Following on the ever-increasing ease of accessibility of all renewables-hardware, the costs of technologies reshaping energy-related investment per The International Energy Agency’s World Energy Investment 2019 report have mainly affected and/or facilitated the surging demand for even more power. In effect, it is in the developing world, including, the MENA region where the market seems to be the highest, that this is happening before our very eyes. Hence this article of the World Economic Forum.
The world invested $1.8 trillion in energy last year, with spending on renewables stalling, while oil, gas and coal projects increased.
The International Energy Agency’s World Energy Investment 2019 report shows overall global investment in energy stabilised in 2018 after a recent decline, with the power sector continuing to make up the biggest proportion of this spending. Much of that investment has been fueled by the world’s rapidly increasing demand for electricity.
Investment in coal increased for the first time since 2012, despite reduced Chinese spending to focus on power generation.
When it comes to cleaner fuels, there was little movement in the overall investment in renewables and no net addition to capacity, driven in part by the falling costs of some technologies. But production of biofuels, which has fallen behind the IEA’s sustainable development targets, saw a rise in investment last year.
The agency’s report also showed minimal increases in energy efficiency investments, with spending on transport efficiency remaining constant even though sales of electric vehicles are motoring upwards.
Indeed, the IEA warns there is a “growing mismatch between current trends and the paths to meeting” the world’s climate goals laid out in the 2016 Paris Agreement and “other sustainable development goals.”
The changing landscape
The costs of technologies are reshaping energy-related investment, as the chart below demonstrates.
Some of the most marked changes have been seen in the power sector, where there have been dramatic falls in the costs of solar, onshore wind and battery storage.
Prices for some efficient goods such as light-emitting diodes (LED) and electric vehicles have continued to fall, too. But investment in efficiency innovations is still being held back by governmental policy and financing challenges.
On the other hand, there has been little change in the costs of nuclear power projects and carbon capture and storage – a technology that aims to trap greenhouse gases before they enter the atmosphere.
Who invests the most?
China remained the biggest market for energy investment last year, even as the US is rapidly catching up, the IEA report said.
Increases in oil and gas — particularly in the shale sector — have driven the bulk US investment. By contrast, China is putting much of its money into low-carbon projects, with big investments in nuclear power and renewables.
India is the most rapidly growing market for investment. Elsewhere, investment in energy generally has fallen in recent years in Europe, the Middle East, Southeast Asia and sub-Saharan Africa, according to the agency.
As Chinese President Xi Jinping concluded the latest high-level Belt and Road gathering of world leaders in Beijing last month, China’s signature project has seemingly entered a new phase: worldwide acceptance of the Belt and Road Initiative (BRI) as a fact of international life (like it or not). So, with the wind at its back, is China doubling down on its investments worldwide? Not exactly. The total value of China’s global investments and construction contracts actually fell by $100 billion in 2018, according to data analyzed from the American Enterprise Institute’s China Global Investment Tracker. Just about every region saw a significant decline in Chinese investment or construction projects except, surprisingly, for one: the Middle East and North Africa (MENA).
A flurry of Chinese investment and construction projects in the MENA region over the last three years has made it a key geoeconomic partner for Beijing. But surely, in pure volume terms, the MENA region could not have attracted as much Chinese economic activity as sub-Saharan Africa or East Asia, right? Think again. The MENA region ranked as the second-largest recipient of investment and Chinese construction projects worldwide after Europe in 2018, as the chart below shows.
MENA’s Growing BRI Clout
In 2018, the Middle East and North Africa leapfrogged other emerging markets as a destination for BRI projects.
The MENA region ranked ahead of traditional BRI stalwarts East Asia and sub-Saharan Africa last year, recording $28.11 billion in new projects. The region still lags behind both those regions as a whole since the launch of BRI in 2013 and dating back to 2005, but a three-year surge has brought it in closer proximity to the top of the table. That could mean a windfall for Chinese state-owned construction companies as the majority of MENA projects involve construction, rather than foreign direct investment.
Of the 2018 MENA total, nearly three-quarters was targeted at Egypt, the United Arab Emirates, and Saudi Arabia. Those three countries also make up half of the “$20 billion club”—the group of countries with more than $20 billion worth of projects from China dating back to 2005.
Chinese Investment in MENA Countries
MENA countries with more than $20 billion worth of investment and construction projects by Chinese firms since 2005.
The list here is heavily skewed toward regional oil producers, with the exception of Egypt, and most of China’s projects in the region involve construction rather than investment. Despite a recent setback, Chinese state-owned enterprises will likely play a prominent role in Egypt’s ambitious infrastructure program, including the building of a new, gleaming capital city just outside Cairo. Chinese construction companies were vitalin President Abdel Fattah al-Sisi’s ambitious Suez Canal economic zone project.
At the Belt and Road Forum last month, Chinese enterprises also announced a new $3.4 billion investment to build a trade hub for Chinese goods in Dubai’s Jebel Ali Port, as well as a manufacturing and processing hub for animal and agricultural products for the food industry. China’s dramatic ramp-up of projects in the UAE suggests that it sees the country as an important piece of its Belt and Road logistics network.
Other significant nodes of China’s economic footprint in the region are Israel ($12.19 billion), Kuwait ($10.43 billion), and Qatar ($7.27 billion), according to data analyzed from AEI’s China Global Investment Tracker for the years 2005-2018.
China is pouring a lot of concrete and cement into construction projects in the region but what of Middle East exports to China? How is China affecting the bottom line of key MENA states?
The answer broadly: If you have oil or gas, China is likely to be a major export destination.
Exports to China From MENA Countries
China has emerged as a vital export destination for several countries in the Middle East and North Africa. For these countries below, China made the top five in 2018.
Major oil and gas producers generate significant revenues from Beijing, and China ranks as the top export destination for Saudi Arabia, Iran, Kuwait, and Oman, according to an analysis of data from the International Monetary Fund’s Direction of Trade Statistics.
In some cases, key U.S. allies such as the UAE send nearly three times more exports to China than to the United States, and for Kuwait, Qatar, and Oman, the gap is even starker, with nearly eight times, nearly nine times, and nearly 28 times, respectively, more goods exported to China than to the United States.
For Saudi Arabia, the difference in 2018 was less stark, sending some 30 percent more exports to China than to the United States, according to an analysis of IMF data. Expect this gap to widen as the United States continues to ramp up domestic oil production.
Meanwhile, most North African countries still maintain an export profile heavily dependent on Europe rather than on China, and Israel sends four times more goods to the United States than to China.
You can expect this map to get to darker shades of red over the next decade, particularly as China’s demand for energy—especially natural gas—continues to grow.
Afshin Molavi is a senior fellow at the Foreign Policy Institute of Johns Hopkins School of Advanced International Studies and the editor and founder of the New Silk Road Monitor blog.
The economic performance of lower-income developing countries will be crucial to reducing poverty further. Although these economies face significant headwinds, they could also seize important new growth opportunities – especially with the help of digital platforms.
MILAN – The global economy is undergoing very large structural shifts, driven by three megatrends. One is the digital transformation of the foundations on which economies are built and run. Another is the growing purchasing power and economic strength of emerging economies, and China in particular. Lastly, there are broad-based political-economy trends, which include rising nationalism, various forms of populism, political and social polarization, and a possible breakdown of the multilateral framework within which the global economy has functioned since World War II.
The media devote most of their attention to the economic, social, and regulatory challenges arising from these megatrends, and to the trade, investment, and technology tensions between China and the United States. Yet a significant share of the world’s population lives in poor countries, or in poorer parts of developing countries. Furthermore, the rapid reduction in global poverty over the past three decades is primarily the result of sustained growth in developing economies.
The future growth prospects of today’s early-stage (that is, lower income – some growing and others not) developing countries will be of huge importance in reducing poverty further. Although these countries face significant headwinds, they could also seize important new growth opportunities – especially with the help of digital platforms.
The headwinds are certainly considerable. For starters, advances in digital technologies – robotics, machine learning, sensors, and vision – directly threaten the labor-intensive manufacturing and assembly upon which lower-income, non-resource-rich economies have traditionally relied.
Moreover, climate change has had its greatest economic impact in the tropical and subtropical regions where most lower-income countries are located. The effects of global warming are highly disruptive in fragile economies, and, taken together, constitute a major new obstacle to growth.1
Fertility rates, meanwhile, remain astonishingly high in some countries, especially in Sub-Saharan Africa. In a few of the poorest – Niger, Mali, and the Democratic Republic of Congo – the rate is 6-7 children per female. The resulting flood of new entrants to the labor market is far outstripping the number of jobs available.
No known growth model can accommodate or keep up with this kind of demographic surge. Even sustained economic growth of around 7% per year won’t be enough. And although fertility tends to decline as incomes rise, that does not happen immediately. Empowering women, therefore, may be the most effective way of starting to address the challenge.
Conflict also disrupts growth. Although many conflicts appear to have a religious or ethnic basis, some scholars believe that their root cause may be economic, with ethnic divisions serving as a way to exclude other groups from access to scarce resources and opportunities. Whatever its source, inequality of opportunity has a highly disruptive effect on governance and hence growth.
But these obstacles are not insurmountable. For one thing, developing countries now have huge potential export markets in middle-income countries, and no longer depend entirely on advanced economies for access to global markets.
There is also a renewed awareness of the importance of infrastructure in enabling growth. In addition to roads, railways, and ports, electricity and digital connectivity are crucial. In this regard, the rapid expansion of cellular wireless technology, combined with the installation of high-capacity undersea broadband pipes around Africa, represents major progress. Meanwhile, China’s “Belt and Road Initiative” – though criticized by much of the West, and the United States in particular – could bring dramatic improvements in physical and digital connectivity to Central Asia and parts of Africa.
Further advances in critical infrastructure will create important growth opportunities for developing countries via e-commerce, mobile payments, and related financial services. The experience of China strongly suggests that these digital platforms, and the ecosystems that develop around them, are powerful engines for incremental, highly inclusive growth.
China, of course, is a very large, homogenous market. If smaller, lower-income developing countries are to benefit from equally rapid inclusive growth, the digital platforms will have to be regional and international in scope.
Some are starting to emerge. Jumia, a Nigeria-based e-commerce platform covering 14 African countries, recently went public on the New York Stock Exchange, amid considerable excitement. True, the company faces similar obstacles to those that Asian and Latin American platforms previously had to overcome, including a lack of reliable payment systems, low trust between buyers and sellers, and logistics and delivery bottlenecks. But the experience of other regions shows that these shortcomings can be addressed over time.
The bigger risk to these platforms stems from the inevitable and necessary increase in regulation of the Internet around the world. In particular, diverse national regulatory regimes may inadvertently or deliberately disrupt or block the international development of e-commerce ecosystems, hurting lower-income countries in the process. Avoiding the creation of such unintended obstacles should therefore be a high priority for the international community.
Today’s lower-income countries already face a tough task in trying to emulate the impressive growth of developing economies before them. An underperforming global economy, and rising national and international tensions, will make that task even harder. If the world is serious about reducing poverty further, it must pay far more attention to their progress.
Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Advisory Board Co-Chair of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World.
Hunger continues to rise in the Near East and North Africa region where over 52 million people are undernourished.
Conflicts and widening rural-urban gaps hamper the region’s efforts to end hunger by 2030.
8 May 2019, Cairo/Rome – Hunger in the Near East and North Africa region (NENA) continues to rise as conflicts and protracted crises have spread and worsened since 2011, threatening the region’s efforts to achieve the 2030 Agenda for Sustainable Development, including Zero Hunger.
Conflict continues to be the main driver of hunger across the region. More than two-thirds of hungry people in NENA, approximately 34 million people, live in conflict-affected countries, compared to 18 million hungry people in countries that are not impacted directly by conflict.
Stunting, wasting, and undernutrition are also far worse in conflict countries than in the other countries.
“Conflicts and civil instability have long-lasting impacts on the food and nutrition security of both affected and surrounding countries in the regions” said Abdessalam Ould Ahmed, FAO Assistant Director-General and Regional Representative for the Near East and North Africa.
“The impact of the conflict has been disrupting food and livestock production in some countries and consequently affecting the availability of food across the region,” he added.
“Rising hunger is also compounded by rapid population growth, scarce and fragile natural resources, the growing threat of climate change, increasing unemployment rates, and diminished rural infrastructure and services” Ould Ahmed underscored. The report highlights that the region is not facing just a hunger crisis as some of the highest rates of obesity are also found in countries within the region, putting pressure on people’s health, lifestyles and national health systems and economies. Addressing obesity requires food systems that ensure that people have access to healthy nutritious food and also increased public awareness and information on the risks associated with overweight and obesity.
Inadequate rural transformation hampers efforts to eradicate hunger and malnutrition by 2030
The report shows that not only do conflicts undermine the region’s Zero Hunger efforts, but also the degree of rural transformation.
“Countries that are not in conflict and have gone furthest in transforming rural areas in a sustainable way including through better management of water resources, have achieved better food security and nutrition outcomes than those in conflict or with lower levels of rural transformation,” Ould Ahmed said, noting how the report stresses that more efforts are needed to boost rural employment, stimulate economic growth in rural areas, reduce urban-rural gaps, and improve agricultural productivity and rural infrastructure and services.
The report highlights how unemployment, particularly for young people and women across all age groups is a significant challenge in the NENA region and is often higher than in other regions of the world. This is aggravated by rural-urban gaps – with significant disparities in living standards and poverty rates between rural and urban areas – and differences in labour productivity between traditional agriculture and industry and services. This gap is deepened by differences in access to education, health as well as other public services and housing.
At the same time, rural areas accommodate around 40 percent of the population, where the majority of poor are living. The report shows that the average wages for those employed in agriculture are likely to be far below those of workers outside the sector. Partially as a result of lower wages in agriculture, rural areas in the NENA region generally have higher income poverty rates than urban areas. On average, rural poverty is about twice as high as poverty in urban areas.
Transforming agriculture to achieve Zero Hunger
At a regional level, there are significant opportunities for transforming agriculture in a sustainable way, starting with the provision of improved access to markets for farmers, promoting investments in agriculture, transfer of technology and other innovations, more efficient and effective management of water resources, as well as key policy changes that support the shift from subsistence farming to commercial and diversified production systems.
“There is a great need to encourage our region’s farmers to produce according to the comparative advantage of the region,” Ould Ahmed said, highlighting that the NENA region has a great potential in the production of crops and livestock products that are least intensive in arable land and water and more intensive in use of labour.
The report highlights that greater efforts and actions are needed to support the development and implementation of policies and programmes to abolish rural-urban differences.
Key facts and figures
Number of hungry people in the Near East and North Africa: 52 million, 33.9 million are in conflict countries directly and 18.1 million in non-conflict countries.
Children under five affected by stunting (low height-for-age): 21.1 percent.
Children under five affected by wasting (low weight-for-height): 8.7 percent.
Children under five who are overweight (high weight-for-height): 9.1 percent
Note to editors: NENA countries include Algeria, Bahrain, Egypt, Iran (Islamic Republic of), Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, the Syrian Arab Republic, Tunisia, the United Arab Emirates and Yemen.
Governments in the Middle East are becoming more
receptive to growing private sector involvement in their economies because
public sector debt in many markets is ballooning, an official from the World
Bank’s International Finance Corporation (IFC) has said.
Speaking on an investors’ panel debate at the
Global Financial Forum in Dubai on Monday, the IFC’s Middle East and North
Africa (MENA) director, Mouayed Makhlouf, said: “For the first time,
because of the massive rise in public debt across the region, we see a
difference. Our narrative with these governments has changed. Now, they are coming to us and they are saying
‘can you help us with the reforms?'”
Makhlouf said that the MENA region needs to create
300 million new jobs – “basically, double the population” by 2050 due
to the burgeoning youth population in the region, and that Egypt alone needs to
create around 700,000 jobs per year, although he said it is MENA’s fastest
growing economy currently, with GDP growth of 5.3 percent, compared with a
regional average of around 2-3 percent.
“The social contract in MENA is as such where
most of the services (are) provided by the public sector. But what you have ended up with… is a huge
public debt that has been rising for the past few years,” he said, adding
that debt-to-GDP ratios stand at around 96 percent in Egypt, 97-98 percent in
Jordan and 150 percent in Lebanon.
“For us, the main thing we need to find in
this region are… growth and jobs. And
I really believe both of these things can only come through a larger private
sector participation,” Makhlouf said.
In a separate panel on the outlook for the region’s
banking sector, JP Morgan‘s Asif Raza said that the decline in oil prices
that began in 2014 had created opportunities for
international banks to advise governments that are looking to
diversify on how to embark on “monetisation and privatisation” of
Kamal, MENA head of corporate banking at Citi, said that governments had run up deficits as oil
revenues fell, and had financed these through “various instruments where
banks have been involved”.
“And we expect to see that continue over the
next 2-3 years.”
Although total GCC fixed income issuance declined
by 16 percent year-on-year to $145.3 billion in 2018 as oil prices rallied,
according to Kamco Research, JP Morgan’s Raza said the current pipeline is
A faster flow
Raza said that at this stage last year, “over
$15.4 billion worth of issuance was done in the MENA region – this year, it’s
He added that in 2018, “the loan market
was (at an) all-time high in this region”. Figures published earlier this month from
Acuris showed that syndicated loan activity in the MENA region last year
outstripped bond issuance – with $133 billion of syndicated loans issued,
compared to $89.5 billion in bonds.
Raza said that at the top end of the corporate
banking market, “there’s lots of activity still happening”.
“There’s still quite a decent pipeline of
financing and refinancing,” he said.
However, Citi’s Kamal argued that the market has
been much tougher for SMEs in recent years.
“I believe that there is room for improvement
for all countries in the region as far as creating the right balance for SMEs
(is concerned),” he said.
He said that “time and again” in tougher
economic times large corporates, government-related entities and even government
departments have delayed payments to SMEs, which causes cashflow problems and
affects their ability to repay creditors.
“And some of the legal framework that
surrounds the corporate sector – we all know about bounced cheques and the
consequences of that. In summary, what
happens is SMEs can’t stay back in a number of cases (to) fight through these
cycles. So, we see skips, people leave
and that does not leave a very strong impact as far as consumer confidence is
Yet funding shortages for private sector firms can
also create opportunities – not least for the region’s private equity sector,
according to Karim El-Solh.
Speaking on the investment panel, El-Solh said that
his firm’s pipeline “has increased dramatically as a result of a lack of
availability of funding for businesses elsewhere.
“The IPO market is not open; the bank
liquidity has dried up so for us it’s an opportunity to come and be a provider
of growth capital. We are seeing more
companies, better quality companies, we’re acquiring controlling stakes at
lower valuations,” he said.
Makhlouf said more opportunities need to be created
for the private sector, stating that levels of private sector involvement in
the economy in the region lag behind other emerging markets.
“MENA region is only one-fifth in terms of
private sector participation compared to Latin America,” he said.
The number of millionaires in the UAE increased
last year and this trend will continue over the next five years as growing
investment opportunities will generate more millionaires locally as well as
political and economic stability will also woo rich individuals and families
from foreign countries, say researchers and analysts.
According to the latest report released by global
consultancy Knight Frank, the number of millionaires, or high net worth
individuals, in the UAE expanded 3 per cent to 53,798 last year from 52,344 in
the previous year. The numbers are projected to grow 14 per cent to 61,292 by
2023. Similarly, the number of ultra-high net worth individuals (UHNWIs) – who
own more than $30-million wealth – in the UAE grew from 672 in 2017 to 693 last
year and will reach 799 by 2023.
The study predicted that the number of UHNWIs in
Dubai and Abu Dhabi will increase from 440 last year to 511 in 2023 and from
192 to 223, respectively.
Issam Kassabieh, senior financial analyst at
Menacorp, believes that the ultra-rich will continue to flock to the UAE in
“At the moment, Dubai is attractive for
foreigners. Now, it is a place not just for good investments returns but also
to stay for long term. Government is focusing on key sector so that the cash
comes in and stays in the country through different measures such as longer
visas and ease of doing business initiatives,” Kassabieh said.
“The UAE is an attractive place for foreign
investors – financial markets are at an early stage and have a long way to go.
Real estate was the first to anchor the economy and that brought foreign
investors here. Going forward, the focus will be on more diverse sectors. Also,
the ease of doing business chart shows the UAE is first in the region and also
competitive globally,” he added.
“Dubai offers a full package – good quality of
life, healthcare, education and investment opportunities. All these complement
each other and attracts high net worth individuals to this country. In addition
to that, diversity of population plays a big role in this,” said
Knight Frank data revealed that Dubai and Abu Dhabi
will witness higher growth in UNHWIs as compared to Manama and Riyadh.
Raju Menon, chairman and managing partner, Kreston
Menon, said the number of millionaires will undoubtedly continue growing in the
UAE in coming years.
“Whatever the business challenges or revenue
decline the companies are facing today, it is temporary. We need to look at
long-term of 5 to 10 years. Millionaires should grow here in the UAE because
money is available here so the investment avenues will be opened. The UAE’s
economy offer big opportunities,” he said.
Menon believes that most of the new millionaires
will be homegrown mainly in retail, trading, healthcare, real estate, services
and shipping sectors.
Iyad Abu Hweij, Managing Director of Allied
Investment Partners, said the UAE, home to over 9.4 million residents, remains
an attractive destination for HNWIs in the region.
With investor and business friendly policies, world
class infrastructure and a stable outlook, HNWIs are expected to continue to
grow in numbers in the country over the next coming years. Such policies and
initiatives have played an important role in bolstering the confidence of
investors and attracting Foreign Direct Investments in the UAE, which in turn
creates jobs for a highly talented workforce,” Abu Hweij said
Additionally, the UAE, viewed as a regional startup
hub and a digital leader, continues to boast more startups than any other
country in the region. Naturally, such startups attract more venture capital
and private equity investments locally than anywhere else regionally, he added.
“The UAE continues to provide solid investment
opportunities for investors locally and globally, which, along with a rapidly
developing financial services sector, has played a catalyst like role for the
growth of HNWIs in the country.”
The number of millionaires in the Middle East with
wealth below $30 million grew three per cent from 446,384 in 2017 to 459,937
last year. The number is projected to grow 18 per cent to 541,311 by 2023.
Similarly, the ultra-high net worth individuals with more than $30m assets grew
four per cent year-on-year to 8,301 last year. It’s estimated that the number
will grow 20 per cent over the next five years to 9,997.
According to Knight Frank forecast, the number of
billionaires in the region will grow from 89 last year to 99 by 2023.
Globally, the number of millionaires with less than
$30 million assets are projected to expand from 19.6 million in 2018 to 23.4
million by 2023, an increase of 19 per cent. While ultra rich will increase 22
per cent during 2018 to 2023 from 198,342 to 241,053.