Every company, every individual, needs recognition for whatever he does. An award is one way the market, customers, or specialized institutions recognize your efforts in reaching a certain level of professionalism.

How do you view the difficulties facing your business in 2009?

It has been challenging, but in every depressed market there is an opportunity. It is an opportunity for us now to go back to the basics, to go back to normality. Everything went berserk at once - prices, rates, salaries, costs. Everything was hitting the roof and for no reason.

But even before that set in you had started moving into Abu Dhabi, which is comparatively better off. Was that anticipation or calculation on your part?

We actually didn’t move, we started in Abu Dhabi. But obviously the demand three to four years ago was mainly in Dubai; Abu Dhabi was somehow stagnant. Around four to five years ago, Abu Dhabi started picking up. So we didn’t shift gear and go to Abu Dhabi, we were in Abu Dhabi, but we opened our eyes to the opportunities that existed - the low-hanging fruit was in Abu Dhabi.

Asked how his understanding of the subject applies to the Middle East and what are the lessons to be learned, Hamilton offers more than just one hypothesis. He says many of the private equity players are recognizing too late that they significantly overpaid for some of the deals. “The smarter ones got out and sat on the sidelines because they were unwilling to pay some of the crazy prices. Some of them are having the learning forced on them,” he says. On what the future holds for them, he is even more severe. “The funds will disappear and the monies will be returned to the original investors. They will have difficulty re-entering the market in the foreseeable future,” he says.

That may be PE’s worst kept secret out in the open, but not everyone is calling it doom and gloom despite the change that the financial meltdown has brought about. From more money chasing fewer deals a few quarters ago, to fundraising difficulties and underachieving investments, the landscape has certainly changed for PE in the region. With the days of quick-flipping over, there is a need to exercise greater prudence in acquisitions and create value post acquisition, things that were not always on the priority list. While year 2008 saw a significant accumulation of “dry powder,” industry insiders now admit no fantastic deals have happened in recent months.

According to the “Gulf Venture Capital Association (GVCA) Annual Report 2008,” private equity companies have $11 billion ready for investment. But deals are hard to come by, exit routes are scarce and smaller players are finding it difficult to raise funds. In contrast, fund managers last year collected $6.4 billion, 10 percent more than the previous year.

The situation is forcing companies to wait for recovery. Whenever that happens, it’s unclear whether investors will continue to channel their money to the same players or wait for consolidation. According to one estimate, the number of reported deals executed by PE funds in the GCC plunged over 60 percent in re-cent months. The plunge in GCC stock markets has dried up exit opportunities and damaged the attractiveness of IPOs as well. This situation is drastically different from the one not too long ago when liquidity was abundant and there was pressure to do transactions irrespective of valuations. This, according to some, led to questionable deals that took place in areas where PE players had little expertise. “They invested in high valuations and bad assets, and, more importantly, had little or no post-acquisition experience to make such investments work,” says one insider, on condition of anonymity. “In my view the number of private equity players in the region is likely to shrink even if assets under management or aggregate stay as is.” As per GVCA figures, the number of PE investments dropped by 22 percent between 2007 and 2008, while the volume of investments declined 31 percent.

Fortunately, with a lot of momentum gathered in recent years, the tourism sector enters this phase of uncertainty from a position of strength. An Alpen Capital report, citing the International Monetary Fund (IMF), says international tourist arrivals in the Middle East more than doubled from 24.4 million in 2000 to 52.9 million in 2008. With a compound annual growth rate of 11.7 percent, that is more than double the world international tourist arrivals (4.4 percent) over the same period. The WTO data says international tourism receipts in the region grew by 25.5 percent, from $27.3 billion in 2005 to $34.2 billion in 2007, and are expected to reach $38 billion in 2008. According to a Euromonitor International report - “Future Trends for Travel in the Middle East” - a total of 67 million arrivals to MENA brought $50 billion worth of incoming receipts during 2008. Clearly there is a lot at stake, and the region can ill-afford to lose ground at a time of crisis.

Refreshingly, sector stakeholders are displaying more realism than they have been known for. They are willing to make short-term adjustments to achieve broader objectives. Hoteliers are openly admitting a drop in occupancy, authorities are cutting tourist projections, and airlines are launching budget brands. Hotel owners and management companies are being advised to assist each other in promoting destination tourism and not just rely on government marketing. The focus is therefore shifting towards maximizing revenue streams and greater efficiency at lower costs, even though key drivers are very much part of the equation. The reason is simple. Around 68 percent of the population of the GCC are aged under 35, and there is still a positive regional GDP growth compared to other parts of the world. The liquid assets in the form of oil reserves that provide a cash buffer during boom times are now proving a valuable resource for the region in the current crisis. More importantly, government investment in infrastructure is set to keep the momentum going.

Correction time. The sector is still nervous, though - awaiting good news with bated breath even as short-term projections spread further gloom. Independent observers are revising tourist target numbers in places such as Dubai. “The 10 million visitors by 2010 [in Dubai] is not achievable in the current climate. However, it will be by 2013 once the global economy recovers and developed countries’ growth stabilizes, leading to improved consumer confidence,” says Caroline Bremner, the global travel and tourism manager at Euromonitor International. The source of tourism dollars is still not being properly tapped. The United Kingdom will continue to be the region’s leading source market, whereas key alternative source markets with emerging middle classes remain negligible, even as China, Brazil, Eastern Europe and Latin America offer long-term potential, according to Euromonitor.

Government support notwithstanding, hotel occupancy rates have been falling significantly in Dubai - to 73 percent in the first quarter of 2009 from almost 90 percent last year (according to one estimate). To tide over this situation, different players are trying different prescriptions. “First we launched a 20 million savings campaign in our net profit line,” says Marko Hytonen, the area vice president for the Middle East and Egypt at Rezidor, the multi-brand hotel management company. His company then followed up with another initiative to save 10 million more so as to stay in line with the drop in revenues. “It has been a bit of a corporate diet. We still keep the muscle but we trim the extra fats,” Hytonen says candidly.

Rezidor’s biggest drop has come about in Dubai. “During the first quarter we have lost 36 percent in revenue per available room in Dubai,” he says, and the average house rates have also definitely decreased in the city. “It definitely is correction time, there is no question about it.” Rezidor currently operates in 20 countries, has 5,000 hotel rooms in operation and is in the process of adding another 5,000 rooms and 18 hotels over the next five years.

How is the financial crisis affecting your organization? How are you adjusting your operations?

One is our direct income. In the UK a lot of people give us money and that, fortunately, is pretty well standing up. But we can get no new donors at the moment because nobody will commit to the future. They will still give for emergencies, such as Congo and Zimbabwe, but not for committing long term. The biggest worry that we have had in terms of our money is the exchange rate. Because we get about half of our money in sterling and we spend in 64 countries, a lot of whom are not linked to the sterling in any way. Then the buying power of our money is much less, and that is a really serious issue for what we can do.

What does that look like, on the ground?

If you are doing water and latrines, or food security work, you just can’t buy so much for your money. But the bigger worry is the impact on poor people across the world, and that picture is only just beginning to unfold. We’ve seen already with the emerging economies, particularly those that are into big export businesses for consumer goods, that they are already getting hit quite substantially. You know, we are hearing all the time about factories closing down in some of the poorer countries, including China. So that’s one of the first effects.

But there are quite a lot of other effects. We are expecting a lot more people to lose their jobs. If they’ve not got jobs, they are not sending money back. And it’s been estimated that actually a quarter of a trillion dollars less money will go back to developing countries in remittances this year. Well again, that’s a lot of money for things like education and healthcare, food security and getting the house fixed.

There are as many of these stories as there are individuals. For some, living within their means over the years has helped them avoid unnecessary debt exposure. For others, a lifestyle propped up by credit is now taking its toll. Some of the most happening industries have shed excess fat and made people redundant. As the dust settles, austerity is becoming an important virtue. It’s difficult to say who is scaling back on what. But, by and large, changing circumstances seem to be hurting people across the board.

Those who are still buoyant deserve first mention. Elias Fayad belongs to the category of people who refused to participate in the web of consumerism that became synonymous with life in boomtowns such as Dubai. With that phase over, for now, Fayad is waiting for an opportunity to indulge.

”In terms of personal lifestyle, I am planning to travel more this year and benefit from bargains in hotels, airlines tickets as well as shopping,” says a boisterous Fayad, the director of Middle East & Indian Ocean at Danone. “As I avoided tying in my cash to overpriced real estate I am emerging with a better position to catch some bargains, and this will include buying a new car, trips to new places, and maybe buying some investment at a good price. Cash is king now.”

But even financially savvy Fayad would hope for things to get better. The downturn is beginning to manifest itself at a consumer level as the effects of the credit crunch kick in. Consumer confidence in the UAE, for instance, dropped by 3.4 index points in late 2008, its third consecutive decline in a year. A Bayt.com and YouGovSiraj research study says the dip follows continually waning levels of consumer confidence in the UAE throughout 2008. “The picture around the rest of the Gulf region was mixed. Bahrain and Qatar improved by 1.8 and 1.2 points respectively, while Saudi Arabia registered no change. Kuwait and Oman recorded a similar drop to the UAE, falling down the index by 3.3 and 3.4 points respectively,” the report said.

Nassim Ghrayeb, chief executive officer of YouGovSiraj, says although the indicator does not predict economic performance, it does provide a glimpse into how consumers are truly feeling. “The fact that the numbers have dropped in terms of willingness to spend suggests that consumers are exercising caution during this period of instability,” says Ghrayeb.

If there is a lull in the country’s parliament, you can bet there’s a good chance it will wreak havoc on the business community. And since a very thin line divides Kuwait’s private and public sectors, it’s easy for developments in one to spill over to the other.

That was the case in the closing days of 2008, when the Kuwaiti government announced a decision to back out of a $17.4 billion joint venture between Dow Chemical and Petrochemical Industries Corp. (PIC), a subsidiary of the state-owned Kuwait Petroleum Corp. A close-run thing, as operations were set to launch on Jan. 1.

Instead, however, Kuwait’s prime minister, Sheikh Nasser al-Mohammad al-Ahmad al-Sabah, said “opposition in parliament” was compelling him to cancel the agreement, which would have created the world’s largest maker of polyethylene. Since then, there has been a war of words on legal options available to the aggrieved party, Dow Chemicals, and much debate about what the future holds for ventures of this kind.

Kuwait’s decision has also thrown up further questions on the state of affairs in the country. It could have been just a case of holding on to its purse in uncertain times, or avoiding commitment to something they deemed unsustainable in the long term. In the words of banker and columnist Matein Khalid, “when the world is in recession the last thing it needs is an increase in petrochemical ca-pacity.” But the manner in which it was handled has also been called to question.

There are broader issues to consider. Were Kuwaitis really committed to the project when it took shape over a year ago? In July 2008, the two sides reported satisfactory progress and even discussed the project’s headquarters. Then in early December, they signed a “joint venture formation agreement and other key definitive agreements regarding the formation of K-Dow Petrochemicals.” What went wrong after that point is anyone’s guess. If the global business climate was not appropriate for such a venture, wouldn’t putting it on hold have been a better option than scrapping the deal completely?

Observers say political upheavals are making things worse for businesses in Kuwait. Khalid calls it, “a fundamental breakdown in the political system.” According to him, the country is not attracting enough foreign direct investment (FDI), and is dealing with depleting resources and a growing technology gap. On top of that, political turmoil is taking them nowhere. Recent reports of debt defaults involving some big companies have also dented investors’ confidence in Kuwait.

However, not everyone agrees that an unhealthy mix of politics and business is causing the country’s troubles. “Historically Kuwait did not have high FDI. If you look at the last five- to eight-year data, even though it is an issue and the government is trying to deal with it, it may be an issue but not the sole issue,” says Faisal Hasan, the head of research at Kuwait’s Global Investment House (GIH).

“Against the backdrop of distressed global financial markets and an ex-tremely weak outlook for the global economy, the Gulf Cooperation Council (GCC) macro picture for 2009 is going to be disappointing compared to recent years,” says Ala’a al-Yousuf, the chief economist at Bahrain’s Gulf Finance House (GFH), not to be confused with Kuwait’s GIH. His colleague, senior economist Hany Genena, says average aggregate GCC crude oil production levels are expected to post their largest annual percentage decline in more than a decade, while hydrocarbons export revenues are likely to fall by about 60 percent to $200 billion.

Kuwait is facing the same gloomy situation as the rest of the Gulf when it comes to the global financial crisis. The region’s economic boom, which began in 2003 on the back of high oil prices and allowed high government and private spending, has effectively ended. And so has the opportunity to splurge for both the public and private sectors. That’s leading to widespread austerity, and for Kuwait it may manifest in a rude sort of way.