The momentous changes under way in the region will undoubtedly lead to a period of instability which will prompt investors to step back in the short term. But as long-standing oligarchies lose sway over regional economies, new opportunities will emerge.
From Arab streets, a desire to join the global discourse
Suddenly, everything is different.
In the space of a month, the presidents of Tunisia and Egypt have been toppled by popular protests and Libya has been hit by widespread unrest and military reprisals that have killed hundreds.
Demonstrations have also occurred in other Arab nations, with youths calling for reform and greater economic opportunity.
The events have happened so quickly and unexpectedly that it almost feels strange to write these simple words. And because of the speed and suddenness of the changes, investors and executives are only now beginning to make sense of them.
Naturally the first reaction of any investor to unexpected change is caution and withdrawal, as witnessed by the declines in regional stock markets and ratings downgrades. But there are positives to be drawn, even at this early stage. If nothing else, the protests illustrate how young Arabs have embraced new telecommunications technology. The spread of television networks such as Al Jazeera has undoubtedly been a driver for the uprisings, and the use of Twitter and Facebook on mobile devices illustrate how traditional media have been abandoned.
On a more profound level, if the global financial crisis signified the collapse of the West's debt-based model of economic development of the late 20th century, the tectonic shifts under way in the Middle East are a sign that the old ways of doing business in this region have failed too. The region's youths are demanding that leaders move away from the system of patronage that produced bloated and unproductive bureaucracies to a more liberal economy which offers greater opportunity to the millions of new workers entering the job market.
They have displayed a desire to enter a modern global discourse about freedom of opportunity and fair play, rather than being defined by traditional categories of tribe or sect. Increased mobility is also in evidence, as shown by the exodus of young Tunisians to Italy shortly after the fall of the Ben Ali regime and the flood of new bookings in Dubai hotels. Arab countries are increasingly connected, thanks in part to the development of Gulf airlines which have offered unprecedented mobility across the region and beyond.
A lack of opportunity at home is driving many Arabs to travel in search of jobs. Over the next decade, the Middle East and North African (Mena) region will see 100 million youths enter a job market which has only produced 50 million jobs over the past 50 years. Some of these new workers will go to those countries in the region where growth is creating employment. This will drive property development and GDP growth in these nations. Others will go to Europe, where there is predicted to be a shortfall of 50 million workers over the next decade due to the low birth rate.
The region's energy sector has traditionally been designed for export. This, too, is changing. Domestic energy demand in the region has soared with the massive deployment of air conditioning and electronic devices.
At the same time, oil and gas importers from China to the United States and Europe are responding to higher costs and depleting supplies with conservation and new domestic sources of energy, including renewables. The world's largest energy consumer, the United States, already has a policy of ending dependence on Middle Eastern oil within a decade. Energy exporting countries in the region that have not already moved to diversify their economies and add value to their mineral resources will have growing incentives to do so. A more diversified economy in the Middle East will ultimately have a greater stake in the growth of the global economy.
The momentous changes under way in the region, like the fall of the Berlin Wall, will undoubtedly lead to a period of instability which will prompt investors to step back in the short term. Government budgets may be stretched and there may be disruptions to oil and gas supplies, as is the case already in Libya. But as long-standing oligarchies lose sway over regional economies, new opportunities will emerge.
The events of recent weeks illustrate a growing cohesiveness and common aspiration of the 300 million souls that make up the Mena market, one of the great potential growth stories of the next century.