THIS
POST WAS ORIGINALLY PUBLISHED JUNE 21, 2011
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 :
·
The Mediterranean Between Growth and Revolution Foreign
Direct Investments and Partnerships in MED Countries in 2010(March 2011)
Doing Business 2011 – Middle East & East Africa by the World Bank
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
Perspective on the Middle East, North Africa and
South Asia (MENASA) region a very detailed report by the McKinsey&Company (2008)
THE OTHER FACE OF ARAB WEALTH: DOMESTIC INVESTMENT
OPPORTUNITIES – by
Passport Capital (2008)
INVESTMENT CLIMATE AND REGULATION OF INTERNATIONAL INVESTMENT IN MENA
COUNTRIES – OECD
document (2005)
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