A bet on oil or on people?
????For the hardy investors who have stayed in the region, their investments in MENA countries boil down to either a bet on the price of oil and natural gas produced mainly by the Persian Gulf states (Saudi Arabia, Oman, Qatar, Kuwait, Bahrain and the United Arab Emirates), or a bet on the demographics of the more densely populated countries of north Africa – Morocco, Algeria, Tunisia, Libya, Egypt, Sudan, Lebanon, Syria and Jordan, several of which (Egypt, for instance) are net oil importers.
????The World Bank expects the MENA region to grow 3.6% in 2011, mostly from gains by big oil producers of the Gulf. (Before the fall of longtime governments in Tunisia and Egypt the World Bank had predicted 5% growth.) Javier Cervino, a partner in Isthmus Partners, a financial consultancy in Dubai, United Arab Emirates, says the Gulf economy has stabilized over the last year or so. Real estate investment in Saudi Arabia and the U.A.E. has stabilized and telecoms like Saudi Arabia's Mobily and Qatar's Qtel have done well lately. "From our point of view the events in Syria and Egypt seem as far away as they would to someone in New York," Cervino adds. Less explosive but still simmering political conflict in Bahrain, he says, was more urgent to Gulf investors.
????The investment argument for the North African countries is based on their large, youthful and in many places well-educated populations. This huge pool of workers, consumers and entrepreneurs wants jobs and income to spend on themselves and their families. That means economic growth and thus opportunity for investors who can supply the capital -- and are willing to take the risks that come with investing in "frontier" markets, many of which lack stock exchanges or trustworthy legal systems.
????The big problem is that the despots and monarchs who have long dominated Arab politics (recent moves toward economic liberalization over the last few years aside) don't want to give up either political or economic control of their countries. Neither do the countless bureaucrats and officials who rely on payoffs and kickbacks from business people. One of the initial sparks for the Arab Spring was the leak of a cable in which a U.S. diplomat commented that "seemingly half " the business elite of Tunisia were members of President Ben Ali's family. The Arab Spring began in earnest when the old politics of governments being able to buy off their populations with public sector jobs and subsidies finally collapsed.
