Practical analysis for investment professionals
04 May 2016

Amid Low Oil Prices, MENA Charts a Way Forward

As Oil Prices Stay Lower for Longer, MENA Charts a Path Forward

In early 2015, an ongoing slump in oil prices had experts discussing whether the decline was structural or cyclical in nature. Later that year, headlines announced that sovereign wealth funds managed by oil-rich countries were selling some of the assets in their portfolios, possibly in an attempt to fill gaps in national budgets hit by low commodity prices. Conversations about diversifying into non-petroleum–based sources of revenue had been ongoing in the Middle East and North Africa (MENA) region for some time, but at the start of 2016, Saudi Arabia announced that it would consider selling shares in the state-owned Saudi Aramco oil company.

When more than 300 investment professionals gathered in Bahrain for the 2016 Middle East Investment Conference, discussions around new drivers of economic growth, transitioning away from oil production, and increasing entrepreneurship and the growth of small and medium enterprises had gained greater relevance.

Ahead of the conference, CFA Institute published the results of its sixth annual Middle East Societies Market Sentiment Survey, which asked investment professionals throughout the region about key financial issues. Respondents to the survey felt that heightened uncertainty would have negative effects on the financial markets over the coming year. They also raised concerns about the introduction of a value-added tax (VAT) that could spur inflation in the region and increase the cost of doing business. (You can watch Bahrain TV’s Arabic-language coverage of the survey results.)

At the conference itself, speakers addressed the region’s economic issues directly. Yousef Abdullah Al-Benyan, the vice chairman and CEO of SABIC, discussed how the private sector can play a role in generating jobs for the region’s growing population. Florence Eid-Oakden, CEO and chief economist of Arabia Monitor, talked with Fadi Al Said, CFA, director and portfolio Manager at Lazard Gulf Ltd., about the region’s changing economic foundations, including the challenges and opportunities presented by increased volumes of trade with China. And Martyn Davies, managing director of emerging markets and Africa at Deloitte Frontier Advisory, revisited some of those ideas during his presentation discussing the Africa-Arabia-Asia arc economy.

For conference insights, and thoughts from delegates at the event, you can review the social media highlights below:

#MEIC16 – CFA Institute Middle East Investment Conference 2016

13 April 2016, Manama, Bahrain

Storified by CFA Institute· Thu, Apr 14 2016 19:33:10

Thank you to everyone who attended #MEIC16, or followed online, and posted updates. Enjoy the gala evening event! https://t.co/hJTajWfIUTCFA Institute EMEA
Lord Adair Turner, Chairman, Institute for New Economic Thinking
Many emerging market countries have only been able to keep growth going by increasing private non-financial debt: @AdairTurnerUK #MEIC16Lauren Foster
"In 4 years, China poured more concrete than the USA had done in the entire 20th century" – Lord Turner #MEIC16 @CFABahrainمعز
.@AdairTurnerUK: There will be ‘helicopter money’ in Japan. Govt debt will never be repaid in the normal sense. #MEIC16Delme Thompson
#MEIC16 @AdairTurnerUK debt shift from private sector to governments in Japan over past 25yrs, happening in Western markets todayMahmoud
We live, as the IMF has put it, in a world of subdued demand and diminished prospects — @AdairTurnerUK #MEIC16Lauren Foster
Christof H. Rühl, Global Head of Research, Abu Dhabi Investment Authority · Boutros Klink, Chief Executive Officer, Bahrain & GCC, Standard Chartered Bank · Anthony, Mallis, Principal, Mallis & C0
#MEIC16 Panel:Simplifying banking structures likely to be more important to MENA capital market development, than stock exchanges.Delme Thompson
The future of MENA #CapitalMarkets panel discussion at #MEIC16 https://t.co/03KhxYoFRVCFA Institute EMEA
Martyn Davies, Managing Director, Emerging Markets & Africa, Deloitte & Touche
#MEIC16 @martyndavies888 of @deloitte highlights the East Africa to South Asia #economic arc https://t.co/OQrk7KVq17Javier Cervino
Africa-Arab-Asia arc economics could be Goldman Sachs new fund after the failure of BRICS #MEIC16Ibrahim Al Mulhim
@Dr Martyn Davies : QE led to false economics exacerbating effects in commodity driven economies. Countries have to work to grow! #MEIC16Dom Silva
Davies: Commodity prices have not crashed – they have normalized. 2007 growth rates and prices were not normal. #MEIC16Delme Thompson
When every other country was growing, In 2007 three countries GDP did not grow, Zimbabwe, Congo & Fiji, Martin Davies #MEIC16MANI L CFA
Sobering stats about decelerating world #economy by @martyndavies888 of @deloitte #secularstagnation #MEIC16 https://t.co/ScIRu5vHufJavier Cervino
Emerging markets or submerging markets ! Dr Martyn Davies #MEIC16M.R. Raghu, CFA FRM
.@Deloitte’s @martyndavies888 50/50 whether SA economy is downgraded to junk status this summer. #MEIC16Delme Thompson
Chester Santos, US Memory Champion, International Man of Memory
Ever forgotten an important clients name? Chester Santos, international man of memory about share some tips #MEIC16 https://t.co/YWu91t25d9Delme Thompson
Memory guru @Chestersantos rocking #MEIC16 with an amazing demonstration of total memory recall. Great stuff Chester! #MEIC16Dom Silva
Unbelievable! Chester Santos recalls names of dozens of strangers . I can’t even remember names of relatives . But that’s good, no??#MEIC16Rajiv Bishnoi राजीव

Chester Santos memorised this immediately. I only remembered the 1st 12 digits 🙁 and forgot it now too.

#MEIC16 https://t.co/KEDhvoW8iBمعز

Global Growth and Investment Strategies in a World of Technological and Demographic Shifts

Dambisa Moyo, Global Economist and Author
‘Four key headwinds to economic growth: technology, demographics, income inequality, resources’ @dambisamoyo #MEIC16 https://t.co/bL8No1Ecm3CFA Institute EMEA
.@dambisamoyo Income inequality in the US is the same as in China. No longer a ‘developing market’ issue! #MEIC16CapitalMarketsAcad
Author @dambisamoyo in #MEIC16: "The World economy needs to grow by 7% p.a. to dramatically impact peoples’ lives but it only manages 2.5%."Attila Koksal
Immigration can fill the gap of population growth in different region, but integration is an issue #MEIC16MANI L CFA
Since the beginning of life on earth 108 billion inhabited (living and dead)! Today we have 7.5b living Dambisa Moyo #MEIC16M.R. Raghu, CFA FRM
.@dambisamoyo: India pop grows by 1 million a month. Acceleration rate of global pop growth higher now than any time in history. #MEIC16Delme Thompson
.@dambisamoyo picks China over India as Chinese policy makers have a clear view and agenda in place. #MEIC16Craig D’Souza, CFA
#MEIC16 @dambisamoyo I would choose to invest 100% in China for 10 years given that the Chinese have a clear view of their agenda and targetMahmoud
Florence Eid-Oakden, CEO and Chief Economist, Arabia Monitor · Fadi Al Said, CFA, Director, Portfolio Manager/Analyst, Lazard Gulf Ltd.

"Equity earnings were effectively subsidised in the GCC during the oil boom" – Fadi Al Said, CFA

#MEIC16 @CFABahrain @CFAinstituteمعز

GCC markets going to be challenging for investors. Current recovery is temporary, Fadi Al Said #MEIC16MANI L CFA
Winners are those that put their weight behind job creation -Florence #MEIC16M.R. Raghu, CFA FRM
Highlighting Sino-MENA increasing trade by Dr. Florence Eid-Oakden of @ArabiaMonitor #MEIC16 https://t.co/I2B2ZUzSwbJavier Cervino
.@ArabiaMonitor’s Florence Eid-Oakden: Sino-MENA the only area where we see double digit growth in near term. #MEIC16Delme Thompson
Iran: a regional game changer, not just for oil markets — Florence Eid-Oakden @ArabiaMonitor #MEIC16Lauren Foster
Willis Sparks, Director, Global Macro, Eurasia Group
Willis Sparks, Director, Eurasia Group talks about US Politics in #MEIC16 https://t.co/q6ADzkRmcwAttila Koksal
On oil prices, the short answer is “lower for longer”, says Willis Sparks of @EurasiaGroup #MEIC16Lauren Foster
Oil production more sensitive than ever to #oilprices due to new USA swing role Willis Sparks @eurasiagroup #MEIC16 https://t.co/l4ihbHpo9aJavier Cervino
Upward drive for oil prize has to come from demand side, particularly from ChinaWillis Spark #MEIC16MANI L CFA
Sparks: 2017 crucial yr for #China leadership as 5 key figures replaced. Even ‘appearance’ of instability has serious consequences #MEIC16Delme Thompson
Largest economy in world (#China soon) is a poorly understood developing economy – unprecedented situation & big risk source -Sparks #MEIC16CFA Society SA
Markets like good news dislikes bad news but hates uncertainty Willis Sparks Eurasia #MEIC16M.R. Raghu, CFA FRM
Majority of delegates (64%) at #MEIC16 say geopolitics will play an increased role in terms of market prices over the next 12 monthsLauren Foster
Yousef Abdullah Al-Benyan, Vice Chairman and CEO, SABIC
The private sector, through SMEs, will play a key role in generating jobs for the growing young population in MENA #MEIC16Lauren Foster
Mr Yousef Abdullah Al-Benyan, CEO of SABIC depicts the importance of population growth in MENA region. #MEIC16 https://t.co/7dQo5iBUz2Attila Koksal
SMEs in MENA continue to face challenges on three fronts: business development, management capabilities, and technical capabilities #MEIC16Lauren Foster
We should transfer from entitlement mentality to leading mentality. Yousef Abdullah Al-Benyan Sabic CEO at #MEIC16M.R. Raghu, CFA FRM
.@SABIC downstream strategy to promote #SMEs presented by Mr. Yousef Abdullah Al-Benyan at #MEIC16 https://t.co/OItJdLIBpbJavier Cervino
Wonderful keynote address on Igniting MENA’s Engine of Entrepreneurship by @SABIC CEO Mr. Yousef Abdullah Al-Benyan to kick off the #MEIC16Craig D’Souza, CFA
Getting ready for the #MEIC16 with a media briefing hosted by @CFABahrain President @msnawar https://t.co/H69xFzoAsmCFA Institute EMEA
Lindsey Matthews, CFA, Head of Risk, UBS Delta
The #MEIC16 pre-conference workshop kicks off with @lindseymat from @UBS discussing Quantifying Risk & Performance https://t.co/HymAwKu0IFCFA Institute EMEA
#MEIC16 on 13 April 2016 at The Ritz-Carlton, Bahrain – Register now https://t.co/xfEehQdiYz https://t.co/MnybtAohKvCFA Society Bahrain
I’m headed to Bahrain for the 2016 Middle East Investment Conference https://t.co/lyrHKnQ1eq Follow the action with #MEIC16 @CFABahrainLauren Foster
Dambisa Moyo Identifies a Key Challenge and Opportunity for Prosperity https://t.co/DsEM8gdiyQ via @CFAInstituteMr. Smith
@CFAinstitute Thank you for hosting #TwitterChat today. Look forward to speaking at the #MEIC16 event on April 13th: https://t.co/epr6LrwNS9Dambisa Moyo
.@CFABahrain President @msnawar interview with @bahraintv ahead of the Middle East Investment Conference #MEIC16 https://t.co/GYpFc6WeO4CFA Institute EMEA
Attend #MEIC16, the Middle East #Investment Conference https://t.co/DkioWMycUQ   13 April in Bahrain https://t.co/qcVTGqIoeQCFA Institute Events

This article originally appeared on the Middle East Investment Conference blog.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Photo courtesy of George Raphel.

About the Author(s)
Peter M.J. Gross

Peter M.J. Gross is an online content specialist for CFA Institute, where he has managed blogs for the CFA Institute Annual Conference, European Investment Conference, and Middle East Investment Conference. Previously, he worked at Hampton Roads Publishing Company and at MFS Investment Management. Mr. Gross holds a BA degree from Connecticut College.

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