Shadow Players: Western Consultancies in the Arab World

Motivation of the consultancies

Above all, the consultancies are concerned about making a profit. To secure contracts, they strategically target government offi­cials who are receptive to such overtures. For example, McKinsey⁠ – in addition to its work in Bahrain and Saudi Arabia⁠ – courted the sons of the rulers of Yemen and Libya in the 2000s. For their part, these heirs to power saw McKinsey’s reform agendas as an opportunity to brand themselves as pro­gres­sive leaders ahead of their “ascent to the throne”. In Morocco, consultancies were involved in the “Plan Maroc Vert” and the social security strategy of the current prime minister and former agriculture minister, who is one of the country’s wealthiest busi­nessmen and has close ties to the king.

However, the firms do more than simply develop concepts, strategies and legislation. By overseeing the implementation, moni­toring, and evaluation of projects, they amass sufficient influence to institutional­ise themselves as quasi-state actors; indeed, Saudi officials informally dubbed the Min­is­try of Economy and Planning the “Ministry of McKinsey”. In some cases, new state insti­tutions have even been created or existing ones replaced. Bechtel Corporation – the largest US construction and engineering firm, which has close ties to the Saudi royal family – was commissioned to establish and run the kingdom’s National Project Management Organization (Mashroat). This organisation was mandated to oversee cross-ministerial capital expenditures for infrastructure projects under the National Transformation Program.

Motivation of the local stakeholders

That power is centralised and redistributed is symptomatic of the consultancies’ modus operandi and often meets with resistance from middle-management and other local actors who feel bypassed or overlooked. At the same time, the engagement of consultancies provides an opportunity for emer­g­ing local stakeholders, who tend to be younger, Western-educated, and leaning towards (economic) liberalism. It is often they who actively promote consulting firms – not only to push (their own) eco­nomic and socio-cultural reform agendas but also to gain influence. According to the consultancies, their clients and contacts in the region are often themselves former employees of multinational corporations or alumni of prestigious Western MBA programmes. Hence, it would be wrong to suggest that consultancies impose their policies on the respective countries; rather, there is support from within the borders of those states.

Motivation of the rulers

Rulers in the Arab world engage consulting firms for various reasons. More often than not, they attach more prestige to “imported knowledge” than to local expertise. This bias is a colonial legacy: Arab decision-makers still associate progress and mod­erni­sation with external know-how. The usual justification for engaging consultants is a lack of human resources or expertise⁠ – a view somewhat at odds with the realities of the region. Unemployment is rising, even among high-skilled workers; the Arab Gulf states are pushing for the nationalisation of the labour force; and in countries from Oman to Morocco, there are growing num­bers of outstanding local institutions and professionals capable of devising public sec­tor strategies. Yet, governments typically do not take such expertise seriously unless consulting firms endorse it. Even experts who come from the region and live abroad lament that they are asked to contribute their expertise on a pro-bono basis only and have very limited influence⁠; this stands in stark contrast to the role of consulting firms.

Furthermore, the Arab world’s rulers generally regard Western consultancies as “neutral”, while local companies and experts suffer from the omnipresent polit­icisa­tion of business and science in the region – even academics and private entre­preneurs are assumed to harbour national agendas and seen as political representatives of their countries.

In accordance with textbook business logic, rulers deploy these external forces, above all, to overcome internal resistance. This enables them to push through such controversial measures as comprehensive economic and social transformations or administrative reforms.

For rulers, one of the key attractions of consultancies is their ability to operate below the radar. Specifications, costs, and local sources of information are largely shielded from the public eye. This allows clients to conceal processes and data, some­times even from the members of their own government; it also permits them to limit public participation to a minimum and stave off any interference in their “internal affairs”. It is because of this opaqueness that Arab leaders find consultancies more attractive than state-funded Western devel­opment agencies (whose assistance overlaps to a large extent with that of consultancies), such as the United States Agency for Inter­national Development (USAID), the German Agency for International Cooperation (GIZ), and Germany’s various political foundations. Their objectives include promoting democracy and Western values. In the case of consultancies, it is easier to dictate man­dates and rulers are not concerned about nor­mative agendas or political conditionality.

Incentives provided by external actors

At the same time, it is also international institutions and Western governments that provide incentives – both directly and in­directly – for the increased use of consul­tancies in the region. They view these firms as neutral⁠ or even like-minded⁠ actors that operate in accordance with Western norms, steer clear of local nepotism, and do not have a political agenda. Supposedly in the interest of objectivity, donor institutions often emphasise quantitative approaches such as econometrics. While this “measur­ing” of international development at all levels⁠ – which, in particular, has been fuelled by the UN’s Sustainable Develop­ment Goals⁠ – has major pitfalls, it does favour international consultancies. These companies are often better equipped to meet such requirements than are state-financed development actors.

Plans drawn up by consultancies generally enjoy high levels of international credibil­ity. Consequently, contracting these firms increases the likelihood of securing external funding for reforms. At the same time, it improves creditworthiness, which reduces the cost of public debt. Financial incentives are thus in play.

Furthermore, Western development agencies and international organisations them­selves contract consultancies. In Tunisia, for example, Germany’s GIZ is collaborating with Deloitte to integrate women into the labour market, and USAID has funded PwC to develop fiscal reforms. Also in Jordan, consultancies frequently receive contracts from Western development agencies. Moreover, donor countries often engage consulting firms to evaluate state-funded development projects, as in the case of Yemen, where the mandates given to external actors have expanded since the onset of the conflict from finan­cial auditing to project monitoring.

Poor quality of consultancy services

Consultancies face a fundamental constraint: securing new contracts requires satisfied clients and, as a rule, clients seek outcomes that affirm rather than fundamentally challenge their set course. This limits the spectrum of recommendations.

Local officials and academics frequently criticise the poor quality of consultancy services. The issues raised include questionable advice, shallow PowerPoint presentations submitted as end products, inconsist­encies in reports, and even gross errors in the handling of data and facts. In 2011 Moroccan economists sharply criticised the “Plan Maroc Vert,” which was drawn up mainly by McKinsey. Ever since, there has been hardly any government communication on the public awarding of contracts to consultancies, even though consultancies are still contracted widely. And in the Arab Gulf states, officials noticed that some reports were – either in part or in whole – verbatim copies of deliverables produced for other countries, sometimes even with­out the name of the original recipient coun­try having been removed.

This copy-paste consulting has strikingly adverse consequences. Notably, recommendations seldom deviate from familiar motifs⁠, owing in part to a tendency towards group­think in the largely homogeneous consult­ing industry. Agendas and reforms mostly centre around privatisation, liberalisation, and the so-called “Dubai Model”, even though the academic literature has pointed out substantial flaws in the last-named (and in infrastructure-driven growth in general). If the industrial policy⁠ advice given to Arab countries – for instance, to scale up tour­ism or IT⁠ – is always identical, the result is aggressive competition in new sectors instead of (urgently needed) specialisation based on comparative advantages and national differences. This ruinous compe­tition is not only costly; it also jeopardises crucial diversification initiatives aimed at reducing oil dependency.

Overall, the consultancies’ recommen­dations tend to reflect a lack of contextual awareness and insensitivity to social, cul­tural, and political realities. Solutions are typically based on presumed “best practices” duplicated throughout the region. For ex­am­ple, Qatar’s education reform, discussed above, sought to introduce the US concept of the partly privatised charter school⁠ – some­thing alien to the region⁠⁠ – but over­looked the fact that many female teachers are willing to work only in gender-segre­gated public schools. Another banal ex­am­ple stems from energy efficiency recommen­dations some consultants made to Bahrain and the United Arab Emirates. They suggested that air conditioners could be turned down and ⁠that people should simply dress less conservatively if they felt too hot, in complete disregard for religious and social norms.

Until recently, consultants used to come mainly from abroad, lack regional expertise, and show little interest in local soci­eties. But in recent years, firms have started increasingly to recruit people from the region for their local offices⁠ – often at the request of clients. This shift has led to a super­ficial “Arabisation” of the consulting firms. But limited social diversity and a veiled form of colonialism persist at these companies: their employees are expected to have graduated from elite Western uni­versities, and they will usually come from privileged, urban backgrounds. As a result, the perspectives of the less privileged or more conservative segments of society con­tinue to be overlooked. Thus, consultancies risk perpetuating the existing divide be­tween a modern, globalised core and what some seem to consider a “backward” rural periphery.

Obstacles to development

The poor quality of consultancy services can have a lasting impact on a country’s development. This is particularly true when, as noted above, industrial policies are misguided or the implemented reforms clash with the local work culture, thereby jeopardising the nation’s prospects for sus­tainable development. But there are other risks that Arab countries face when they engage consultancies.

First, the exorbitant costs of hiring con­sul­tants can impede development, particu­larly in countries with limited financial resources. And it is unclear whether con­sultancies are paying taxes on locally gen­erated profits. For example, the Moroccan press reported in 2022 that McKinsey’s local office had failed to pay any taxes despite generating revenues of approximately 27 million euros. Furthermore, some clients in the Gulf suspect there is price collusion among consultancies.

In order to secure sizeable and long-term contracts, consultancies have to cultivate close relationships with their clients. The closer these relationships are, the more chal­lenging it becomes for firms to main­tain their integrity – that is, to steer clear of inadvertently engaging in nepotism and corruption. Such risks were laid bare, for ex­ample, in the scandal surrounding McKinsey’s operations in South Africa.

Another barrier to development is the consultancies’ propensity to sideline stake­holders who are either problematic or irrel­evant for the client. This practice not only undermines the efforts of Western devel­opment agencies to broaden inclusivity in development processes but also fosters cen­tralisation and power consolidation. Con­sequently, local viewpoints and poten­tially important counterarguments are pushed to the margins.

Particularly serious is the issue of the brain drain and the failure to increase local capacities. When “indigenous knowledge” is systematically neglected and undervalued, the barriers between academia and civil society, on the one hand, and admin­is­tration and politics, on the other, are per­petuated. The importation, monopolisation, and privatisation of knowledge all con­trib­ute significantly to the brain drain. Experts opt to emigrate to countries that value their skills rather than remain at home as mere suppliers of individual data or facilitators for enabling consultancy recommendations. At the same time, the procurement of exter­nal expertise hinders the development of local skills. This results in a vicious cycle of dependency on consultancies, as the lack of local capacity building allows decision-makers to justify the continued reliance on external resources.

That said, there are distinct differences across the region. The fact that consultan­cies are not ubiquitously active in Moroc­co’s public sector is due not only to limited financial resources but also to the palace’s deliberate efforts to build the country’s own capacities. Morocco’s “New Development Model”, introduced in 2021, was crafted – intentionally – by local actors alone. In Saudi Arabia, the authorities were instructed in 2019 to increasingly engage domestic consulting firms. Meanwhile, Western con­sultancies, which are perceived as neoliberal in Algeria, find it particularly challenging to gain a foothold in that country, owing to its statist economic mindset and anti-colonial reflexes. In 2022, the Algerian government (temporarily) suspended the activities of three of the “Big Four” firms and launched investigations into those companies, an act that was seen as a politi­cal move to protect the local consulting market.