(Bloomberg) — The famously difficult road to partnerships and promotions at some of the world’s largest consulting firms can run through the Middle East these days.
Globally, the industry is in the throes of an extended slump, growing just 3% to $250 billion in 2023, according to Source Global Research, which focuses on mid and large-sized firms. In the Gulf, the pace of increase has been four times that as governments spend trillions on nation-building and dealmaking. That’s fueled expansion sprees by behemoths like McKinsey & Co. and Boston Consulting Group Inc.
At McKinsey, some executives choose to take positions in the Gulf because they see it as a stepping stone for career advancement and partner roles, people familiar with the matter said. The firm employs more than 1,000 consultants in the Middle East, up sharply from pre-pandemic years, they said. At rival BCG, some senior leaders are based in Dubai and the firm counts Saudi Arabia’s $925 billion sovereign wealth fund as one of its largest customers, the people said.
To be sure, the race to capitalize on the Gulf’s oil wealth comes up against a backdrop of escalating hostilities between Iran and Israel. Coupled with that, crude prices have averaged about $80 over the past two years after having surged to well over $100 in 2022. Executives said government entities in the region have grown more demanding, and are starting to push for lower fees.
Saudi Arabia has also slashed growth forecasts recently and has been paring back work on some of its ambitious projects, which has the potential to cut demand for consultants in some areas.
Still, multiple senior executives interviewed by Bloomberg say the consulting industry is expected to be one of the more resilient sectors in the Gulf. It’s a simple playbook: Consultants thrive by working very closely with Middle Eastern governments, providing expansionary advice during booms and restructuring proposals in downturns.
“Behind every single big project in the Gulf they have a consulting team,” said Hagop Panossian, a senior lecturer at the American University of Beirut, who’s seeing many new graduates nab high-paying jobs in the sector.
The Dubai Model
For McKinsey and BCG, the region ranks among the strongest globally based on revenue and profitability, according to people familiar with the matter, who declined to comment on confidential matters.
BCG has influential names like Saleh Al-Ateeqi, who joined the firm in 2023 from the Kuwait Investment Authority’s London arm that he helmed for four years, and Ihab Khalil, who has extensive experience working with sovereign wealth funds and regional investors. BCG also employs more than 1,000 consultants in the region, the people said.
Representatives for McKinsey declined to comment. BCG didn’t respond to a request for comment.
Adding to the demand, some consulting firms have been providing employees on a secondment basis to staff entire departments at entities based in the Middle East, people familiar with matter said.
The activity continues despite escalating violence in the region. One executive said the conflict hasn’t had a big impact yet and entities are still pursuing investment plans, although any escalation could impact the business environment.
As a result, entry-level compensation in Gulf capitals for consultants can eclipse London even without adjusting for taxes, they said. In Riyadh, a city that expatriates have long avoided because of its strict social norms, fresh recruits at BCG can secure a monthly tax free salary of about $10,000 a month, higher than the median base pay listed on Glassdoor for US associates at the consulting firm, according to some of the people.
The dependence on outside expertise has been a feature of the region’s transformation for years. The most prominent example, perhaps, is the Middle Eastern business hub of Dubai. The city leaned on consultants for developments including the iconic man-made island of Palm Jumeirah, said Jim Krane, a fellow at Rice University’s Baker Institute for Public Policy in Houston.
The Palm is now at the center of the city’s luxury housing boom, that’s drawn billionaires from around the world. When the emirate revived a similar project years after it was halted, buyers lined up for million-dollar homes.
While Dubai started its transformation decades ago, Saudi Arabia is in the midst of its own cycle of economic and societal changes. Other cities in the UAE are ramping up ambitious plans of their own, moves that could potentially mean more business for consulting firms.
“I’d bet the consultants responsible parlayed Dubai’s big wins into a lot of new business around the Gulf,” Krane said.
Neom, LIVGolf
One strategic goal is advancement in artificial intelligence. The UAE and Saudi Arabia are spending billions to build expertise in semiconductors, AI and data management. Some of those ambitions have drawn scrutiny in the US, where officials are concerned over the region’s ties to China.
Still, consulting firms are staffing up in the tech space.
For instance, the head of Oliver Wyman Quotient — which was launched in June as a global offering that combined the firm’s AI expertise and tools — is based out of the Middle East.
“For us, this region is one of our strongest globally,” said Nick Studer, CEO of the New York-based firm said in an interview. Still, the firm is “careful about the work we take on, so in a region that can be contentious we tread carefully,” he said.
Smaller consultants like AT Kearney and Roland Berger have also grown more active in the Gulf.
The mood in the region contrasts with a post-pandemic retrenchment in other parts of the world, where firms are now having to cut staff amid a dearth of transactions. Although consulting revenue in the Middle East remains a fraction of the global total, Source Global Research estimates that the $5.4 billion market expanded 13% last year.
“One of the primary reasons these sorts of organizations are booming in the Middle East is that there remains a great number of speculative projects underway as part of the Gulf’s economic transformation away from oil,” said Ryan Bohl, a senior Middle East & North Africa analyst at risk intelligence consultancy Rane Network.
Governments sitting on trillions of dollars in sovereign wealth are leaning on consultants to draft economic strategies for life after oil. They’ve hired firms for advice on the plans for the $1.5 trillion desert project Neom and helped shape the Riyadh-backed LIV Golf tour.
As firms make a beeline for the region, they’re having to compete for a piece of the same pie. Some are now even doing short-term work for free in the hope it leads to longer projects, one of the people said.
Consultants have also received mixed reviews locally for their work. “While they helped improve the image of Gulf countries, some have helped conceptualize ‘over-exuberant choices,’” Rice University’s Krane said.
Still, many are betting that government agencies in the Gulf are now so dependent on consultants that firms will continue to see business sent their way. Amid all the focus on its budgets, Riyadh is already talking about a new economic transformation plan called Vision 2040.
“Though there’s clear rumors that Saudi Arabia intends on paring back some of these projects, the strategic imperative remains,” according to Rane Network’s Bohl. “I think it would be remiss for these types of organizations not to be taking seriously their aspirational plans.”
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