Economic Prosperity to Come to MENA

By: Saud Masud

After losing a quarter of its market value within the first 30 days of 2011 the Egyptian stock market is at a standstill and it appears so is the rest of Egypt. In the last few weeks the socio-political turmoil sparked in Tunisia, a country of 10 million, quickly spilled over to Egypt, the MENA (Middle East and North Africa) region’s largest population at 84 million. Now fears of contagion appear to be spreading over to the Levant (Jordan, Lebanon, Syria, Israel and Palestine) and the Gulf Cooperation Council (Saudi, UAE, Oman, Kuwait, Bahrain and Qatar). While pundits around the world are busy gauging near term impact of political uncertainty and brain storming what-if scenarios and alternatives to the status-quo, there is a bright future ahead. Today it is difficult to see past the tear gas, vandalism, deaths and injuries from riots, loss of income from business’ shutdown, etc., but the smog will clear as it always does and people will continue to eat, clothe, work, travel, live and continue to push for a better future.

But first let’s examine why Tunisia, Algeria and Egypt land in the spotlight, or why North Africa? The MENA belt is home to roughly 300 million people equivalent to the US and we find North Africa accounts for 65% of region’s population but only 32% of GDP. North Africa’s GDP per capita is $5,300, only one-third that of the Arab world average of $16,000. In other words more people with relatively lower incomes are living in North Africa. Furthermore MENA has several countries with poverty levels averaging around 20% of the population, inflation rates north of 10% and average unemployment near 15%. To top it all, there is youth and a lot of it! MENA has also one of the youngest populations worldwide with a median age of less than 26 years, 10-20 years younger than various developed countries.

So where is the opportunity in this chaos? The secular story is strong with a young population growing twice as fast as the world average, urbanizing and adopting modern trends in technology, social networking, fashion, food consumption, media, etc., and a growing middle class creating healthy and sustainable demand trends across all economic sectors. The middle class has potential to be significantly larger provided domestic spending and investments trickle down to the people on the streets and not just get netted at society’s top echelon. Given the region is predominantly Muslim there is also a high potential for $2 trillion global shariah-compliant market with Islamic finance contributing nearly $1 trillion, halal food and related products (cosmetics, pharmaceuticals, fashion, etc.) the remainder. Over the next decade personal consumption in the broader MENA region is expected to double from $1.5 trillion to $3 trillion, oil revenues to come in around $8 trillion provided oil prices stay between $80-$85 (near $100 per barrel currently) and tourism expected to rise from 110 million visitors to 175 million. Demand gaps are wide and across most sectors including education, energy, health care, agriculture, banking, communications and infrastructure. Bottom line is the region is a classic emerging market and economic bloc that has the potential to outpace developed economies for years and decades to come.

Though near term uncertainty is high and understandable I am now more inclined towards an optimistic future for Egypt and the region in the long run. In my opinion the current crisis though unprecedented is a uniting factor for many countries in the region and may inspire managed change with more political organization and maturity in order to better lead the region to its true social and economic potential.