Emerging trends in MENA and around the globe
Castlereagh’s Market Monitor collection offers top-tier news and analysis of future trends and buried topics in business, geopolitics, energy, finance and more. Utilising on-the-ground sources and including commentary from some of the region’s top analysts and policy experts, gain a fresh perspective on developments in the Gulf, Middle East, North Africa and further afield.
India has been extremely successful in attracting investment into its domestic renewable energy sector, with efforts underpinned by strong government support. That said, concerns over tariff feasibility, grid bottlenecks and the leadership’s lingering commitment to coal-fired power are underappreciated risks that have the potential to dampen investor sentiment and temper the country’s renewable expansion.
The multi-modal International North-South Transport Corridor (INSTC) has the potential to boost Eurasian trade connectivity by linking Russia to the warm waters of the Persian Gulf and Indian Ocean. Only 160 km of track remains to be laid in Iran’s northwest for Mumbai to be connected to the Baltic Sea. However, geopolitical barriers and the fragile political commitment of member states risk putting the network into a state of arrested development and have raised questions about the project’s economic viability. Meanwhile, Russia is strengthening its access to diversified regional transit corridors in West Asia.
Recent news on ports and shipping in the Gulf has offered some stark contrasts. On the one hand, a landmark reached in Qatar’s project to equip Doha port to receive giant cruise ships, and the announcement of a slew of deals for Chinese companies to invest in projects serving ports in the UAE and Saudi Arabia; on the other, a further downturn in container traffic at Dubai’s Jebel Ali and Mina Rashid ports – and the ramping up of tensions in the Strait of Hormuz with Iran’s seizure of a UK-flagged tanker on its way to pick a cargo of petrochemicals in Saudi Arabia.
The region is facing a triple challenge: Emerging climate patterns herald a future where water resources lie below sustainable levels; rapid population growth is threatening to imperil food security; and over reliance on oil is curtailing governments’ ability to act. The situation requires new thinking on sustainability, scalable technological adoption and radical agricultural transformation.
Ethiopia’s ambitious industrialisation strategy is expected to create opportunities in three main areas: power and distribution, logistics infrastructure and export-orientated manufacturing. While growth will be rapid, obstacles will prevent full realisation of government targets. Most notably, opposition to political reform and social unrest look set to challenge policy continuity.
Iran’s limited use of violence in the Gulf has caused US President Donald Trump to adopt a more cautious posture towards Tehran. However, conflict is likely to erupt again as long as the economic sanctions remain in place. Iran has begun violating the Joint Comprehensive Plan of Action (JCPOA), with the aim of pressuring the international community to break the blockade and may even be willing to risk a “limited” conflict. In the US, while the prospect of elections in 2020 is likely prevent the Trump administration from hardening its stance in the short run, if it wins a second term and Iran continues its provocations, the anti-Iran hawks in the Cabinet will have maximum flexibility to make the case for military action.
The start-up in June of a large new car plant by France’s PSA Group in Kenitra, north of Rabat, has underlined Morocco’s unique position in the MENA region as the dominant automotive producer and exporter. Its success contrasts with the struggles other countries in the region are facing in developing their car industries. Iran’s efforts, in which PSA has also been involved, have been hobbled by sanctions; Egypt’s auto sector is fragmented, and focused on the domestic market; and Saudi Arabia’s aspirations recently received a setback with the breakdown of talks with Toyota about setting up manufacturing operations in the kingdom.
Russia has successfully leveraged its influence in Syria to become an important, if not central, power broker in the Middle East. Nowhere was that more visible than in the meeting between the Israeli, US and Russian national security advisors in Jerusalem at the end of June 2019. While nothing concrete emerged from the talks, it was clear from the security chiefs’ statements that all three countries are setting the stage to stabilize the region, drawing a line under the tectonic shifts that have transformed the Middle East in the last decade.
A lot more is at stake in the restructuring of Saudi Aramco than just its corporate strategic success. The future viability of the state of Saudi Arabia depends on the national oil company (NOC) cultivating a vibrant industrial sector. At the same time, the government’s success in achieving its broader economic development goals will guarantee the NOCs’ strategies are sustainable. Globally, most NOCs have failed to meet strategic objectives, either because their governments undermined their efforts or because the NOCs were unable to deliver the necessary support to their owners. The challenges are great for Saudi Aramco, but it has a developed skills base, global experience and, of course, large resources to exploit.
Saudi Arabia and the UAE are focusing on using advanced technology to foster economic growth as part of their broader development plans. The success of these initiatives will depend heavily on their ability to attract foreign investment. The UAE stands on a strong footing in this regard, while Saudi Arabia will need to make considerable progress in business environment reform and improving human capital.
Morocco will be a bright spot for investment in the MENA region over the next five years. Opportunities will be underpinned by solid underlying economic growth and a competitive business environment. Three particularly promising areas are export-orientated manufacturing, renewable energy and tourism.
Turkey’s dispute with the US over its acquisition of long-range missile defence system S-400 is not a one-off: the country’s ambition to become more self-reliant in military hardware and security is a point of contention between it, the US and, more broadly, NATO....