The Middle East & North Africa:A Dynamic Region for Inward & Outward Investment

The Middle East and North Africa (MENA) region is a hugely diverse cultural and geographical mix that stretches from Morocco in northwest Africa to Iran in Southwest Asia.

The region is home to a range of economies with vastly different levels of openness to international trade and investment. But with the help of international organisations such as the OECD and IMF, along with local and foreign investment, much of the region has started to make giant strides in economic development in recent years.

Despite the Covid-19 pandemic that resulted in negative growth of 3.8% for 2020, most analysts agree the region continues to offer ideal opportunities for businesses and investors going forward. Indeed, with the pandemic starting to ease, an estimated $4.1 trillion of projects are planned or underway in many countries across the region as they continue to diversify and expand their economies.

Moreover, to ease the stress on local companies while offering incentives to foreign investors, most MENA countries recently announced a series of fiscal stimulus packages including tax payment reductions and loan guarantees for businesses. These moves have been popular inside and outside the region for encouraging investment and many analysts predict growth increasing to as much as 3.1% for the region in 2021.

Nevertheless, this uptick in economic growth depends on several factors including the ongoing success of the Covid-19 vaccine rollout across the region and the stabilising of oil and gas prices. Furthermore, if geopolitical tensions continue to stabilise, many believe oil exports will recover to 1.8% for 2021 and this will be supported by the resumption of large-scale capital investment projects that were largely put on hold during 2020.

Outside of the traditional industries such as oil and gas, many MENA countries are now looking at a range of sectors to accelerate economic recovery. This will help to ease the pressure on the post pandemic economies, while providing jobs for the region’s highly educated young population.

Fintech is one of those sectors that is attracting huge investment in the UAE and more recently in Saudi Arabia, which has created a hub for tech firms. By 2022, the fintech market is estimated to be worth some $2.5 billion across the MENA region, according to Accenture. Moreover, Dubai and Abu Dhabi are jointly competing with each other to lead the way in the fintech sector.

In Dubai the Smart Dubai initiative is encouraging investment in AI, data and blockchain businesses helping to drive Dubai’s post pandemic economy. This also dovetails with an acceleration of sustainability and decarbonisation efforts, particularly in the GCC as a whole.

Ironically, while Gulf states will continue to be the world’s main oil and gas producers, Covid-19 has been the catalyst for trends towards decarbonisation. Dubai’s Clean Energy Strategy, for example, focusses on solar-power projects, aiming to achieve 75% renewable energy production by 2050.

All this innovation has been helped by the UAE’s push for economic innovations that include allowing 100% foreign owned companies to set up in the country.

Elsewhere across the region, there is a general trend towards creating dynamic private sector growth, as governments from Turkey and Lebanon to Saudi Arabia look to promote investments, giving companies setting up in the region generous incentives. Saudi Arabia alone is predicted to invest some $40 billion into the local economy through its public investment fund to accelerate diversification.

Turkey, meanwhile, has liberalised its commercial code removing many commercial restrictions and much of the stifling bureaucracy that held the private sector (and foreign investors) back. These days an investor can start up a business in Turkey within weeks and it’s now possible for foreign businesspeople to be 100% shareholders of that business without the need for a Turkish partner – something that was unthinkable only a few years ago. Furthermore, Istanbul and Ankara are now centres for a thriving software and gaming industry, with most of the businesses focused on global markets.

Despite huge issues around Covid-19 and ongoing geopolitical tensions between certain states, all analysts agree the MENA region offers local and overseas businesses and investors huge commercial opportunities to take their products and services to new regional and global markets. Similarly, businesses from within the region like never before are looking outwards for investment opportunities and international markets for their own products and services.

In this publication members of the IR Global MENA group discuss the commercial opportunities for businesspeople looking to invest in the region and likewise for investors in the region looking at opportunities in Europe and North America.