Tuesday, April 22, 2014

MENA Mining: General Overview


About two years ago I placed a number of posts in my Blog (under different name at that time) providing general overview of MENA mining. At this time I am returning to these posts with some new updates. The reason – I am scheduled to make a short presentation at the Mena Mining 2011 Congress that will take part in Dubai in October this year. This would be a part of Mining investment Opportunities Session and the title is “Investment attraction of MENA mining”. For the next couple of months I plan to publish some posts that would reflect latest developments in selected countries – that would actually serve as a basis for understanding my conference presentation. This is not an attempt to make a detailed analysis, rather an effort to pinpoint to certain considerations, providing links to useful documents.

In this particular post I would not touch the recent political turmoil in the Middle East, and it effect on investments, however, I just want to pinpoint to some facts that affect the investors’ decisions when they contemplate their business.

While the numbers of countries that are included in the term MENA, per se, by many institutions vary – I shall stick to the World Bank data.

MENA experiences a rather difficult time in its economy growth, as it rightly reflected in this IMF title: The Recovery in the Middle East and North Africa Region Faces an Uncertain Environment, supported by the graph:

I would not go into many details, but economic data is provided in these two cited above sources.

Generally speaking, everyone thinks about MENA region as of the one that has abundant hydrocarbon mineral resources – and this is true. The region is rich in natural resources, but they are unevenly distributed:
• 57% of world’s oil resources, 41% of natural gas
And there is one peculiarity: enormous disparity exists between countries rich in resources and countries that are not. Another true fact is – mining sector here is really non-exploited and still has a lot of potential. The governments in the area are striving to diversify their economies, secure more foreign investments – and one of the roads here is to make the most of non-hydrocarbon mineral resources.

However, MENA region has some really good advantages, that are pointed in the Deloitte’s MENA Private Equity Confidence Survey 2010“MENA is better regulated and managed than some of the other emerging markets such as India. Foreign investors find this market more transparent, particularly developed areas such as Dubai, Oman and Qatar, but less so for Syria and Egypt. In India, the legal structure has a long way to go and you really do need to be on the ground, whereas I am comfortable here in the GCC.”
MENA countries are rapidly developing, though investors’ sentiment is rather cautious. As an example we may look at the real estate sector, where two definitions are visible: “markets that are perceived as secure and stable, for example Abu Dhabi, Dubai, Qatar, and Saudi Arabia and other markets where political uncertainty lingers, for example, Bahrain, Egypt, and Syria. This further illustrated by this slide:

 There is a definite inflow of Foreign Direct Investments (FDI) in the region, and that is – despite the limits for foreign ownership, illustrated by the graph from Passport Capital presentation:

There is a pretty useful graphic document from ANIMA Investment network that lists many investment projects in MENA region – Atlas of Investments and Partnerships in Mediterranean (2010)

Summarizing this short post, I would like to mention the following. There is a lot of talk among economic science pundits about the natural resources role: is this a blessing or a curse (some go back to Adam Smith and David Ricardo times), but this one thought that was expressed by  Professor Robert Weiner, Chairman of George Washington University’s Department of International Business way back in 2003, in my opinion, reflects the task of investors in MENA: “a challenge to transform the non-sustainable, depletable resource wealth of a country into sustainable wealth by converting it through investment into human capital and physical capital. That is the challenge that the region faces, and that is where the curse can be a blessing if things are done right.”

On these general issues of investment, I would like to point you to the following documents:
Detailed reports on investments with a comprehensive list of projects in many industries – by ANIMA Investment network :
·                  Investment and Partnership in the MED Region in 2009 (April 2011)
The Anatomy of Private Equity Investments in the MENA Region – prepared by Harvard Business School MBA, in 2010
MENA Tax Review 2010 – by Ernst & Young

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