
Similarly, the GCC as a whole is continuing to concentrate on infrastructure development as population and economic growth, even in the light of reduced oil prices and government income, continues to make economic and political development a necessity rather than a choice. This is particularly the case in Qatar (with the added timeline pressures of working towards holding the World Cup in 2022) and Saudi Arabia.
Other potential regional business growth dynamics exist in the re-integration of Iran into the mainstream global economy, as and when sanctions are lifted, and the further development of links between the Middle East and Africa, with some multinationals starting to either direct or run their African related business from a Middle East hub, mainly Dubai.
All of the above provides plentiful opportunity for dynamic growth of the legal sector, particularly heading towards the end of the decade.
As businesses extend their operations within the wider region, they are required to build out their in-house legal teams to navigate their way through the region and also keep a sensible lid on external legal costs. Having said that, given that these in-house teams will, on the whole, remain relatively small (relative to other global centres), law firms will continue to find adequate opportunities to expand their reach and presence.
As ever, the challenge for law firms is to make sure that they do not over-extend, like in the pre-2008 period. However, with the likelihood of increasing oil prices from late 2016, further government investment to follow, increased diversification across the region, general growth in the markets in the catchment area of the Middle East and major global events on the horizon in the UAE and Qatar, there is genuine reason for firms and companies to plan positively for the future.