Energy investments in Middle East and North Africa (MENA) are forecast to grow in 2022 from $805 billion and continue in the next five years on the strength of higher oil and gas prices and planned unconventional gas and upstream investments.
Energy investments in MENA will continue to grow: Apicorp
Nicolas Thevenot
For petrochemicals, the drive for further integration and rationalisation will continue with reconfigurable petrochemical plants shifting to high-margin products such as plastic packaging films and healthcare and hygiene products, The Arab Petroleum Investments Corporation (Apicorp), a multilateral development financial institution, said in its annual Top Picks 2022 outlook on the key trends that are expected to shape the Mena energy markets landscape this year.
“The strong pipeline of investments we are seeing in the downstream projects reflects the region’s push to direct more funds to this sector, especially in brownfield petrochemicals projects versus greenfield ones. This makes sense in light of the current market conditions which favor improving cost and operating efficiencies in existing projects rather than sheer expansion,” said Nicolas Thevenot, Managing Director of Corporate Banking at Apicorp.
As for the energy markets, the report forecasts that they will remain comparatively stable during 2022 due to higher oil production by Opec+ and non-Opec countries and increased gas production and LNG supply. Brent is expected to average between $65/bbl. and $75/bbl. As for gas, the JKM and TTF/NBP hub prices in Asia and Europe are expected to cool down considerably from their all-time highs of 2021, especially after the winter season.
Meanwhile, the uptick in regional energy investments, which registered a modest $13 billion increase in Apicorp’s latest five-year outlook, will continue over the mid-term on the strength of higher oil and gas prices throughout 2022.
Among the trends the report examines is the impact of oil and gas prices on energy investments in the region and the main factors weighing down on broader economic recovery.
“Despite the volatility in commodity prices which is expected to persist throughout 2022, the good news in the short-term is that oil and gas prices will likely remain elevated throughout the year, providing support for energy investments including renewable energy and ESG-related projects. Power sector investments in Mena are also expected to continue to thrive, with an accelerating shift towards renewables. Collectively, the region is expected to add nearly 20 GW of solar power over the next five years,” noted Dr Ahmed Ali Attiga, CEO of Apicorp.
The Mena region will take centre stage in the ongoing global energy transition as all eyes shift to Egypt, which will host COP27 in November — and UAE for COP28 in 2023. Yet while the transition continues to steadily gain momentum, the report notes that it may be marred by mixed policy signals from governments as they attempt to balance imperatives which are oftentimes very difficult to align: emissions reduction, energy affordability and energy security.
Thus, a sustainable and comprehensive policy is needed in order to avoid tilting the policy scale too far towards in favor of one of these factors, as this may lead to unintended consequences such as market distortions, heightened volatility, and energy shortfalls.
The already substantial pressure on policymakers is expected to be further exacerbated by continued volatility in commodity markets in 2022 due to the pandemic, uncertainty over macroeconomic policy, and supply chain disruptions. Despite the modest –-albeit uneven—recovery in 2021, it will take time for this improvement to migrate downstream and ease cost pressures this year.
The report’s analysis of energy investment trends suggests that the expected robust oil and gas prices in 2022 have triggered an opportunity to return to pre-pandemic activity.
The uncertainty around Covid recovery will continue to influence how market dynamics will ultimately play out. Given the global vaccine inequity and a constantly evolving virus, governments are still grappling with the dilemma of public health versus economic recovery.
In addition to global trade, supply chains and services, the current surge in cases globally will also adversely affect international travel and tourism. This will dent economic growth during 2022, which has already prompted a slight downward revision of the 2022 GDP growth forecasts in some regions and a likely asymmetric global recovery that is not necessarily sustainable for all countries.
Another uncertainty stems from the need for governments to introduce fiscal austerity measures to rein in spending and curb soaring inflation. Although markets ended 2021 with high returns (27% in the case of the S&P 500 index), high jobs growth and soaring commodity prices pushed inflation rates higher.
A fear of stagflation looms as public fiscal stimulus packages are withdrawn, asset purchasing programs are tapered and interest rates rise. While these measures will very likely cause economic recovery to slow down, the lagging unemployment rates are expected to remain relatively high amid a simmering inflationary cycle that may turn out not to be transitory after all. — TradeArabia News Service
The above-featured image is for illustration and is credit to Oil Price.
The increase in entrepreneurship and start-ups in the region has been happening over the past decade as revealed by Arabian Business in the latest trends shaping the region’s start-up ecosystem
Financial technologies and e-commerce businesses dominated the market in the Web 2.0 wave, while blockchain and cryptocurrencies are slowly growing in the region
In the post-pandemic economy, it feels like start-ups are launching almost daily in unprecedented numbers, but the Middle East entrepreneurial ecosystem has been steadily growing for almost a decade now, explained Walid Hanna, CEO and founder of MEVP, a venture capitalist firm.
Talking exclusively to Arabian Business, Hanna looked back at the evolution of start-ups in the region and the major trends that dominated each phase until today.
What can you tell us about the regional landscape for start-ups in the post-pandemic economy?
The increase in entrepreneurship and start-ups in the region has been happening over the past decade.
We [at MEVP] began our journey back in 2010 and, at that time, we used to see one or two start-ups a week, while now we receive three or four business plans a day, so the multiplier has been enormous in terms of the number of start-ups.
This has been the case post-Covid as well. When the whole ecosystem realised how important technology is during the pandemic, it gave a boost to our portfolio of companies and they grew faster and it also gave a boost to potential entrepreneurs who left their jobs to start their own businesses.
Why do you think fuelled this growth in the pre-coronavirus days?
It’s a natural progression that happened across the US, Europe and China over the past two decades and since there’s always a lag with the Middle East, it’s finally happening here now.
If you look at the penetration rates in internet usage or mobile phone usage, the Middle East has typically been lagging, the exception being countries like the UAE. But, now they’re all catching up.
What are some of the trends you’ve seen among regional start-ups, in fintech and tech in general?
Trends have been evolving over the past decade as well.
Originally there was the Web 1.0 wave, which was only content-based such as browsing the internet for cooking recipes, for example.[Start-ups] were making money, but it was based on reading, there were no interactions or transactions involved.
Walid Hanna, CEO and founder of MEVP. Image: ITP Media Group
Then it evolved into Web 2.0, where we saw a lot of financial technologies, e-commerce sites and software-as-a-service for enterprises. We’ve invested in 60-plus companies across those verticals.
We’ve also seen a lot of mobility plays, such as Uber, and we’ve seen that model [replicated] across tuk-tuks, motorcycles, electric scooters and trucks which, in a way, is good for the environment.
Within fintech, we’ve seen a lot of sub-verticals, such as the Buy Now, Pay Later model, which is a big trend at the moment – there are around ten [such start-ups] in the region and we’ve invested in an Egypt-based one. But there are so many other trends within fintech, including micro-lending, SME-lending or treasury solutions; payment solutions in general.
The hype over non-fungible tokens and cryptocurrencies, the whole blockchain business model, has evolved tremendously over the past couple of years and is just starting to pick up in the Middle East. We’ve seen two NFT marketplaces and a couple of blockchain business models. It is still quite limited, although I expect it to grow much faster in the next three years.
How do you identify the companies you will invest in?
Just as they say “location, location, location” for real estate, it is “people, people, people” for start-ups.
If a start-up is at the earlier stages, the best thing you can look at is how investment-ready the business is and how qualified the founders are with relevant experience. We look at how dynamic, hardworking and motivated they are.
Buy Now, Pay Later model is a big trend at the moment.
We look at the total addressable market and try to understand if it’s big enough and if they are really answering a pain point that is large enough to make serious money. This is because we are not interested in a small niche in a tiny country. For example, if a start-up is trying to solve a small issue in a country like Lebanon and the issue is not the same in Saudi Arabia and the GCC, then we are not interested.
We also look at the business model and the unit economics to see if it is viable, meaning we try to find out if the cost of producing, marketing and selling whatever product is worthwhile. If you look at the cost of acquiring a user and realise that the margin you are making out of this one product is inferior to that, then it is not worth it.
We also look at how robust and scalable the technology itself is and the stack they use. We invest in tech start-ups only.
Growth is key to our assessment of technology companies. We don’t do seed capital so when we invest in Series A, we can already witness a traction behind the start-up. If the traction is interesting, we get interested but if it is not already interesting, we don’t invest.
What are the challenges that remain for entrepreneurs in the region?
It depends on the country. In the GCC, there are no currency risks because they are pegged to the dollar, but if you look at currency in Egypt, they got really hit by the devaluation about three years ago.
There is also a political risk because of the region’s instability and relationship with its neighbouring countries.
Enablers are becoming better and better, but we still have some issues with the banks, for example. Opening up a bank account for start-ups is very challenging across the region. It takes ages and a lot of KYCs.
Five years ago, the logistics were very poor. Even the online payment systems were very poor so it was difficult for start-ups to thrive within that environment. This has been enhanced over the past couple of years but, for some reason, many customers here still want to pay cash-on-delivery and not use credit cards online. Penetration is increasing in terms of card usage but it is still lower than the global average.
Other than that, the ecosystem has evolved well and the enablers have followed. I would say the only challenge that remains is for fintech companies in terms of licence and regulations. Government regulations are making it easier by offering sandbox licences, but other than that, the regulatory framework is quite limited. The process is very slow but will happen one day I am sure.
Exits are happening, but still at a low rate where selling the start-up is difficult. There are more investors from outside the region looking at the region, which is positive, and the big regional conglomerates have also started to acquire start-ups so the trend is good but the numbers are still behind.
We have good start-ups and we want to sell them, but buyers are scarce. We should expand our horizon of buyers towards the global market, such as China or the US.
MENA region’s GDP to surge by over 3x by 2050 according to Gulf Capital White Paper as reported by SME10X . In effect, the oil and gas trade revenues allow considerable financial power and a strategic position on the international scene for those exporting countries but also a source of vulnerability for their economies, especially in the aftermath of not only this recent COP26 but to also the ensuing COPs Let us nevertheless look at this prediction of this white paper.
MENA region’s GDP to surge by over 3x by 2050
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A New report quantifies unprecedented growth opportunities across “Ascending Asia” which is set to drive 40 percent of global consumption by 2040.
Gulf Capital has released a white paper, “Bridging West and East Asia: The Investment Case for Ascending Asia”, that outlines the significant future growth of the Asian economies and the growth in the intra-regional trade and investment flows between West Asia, including the GCC, and East Asia.
The study, jointly published by Gulf Capital and Dr Parag Khanna, Founder and Managing Partner of FutureMap, reveals that the MENA region is expected to increase its GDP by over 3x by 2050, the ASEAN region is expected to grow by 3.7x, and India by 5x. This turbo-charged growth is in sharp contrast to the projected slower growth of the European and US economies at only 1.5x and 1.8x respectively for the same period.
Within greater Asia, the GCC and Southeast Asia are two ascending regions with rising youth populations where demographic and technological shifts will generate a significant expansion of the services sectors. Across these societies, rising affluence and consumption will drive business expansion, corporate profits, and higher valuations. Longer-term reforms including capital account liberalization and accelerated privatization will unlock fresh investment inflows into new Asian listings.
Dr Karim El Solh, Co-Founder and Chief Executive Officer of Gulf Capital, said: “The unprecedented growth opportunities presented by the emergence of ‘Ascending Asia’ have never been greater. The strong macro-economic fundamentals, a growing middle class and youth population, increasing GDP per capita, rapid adoption of technology, and growing intra-regional trade and investment flows will only strengthen the case for the Asian economies. We are fortunate to be investing and operating across Ascending Asia from the GCC to the Near East and Southeast Asia, where we have acquired a large number of companies in the past.”
Additionally, East and West Asia’s deepening trade and investment networks indicate that capital, companies, and consumers will increasingly traverse the Indian Ocean and strengthen ties along the new Silk Roads, stitching the region into a whole greater than the sum of its parts.
El Solh concluded, “Against the backdrop of the evolving megatrends of deepening trade links, sizable FDI flows, greater political cooperation, and the fastest growing consumer sector, Gulf Capital is ideally poised to capitalize on this once in a generation cross-border opportunity. It is our firm belief that if investors want to capture rapid growth over the next three decades, they need significant exposure to the fastest growing industries across Ascending Asia.”
SCOOPEMPIREBusiness provides a Guide for MENA Investors in its Essential Tips for Investing in Gold and Silver. Or is it another way to providing a safe door out of the increasingly Fossil Fuels divestment world trends? Let us find out.
A Guide For MENA Investors: Essential Tips For Investing In Gold And Silver
Precious metals such as gold and silver are fascinating investment asset classes, which also offer the benefits of stability and predictability to traders across the globe.
For example, despite being separated by a number of key differences, both gold and silver see demand and price points soar during specific times, in which each asset is heavily influenced by an array of macroeconomic factors.
Interestingly, precious metals are particularly important for MENA populations, both culturally and from a wider investment perspective. However, when is the best time to invest in gold and silver? We’ll explore this question further below!
The Importance of Precious Metals Amongst MENA Populations
While China and India remain the dominant buyers of gold and precious metals in the global marketplace, there’s no doubt that certain MENA countries are becoming increasingly influential within this space.
To provide some context, China and India acquired more than 364 tonnes of gold jewellery alone during the first quarter of 2015, with this number having increased incrementally through 2019.
However, while the US trails behind in third place in terms of precious metal procurement and consumption, MENA nations are beginning to threaten the established status quo within the industry.
Make no mistake; Saudi Arabia and the UAE are now established as the fourth and fifth biggest buyers of gold in the world, with this trend increasingly driven by cultural elements and age-old traditions (particularly those pertaining to religious celebrations and weddings).
The Economic Case for Gold and the Best Time to Invest
In the MENA region, gold purchases are also commonly completed as an investment, particularly given the increasingly uncertain economic climate that persists across the globe.
The world has seen two significant economic crises during the last decade. For example, in the form of the great recession, and the financial fallout from the coronavirus pandemic.
As a result, gold has never been more fashionable and relevant as an alternative investment, thanks to its reputation as a secure store of wealth and viable hedge against uncertainty, and the inflationary pressures of fiat currencies.
While silver boasts similar qualities, it boasts far greater industrial usage, and is far more likely to increase in value as countries move out of a recession. This point of difference underpins the so-called “gold-silver ratio,” which encourages investors to hedge their bets in both metals, by taking a short position in either gold or silver (depending on live prices and the prevailing economic climate).
As a general rule, however, it’s best to purchase gold during times of economic tumult, whilst transitioning to silver as the global economy and demand begins to improve.
There are also plenty of options in terms of how to trade gold or silver, aside from physical procurement and leveraging these precious metals as tangible stores of wealth.
You can also trade precious metals through derivative products such as contracts-for-difference (CFDs), which are ideal from a practical perspective, as physical gold trading is incredibly inefficient and non-cost-effective.
Through CFDs, you can also gain flexibility by profiting through gold and silver price speculation, as you can simply trade price movements and fluctuations that occur on a daily basis.
This is often particularly beneficial during times of economic flux, as countries begin to move out of a recession, and real-time prices remain especially vulnerable to the macroeconomic climate.
Mohamed A. El-Erian writes that ensuring a Stronger and Fairer Global Recovery is required for a better and more satisfactory tomorrow. The two ginormous economies of the World would lead it that way. Here is what he says about that.
Ensuring a Stronger and Fairer Global Recovery
2 April 2021
Although tough trade-offs are sometimes unavoidable, there is a way for policymakers to maintain a robust global economic recovery in 2021 and beyond while simultaneously pulling up disadvantaged countries, groups, and regions. But it will require both national and international policy adaptations.
CAMBRIDGE – An old joke about tricky trade-offs asks you to imagine your worst enemy driving over a cliff in your brand-new car. Would you be happy about the demise of your enemy or sad about the destruction of your car?
For many, the shape of this year’s hoped-for and much-needed global economic recovery poses a similar dilemma. Absent a revamp of both national policies and international coordination, the significant pickup in growth expected in 2021 will be very uneven, both across and within countries. With that comes a host of risks that could make growth in subsequent years less robust than it can and should be.
Based on current information, I expect rapid growth in China and the United States to drive a global expansion of 6% or more this year, compared to a 3.5% contraction in 2020. But while Europe should exit its double-dip recession, the recovery there will likely be more subdued. Parts of the emerging world are in an even tougher position.
Much of this divergence, both actual and anticipated, stems from variations in one or more of five factors. Controlling COVID-19 infections, including the spread of new coronavirus variants, is clearly crucial. So is distributing and administering vaccines (which includes securing supplies, overcoming institutional obstacles, and ensuring public uptake). A third factor is financial resilience, which in some developing countries involves preemptively managing difficulties from the recent debt surge. Then come the quality and flexibility of policymaking, and finally whatever is left in the reservoirs of social capital and human resilience.
The bigger the differences between and within countries, the greater the challenges to the sustainability of this year’s recovery. This reflects a broad range of health, economic, financial, and socio-political factors.
In a recent commentary, I explained why more uniform global progress on COVID-19 vaccination is important even for countries whose national immunization programs are far ahead of the pack. Without universal progress, leading vaccinators face a difficult choice between risking the importation of new variants from abroad and running a fortress economy with governments, households, and firms adopting a bunker-like mindset.
Uneven economic recoveries deprive individual countries of the tailwind of synchronized expansion, in which simultaneous output and income growth fuels a virtuous cycle of generalized economic well-being. They also increase the risks of trade and investment protectionism, as well as disruptions to supply chains.
Then there is the financial angle. Buoyant US growth, together with higher inflation expectations, has pushed market interest rates higher, with spillovers for the rest of the world. And there is more to come.
European Central Bank officials have already complained about “undue tightening” of financial conditions in the eurozone. Rising interest rates could also undermine the dominant paradigm in financial markets – namely, investors’ high confidence in ample, predictable, and effective liquidity injections by systemically important central banks, which has encouraged many to venture well beyond their natural habitat, taking considerable if not excessive and irresponsible risks. In the short term, high liquidity has pushed cheap funding to many countries and companies. But sudden reversals in fund flows, as well as the growing risk of cumulative market accidents and policy mistakes, could cause severe disruptions.
Finally, uneven economic recovery risks aggravating the income, wealth, and opportunity gaps that the COVID-19 crisis has already widened enormously. The greater the inequality, particularly with respect to opportunity, the sharper the sense of alienation and marginalization, and the more likely political polarization will impede good and timely policymaking.
But, whereas the old joke hinges on the unavoidability of tough trade-offs, there is a middle way for the global economy in 2021 and beyond – one that maintains a robust recovery and simultaneously lifts disadvantaged countries, groups, and regions. This requires both national and international policy adaptations.
National policies need to accelerate reforms that combine economic relief with measures to foster much more inclusive growth. This is not just about improving human productivity (through labor reskilling, education reforms, and better childcare) and the productivity of capital and technology (through major upgrades to infrastructure and coverage). To build back better and fairer, policymakers must now also consider climate resilience as a critical input for more comprehensive decision-making.Sign up for our weekly newsletter, PS on Sunday
Global policy alignment also is vital. The world is fortunate to have benefited initially from correlated (as opposed to coordinated) national policies in response to the COVID-19 crisis, with the vast majority of countries opting upfront for an all-in, whatever-it-takes, whole-of-government approach. But without coordination, policy stances will increasingly diverge, as less robust economies confront additional external headwinds at a time of declining aid flows, incomplete debt relief, and hesitant foreign direct investment.
With the US and China leading a significant pickup in growth, the global economy has an opportunity to spring out of a pandemic shock that has harmed many people and, in some cases, erased a decade of progress on poverty reduction and other important socio-economic objectives. But without policy adaptations at home and internationally, this rebound could be so uneven that it prematurely exhausts the prolonged period of faster and much more inclusive and sustainable growth that the global economy so desperately needs.
Traditional construction methods were no match for the earthquake that rocked Morocco on Friday night, an engineering expert says, and the area will continue to see such devastation unless updated building techniques are adopted.
A Bookshop in Algiers by Kaouther Adimi Algerian fiction Original title Nos Richesses
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