Middle East and North Africa
Key Emerging Markets: Qatar, UAE, Oman, Kuwait, Algeria, Tunisia
Major Industries: Oil Production, Petroleum, Natural Gas, Tourism, Finance and Real Estate
The term Middle East was coined in 1902 by Captain Alfred Thayer Mahan, an American naval officer and expert strategist. Mahan used the term Middle East to describe the area between the Turkish-dominated Ottoman empire (the Near East), the expanding Russian empire in Central Asia, and the British colony of India (the Far East). Over time, various countries have been included and excluded from the region with the occurrence of wars and political upheavals. Since then, Middle East has gradually come to incorporate the Near East and North Africa as well.
The Middle East is situated at the point of intersection of three continents – Asia, Africa and Europe. Historically it was the economic and cultural crossroads between these three continents, with strategic waterways that allowed them to establish trade routes with one another. Today its geographical location accords the Middle East significant military importance for world powers interested in gaining greater influence over the region and its adjacent areas.
Stability of Region
Since the onset of the Arab Spring uprising three years ago, the Middle East and North Africa (MENA) region has been rife with protests, revolutions and war. During periods of prosperity, deep-rooted issues such as the sorely-lacking voice and accountability of the people lay latent. Once the problem of job shortages grew worse, the young people began revolting to unleash their dissatisfaction over the curtailment of their personal liberties.
Most notably in Syria, there appears to be no end in sight to the civil war sparked by revolutions started in 2011. Fuelling the stalemate on one end is Iran, despite its recent rapprochement with the U.S., continues to provide financial support for the incumbent Assad regime; on the other side of the table, the Gulf Cooperation Council (GCC) countries continue to furnish the Sunni opposition with cash and armaments. Iraq looks set to topple back into political turmoil, with the jihadist militant group, the Islamic State of Iraq and the Levant (ISIS), slowly gaining control over Iraq and Syria.
Apart from the apparent risk to the regional stability that ISIS threatens to bring, other post-Arab Spring countries continue to grapple with the fall-out from the revolutions, and struggle for the political future of the region – with the GCC Sunni monarchies on one end and Shi'a Iran on the other.
Oil forms the backbone of many MENA countries, with the region holding more than 75% of the world's total oil reserves. The oil-rich GCC countries, Algeria and Libya earn enormous incomes from the sale of oil and gas, while the other MENA countries earn their incomes through far less profitable sources. Last year approximately 70% of the region's USD2trn GDP was accounted for by the 13 oil-exporting countries. As a result, there is a significant disparity between the national incomes of countries that export and import oil and gas. In 2012, Yemen, which remains the poorest country in the region, had a GDP per capita of less than USD2,000, while GCC countries had GDP per capitas ranging from USD20,000 to USD90,000.
The Arab Spring has worsened this disparity, where the countries most affected by war saw stagnating economies, while the more stable (and typically, more oil-rich) countries have boomed on the back of high oil prices. To ensure that the stability within their countries is protected from the spreading unrest, GCC countries splurged on enormous public-sector salary and pension rises, massive infrastructure and housing programs, as well as increased subsidies. As a result, such spendings have taken an enormous toll on the GCC national budgets, and even tipped Oman and Bahrain into fiscal deficits in 2014. In response, the GCC governments are beginning to take steps to rein in their uncontrolled expenditures and embrace sustainable growth through economic reform.
Political tensions will continue to be the main roadblock of progress for most MENA nations. On the other hand, growth potential for politically stable countries like the GCC states and Algeria are more optimistic. Yet, these energy exporting nations must continue their diversification efforts or risk the full-blown effects of volatile prices in an uncertain global economic climate. In addition, youth unemployment continues to be a recurring problem for oil-rich nations as the precious resource grants wealth but not jobs. Energy-rich states must initiate and support private sector growth in order to foster job-creation and to build a more robust economy for the future.