MENA Business: A 2009 review

MENA Business: A 2009 review

2009 will forever be remembered for the effects of the global financial crisis. Led by America's unstable financial houses the worlds banks tumbled into recession dragging with them every industry and pretty much every country on the planet for almost two years.

The real estate sector was one of the worst affected and so, inevitably, the Middle East with its economy heavily reliant on property and construction soon slid down the slope with the rest of the world.

Some 556 Middle Eastern construction projects have been cancelled or shelved in 2009, with the majority of them being in Dubai - an emirate built almost entirely on its property market. As we all know, this was going to impact the region heavily by the end of the year.

But believe it or not, there is more to report from the MENA business world than just financial misery, so here is a round-up of what caught my eye in 2009.

Single Gulf currency

In the summer of 2009 Saudi Arabia, Kuwait, Bahrain and Qatar, members of the Gulf Cooperation Council (GCC), signed an agreement aimed at creating a joint monetary council that would later become the GCC central bank.

Middle Eastern states have shown a greater willingness this year to move away from foreign economies, especially Western economies such as the US, and single Gulf currency would facilitate trade in the region, hopefully leading to greater economic prosperity and greater equality of resources for GCC member states.

Although the UAE and Oman are to abstain from the project, with the UAE citing they are not happy with the selection of Riyadh, the Saudi capital, as the location for the future GCC central bank, other GCC member nations hope the single currency can be put in place at some stage next year. It would be an incredibly important step for the Middle East as it adjusts to the shifting global geopolitical and economic landscape in the wake of the financial crisis.

Venezuela makes friends in the Gulf

This year saw Venezuela strengthen its ties in the Middle East as it moved closer to both Syria and Iran, which, no doubt, is another attempt by a nation to try and alienate the United States.

In October, the Venezuelan Foreign Ministry announced it had signed five trade, agricultural and energy cooperation agreements. Included in the deals signed by the nations Foreign Ministers, Nicolas Maduro (Venezuela) and Walid Muallem (Syria), was a deal to build an oil refinery that can process 140,000 barrels per day.

And last month, Iranian President Mahmoud Ahmadinejad vowed to counter US "imperialism" with strong support from Venezuela, Bolivia, Brazil and Cuba's Fidel Castro.

In Caracas, Venezuela's capital, Ahmadinejad sat next to Venezuelan President Hugo Chavez at a televised press conference and vowed to "stand together until the end" against the US. Coming to the end of his tour of South American allies, Ahmadinejad praised Chavez, saying: "Today the people of Venezuela and Iran, friends and brothers in the trench warfare against imperialism, are resisting.

"We will stand together until the end," he added.

Venezuela remains quite unstable, and Chavez has a reputation for being volatile and irrational. If Middle Eastern states are eager to build new relationships as they try and make a stamp on the emerging new world order, perhaps they should choose their allies more carefully.

Iraq auction its oil fields

As Iraq try and recover from years of war, which has seriously damaged society and ruptured its economy, it has been crying out for foreign investment as it looks for global energy firms to take advantage of its oil reserves.

Last week Iraq auctioned off its largest oil fields, hoping firms would look beyond persistent security fears and strike deals crucial for the country's reconstruction efforts.

Whereas this marked an important step for Iraq, the auction did not go as well as hoped. Of the 15 fields on offer in the two-days of bidding, only those located in the relatively stable southern region of Iraq attracted heavy interest, while five located in more restive regions were withdrawn and a sixth field drew only one bid.

Unfortunately, the hostile regions around Kirkuk could seriously damage Iraq's hopes of a quick recovery based on revenue from FDI in its oil. But the country remains a decent long term bet for energy firms as we approach "peak oil."

Dubai World collapse

In the last monthe one of the emirate's largest investment companies, state-owned Dubai World, asked for a delay on repaying its US$60 billion debt until at least May. The company's real estate arm, Nakheel shoulders the bulk of money due to banks, investment houses and outside development contractors.

The drama sent global stocks plummeting and things were made worse when Abu Dhabi insisted they will "cherry-pick" what to save from Dubai, before deciding to give its neighbour US$10 billion to help repay its debt.

Some people in the MENA region are eager to see Dubai learn its lessons the hard way after letting the Western world and all its money through its flood gates. But the region has far more to lose by letting in go under, and although unpopular at the moment Dubai will reemerge as a shining light in the Middle East's economic future.

The bubble may have burst in 2009, but 2010 may just see an even bigger bubble being blown by the region's economies.

Like this article? Get the RSS feed: