Economic and Governance Risks to the MENA Region

Economic and Governance Risks to the MENA Region

Economic and Governance Risks came as a no surprise assessment of today’s as well the immediate future of the MENA region. The inefficient state of most countries characterizes all of their public management and related corollaries: i.e., internal violence for some and external dependence for most. Even in the favourable assumption of relatively stable of the latter ones’ authorities, these prove powerless to achieve the objectives they have set themselves, because of the inefficiency of their administration and when these manage to achieve their objectives, it is at a high cost. Here is that Economic and Governance Risks to the MENA Region.

Exogenous factors, such as geo-economic division, climate change and technological threats all pose a particular risk to MENA, but so, too, do hazards that are more regional in nature. According to respondents in the Middle East and North Africa to the World Economic Forum’s Executive Opinion Survey, the top two risks across the region for doing business are “energy price shock” and “unemployment or underemployment.” These risks are largely economic in nature and affected by the health of governance in the region. Similarly, the number five risk, (“fiscal crises”), the number seven risk (“unmanageable inflation”) and the number 10 risk (“failure of financial mechanism or institution”) follow the same pattern of being largely economic in nature and potentially governance-driven.

The top risk, “energy price shock”, comes at a time when some countries have taken steps towards diversification, but the region is still largely a hydrocarbon economy, heavily reliant on revenue from this sector. Oil prices increased substantially between 2017 and 2018, from around USD 50 to USD 75. This represents a significant fillip for the fiscal position of the region’s oil producers, with the IMF estimating that each USD 10 increase in oil prices should feed through to an improvement on the fiscal balance of three percentage points of GDP. However, vulnerabilities to swings in oil prices have not disappeared and are particularly pronounced in countries where government spending is rising. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil — that is, the price required to balance the national budget — rise to USD 88, 26 percent above the IMF’s October 2017 estimate and also higher than the country’s medium-term oil price target of USD 70 – USD 80.

It is no surprise, then, that Saudi Arabia remains one of five countries in the region that rank “energy price shock” as the top risk to doing business in the survey, along with Bahrain, Kuwait, Oman and Qatar.

The World Economic Forum in partnership with Marsh & McLennan Companies and Zurich Insurance Group released its Middle East and North Africa Risks Landscape Report, which uses data from the Global Risks Report 2019 and the Regional Risks for Doing Business 2018.

Click here to download the full briefing: Middle East and North Africa Risks Landscape Report >>

Click here to explore additional insights from Guy Carpenter >>

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MENA start-up ecosystem on the rise

MENA start-up ecosystem on the rise

Saudi Gazette posted an article dated July 9, 2019, on MENA start-up ecosystem on the rise, explaining that it is all “positive news for the continually growing ecosystem with strong growth through a record number of transactions.”

DUBAI — Total funding across the Middle East and North Africa (MENA)-based start-ups was up 66% from H1 2018, MAGNiTT, the region’s most powerful startup platform, said in its H1 2019 MENA Venture Investment Report, which provides an in-depth analysis of start-up funding and venture capital across the Middle East and North Africa.

The report highlights positive news for the continually growing ecosystem with strong growth through a record number of transactions.

Philip Bahoshy, MAGNiTT’s founder, said “the MENA region is hitting its inflection point. The acceleration of funding we saw in the latter half of 2018 has continued into 2019.”

Bahoshy noted that “there are many signs of an ever maturing ecosystem. As start-ups grow, we have seen more start-ups raising larger tickets, more exits and a continued interest from International investors in the region, especially from Asia.”

He also pointed to “UBER’s acquisition of CAREEM is another example of a large international player acquiring a local company after Amazon’s acquisition of Souq. This will further act as a catalyst to spur on the regions entrepreneurial environment.”

The report noted that H1 2019 saw 238 investments in MENA-based start-ups, amounting to $471 million of total funding. This is an excellent indicator, a 66% increase in investment dollars compared to H1 2018, in which $283 million was invested.

The number of deals remained healthy at a record high, up 28% compared to H1 2018, showing continued appetite in start-ups from the region at all stages of investment.

Noor Sweid, General Partner of Global Ventures, said “the growth in the start-up and tech ecosystem in the region is phenomenal, and yet, we are just at the beginning of a trajectory that will see technology-driven companies grow significantly and incredibly quickly over the coming years. These numbers illustrate the momentum and successes that the underlying companies and founders are achieving, and the growth in the investment ecosystem and opportunities alongside them.”

The UAE remains the most active startup ecosystem with 26% of all deals and 66% of total funding. Saudi Arabia was one of the fastest growing ecosystems, up 2% from H1 2018 recording 26 investments in H1 2019.

The UAE has maintained its dominance with 26% of all transactions made in to UAE-headquartered start-ups in H1 2019, while it also accounted for 66% of total funding.

Khalfan Belhoul, CEO of the Dubai Future Foundation, explains this by highlighting that “With the vision of our leaders, and a strong strategy in place, the UAE has cemented its position as an ideal destination for startups, founders, creative thinkers, and innovators. We have leveraged that vision, through creating dynamic co-working spaces, agile legislation that supports innovation and attractive visa policies for entrepreneurs and business professionals, and we continue our efforts toward positioning Dubai as a global testbed for cutting-edge technologies.”

However, the landscape continues to evolve. Tunisia was the fastest growing ecosystem in H1 2019 – receiving the 5th highest number of deals at 8% of all deals, up 4% from H1 2018. While Saudi Arabia recorded 2% increase in number of deals, up to 11% of all transactions across the MENA region.

FinTech retained its top spot in H1 2019 and accounted for 17% of all deals. Notable investments include the $8 million in Yallacompare, $6 million in Souqalmal and $4 million in Beehive.

E-commerce still remains prevalent accounting for 12% of all deals, followed Delivery & Transport, which was the third most popular industry in terms total deals in H1 2019, accounting for 8%.

The report furthered said 130 institutions invested in MENA-based start-ups in H1 2019, of which 30% were from outside the region.

500 Startups remained the most active venture capital firm, especially at early stage investments, while Flat6Labs was the most active accelerator program.

Moreover, H1 2019 saw the influx trend of foreign investors continue. The entrance of China’s MSA Capital and Germany’s food conglomerate Henkel, among others, highlighted continued international interest in MENA start-ups. In fact, 30% of all entities that invested in MENA-based start-ups were international investors.

Walid Faza, Partner and Chief Operating Officer of MSA Capital, said: “Chinese models are shaping the consumption habits of emerging market tech consumers and MSA’s deep knowledge in both ecosystems positions us to add a lot of value to companies based in MENA.”

EMPG leads the start-up ecosystem with a $100 million fundraise, followed by Yellow Door Energy and Swvl

EMPG receives the highest amount of funding by a single start-up, raising $100 million in February 2019. Yellow Door Energy ($65M) and Swvl ($42 million) complete the top 3.

In total, the top 10 deals in H1 2019 account for 62% of the total investment amount in H1 2019, down 9% from H1 2019. In terms of exits, H1 2019 has seen 15 start-up exits take place across MENA, an increase of 5 compared to H1 2018.

The largest of these was Careem’’ landmark exit to Uber. Magnus Olsson, Co-Founder, Chief Experience Officer noted “Our $3.1 billion deal with Uber was a hugely significant moment, not just for Careem, but also for the Greater Middle East. It was the largest tech deal this part of the world has ever seen and puts our region’s emerging technology ecosystem on the map of both regional and foreign investors.” On the impact the deal will have across the ecosystem, Olsson noted that “Careem views its colleagues as owners of the business and so we introduced an equity scheme that will now see them financially benefit from the transaction. We hope that the deal will act as a catalyst for the next generation of tech startups in our region.”

— SG

International Cooperation for Sustainable Development

International Cooperation for Sustainable Development

The Peninsula, a daily of Qatar, elaborated as follows on July 9, 2019, on the Qatari role of international cooperation for sustainable development

Whereas Qatar was taken by surprise on June 5th, 2017, the international community was impressed by Qatar’s composed and firm stance in the face of the blockade and continued provocations of the blockading countries. Maturity of the Qatari diplomacy has since gripped global attention, courted international approbation, and most importantly, captured hearts and minds of Qataris into solidarity. A growing reverence for Qatar’s foreign policy and its key figures is unmistakable both domestically and abroad.

A less celebrated side of Qatar’s international role is that of sustainable development. Hundreds of resolutions and decisions are adopted yearly by the General Assembly, the Security Council and the Economic and Social Council of the UN, enacting and promoting sustainable development goals. Overall, the tie-ins between international cooperation and sustainable development are growing more reciprocal and symbiotic. 

This is evinced by the Millennium Declaration, the Johannesburg Declaration and the thousands of bi/multilateral treaties that have followed on from the UN Conference on Environment and Development in 1992. Since then, sustainability and sustainable development have become the watchwords for international bodies, most prominently the European Commission, the World Bank Group, the G-20 and obviously the UN, so much so they established dedicated offshoot organizations. Continuing to reaffirm commitment to the international community, Qatar has lived up to the (arguably) very ambitious agenda of sustainable development set in 2015.

Largely via Qatar Investment Authority (QIA) and Qatar Fund for Development (QFFD), Qatar has assumed the mantle of financiering, especially for the past several years. Qatar generously funds not-for-profit, philanthropic deeds in development assistance as well as investments in sustainable development. 

View of West Bay, Doha

In one year, 2018, QFFD disbursed more than $500m to hundreds of humanitarian and developmental projects in 70 countries across the world; funding natural disaster relief and recovery in the Caribbean, roadbuilding in the Horn of Africa, microfinancing SMEs in the Muslim World, and rehabilitating healthcare facilities in Arab countries, to name a few. 

QIA, on the other hand, ensures sustainable economic prosperity of Qataris for generations to come by investing in sustainable and profitable ventures worldwide. The $10bn pledged for US infrastructure enhancement and the £5bn for British infrastructure are examples of Qatari investments in international sustainable development.

We are yet to see all of these Qatari accomplishments and financial means complemented and popularised byways of active participation and close engagement with international bodies to further promulgate Qatar’s established role in global sustainable development. Young, well-educated Qataris are now more than ever capable of taking part in the sophisticated, pluralistic discourse on climate change, environmental protection, circular economy, wealth equality and social justice; hot sustainability topics that are increasingly gaining steam in international dialogue. In promoting sustainability and sustainable development, Qatari youth have HH Sheikha Moza bint Nasser as the role model to follow, especially with the recent designation of Her Highness as UN Sustainable Development Goals Advocate.

Domestically, international agreements have been coordinated with Qatari laws and regulations. This harmonisation process is best exemplified by the synchronization of the UN 2030 Agenda for Sustainable Development, Qatar National Vision (QNV) 2030 and the resultant quinquennial National Development Strategies. Qatar facilitated the UN Voluntary National Review of the country’s 2030 Agenda for Sustainable Development to acquire international credibility of implementation. Many nations are still lagging in setting and/or implementing sustainable development goals.

Following the onslaught of the blockading countries against Qatar, strong local faculties in sustainable development would call attention to ways the blockade hinders international cooperation intended to foster sustainable development; and they are many. 

The mere act of obstructing transportation to/from Qatar by stifling international transit corridors is condemnable as it violates the General Assembly’s Resolution 69/213 propositioned by the Secretary-General’s High-level Advisory Group on Sustainable Transport.

Qatar is building educational, governmental and diplomatic capabilities to navigate organizational and intergovernmental synergies of sustainable development. And as sustainable development organizations grow more influential in shaping major international accords, frameworks, standards and policies, Qatari representation is essential to preserve our state’s interest. 

Luckily, collective intelligence in Qatar has recognised that reinforcing alliances and partnerships through concerned UN agencies, and other organizations such as IFC and OECD can very much help perpetuate Qatar’s stability amidst the perils of the region.

Whether we are bracing for more seismic shifts in our regional geopolitics, more chasms, or for that matter, expecting rapprochements, sustainable development remains key to continued Qatari prosperity.

Dr Soud Khalifa Al-Thani is Sustainability Director at ASTAD.

A Fine Couple They Are (Wind and Solar Power)

A Fine Couple They Are (Wind and Solar Power)

The pairing of wind and solar is emerging as a smart strategy to implement renewable energy sources with better economic feasibility. A Fine Couple They Are (Wind and Solar Power) as suggested by Jim Romeo would definitely affect this Energy Transition era if only in terms of duration.

The pairing of wind and solar power is an advantageous complement; the two benefit each other. The synergistic combination is an emerging trend in renewable energy and power generation as costs drop. The pairing of sustainable sources is in early stages, however. And the configuration still has challenges regarding return on investment (ROI), ease of implementation, and storage.

In western Minnesota, a 2-MW wind turbine and 500-kW solar installation—wind-solar hybrid project—is an early entrant to the wind-solar market and one of the first of its kind in the U.S. It was introduced at a cost of about $5 million with high expectations and the goal that Lake Region Electric Cooperative in Pelican Rapids would acquire the power for its 27,000 members.

The pioneering project got a boost amid the lower costs of solar. The power generation from both renewable sources is calculated to provide dividends on its investment.

According to market researcher Global Market Insights, hybrid solar-wind projects are expected to grow by 4% in the U.S. over the next five years to join a $1.5 billion global market. Some attribute the growth to the 2015 United Nations Climate Change Conference objectives, combined with lower costs of development and materials, and a keen interest by many nations to rely more on renewable energy sources. Because wind turbine power and solar both have excess capacity, together they offer far greater possibilities.

Lucrative but Limited

Renewables especially make economic sense in non-urban areas, where costs per kWh are higher, said Mike Voll, principal and sector lead for Smart Technologies at Stantec. “So, rural communities and remote locations, where energy prices often reach $0.40 to $0.45 per kilowatt-hour, actually see an ROI from these projects. When it comes to combining both wind and solar with storage, however, the list of locations is even smaller still. In a perfect world, we’d have a place that has excellent radiance with enough wind and low cloud cover, but the reality is there are very few locations that meet the geographic requirements. So even as the price continues to drop, there will still be significant limitations to pairing solar and wind.”

Despite limitations, renewables can work well in locations where everything clicks. A storage option is an essential component. “Adding energy storage can reduce intermittency of output, reshape the generation profile to match to load, and enable dispatch of the renewable energy to maximize revenue generation through ISO market participation or utility programs,” said Todd Tolliver, senior manager at ICF, a global consulting and technology services company headquartered in Fairfax, Virginia.

Tolliver said the economic viability of these systems is constrained by equipment, costs of storage, and limited or irregular revenue streams. But he explained that the most common combination today is solar plus battery storage, thanks to investment tax credit and incentive programs in certain markets that provide clear lower costs and better revenue streams. Still, wind power energy storage has challenges.

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English football: a proxy battleground for feuding Gulf states?

English football: a proxy battleground for feuding Gulf states?

The six Gulf Co-operation Council (GCC) states have used their oil exports revenues of the past years not only to spend lavishly but to plan for a peaceful and serene future.  So English football: a proxy battleground for feuding Gulf states?

Decades earlier, low oil prices meant economic disaster for a region that once controlled the world’s leading energy supplies impacting their sovereign wealth fund holdings.  The ‘rentier’ states had to cope, some for the first time, with rising budget deficits.  They had to conjure up policies to make good use of the classic rentier state economy involving a reduction in their dependence on oil revenues. A historical shift was handled quite artfully with notable policies of diversification of the respective economies and eventually getting hold of some ‘Soft Power’.  Education, Sports and TV Entertainment or News channels amongst many other sectors of human activities were not precisely only bad earners in terms of Dollars.  While there seems to be no question about the proceeds from the sector as mentioned earlier’s sales, these might have been central to the development of the Gulf States rivalries, eventually leading to the enduring present day blockade of Qatar.

So: English football: a proxy battleground for feuding Gulf states?

Image result for English football: a proxy battleground for feuding Gulf states?

Simon Chadwick, University of Salford

There’s nothing like a Saturday night scoop to get social media buzzing. Revelations that a Qatari investor wants to acquire a stake in Leeds United certainly did. If the story is correct, then it seems Qatar Sports Investments (QSI), which already owns French club Paris Saint-Germain (PSG), is interested in buying shares in the Yorkshire based English Championship football club.

In some ways, we shouldn’t be surprised by the report, as Leeds United’s current majority shareholder, Italian Andrea Radrizzani, is thought to be seeking a buyer for his holding in the club. Indeed, some reports suggest that he may be negotiating with as many as six parties with a view to them buying a stake.

That a Qatari group is showing interest should be no surprise either; after all, the Yorkshire outfit already has a partnership with the small Gulf nation’s Aspire Academy. Over the last two years, rumours have been recurrent that big money from Doha will, sooner or later, be invested.

Hence, it was the timing of the latest rumour’s emergence that was actually more revealing than the rumour itself. It came after a tumultuous week in football (and sport more generally) which was stitched together by a narrative stretching from Manchester, through Paris, to Doha and Abu Dhabi.

A big week for Qatar

The previous weekend, Abu Dhabi-owned Manchester City won the English FA Cup, which ensured the club secured an unprecedented domestic treble of trophies (alongside the club’s Premier League title and Carabao Cup win). City’s success, however, was very quickly tempered by stories that UEFA may ban the club from the Champions League for what are alleged to be serious breaches of the European football governing body’s Financial Fair Play regulations.

Later in the week, news came through that two PSG board members – Nasser Al-Khelaifi and Yousef Al-Obaidly – are being investigated on suspicion of corruption in connection with Qatar’s bid to host the 2019 IAAF World Athletics Championship in Doha. Significantly, Al-Khelaifi is president of PSG but also chairman of QSI (the Qatari investment group behind the alleged Leeds bid) and a member of UEFA’s executive committee. Al-Obaidly is chief executive of the Qatari media group beIN.


Read more: Football may be caught in the crossfire between Qatar and the Saudis


It was quite a week for the Qataris, as news also broke that FIFA will concede during its forthcoming council meeting that the 2022 World Cup will be contested by 32 teams. FIFA had been pressing for an increase in tournament size to 48 teams, though this would have necessitated Qatar sharing the tournament with at least one other country. Qatar, though, is currently engaged in an acrimonious feud with its near neighbours, notably the United Arab Emirates (UAE), Saudi Arabia and Bahrain, so FIFA’s capitulation was effectively a victory for Qatar over its rivals.

The Gulf feud is ongoing, having broken out two years ago following a visit to Riyadh by a bellicose Donald Trump. Since then, all manner of tactics have been used by the countries involved, ranging from heavy political lobbying in Washington DC through to an online war in which misinformation has been spread.

The spat has spread into sport, too. Frequent reports allegedly spread by pro-Saudi consultants have sought to discredit Qatar’s World Cup hosting by making dubious claims about its ability to stage the tournament. Meanwhile, BeIN has fallen victim to a massive and concerted bootlegging operation instigated by BeoutQ, which appears to be a Saudi Arabian-backed pirate channel that has stolen the Qatari broadcaster’s content.

The feud spreads

Qatar hasn’t stood idly by in the face of such provocation, often spending lavishly both to demonstrate its oil and gas fuelled economic strength and to project its soft power. The world record breaking transfer of Brazilian international Neymar, from FC Barcelona to PSG, is the most potent symbol of this, as the government in Doha set out to shift attention away from its rivals while simultaneously making a statement about the aspirations of Qatar.

As such, the news that QSI may be circling Leeds United doesn’t seem to be about a Qatari penchant for Yorkshire puddings, nor is it merely a nice opportunity to generate some Saturday night clickbait. Rather, it suggests the opening of another front in a feud which, instead of resolving itself, appears to be intensifying. Rather than being the dawn of a new era for Leeds United, the club may consequently be on the cusp of being drawn into a bitter battle of competing geopolitical interests.

The dense network of connections and conflicts between the likes of Qatar Sports Investments, Saudi Arabia, UEFA and Abu Dhabi may therefore be about to span the English Pennines, sparking a new War of the Roses between Yorkshire and Lancashire. Given the on-off speculation about Saudi Arabia’s purchase of Manchester United, and Abu Dhabi’s continued lavishing of its wealth upon Manchester City (as well as its rumoured acquisition of Newcaste United), these Gulf states are strengthening their hold over Lancashire, the western side of the Pennines, and possibly further north too.

In buying Leeds United, their rival, Qatar, would be shoring up its own defences in neighbouring Yorkshire, meaning that the Gulf region’s proxy war could spill over into English football. Thus, as fans on both sides of a historic English divide anticipate the prospect of their clubs’ battle for supremacy, they should remain mindful that Elland Road and the Etihad Stadium could become modern day proxy battlefields in a new stand-off between the houses of York and Lancaster.

Simon Chadwick, Professor of Sports Enterprise, University of Salford

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Costs of Corruption running deep in the MENA

Costs of Corruption running deep in the MENA

The IMFBlog on May 28, 2019, is about a world phenomenon that seems to still be present in all walk of life throughout the world. The Costs of Corruption running deep in the MENA, have been amplified by the hydrocarbon-related rentier economies to a point where only a defossilisation of the respective economies could somehow reduce their extent. In the meantime, costs of corruption running deep in the MENA seem to go unattended to. Anyway here is this IMFBlog article.

Corruption and Your Money

The costs of corruption run deep. Your taxpayer dollars are lost in different ways, siphoned off from schools, roads, and hospitals to line the pockets of people up to no good.

Equally damaging is the way it corrodes the government’s ability to help grow the economy in a way that benefits all citizens.

And no country is immune to corruption. Our Chart of the Week from the Fiscal Monitor analyzes more than 180 countries and finds that more corrupt countries collect fewer taxes, as people pay bribes to avoid them, including through tax loopholes designed in exchange for kickbacks. Also, when taxpayers believe their governments are corrupt, they are more likely to evade paying taxes.

The chart shows that overall, the least corrupt governments collect 4 percent of GDP more in tax revenues than countries at the same level of economic development with the highest levels of corruption.

A few countries’ reforms generated even higher revenues. Georgia, for example, reduced corruption significantly and tax revenues more than doubled, rising by 13 percentage points of GDP between 2003 and 2008. Rwanda’s reforms to fight corruption since the mid-1990s bore fruit, and tax revenues increased by 6 percentage points of GDP.

These are just two examples that demonstrate that political will to build strong and transparent institutions can turn the tide against corruption. The Fiscal Monitor shines a light on fiscal institutions and policies, like tax administration or procurement practices, and show how they can fight corruption.

The costs of corruption run deep.

Where there is political will, there is a way

Fighting corruption requires political will to create strong fiscal institutions that promote integrity and accountability throughout the public sector.

Based on the research, here are some lessons for countries to help them build effective institutions that curb vulnerabilities to corruption:

Invest in high levels of transparency and independent external scrutiny. This allows audit agencies and the public at large to provide effective oversight. For example, Colombia, Costa Rica, and Paraguay are using an online platform that allows citizens to monitor the physical and financial progress of investment projects. Norway has developed a high standard of transparency to manage its natural resources. Our analysis also shows that a free press enhances the benefits of fiscal transparency. In Brazil, the results of audits impacted the reelection prospects of officials suspected of misuse of public money, but the impact was greater in areas with local radio stations.

Reform institutions. The chances for success are greater when countries design reforms to tackle corruption from all angles. For example, reforms to tax administration will have a greater payoff if tax laws are simpler and they reduce officials’ scope for discretion. To help countries, the IMF has built comprehensive diagnostics on the quality of fiscal institutions, including public investment management, revenue administration, and fiscal transparency.

Build a professional civil service. Transparent, merit-based hiring and pay reduce the opportunities for corruption. The heads of agencies, ministries, and public enterprises must promote ethical behavior by setting a clear tone at the top.

Keep pace with new challenges as technology and opportunities for wrongdoing evolve. Focus on areas of higher risk—such as procurement, revenue administration, and management of natural resources—as well as effective internal controls. In Chile and Korea, for example, electronic procurement systems have been powerful tools to curtail corruption by promoting transparency and improving competition.

More cooperation to fight corruption. Countries can also join efforts to make it harder for corruption to cross borders. For example, more than 40 countries have already made it a crime for their companies to pay bribes to gain business abroad under the OECD anti-corruption convention. Countries can also aggressively pursue anti–money laundering activities and reduce transnational opportunities to hide corrupt money in opaque financial centers.

Curbing corruption is a challenge that requires persevering on many fronts, but one that pays huge dividends. It starts with political will, continuously strengthening institutions to promote integrity and accountability, and global cooperation.

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