Sep 23, 2008 – The Middle East, North African and South Asian (Menasa) region is well positioned to claim a higher stake in the global economy than ever before, said a new report by McKinsey & Company.
The region – home to about 25 per cent of the world's population – is now in the midst of
unprecedented economic developments and is poised to dramatically increase its share in the world economy, said the United States-based international management consulting firm. The report, Perspective on the Menasa region, said the region is set to generate nine per cent of the world's total growth in gross domestic product in the next 10 years, up from its current five per cent share. And during this period it is slated to achieve real growth rates of six to seven per cent.
This is still relatively small compared to the US gross domestic product, which according to the International Monetary Fund, amounts to more than $13 trillion (Dh47.75trn) and constitutes more than 25.5 per cent of the gross world product. But the ongoing momentum in Menasa and its resilience to the sub-prime crisis and the burgeoning food inflation is set to give the region a definite edge in contrast to the slowing down of the world's remaining superpower.
The report, obtained by Emirates Business, said the growing level of financial liquidity is
increasingly being invested back into the region as both governments and entrepreneurs witness the need for – and opportunity in – regional investments. It said $3trn was invested in the development of the region, amounting to 4.3 per cent of the global investment between 2002 and 2007, and over the next 10 years cumulative investments could exceed $15trn.
The total market capitalization of the equity markets has also been increasing significantly in the past four years, with levels approaching those found in developed Western markets including the US and United Kingdom. For example, the combined Menasa market capitalization is 92 per cent of the combined GDP, versus 117 per cent in the US and 131 per cent in the UK.
The region – which under the report's scope comprises the six Gulf Co-operation Council
countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE – Turkey, the Levant (Jordan, Lebanon and Turkey), North Africa (Algeria, Egypt, Libya, Morocco and Tunisia) and South Asia (India and Pakistan) – currently accounts for 29 per cent of international oil production and 15 per cent of global gas production.
This share is expected to increase as the booming region houses 45 per cent of the worlds
proven oil reserves and 28 per cent of the proven gas reserves.
McKinsey estimates cumulative financial inflows from hydrocarbon exports in these countries could exceed $9trn by 2020, up from last year's $500 billion.
The region's fortunes – especially in the GCC – have risen and fallen with the price of and demand for oil over the years. However, recent trends indicate that the economy of these countries is moving away from the boom-bust-boom past to a more secure and sustainable economic future.
And while some countries are hydrocarbon endowed – the GCC countries, Algeria, Libya and to a lesser extent Egypt account for 99 per cent and 96 per cent of Menasa's total oil and natural gas reserves – some states are endowed with large pools of talented labor.
India, Pakistan, Egypt and Turkey account for 92 per cent of the region's population.
This leads to these countries exploiting their resource richness: hydrocarbon- rich countries invest in other parts of the region, and workers from population-rich countries migrate to those parts of the region where they find opportunities to work. Menasa countries thus received more than $59bn in remittances of which $16bn originated from the region itself, predominantly the GCC states, shows World Bank data.
At the same time, the widespread use of English in India, Pakistan and Egypt and French in Morocco, coupled with these countries' significant pool of skilled people and the relatively low labor costs, make them attractive destinations for companies looking to outsource support functions and value-added services such as legal and accounting services.
Revenues from information technology and business process off shoring in India alone were $40bn in 2007. The region's leaders have also been initiating and implementing reforms that will liberalize the economies of their countries. Governments are promoting the role of the private sector and foreign investments, while they move towards more regulatory and monitoring roles. "Never before has the inflow of financial liquidity into the region from hydrocarbons and the availability of skilled labor been so large, and never before has economic development in the region been accompanied by comprehensive government reforms," said the report by McKinsey.
The total liquid assets owned by institutions and nationals from the GCC and Egypt alone were estimated to be $3trn in 2006, and are expected to grow to between $4.5trn and $5trn by 2012.
In addition to hydrocarbon- related inflows and the monetization of the large labor force,
McKinsey also attributed the wealth creation across the region to the increased foreign direct investment (FDI). Increased investor confidence has pushed total foreign direct investment in the Menasa region from $16bn in 2002 to $128bn in 2007, which is more than the combined foreign direct investment of China and UK.
India, UAE and Turkey all ranked in the top 20 on AT Kearney's list of global foreign direct investment index, which was released in July 2007. Turkey, which currently has the highest foreign direct investment in the region, has increased its investment eight-fold, from $2.9bn in 2004 to $23bn in 2007.
The increased financial liquidity and investment of this liquidity into the economy are fuelling development of other sectors in these countries. Hydrocarbon upstream expansions in the region are set to account for 34 per cent of total global planned expansion through 2017. These expansions will require significant investments.
In the GCC alone ongoing and planned upstream projects are valued at nearly $275bn.
In addition to extraction, these countries are also expanding their capacity in downstream oil refining, petrochemicals and energy-related products.
Over the next decade the region will account for 36 per cent per cent of the global growth in refining capacity, 27 per cent growth in the petrochemical business, and 40 per cent of the planned growth in global aluminum production.
The region's financial sector has been growing at an average rate of 25 per cent per year since 2002, with the total value of banking assets in select Menasa countries reaching $2.3trn in 2007.
Today, these countries account for three per cent of the global assets, and these assets are expected to grow to $4.9trn by 2012. According to the Economist Intelligence Unit, between 2007 and 2012, these countries are projected to account for nine per cent of overall growth in total worldwide banking assets.
The telecommunications industry is also growing very rapidly. The number of mobile phone subscribers grew from 62 million to 476 million from 2002 to 2007. Today the Menasa countries account for 15 percent of mobile phone users worldwide.
The tourism industry has grown from 62 million international visitors in 2002 to 104 million visitors in 2007, accounting for six per cent of the global tourism market. By 2017, this industry is expected to grow to 167 million. During the next 10 years, more than seven per cent of overall growth in global tourism is expected to be from the region.
In addition, more industries are expected to increase their international share, most notably aerospace and aviation, logistics and real estate.
Emirates Business 24-7
By Karen Remo-Listana on Tuesday, September 09, 2008
The region – home to about 25 per cent of the world's population – is now in the midst of
unprecedented economic developments and is poised to dramatically increase its share in the world economy, said the United States-based international management consulting firm. The report, Perspective on the Menasa region, said the region is set to generate nine per cent of the world's total growth in gross domestic product in the next 10 years, up from its current five per cent share. And during this period it is slated to achieve real growth rates of six to seven per cent.
This is still relatively small compared to the US gross domestic product, which according to the International Monetary Fund, amounts to more than $13 trillion (Dh47.75trn)
The report, obtained by Emirates Business, said the growing level of financial liquidity is
increasingly being invested back into the region as both governments and entrepreneurs witness the need for – and opportunity in – regional investments. It said $3trn was invested in the development of the region, amounting to 4.3 per cent of the global investment between 2002 and 2007, and over the next 10 years cumulative investments could exceed $15trn.
The total market capitalization of the equity markets has also been increasing significantly in the past four years, with levels approaching those found in developed Western markets including the US and United Kingdom. For example, the combined Menasa market capitalization is 92 per cent of the combined GDP, versus 117 per cent in the US and 131 per cent in the UK.
The region – which under the report's scope comprises the six Gulf Co-operation Council
countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE – Turkey, the Levant (Jordan, Lebanon and Turkey), North Africa (Algeria, Egypt, Libya, Morocco and Tunisia) and South Asia (India and Pakistan) – currently accounts for 29 per cent of international oil production and 15 per cent of global gas production.
This share is expected to increase as the booming region houses 45 per cent of the worlds
proven oil reserves and 28 per cent of the proven gas reserves.
McKinsey estimates cumulative financial inflows from hydrocarbon exports in these countries could exceed $9trn by 2020, up from last year's $500 billion.
The region's fortunes – especially in the GCC – have risen and fallen with the price of and demand for oil over the years. However, recent trends indicate that the economy of these countries is moving away from the boom-bust-boom past to a more secure and sustainable economic future.
And while some countries are hydrocarbon endowed – the GCC countries, Algeria, Libya and to a lesser extent Egypt account for 99 per cent and 96 per cent of Menasa's total oil and natural gas reserves – some states are endowed with large pools of talented labor.
India, Pakistan, Egypt and Turkey account for 92 per cent of the region's population.
This leads to these countries exploiting their resource richness: hydrocarbon-
At the same time, the widespread use of English in India, Pakistan and Egypt and French in Morocco, coupled with these countries' significant pool of skilled people and the relatively low labor costs, make them attractive destinations for companies looking to outsource support functions and value-added services such as legal and accounting services.
Revenues from information technology and business process off shoring in India alone were $40bn in 2007. The region's leaders have also been initiating and implementing reforms that will liberalize the economies of their countries. Governments are promoting the role of the private sector and foreign investments, while they move towards more regulatory and monitoring roles. "Never before has the inflow of financial liquidity into the region from hydrocarbons and the availability of skilled labor been so large, and never before has economic development in the region been accompanied by comprehensive government reforms," said the report by McKinsey.
The total liquid assets owned by institutions and nationals from the GCC and Egypt alone were estimated to be $3trn in 2006, and are expected to grow to between $4.5trn and $5trn by 2012.
In addition to hydrocarbon-
McKinsey also attributed the wealth creation across the region to the increased foreign direct investment (FDI). Increased investor confidence has pushed total foreign direct investment in the Menasa region from $16bn in 2002 to $128bn in 2007, which is more than the combined foreign direct investment of China and UK.
India, UAE and Turkey all ranked in the top 20 on AT Kearney's list of global foreign direct investment index, which was released in July 2007. Turkey, which currently has the highest foreign direct investment in the region, has increased its investment eight-fold, from $2.9bn in 2004 to $23bn in 2007.
The increased financial liquidity and investment of this liquidity into the economy are fuelling development of other sectors in these countries. Hydrocarbon upstream expansions in the region are set to account for 34 per cent of total global planned expansion through 2017. These expansions will require significant investments.
In the GCC alone ongoing and planned upstream projects are valued at nearly $275bn.
In addition to extraction, these countries are also expanding their capacity in downstream oil refining, petrochemicals and energy-related products.
Over the next decade the region will account for 36 per cent per cent of the global growth in refining capacity, 27 per cent growth in the petrochemical business, and 40 per cent of the planned growth in global aluminum production.
The region's financial sector has been growing at an average rate of 25 per cent per year since 2002, with the total value of banking assets in select Menasa countries reaching $2.3trn in 2007.
Today, these countries account for three per cent of the global assets, and these assets are expected to grow to $4.9trn by 2012. According to the Economist Intelligence Unit, between 2007 and 2012, these countries are projected to account for nine per cent of overall growth in total worldwide banking assets.
The telecommunications industry is also growing very rapidly. The number of mobile phone subscribers grew from 62 million to 476 million from 2002 to 2007. Today the Menasa countries account for 15 percent of mobile phone users worldwide.
The tourism industry has grown from 62 million international visitors in 2002 to 104 million visitors in 2007, accounting for six per cent of the global tourism market. By 2017, this industry is expected to grow to 167 million. During the next 10 years, more than seven per cent of overall growth in global tourism is expected to be from the region.
In addition, more industries are expected to increase their international share, most notably aerospace and aviation, logistics and real estate.
Emirates Business 24-7
By Karen Remo-Listana on Tuesday, September 09, 2008
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US Export Council provides assistance to American firms seeking access to international markets in the Gulf States, Middle East and Africa. http://www.usexportcouncil.com
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