Thumbnail Gulf Countries Navigate Billions into Mega Port Projects

For years, Dubai’s Jebel Ali Port and industrial zone operated as the shipping hub for the Gulf region. But now, neighboring Arab cities are investing huge sums of money to develop competing mega shipping ports, as the Gulf region views logistics as a means of diversifying traditional oil economies. There is concern however about infrastructure overlap and oversupply as global shipping traffic and trade show signs of slower growth.

How the Middle East Is Protecting Itself from Europe’s Ongoing Woes

In spite of the austerity efforts by European governments and increased financial collaboration in the Eurozone, the region remains saddled with a number of economic and fiscal difficulties. Sony Kapoor, the head of European think tank ReDefine, tells Arabic Knowledge@Wharton that Middle Eastern investors have moved interests out of Europe and into Asia or closer to home as a result. “We have also seen some opportunistic buying-up of distressed assets by the Middle East, so there are also other opportunities that will arise,” he adds.

Christine Lagarde: Emerging Market Nations Will Get More Power in the IMF

Christine Lagarde, managing director of the International Monetary Fund (IMF), sees no alternative to the strict austerity policies being imposed on many peripheral European countries, says the double dip recessions in Italy and Ireland just announced come as no surprise, and notes that IMF reforms will shift 6% of current quotas to dynamic emerging and developing countries. Lagarde’s comments came in an exclusive interview with Knowledge@Wharton and media partner ParisTech Review.

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Despite Wealthy Appearances, the Middle East’s Oil and Gas Exporters Worry about the Future of Energy

One of the great lamentations of the Western world is that its economy is being held hostage to Middle Eastern oligarchies, that the nations of the Middle East and North Africa are becoming richer and richer from monies the United States and the rest of the developed world lay at their feet.

Yet at a recent panel at the first Wharton Middle East and North Africa Business Conference, experts who have spent years looking at the oil industry, often first hand from those oil countries themselves, painted a different picture. It is one of worry about the future of oil, and a move in many places toward not only different industries, but completely different kinds of energy production.

“The challenges in the Middle East transcend oil,” said Morten Klumb, a partner at McKinsey & Company, who has spent the last six years for the firm in the Middle East, often focusing on infrastructure and real estate, not solely the oil business. The World Bank, said Klumb, estimates that the region has to spend billions of dollars on infrastructure just to get up to speed.

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Should you invest if a company’s CEO is single?

From thestreet.com writes about a study by Wharton’s Nikolai Roussanov and Pavel Savor:

“When was the last time you checked a CEO’s romantic status before choosing whether to invest?

If you’re like most people with reasonable expectations of other people’s privacy, the answer is probably “never.” But if so, you want to pry after all.”

The study “found that firms run by single CEOs invest 10% more than firms run by married people, and that the volatility of those firms’ stock returns is 3% higher than of their married counterparts.”

Full story: http://bit.ly/zvxcg4

Can Arab Gulf Economies Survive a Shale Gas Revolution?

Bala Balachandran, the J. L. Kellogg Distinguished Professor of accounting and information management at the Kellogg School of Management at Northwestern University, wonders how the commercial development of shale gas will forever alter Gulf economies.

“Oil reserves here are good for only 40 more years,” Balachandran tells Arabic Knowledge@Wharton. “Shale gas reserves are something like 500 years. So if that becomes economically viable, the barrel of crude oil is going to go down to $US15 dollars in three years. Then what happens to the economy here? Is there an alternative strategic plan? This is something they have to think about.”

Balachandran acknowledges that Arab Gulf countries are still flush with cash, and are investing into alternative energy technology. But technology isn’t enough by itself, he notes, nor does being wealthy help innovation.

“When you’re affluent, you are not motivated to change,” he says. “When your survival is threatened, you’ll come forward.”

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An Arab Spring Boost for the Islamic Finance Industry?

With Islamist parties dominating recent elections in Arab Spring countries, the Islamic finance industry will likely find opportunities to capture large volumes of new customers and emerging infrastructure projects, according to a report by global law firm Simmons & Simmons.
 
Intent on maintaining a secular financial system, regimes in Egypt, Tunisia and Libya were not supporters of Islamic finance, notes Tariq Hameed, a Dubai-based managing associate with the firm, and author of the report, ‘Blue Print for Islamic Finance following the Arab Spring.’
 
But in elections that have seen Islamist parties come to power, such as the Muslim Brotherhood in Egypt, Shariah-compliant banking has been endorsed as part of a larger social and financial reform campaign. “All of the parties have gone on record saying they support Islamic finance,” Hameed says. “It reflects their beliefs.”
 
Hameed says at the consumer product level, there is huge potential for growth. Partly because many people in these countries do not have bank accounts — approximately 25% of Moroccans and 33% of Tunisians with bank accounts, and only 10% of Egyptians, according to his findings. “There was a lack of offerings,” he says. “Many didn’t engage with the conventional banking system.”
 
While expected customer growth would be in volume, Hameed notes that the majority of such accounts would likely be low-income savers. Compared to Arab Gulf countries, GDP per capita among the Arab Spring countries is low: Libya is the wealthiest, but GDP per capita is estimated at just $14,000.
 
In addition to creating savings products, one opportunity could come from the further development in Islamic microfinance offerings, Hameed notes. Currently there is very little being offered to grassroots Muslims, he says, but institutions will have to serve demand from rural communities and micro-enterprises. The state can act as sponsor of such an initiative, he suggests.
 
Separately, Islamic finance will become an option for these governments as they seek foreign investment. According to Reuters, a number of Islamic financial institutions are opening branches in Libya, for instance, as it explores the industry. Successful Islamic financing of infrastructure projects already exist in Bahrain, Saudi Arabia and Bangladesh, Hameed says, so there are models states can study for implementation.
 
There remain challenges for the Islamic finance industry before they can reap the potential of these markets, Hameed adds. There are several issues that need to be addressed to ensure growth, his report notes, including the strengthening of consumer protection laws, clarifying governance, and establishing central Shariah boards for finance. 
 
For Western financial firms and businesses seeking to be in the region, they will have to have a capability to engage in Islamic finance, Hameed notes. “If the customer wants Islamic finance, competitors will provide it if they don’t,” he says.

Arabic Knowledge@Wharton And Wamda Announce Content Partnership

Announcing a partnership that will reach thousands of readers in the Middle East and North Africa, Wamda and Arabic Knowledge@Wharton, the online journal of The Wharton School, will freely offer tailored content to entrepreneurs directly from the world’s leading business school.

Readers will be able to access a knowledge base that includes interviews with Wharton faculty and exclusive conversations with industry leaders. Anyone seeking guidance on the MENA region will benefit from featured analyses of regional trends, success stories, and articles on best practices.

Additionally, Wamda, the platform that empowers entrepreneurs through investment, content and programs, and Arabic Knowledge@Wharton will jointly author reports for their specialized audience, which counts senior executives and leaders from government, academia and the media. Collectively, Wamda and Arabic Knowledge@Wharton reach over 150,000 people monthly in the region, offering content both in English and Arabic.

“The Middle East is fast developing into a hub for the emerging global economy,” said Bulent Gultekin, associate professor of finance at the Wharton School, and Academic Director of the Wharton Center@CERT, Abu Dhabi. “Wharton is very interested in understanding the region’s growth and its future economic roles.”

To further support entrepreneurs, Wamda and Arabic Knowledge@Wharton will jointly host online interactive sessions with Wharton faculty and experts and Arabic Knowledge@Wharton will provide Wamda members with more access to seasoned advice at select events.

“This partnership is a natural extension of Wamda and Wharton’s shared belief in leveraging the web to inspire and empower entrepreneurs throughout the MENA region,” said Habib Haddad, CEO of Wamda.

The partnership with Wamda extends Wharton’s presence in the Middle East. The business school entered into an agreement with the Higher Colleges of Technology and the Center of Excellence for Applied Research & Training (CERT) in the United Arab Emirates, opening the Wharton Center@CERT, Abu Dhabi in 2010.

The center acts as a hub for the MENA Region where the Wharton School conducts research, hosts seminars and events for UAE-based and regional business and management executives, and publishes Arabic Knowledge@Wharton.

“The readership of Arabic Knowledge@Wharton is spread across the globe,” said Pankaj Paul, managing editor of Arabic Knowledge@Wharton and general manager of the Wharton Center@CERT, Abu Dhabi. “It demonstrates the great interest people have in understanding the role the Middle East plays in the global economy. Our partnership with Wamda will allow us to reach an even broader audience and to better cover the topics and issues that matter to them.”

In A Fight Over Hormuz, Gulf Economies Would Be ‘Very Exposed’

The Hormuz Strait is only 21 miles wide at its narrowest point. With shipping lanes only 2 miles wide to ferry a fifth of the world’s oil trade, it is a choke point in all senses of the word. If closed or blocked, attempts to reopen the strait would concern all of the world’s powers.

The obvious implications of any closure of the Hormuz Strait are stark. According to the U.S. Energy Information Administration, almost 17 million barrels of oil were transported daily through the Strait last year, representing nearly 20% of global oil trade. (Most Gulf oil exports now head to Asia.) A number of analysts predict prices for oil would jump 100%.

Closely neighboring Iran, most of the Arab Gulf countries would find themselves at risk and their economies under pressure. Instead of benefiting from a windfall from sudden increases in the price of oil, they would be dealing with increased security and logistical costs, a fleeing expatriate workforce, flight of investment capital and a squeeze on resource demands.

Read the story here: http://bit.ly/AmieD7

Fareed Zakaria On Afghanistan, China’s Middle East Plans, and Turkey’s Fight With Iran for Influence

A year ago, the Middle East was shaken by the Arab Spring and the subsequent fall of three of its most enduring autocrats. Then in the midst of the upheaval came news about the death of elusive terrorist mastermind Osama Bin Laden. But these endings have not yet brought about new beginnings; instead they have brought new challenges, says prominent foreign policy commentator Fareed Zakaria.

Though Afghanistan will see most of its foreign troop presence dwindle, Zakaria says there will have to be a continuation of foreign aid to the nation to keep it from falling into chaos again.

China has been aggressive in pursuing natural resources in the region, he notes, “but they seem unwilling to take on a larger, more political role, [or articulate a] political vision of what that means in terms of the politics of the Middle East.”

There is meanwhile a battle for regional political influence between Turkey and Iran, he adds, a battle that Turkey is winning. “When I was in Cairo, the people I talked to all looked to Turkey as a model, because they viewed it as democratic, powerful economic model, capitalist, a great trading country, able to deal with the west and the east, confident, assertive,” he says.

Zakaria is host of CNN’s flagship international affairs program,Fareed Zakaria GPS, is also editor-at-large of TIME magazine, a columnist for the Washington Post, and a New York Times-bestselling author.

Read the full article here: http://bit.ly/zsB8rD