With the ongoing turmoil in the Middle East/North Africa (MENA) region, your clients are undoubtedly wondering what effects the conflicts might have on their personal portfolios and on the U.S. economy and markets. Not all MENA countries are created equal when it comes to commodities, exports, and other trade and economic issues. Some, like Saudi Arabia, are major exporters to the United States. Others, like Egypt, are large recipients of American largesse in the form of aid (particularly military aid in Egypt's case).
We believe that an ounce of knowledge about these countries might be better than a pound of having to explain to clients why the mess in Libya doesn't directly affect the oil supply in the U.S., which might allow you to explain why oil prices and what clients pay at the pump for gas, for instance, don't always follow the strict laws of supply and demand.
To that educational end, we’ve taken a look at some of the salient points of economic, trade and political information for a number of the countries you might be asked about by clients: Bahrain, Egypt, Libya, Saudi Arabia, Tunisia and Yemen.
Talking points for your clients–and knowledge for you–on the economic and markets impact of regime change in North Africa and the Mideast.
Bahrain
Oil and Islamic Banking
Protesters and a workers’ general strike has brought Bahrain’s once-vibrant economy to a standstill, and fears of the unrest prompted other Gulf nations to send in troops the week of March 17 to support the regime of King Hamad bin Isa al-Khalifah.
Bahrain, with declining oil reserves, began a successful shift to focus on banking in the 1980s. It has also built up its petroleum refining and processing business. Its natural resources include oil, natural gas, fish, and pearls.
Prior to the most recent anti-government protests, the country had improved its communication and transportation infrastructures, giving Bahrain the edge in attracting multinational companies with operations or business in the Persian Gulf region. A free trade agreement with the U.S. also brought new opportunities. Nonetheless, the nation is still substantially focused on oil. Petroleum production and refining make up more than 60% of Bahrain’s export receipts, 70% of government revenues, and 11% of GDP, according to the CIA Factbook. Its second largest export after oil is aluminum production. Other large economic contributors are finance and construction.
Bahrain rivals Malaysia as a center of worldwide Islamic banking; it also seeks new sources of natural gas to fuel its aluminum and petrochemical industries, which are still growing.
Bahrain exports petroleum and petroleum products, aluminum, and textiles; in 2010, its exports totaled $15.13 billion. As of 2009, its chief export partners were India (4.2%) and Saudi Arabia (2.78%). It imports crude oil, machinery and chemicals, and in 2010 its imports totaled $12.14 billion. Its chief import partners as of 2009 were Saudi Arabia (22.91%), France (9.76%), the U.S. (7.95%), China (6.4%), South Korea (5.26%), Japan (5.19%), Germany (5.01%), and the U.K. (4.34%).
As of Dec. 31. 2010, its direct foreign investment stock abroad totaled $8.399 billion.
Talking points for your clients–and knowledge for you–on the economic and markets impact of regime change in North Africa and the Mideast..
Egypt
Tourism and Suez Canal
Egypt’s fertile Nile Valley is the scene of much of its economic activity. Under the now deposed long-time ruler Hosni Mubarak, the country sought to attract foreign investment and grow its GDP, but the global recession slowed this process. GDP pre-recession was at 7%, but in 2009 fell to 4.6% with lower tourism and manufacturing contributing to the slowdown. The Egyptian stock market reopened on March 23, but the most recent forecasts for economic growth now stand at 2.0%, down from 6.0% GDP expected for the year before the Egyptian revolution that overthrew Mubarak, partly due to weakened tourism. Foreign investors own about 15% of the Egyptian stock market’s capitalization. Its natural resources include petroleum, natural gas, iron ore, phosphates, manganese, limestone, gypsum, talc, asbestos, lead, rare earth elements, and zinc.
Egypt’s commodity exports are crude oil and petroleum products, cotton, textiles, metal products, chemicals, and processed food. In 2010, its exports totaled some $25.34 billion. As of 2009, its chief export partners were the U.S. (7.95%), Italy (7.26%), Spain (6.78%), India (6.69%), Saudi Arabia (5.53%), Syria (5.3%), France (4.39%), and South Korea (4.27%). Import figures for 2010 were $46.52 billion; it brings in machinery and equipment, foodstuffs, chemicals, wood products, and fuels. Chief import partners as of 2009 were the U.S. (9.92%), China (9.63%), Germany (6.98%), Italy (6.88%), and Turkey (4.94%).
As of Dec. 31, 2010, its direct foreign investment stock abroad totaled $4.9 billion. U.S. direct aid to Egypt has totaled about $2 billion each year, reports ProPublica; more than $1.3 billion of that amount supports the Egyptian military.
While Egypt does not account for a huge impact on the global economy through its own asset prices, the Suez Canal accounts for some 8% of all global seaborne trade. The country also drives much policy direction and sentiment in the Middle East. These two factors could account for a great deal of change in global markets, due either to restricted shipping through the canal that would increase prices and impact supply lines, or a move toward Islamic Sharia law, which would have an impact on leverage and interest; Sharia law forbids charging interest.
Egypt’s economy accounts for approximately 0.3% of the MSCI emerging market index. There are 166 funds worldwide that invest in the Middle East and North Africa, including Egypt; these funds represent approximately $13.4 billion of equity and bond assets under management in mutual funds and ETFs. Of the $23.7 trillion invested in mutual fund assets globally at the end of Q3 2010, that is a very small portion, according to the Investment Company Institute (ICI) .
Talking points for your clients–and knowledge for you–on the economic and markets impact of regime change in North Africa and the Mideast.
Libya
Oil and Chemicals