It is said that from adversity comes opportunity. The strength of character needed to face serious issues, from political unrest to wildly disturbed commodities markets, is undeniable. Yet the Middle East, North Africa and Turkey (MENAT), as a region, has looked upon such issues and is taking a bold stance: it means business.
Take Egypt, a country trying to turn a corner after recent economic and political challenge. In March 2015, a Presidential Decree was issued introducing a ‘one-stop shop’ system enabling investors to obtain permits and licenses directly from the General Authority for Investment and Free Zones (GAFI) instead of multiple government entities.
By facilitating the investment process, such as by providing more effective services, the decree aims to attract more investments in Egypt. They will find new corporate rights, protections, incentives and guarantees in certain regions and sectors (especially around importation company ownership and management).
It’s a simple move, yet taken in difficult circumstances it demonstrates that Egypt is open for business, especially for foreign investors. Satisfied that it is making progress, and although exchange controls remain for certain goods and products, the Egyptian government recently announced the free-floating of the Egyptian pound. While the move devalued the currency, Egypt is now firmly in the global market place.
Turkey too has seen unrest in recent times. The future of relations with the EU is uncertain and there are many domestic security issues. Under the leadership of President Recep Tayyip Erdoğan, Turkey has become the world’s 16th largest economy, with an annual GDP growth rate between 2002 and 2015 of 5.9 per cent.
Turkey continues to implement commercial reforms in areas such as FDI and taxation. It is pushing ahead with ‘ease of doing business’ reforms, drafting simpler regulations for businesses and stronger protections of property rights. It also now offers a number of manufacturing, employment, technology, R&D and services incentives which has driven FDI inflows of USD165 billion from 2002 to 2015.
Turkey’s physical location places it as a key East/West connecting point, through road, rail, sea and air. This naturally gives it prime status as a hub for manufacturing and export, a fact global companies such as Toyota, Ford and Nestlé will attest.
Of course, MENAT intra-regional support is massively evident. Some USD9 billion of GCC FDI flowed into Turkey as of 2015. This helped encourage USD16 billion of GCC bilateral trade in 2016, including USD10 billion of Turkish export and USD6 billion of GCC imports.
Of all the GCC economies, KSA is the largest. It too has seen a major programme of diversification and reform in recent years, mindful of the volatility of its key commodity, oil.
With the construction of multi-mode transportation links, economic and commercial zones, technology centres and sustainable energy generation plants all coming to fruition over the next decade or so, the country is taking bold steps to wean its economy off the black gold. But it too is resorting to structural reform and fiscal consolidation: it knows it has to.
MENAT exporters lost USD360 billion in oil revenue in 2015. Across the region’s oil-producing nations this put huge pressure on domestic finances. KSA was forced to draw down foreign reserves and tap Saudi banks with local currency bonds to plug the deficit.
Shocked into action, a major spending review was ordered. By April 2016, Saudi Vision 2030 was unveiled. This included plans to grow the private sector to 65 per cent of GDP from 40 per cent, taking in government services, healthcare, municipal services, housing, finance and energy sectors.
The Vision is billed as a permanent cure for oil-dependency. Higher oil prices seen in recent months have eased pressure on government finances but, according to IMF’s Middle East office, this does not change the outlook for oil prices or the implications for all oil exporters in the region: this is for the long-term.
Balancing the region’s books is seeing the arrival of new business-friendly policies and economic reforms. The vision-driven leadership is capable of rapid decision-making which is leading to the quick emergence of major high-value opportunities
Clearly it is not all plain sailing - transition on such scale rarely is. But this is an opportunity for the region, and for those seeking to be a part of this phase of development, rest assured that MENAT means business.