The majority of business leaders in Europe and the Middle East (64 percent) agree that Europe's position as a world economic and political superpower has peaked and that its importance will decline over coming years, according to a KPMG survey of more than 1,500 CEOs and finance directors from 22 countries in Europe and the Middle East. Despite Europe's current economic and political problems, almost two thirds of respondents (64 percent) said they believe the Euro in its current form will still exist in 5 years time.
Jeremy Kay, Partner at KPMG's Operations Strategy Group comments:
"Europe's business and political leaders are only too aware of the challenges Europe as an economic and political union faces. By now everyone knows that the debt crisis in the peripheral economies of the Eurozone is serious and that staying in the Euro will require large real wage/price adjustments in these countries to restore competitiveness, on top of the austerity measures to correct the public finances."
"There would also be severe penalties for a state which sought to solve its problems by leaving the single currency. The knock on effect for other economies of the Eurozone if one country left would be tremendous and results of the survey reflect the belief that sufficient political will and must exist to avoid this in order to prevent another financial crisis on the scale of Lehman."
Presented with a variety of key themes for their businesses "changing business operations to realize cost efficiencies" came out top of the list (51 percent), followed by "improving cash and working capital management" (42 percent). The third hot topic was "exploiting growth opportunities through successful transactions" (36 percent), a clear sign that mergers and acquisitions are back in fashion and on many
"Preparing your organization for major business changes" (33 percent) and "addressing risk throughout the organization" (30 percent) were also high on businesses' agenda.
The survey gives an in-depth breakdown of the results for each participating country and 15 different industry sectors thereby also providing insight into specific issues for each sector and each country.
"Changing business operations to realize cost efficiencies", for example, was particularly high on the agenda of Saudi business leaders (51 percent which is same for all respondents). Similarly, "addressing risk throughout the organization" is equally important issue for Saudi business leaders as compared to rest of the world (51 percent compared with 30 percent for all respondents)
Mark Godson, Head of Management Consulting at KPMG Saudi Arabia said:
"The survey highlights the focus of Saudi companies on transforming business operations to realize cost efficiencies and addressing risk. This focus is consistent with the current Saudi environment, where the market is dynamic and growing with an increasing in-flow of foreign players into the market. Locally, a large proportion of the private sector is represented by family run businesses, with the market maturing, a number of these businesses are keen to put in place initiatives towards risk management and business transformation."
"Even in the Government sector, large institutions have initiated transformation programs to improve efficiencies and deliver performance. A good example of such an initiative is the performance improvement programme started by The Electricity, Co-Generation Regulatory Authority (ECRA)."
"Exploiting growth opportunities through successful transactions" and "Improving cash and working capital management" were next hot topics for Saudi business community as represented by 36 percent each as compared to 36 percent and 42 percent respectively for all respondents. Survey also reveal various "transaction-hungry" countries from Eastern Europe and Middle East (Kuwait 72 percent, Hungary 66 percent, Slovakia 54 percent, Netherland 48 percent and UK 45 percent)
Arvind Singhi, KPMG's Senior Director in Transaction and Restructuring Advisory, in Saudi Arabia comments:
"The volume of transactions in the M&A market is lower than most economies of comparable size and other regional economies. Firms have been achieving growth through greenfield investments and expansion of existing businesses. In 2009, the Ministry of Commerce and Industry issued commercial registers for the establishment of 2,865 new companies with a total capital of SAR 32.9 Bn. Furthermore, active portfolio rationalization/management through divestments and acquisitions is not widely practiced among Saudi business groups. However, M&A activity, which is slowly picking up, is likely to gather pace as the overall economy matures."
"The Saudi Government has actively started PPP initiatives in Infrastructure, Healthcare and Education sectors. The structures for these initiatives are still evolving. However, there has been enthusiastic reception in the market for these initiatives, as evident in the survey."
"Going forward, Saudi Arabia will continue to be a growth focused market, with wide range of opportunities and limited number of mature sectors."
A look at the sectors gives an insight into the specific challenges faced by individual industries.
For example, the overwhelming majority of manufactures surveyed believe that the growth agenda in the future will be characterized by a number of factors such as continued globalization and a need for a footprint in the emerging markets (90 percent). Respondents agreed that key characteristics for future manufacturing supply chains must be greater flexibility and the ability to stop and restart supply immediately.
The majority of executives in the media & telecoms sector (81pecent) see an urgent need to rewrite business models in the sector and take them out of the analogue past in order to succeed in the digital world of the future.
The survey also provides a fascinating view into the changes needed in public sector. 92 percent of respondents for example foresee a much greater involvement of the private sector in public health care, both in terms of direct medical provision but also in terms outsourced back office functions.
-Ends-
For further information please contact:
Khalid W Alkhudair
COO - Markets
Kalkhudair@kpmg.com
+966550203300
© Press Release 2011
