Gcc trade and investment flows: The emerging-market surge

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This report explores the changing and growing economic relationships between the GCC and emerging markets. It lays out the key findings of extensive research into trade and investment flows between the GCC and different emerging-market regions: Asia; Africa; the Middle East; Latin America; and Eastern Europe/CIS. It also discusses the implications of the burgeoning interest in emerging markets for the region’s traditional economic partners in the OECD.

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Gcc trade and investment flows: The emerging-market surge

  1. 1. GCC trade and investment flowsThe emerging-market surgeA report from the Economist Intelligence UnitSponsored by Falcon & Associates
  2. 2. GCC trade and investment flows The emerging-market surge Foreword S ustained economic growth in the Gulf Cooperation Council (GCC) countries, buoyed by government spending, has provoked intense interest in the region. The traditional trading partners—Western Europe, North America and the wider OECD—maintain strong relationships with the GCC, but the emergence of newly dynamic, high-growth economies in Asia and other parts of the developing world is producing new opportunities. It looks likely that emerging-market economies will enjoy an increasing share of the spoils. GCC trade and investment flows: The emerging-market surge is an Economist Intelligence Unit report that explores the changing and growing economic relationships between the GCC and emerging markets. It lays out the key findings of extensive research into trade and investment flows between the GCC and different emerging-market regions: Asia; Africa; the Middle East; Latin America; and Eastern Europe/CIS. It also discusses the implications of the burgeoning interest in emerging markets for the region’s traditional economic partners in the OECD. Ayesha Sabavala and Ali al-Saffar were the authors of the report, and Jane Kinninmont was the editor. Aviva Freudmann and Stephanie Studer also contributed research and ideas. The research has been sponsored by Falcon and Associates, a Dubai-based company. The findings and views expressed in the report are the responsibility of the Economist Intelligence Unit, which conducted the research independently. They do not necessarily reflect the views of the sponsor. © The Economist Intelligence Unit Limited 2011
  3. 3. GCC trade and investment flows The emerging-market surge About the research I n December 2010 and January 2011 the Economist Intelligence Unit conducted detailed research and analysis on the trade and investment flows into, and out of, the GCC. The data analysed, sourced from a number of international organisations as well as our own forecasts, were supplemented by 14 in-depth interviews with a selection of senior business executives (with responsibility for trade and investment in the Middle East), academics and investment experts. The insights from the interviews appear throughout the report. We would like to thank all the participants in the in-depth interviews for their time and help. © The Economist Intelligence Unit Limited 2011
  4. 4. GCC trade and investment flows The emerging-market surge Executive Summary T he story of the rise in prominence of the Gulf Cooperation Council (GCC) is by now well known: the region sits on some of the world’s largest hydrocarbons reserves and has used its massive influx of revenue to fund large-scale infrastructure development and, more recently, economic diversification strategies. Beyond oil, however, the complex and vitally important trade and investment relationship the GCC has with the world is less well known. New markets are being sought around the world for a growing range of non-oil goods and services, while, on the investment side, both the well-capitalised sovereign wealth funds and an increasing range of private investors have built up wide-ranging investment portfolios. Emerging markets, especially in Asia, are becoming increasingly important economic partners for the GCC. To put this in perspective, 30 years ago, the OECD, a group of developed countries dominated by Western Europe and North America, accounted for almost 85% of all the GCC’s trade. But since the 1990s there has been a perceptible shift in the pattern of trade, with emerging markets becoming increasingly important. By 2009 the emerging-market share of GCC trade had reached 45%. This share has been rising by an average of 11% per year between 1980 and 2009, compared to only 5% a year for the OECD. The Economist Intelligence Unit has conducted a programme of research, analysis and in-depth interviews on the trends that will shape the GCC’s trade and investment flows in the coming years. Some of the findings of the report are as follows. l Emerging markets will drive global growth in the years ahead: We forecast that around two-thirds of the world’s economic growth will be generated by emerging markets in the next five years. This means that by 2015 emerging markets are projected to account for 41% of global GDP, compared to an estimated 31% in 2011. l The increasing economic importance of India and China and the economic emergence of sub- Saharan Africa present massive opportunities for the GCC. Multinationals operating in the Middle East already use the GCC as a base for their regional operations, but the GCC also has opportunities further to develop as a base for their expanding operations in Africa and South Asia. However, the © The Economist Intelligence Unit Limited 2011
  5. 5. GCC trade and investment flows The emerging-market surge GCC will also face competition from rival hubs and will need to keep improving if it is to maintain its competitive edge. There is a need further to strengthen the labour market, including the local skills base, and the regulatory environment. l Asia will be the most important emerging-market region for the GCC. This is partly a story about rising demand for oil: we forecast that oil consumption in Asia will grow by 4.4% per year on average over the next five years, while the OECD’s demand is expected to plateau. But it is not just an energy story. Growth in China and India is now moving into a new phase, from being focused on exports to a greater focus on domestic demand. Rising consumption in Asia, fuelled partly by an expanding middle class, will produce a host of new opportunities for trade. Tourism, one of the GCC’s competitive strengths, is already benefiting from the growing Chinese middle class. l Most of our interviewees expressed certainty that China would be the GCC’s most important economic partner by 2020, although India’s historical and cultural links with the region will also stand it in good stead. Nonetheless, South Korea, Singapore, Malaysia and India will remain important as providers of technology and know-how for the GCC states. The GCC states already have an abundance of capital; in general, their main reason to attract foreign direct investment (FDI) is for the associated transfers of technology. l Agriculture is a promising sector in Africa: As most GCC countries import the bulk of their food requirements, Africa’s abundance of arable land presents an opportunity for the GCC to implement food security strategies through the acquisition of land for export-oriented farming. However, GCC investors need to be aware of legal and political risk in this area. l In Asia and some parts of the Middle East, GCC investment will be channelled into infrastructure development: Large populations and a shortage of capital in Asia provide an ideal opportunity for the GCC to fill the gap. Tourism and telecommunications, in particular, will be attractive industries for GCC investment. In the Middle East, growth in Iraq has put a strain on the poor infrastructure and there are significant opportunities to invest in the region, particularly in the housing sector. l Overall, the GCC’s investments in emerging markets are likely to focus on tried and tested areas of competitive strength, chiefly energy and services industries and sectors, such as port operations, tourism, retail, financial services (especially sharia-compliant finance) and telecoms. Financial investments will also go into agriculture, minerals and real estate in a broad range of emerging markets. In short, the opportunities are significant, but the rise of new economic powers also means new competition. OECD companies and markets will remain important economic partners for the GCC, especially in knowledge-intensive sectors, but will need to work harder to maintain an edge. © The Economist Intelligence Unit Limited 2011
  6. 6. GCC trade and investment flows The emerging-market surge 1. The rise and rise of emerging markets S ince the onset of the global financial crisis, it has become clear that emerging markets will drive global growth in the years ahead. In 1987 these countries made up just 16% of global GDP, but today they account for 31%. By 2015 the Economist Intelligence Unit forecasts that 41% of the world’s GDP will come from countries that are currently defined as emerging markets. In 2011-15, emerging- markets are expected to generate just under two-thirds of global economic growth. This is partly because growth in many OECD countries is forecast to be fairly modest, owing to ageing populations, fiscal constraints and market maturity. It also reflects favourable demographics, growing levels of investment, and the rapid adoption of technology in many poorer countries. To some extent, emerging-market growth may also be a self-fulfilling prophesy, as confidence in emerging-market opportunities prompts greater investment, boosting growth. This dramatic shift of economic power will also be accompanied by social, political and cultural shifts. In one symbolic illustration, in 1989 the ten tallest buildings in the world were all in North America; in 2011, seven of the ten are to be found in Asia. Emerging markets are by no means a homogeneous bloc. Some will grow faster than others. In addition, an official designation as a “developed country” does not necessarily mean a reduction in poverty and inequality; indeed, these indicators often worsen in periods of rapid growth. The substantial rewards on offer to investors in high-growth emerging markets will also be accompanied OECD/ non-OECD global nominal GDP (share of total) OECD Non-OECD 1987 2010 2015 16 31 41 59 84 69 © The Economist Intelligence Unit Limited 2011
  7. 7. GCC trade and investment flows The emerging-market surge by high risks; state institutions may not be well-developed and rapid population growth will present political and social challenges, as well as opportunities. What does this shift mean for the GCC? Multinational companies operating in the Middle East already use the GCC as a base for regional operations. In the coming years, more will also use The growing importance of emerging markets the area as a base for their growing activities in Africa presents massive opportunities for the six states and South Asia, especially when doing business in of the Gulf Cooperation Council (GCC): Bahrain; countries with weaker infrastructure and higher Kuwait; Oman; Saudi Arabia; Qatar; and UAE. political risk. For instance, a spokesman for Unilever, The GCC is geographically well positioned to act a consumer goods multinational, notes that, for his as a trading hub between the east and the west, firm, “The GCC is an attractive market in its own right expanding on a role that it played for centuries on account of a young, growing and increasingly before the discovery of oil. Both trade and tourism affluent population, but it also provides a base for can leverage on this strategic location, a point operations into Africa.” Markus Wildi, president for highlighted by John Grant, senior vice-president of the Middle East at the Dow Chemical Company, told a US-based route-development company, Airport us, “Our company believes the GCC is on track to Strategy and Marketing, who told us “The Middle becoming the world’s petrochemical hub”, because East is almost an acronym for the middle of the of its energy resources and its current industrial world’’. The GCC governments are also proactively development. Hadi Damirji, deputy chairman at the pursuing economic, financial and diplomatic London-based Trinity Group, notes that “the GCC links, particularly with Asia, and are developing has developed a brand name as a hub for the Asian shipping and aviation links with a widening range of economy,” although he adds that doing business emerging markets. between the GCC countries is not always easy. Our interviews with GCC businesspeople and The rise of new emerging markets certainly investors indicate that there is a strong belief in presents opportunities for the GCC, but will also the Gulf countries that emerging markets will be bring with it new competition from emerging-market increasingly important economic partners. Asia— multinationals and from rival trade and financial especially China and India—dominates the picture. hubs. Maintaining competitiveness as a hub will Meanwhile, opportunities in other areas, such as depend on maintaining and building on the quality Latin America and Eastern Europe, may be relatively of infrastructure (especially international transport overlooked. links), regulations and ability to attract talent. © The Economist Intelligence Unit Limited 2011
  8. 8. GCC trade and investment flows The emerging-market surge 2. The story so far: The shape of trade and investment flows to and from the GCC I n 1980 the OECD, dominated by countries in Western Europe and North America, accounted for almost 85% of all the GCC’s trade. The dominance of these blocs reflects geopolitical, as well as economic, relationships that stretch back centuries before the discovery of oil in the Gulf. Since the development of the GCC’s oil and gas resources, trade with the OECD has largely involved the GCC exporting energy, while the OECD countries have provided a broader range of goods, from agricultural commodities to industrial materials and consumer goods. For much of the past 20 years, the trade balance has been in the GCC’s favour. This has left the GCC with a substantial capital surplus, most of which has been re-invested in OECD markets. Since the 1990s there has been a perceptible shift in the pattern of trade, which accelerated in the early years of the last decade: growth in Asia, on the back of the rise of China and India, have made these markets far more prominent partners to the GCC. By 2009 the emerging-market share of GCC trade had reached 45%. This share has been rising by an average of 11% per year between 1980 and Growth in oil demand (%) OECD Non-OECD 8 8 6 6 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6 2009 10 11 12 13 14 15 Source: Economist Intelligence Unit. © The Economist Intelligence Unit Limited 2011
  9. 9. GCC trade and investment flows The emerging-market surge 2009, compared to only 5% a year for the OECD. In the coming years, oil demand will be an important factor in the shift in trade to emerging markets. Our forecasts suggest that, whereas demand for oil will grow by only 0.1% over the next five years in the OECD, demand growth in Asia will reach 4.4%. In emerging markets as a whole, demand for oil will rise by an average of 3.9% per year, according to our projections. The increasing importance of non-OECD countries does not necessarily signal the absolute decline of the OECD, which is likely to remain an important trading partner and investment destination. But the OECD countries—and businesses based there—will need to work harder to compete for market share and can no longer rely on being the first port of call for Gulf businesspeople or investors. OECD GDP growth vs emerging markets GDP growth forecast (%) OECD Emerging markets 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 Avg 1995-2009 Forecast 2010-12 Source: Economist Intelligence Unit. © The Economist Intelligence Unit Limited 2011
  10. 10. GCC trade and investment flows The emerging-market surge 3. The outlook by region Asia The current picture Asia is clearly the most important emerging-market region for the GCC. In 1980 just 10% of the GCC’s total trade was with Asia. By 2009 this share had risen to 36%. Growth in trade has risen by 12% per year since 1980, double the rate of growth in trade with the OECD. If this level of trade growth continues, Asia will be the GCC’s biggest trading partner by 2017, accounting for a greater volume of trade than the OECD. India, China and Indonesia account for more than half of the GCC’s trade with Asia. The Economist Intelligence Unit forecasts that oil consumption in Asia will grow by 4.4% per year on average over the next five years, while the OECD’s demand is expected to plateau. According to Raja Almarzoqi Albqami, director of the Saudi-based Institute of Diplomatic Studies, “58% of China’s oil imports currently come from the Middle East region, and by 2015 this share will increase to 70%.” Regional oil consumption growth, 2011-15 (% change) China Asia (a) OECD 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 2011 12 13 14 15 (a) Asia includes India and China. Source: IMF, Direction of Trade Statistics. © The Economist Intelligence Unit Limited 2011
  11. 11. GCC trade and investment flows The emerging-market surge Drivers of growth Economic growth in Asia averaged 5% per year between 2005 and 2009, and reached over 8% in 2010. However, these figures belie much more significant growth in some of Asia’s largest and most important economies, with growth in India and China nearing 10% a year. Stretching back decades, Asian growth has traditionally been predicated on a strong manufacturing base. This has worked well, with export-driven growth propelling the continent into the global economy. Over the next decade, Asian growth will enter a new phase, with domestic demand, particularly the local consumer market, which has substantial savings to draw on, becoming increasingly important. This translates into new opportunities to export goods and services to Asia. The increasing importance of the middle-class Chinese consumer is already evident to retailers in Dubai, ranging from the top end of the luxury market to airport duty free, where Chinese beverage brands are now evident alongside the traditional European and American products. The growth outlook for the GCC’s primary trade partners in Asia looks particularly strong; ties with China and India are expected to strengthen markedly over the next ten years, as these economies continue their meteoric rise. For GCC investors, expected returns on investment in Asia compare very well with those in the OECD. But there are risks to this positive picture; Asia’s export-oriented economies are inextricably linked to the performance of international markets for their goods. The global economic downturn in 2008-09 hit export-oriented economies in Hong Kong, Singapore, Malaysia and Taiwan particularly hard, and a double-dip recession would have similar repercussions there. The risks are lesser in the GCC’s main trading partners, India, China and Indonesia, where domestic demand is more significant. There are also concerns about loose monetary policy, which could lead to asset-price bubbles. This would be doubly dangerous in the event that commodity and oil prices stay high. India, China and Asean 6 trade as a proportion of total trade with the GCC (%) China India Asean 6 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 2000 01 02 03 04 05 06 07 08 09 Source: IMF, Direction of Trade Statistics.10 © The Economist Intelligence Unit Limited 2011
  12. 12. GCC trade and investment flows The emerging-market surge Growth in Asia compared with the OECD (%) China India Asean 6 OECD 12 12 11 11 10 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 2010 11 12 13 14 15 16 17 18 19 20 Source: Economist Intelligence Unit. Opportunities: Energy trade: Oil and gas dominate GCC exports to Asia, and are likely to continue to do so as industrialisation and rising consumer incomes contribute to an increasing demand for hydrocarbons. The story of the growth in China’s demand for oil is well known and during the US recession the country briefly overtook the US as the biggest buyer of Saudi crude. China is likely to regain this position within the next five years. The GCC will be crucial to the future of the global oil market, although China will source some of its oil from newer producers, like Sudan and Angola, where it has more of a chance of being the dominant partner in the political relationship. Indian oil demand is also something to watch. Rachel Ziemba, a senior research analyst at New York-based consultancy, Roubini Global Economics, and a specialist in sovereign wealth funds, notes that as India’s population makes “the car transition”, there will be significant opportunity for increased oil trade. Energy investment: Kuwaiti and Saudi national oil companies are already investing in refineries in China, while China’s Sinopec is involved in gas exploration in Saudi Arabia. Consumer goods will remain one of the GCC’s major imports from Asia. At present, this sector is strongly dominated by China. However, Shin-Ichiro Fukushima, the executive director of the Japan External Trade Organisation, told us “There is a movement of manufacturing locations from China to Thailand and Indonesia, because costs are increasing in China.” He adds that “Transportation costs between the GCC and South East Asia will be lower, facilitating trade.” Industrial materials—notably chemicals, steel and aluminium—will be increasingly important GCC exports to Asia, allowing the GCC to diversify its export base into more value-added sectors than hydrocarbons.11 © The Economist Intelligence Unit Limited 2011
  13. 13. GCC trade and investment flows The emerging-market surge Services will also be a crucial component of GCC-Asia economic relations. Most Asian countries have vast infrastructure development needs. This, coupled with a shortage of capital, provides ideal opportunities for the GCC to step in. Notable investments by GCC companies in Asia are evident in the telecommunications industry, where giants such as Etisalat and Saudi Telecom have obtained licences to operate in India, Indonesia, Malaysia and several smaller Asian countries. The expansion of Asia’s middle classes will boost tourism, which will be supported by the expansion of routes to Asia by the big three airlines in the Gulf: Emirates; Etihad; and Qatar Airways. The UAE’s inclusion on China’s list of “approved destinations” since 2007 has resulted in significant Chinese tourism to the country, and other GCC states are likely to seek similar status, particularly Qatar, in time for the 2022 football World Cup. We estimate that around 50m tourists from China travelled abroad in 2009. This figure is expected to more than double in the next five years. Mr Grant of Airport Strategy and Marketing notes that smaller airlines in the GCC, including the budget airlines, will need to develop new niche markets in an increasingly competitive international landscape. This is likely to lead to new routes into second-tier Asian cities. Reverse capital flows: A key trend that we will see emerging in the next decade is the growth of capital flows from Asia into the GCC. China will become an increasingly important capital exporter to the rest of the world. And while average incomes in countries like India and Malaysia will be well below GCC norms, emerging Asian corporations, financial institutions and wealthy individuals will be important investors. One indication of this trend came in reports that around one-third of demand for Dubai’s September 2009 sovereign bond came from Asia. In Oman, a number of Indian companies have invested in manufacturing for export back to the Indian subcontinent, taking advantage of the low-tax environment and well-developed port infrastructure. Islamic finance synergies some rivalry between the GCC and Asia over where the natural hub of Islamic finance should be, but more recently there has also been a trend towards Islamic finance has grown rapidly in the past five co-operation between the different jurisdictions as years in both the GCC and Asia. Total assets of the the industry seeks to establish itself as a credible 500 largest Islamic banks grew year on year by alternative around the world. Sharia standards still almost 29% in 2009, to an estimated US$822bn, vary, but according to the Bank Negara Malaysia according to Standard Poor’s Rating Services. (BNM, the Malaysian central bank) a programme of Sukuk (Islamic bond) issues totalled US$23.3bn dialogue including Gulf and Asian Islamic scholars in 2009, with cumulative issuance exceeding the has led to a consensus being reached on around US$100bn mark. The majority of the global issuance 80% of sharia finance issues. Asian and Arab states took place in Asia, primarily Malaysia, which is home have also come together to support a new liquidity- to the largest sukuk market in the world. According management body for the industry, based in to the Economist Intelligence Unit, around US$41bn Malaysia. In spite of this, Eckart Woertz, a research in sukuks have been issued globally since 1996, 75% associate at the Princeton Environmental Institute, of which have been arranged or issued by Malaysia. believes that the ‘’GCC appetite for Malaysia sukuks Other markets, such as Indonesia, are also emerging will be limited, because most Malaysian bonds are as Islamic finance hubs in the region. There is issued in the local currency, the ringgit”.12 © The Economist Intelligence Unit Limited 2011
  14. 14. GCC trade and investment flows The emerging-market surge Prioritising markets He believes that the shift to emerging markets is predicated on manufacturing and since “India is less of a manufacturing powerhouse than China”, China China versus India? will retain its role as the leading trading partner to Asia’s importance to the GCC as a trade and the GCC. investment partner is certain, but will it be a battle of However, other interviewees emphasised wills between the two Asian powers, India and China? the importance of historical and cultural ties in China’s growth has been faster in recent years, and determining economic links. Professor Niblock of its economy and population are both far larger than Exeter told us, “I believe India is not given enough India’s, but in the next decade, we see India’s growth prominence in the general discourse. It assumes a rates overtaking China’s. The two economies have different role in the Gulf to China, whose relationship very different structures. In China, manufacturing really started developing in 1993 when its demand constitutes just over one-third of GDP, more than for oil surpassed its domestic supply and picked double the contribution of manufacturing to GDP in up significantly after 2000.” He goes on to expand India. On the other hand, services make up more than on the distinction and says, “ India’s relationship, one-half of the Indian economy, compared with 40% however, is much more historical, there is a cultural in China. affinity shared by the two regions, and there are 6m Our in-depth interviews revealed mixed views Indians in the Gulf.” While most are recent migrants, regarding the roles played by both India and China there is also a long-established Indian merchant in the GCC. Hadi Damirji of Trinity Group is of the community in port cities like Dubai, Manama and view that “Local consumption of oil and increased Muscat, whose presence in the Gulf predates the domestic demand will ensure that China remains British imperial presence in the region. Imed Ben the GCC’s main trading partner.” Mr Grant of Airport Abdallah of Etihad also points to the GCC’s Indian Strategy and Marketing adds that China’s “scale of community, saying “India stands to gain from the productivity, cost advantage, relationship between strong cultural relationship with the UAE. China is the two markets and China’s view of the GCC as a increasingly becoming significant as the political and transshipment hub” will also play a major role. economical relationship with the UAE strengthens.” India vs China growth rates (%) India China 11 11 10 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2010 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Source: Economist Intelligence Unit.13 © The Economist Intelligence Unit Limited 2011
  15. 15. GCC trade and investment flows The emerging-market surge India, China and Asean 6 trade as a proportion of total trade with the GCC (%) India China Asean 6 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 1990 82 84 86 88 1980 92 94 96 98 2000 02 04 06 08 Source: IMF, Direction of Trade Statistics. Although India’s cultural ties are stronger with the partners for the Gulf countries. GCC, India’s economic growth faces some key risks, Beyond China and India which, unless addressed, will hinder growth in trade The six major economies of the Association of South and investment with the GCC. Chief among these East Asian Nations (Asean)—Indonesia, Thailand, are infrastructure bottlenecks and a less friendly Malaysia, Singapore, Philippines and Vietnam— business environment. Mr Grant of Airport Strategy contributed over 13% of the GCC’s total trade in and Marketing sees the existence of “bureaucratic 2008. Although the bloc continues to be extremely customs and logistics processes” as the main risk, important to the GCC, its share of the trade has been while “The GCC is making it as easy as possible to eroded by the growth of China and India, whose trade do business in the region.” The World Bank’s Doing with the GCC has grown at an annual average rate Business 2011 report ranks India at 134 out of 183 of 18.5% since 1980. This has meant a major shift countries in ease of doing business, while China is in the pattern of trade with Asia. In 1981 China and ranked 78. Overall, however, India has strong growth India accounted for just 10% of Asia’s trade with the fundamentals, based on high saving and investment GCC, while the Asean-6 made up almost 77%. Today, rates, a large, mobile labour force and the rapid China and India’s share has risen to almost 58% of all expansion of the middle class. Asian trade with the GCC, while the Asean-6 account The Chinese economy, which the Economist for 35%. Intelligence Unit estimates to have grown by 10.2% Beyond trade, the Asean-6, particularly Indonesia in 2010, also faces risks. Growth, which has been and Malaysia with their large Muslim populations, export-driven and boosted by a massive stimulus have important financial links with the GCC, package, could suffer from a sharp correction in especially in the growing area of Islamic finance. the next five years. The withdrawal of the stimulus Even South Korea, which has only a tiny Muslim package, tightening monetary policy, weaker exports population, has taken steps to develop this sector, as a proportion of GDP and overinvestment in the which is a clear testament to its confidence in the economy all pose a threat to economic growth. economic importance of key Muslim countries such as Whatever the outcome, there is no doubt that both the GCC states. India and China will be increasingly important trade South Korea, Singapore, Malaysia and India will14 © The Economist Intelligence Unit Limited 2011
  16. 16. GCC trade and investment flows The emerging-market surge remain important as providers of technology and limited. Chinese investments may prove useful in know-how for the GCC states. The GCC states already energy and infrastructure, but the more knowledge- have an abundance of capital, and ultimately do not based economies will be more important across require foreign domestic investment (FDI) simply many other sectors. Of course, there will also be for financing. Rather, they seek FDI that brings competition between Asian countries and the GCC, technology transfer, as the GCC region’s own research as all try to develop the much desired “knowledge and development (RD) has historically been very economy”. Risks N. Janardhan, a UAE-based political analyst on Gulf-Asia affairs, notes that ties will Asia are moving beyond a pure buyer-seller relationship. Rapidly growing GCC-Asia ties in the economic sphere are already having a notable effect on political relations and will continue to do so. In the long term, these strengthened political ties also have the potential to influence the Gulf region’s security arrangements. However, he says, “For these long-term considerations and possibilities to translate 1 Mr Janardhan’s view is into realities, both sides will need to run a strategic marathon from economic engagement to political supported by Professor Tim engagement, to perhaps a security engagement in the longer term.”1 Niblock of Exeter University. Professor Niblock estimates that “By 2030, there will be more Indian naval ships in the Indian Ocean than [those of] any other country.” However, Professor Niblock highlights China’s cautious approach and notes that “The Chinese are perfectly aware of the fact that oil supplies from the Gulf are dependent on the US navy, both in the Persian Gulf and the Straits of Malaka, and are keen to integrate into the global leadership role, not challenge it.” Nevertheless, Mr Janardhan suggests, there are “opportunities for the GCC to call on others for things that have been traditionally done by the US”, highlighting the role China and South Korea already play in tackling the piracy issue in the Gulf of Aden.15 © The Economist Intelligence Unit Limited 2011
  17. 17. GCC trade and investment flows The emerging-market surge Africa The current picture Africa is becoming increasingly important to the GCC as a trade partner, a trend that we expect to continue over the next decade. Trade links are limited at present: trade with Africa accounted for only 3.6% of the GCC’s total trade in 2009 (the latest data available). However, trade has increased at an average of 11% per year since 1980. That is more than double the rate of growth in trade between the GCC and the OECD, suggesting that Africa’s share of total GCC exports and imports is likely to keep rising strongly. A good indicator of the rising importance of the continent is the variation in how multinationals are classifying the region. Traditionally, Europe, the Middle East and Africa have been referred to as the EMEA region, but increasingly, we see multinationals forming new classifications, such as MEA (the Middle East and Africa) and META (the Middle East, Turkey and Africa). Ashish Panjabi, the chief operating officer of Jacky’s Group of Companies, an electronics and IT company based in Dubai, says some multinationals run their Africa businesses from Dubai because of port and air connections, noting it can be easier to fly to African cities from Dubai than from other parts of Africa (where air routes are relatively underdeveloped). Jacky’s Group is now focusing on Africa and has invested heavily in retail, distribution and after-sales service in Kenya, Tanzania and Uganda. Africa is a particularly fragmented and diverse region; there are major disparities between countries within Africa, both in terms of their trade patterns and growth rates. Egypt and South Africa, the second- and fifth-most populated economies in the region, respectively, accounted for over half of all Africa’s trade with the GCC in 2009, but both have grown at below-average rates for the region since 1995. The GCC states are expected gradually to move into newer, faster-growing African markets. Ms Ziemba of Roubini notes that, while the GCC has had particularly strong links with North Africa for cultural reasons, she now sees “a steady increase, albeit from a very low base, in [GCC investment Africa growth trajectory vs world average and emerging markets average - 1995 - 2009 (%) Africa avg Emerging markets 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 1995 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 Source: Economist Intelligence Unit.16 © The Economist Intelligence Unit Limited 2011
  18. 18. GCC trade and investment flows The emerging-market surge in] East Africa, Nigeria and South Africa”. Drivers of growth Africa’s economy has grown by 5% per year over the past 15 years, driven by rising exports (especially commodities), increased investment and economic policy liberalisation. The fundamentals of growth in Africa, as listed below, are strong. l Demographics. The continent will have the youngest, fastest-growing and fastest-urbanising population in the world. Its population has increased from around 110m in the mid-19th century to an estimated 1bn people today. This is set to double before 2050. Global executives cite Africa’s demographics as one of the continent’s biggest competitive advantages, although it is also a source of political risk in countries where the job market, infrastructure and public services cannot keep up with rapid population growth. Overall, the region has also gradually become more peaceful and democratic in the past 15 years—recent events in Egypt, Tunisia, Libya and Côte d’Ivoire serve as a reminder of continued political risk. l Policy improvements. The apparent willingness of countries in Africa to implement economic reform has improved the attractiveness of the region to foreign investors and businesses, who will increasingly be keen to tap into the continent’s high-growth markets at a time of sclerotic growth in the developed world. l China’s investments. China’s high-profile investments in Africa have also helped to put the continent on the global investment map. China’s meteoric rise over the last two decades and the expectation that it will grow faster than most other major economies well into the future, means the Chinese authorities are on a quest to secure access to raw materials. China is finding many of the minerals and oil it needs in Africa, and is building much-needed infrastructure in return. However, China’s interest in Africa goes beyond sourcing raw materials. Mr Panjabi of Jacky’s Group of Africa GDP growth vs world GDP growth, 1995 - 2012 (%) Africa World 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 1995 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 Source: Economist Intelligence Unit.17 © The Economist Intelligence Unit Limited 2011
  19. 19. GCC trade and investment flows The emerging-market surge Companies believes that China is “also looking to cultivate markets they can sell to. Africa is a virgin market. From a long-term manufacturing point of view, costs have increased in China and they will start to invest in manufacturing in Africa”. India and Brazil are also increasingly important players in the new “scramble for Africa”. China’s investments in Africa are not expected to be a threat to those of the GCC in Africa, as the two blocs differ in their strategic interests. According to Mr Woertz at Princeton, “The GCC would not really go after minerals in Africa for reasons of industrial policy like China does, as the GCC does not have the processing capabilities. They only have some interests in alumina and iron ore production on the continent.” Opportunities for links with the GCC l Agriculture: The GCC is attracted to Africa’s abundance of arable land, particularly as the Gulf states move towards implementing food security strategies in the wake of the 2008 global food Africa: key resources o rocco orocco Tunisia u un W Western Algeria Sah Sahar ahara Libya Egypt The Gambia a uritania Cape ali erde Se a Senegal Niger Er itrea r it e tr Chad Sudan Burkina Bu na Guinee ea aso Djibouti Djibouti Guinea Bissau Benin n Ghana a Nigeria Ethiopia Sierra Leon one ne n Côte Tog Togo Liber ia dIvoire ber r CAR Cameroo o on Somalia om om Equatorial Guinea Uganda g São Tomé Príncipe T Democratic Kenya Gab Gabon Congo abo Republic of Co go Congo Rwanda an (Brazzaville) a Burundi Seychelles Uranium T Tanzania il C Comoros Lead and inc Angola alawi w Iron ambia Diamond Bau ite imbabwe i a dagas gascar oz a que ozambi ozam Coal Botswana a uritius s Namibia Copper Gold South Africa Swaziland 0 km 1,000 2,000 0 miles 500 1,000 Lesotho Source: Economist Intelligence Unit.18 © The Economist Intelligence Unit Limited 2011
  20. 20. GCC trade and investment flows The emerging-market surge Top 10 countries by Muslim population (estimated 2009 population; m) 220 220 200 200 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 Indonesia Pakistan India Bangladesh Egypt Nigeria Iran Turkey Algeria Morocco Source: Pew Research Center. price crisis. The unrest in Egypt and Tunisia in early 2011 serves as a reminder of the importance of food security. And international food prices are expected to keep rising in the long term, as the world’s expanding middle classes gradually shift towards a more energy-intensive, meat-based diet. 2 World Bank, Rising Global According to a recent report by the World Bank2, 56m hectares of land were leased or sold to foreign Interest in Farmland. investors in 2008 and 2009, 70% of which was in Africa. Sovereign wealth funds, state-owned food companies and private investors have shown increasing interest in securing long-term leases on land for use in export-oriented farming. Qatar’s Hassad Foods, the Saudi Company for Agricultural Investment and Animal Production, the Kuwait China Investment Company and the UAE’s Minerals Energy Commodities Holding, are all seeking to invest in farmland. Professor Niblock at Exeter University recently attended a conference in the Saudi capital, Riyadh, on Gulf-Africa relations, and told us “It became clear to me that African countries are looking at ways of opening their economies to the Gulf. The amount of trade between Africa and the Gulf is small, but GCC countries have a sense of food shortage; this provides major investment opportunities in the agriculture sector in Africa.” l Minerals: Africa possesses not only vast amounts of arable land for agriculture, but also precious minerals, including platinum, uranium, bauxite, iron, coal, copper, lead and diamonds. The region possesses more than 80% of the world’s platinum reserves and more than half of the world’s cobalt and diamond reserves. West Africa, which is rich in iron, gold and bauxite, is a battleground for several international mining companies that compete for these minerals, especially since commodity prices have risen following the recession. The past decade has seen increasing petrodollar investments from GCC into Africa in the energy sector, while the Gulf countries have imported minerals . The trend is expected to continue as the GCC forges ahead with diversification away from oil and into petrochemicals and other downstream manufacturing. l Ports are an area of competitive strength for the GCC, and Africa has huge port infrastructure19 © The Economist Intelligence Unit Limited 2011
  21. 21. GCC trade and investment flows The emerging-market surge needs. DP World (UAE) has a 20-year concession to operate a port in Djibouti, while Qatar has invested in a deepwater port in Kenya. l Telecoms has been one of the fastest-growing industries in Africa, and Gulf operators, faced with increasing competition and market maturity at home, have expanded into a number of African countries. However, Kuwait’s Zain has reduced its activities in Africa, having sold its sub-Saharan operations to India’s Bharti Airtel in 2009. l Tourism between the Gulf states and Africa remains low, and most GCC tourists visit North African, rather than sub-Saharan African, countries. However, South Africa is beginning to woo Gulf tourists in its bid to promote itself as a tourist destination. Africa presents vast opportunities, not only for religious tourism into the GCC (Saudi Arabia), but also for leisure, particularly in the UAE, as the region is home to more than 400m Muslims or around one-quarter of the world’s Muslim population. Gulf investments in the region within this sector have been heavily weighted towards property investments. Prior to the recession, construction companies in the Gulf region invested in tourism development projects primarily in North African countries, such as Morocco, Egypt and Tunisia, but many of these projects have now been cancelled or postponed. A Saudi company, Aujan, has ventured further afield with hotel projects in Zimbabwe and Mozambique. Imed Ben Abdallah, the head of network planning at the UAE-based Etihad Airways, highlighted the future potential of the tourism sector in Abu Dhabi, which he says “will have a positive impact on the growth of Etihad”. Risks Political risk remains a concern in many African countries. While the mounting interest in African farmland provides potential for significant investment inflows, such plans also come with political risk. Exporting food from countries experiencing domestic food shortages and high food inflation can breed resentment against the companies and governments involved in the acquisitions. The often ad hoc partitioning and flimsy ownership laws of agricultural land in many African countries has raised issues of farmers being displaced without compensation, and land being leased at below the market rate. Such investments therefore need to be treated with care.20 © The Economist Intelligence Unit Limited 2011
  22. 22. GCC trade and investment flows The emerging-market surge Middle East trade with the GCC, 2009 (share of total) Iraq 1 Iran 45 Jordan 15 Lebanon 8 Syria 20 Yemen 11 Source: IMF, Direction of Trade Statistics. Middle East The current picture The Middle East holds within it abundant opportunities for deepening trade and investment ties with the GCC. Economic growth in the Middle East has been significantly higher than the OECD average over the last ten years, averaging 4.1% per year compared with 2.5% in the OECD. But beyond the economic growth prospects, the shared cultural, ethnic and religious heritage makes the Middle East a natural destination for GCC investment. This said, despite growing 11% on average over the last three decades, trade with the Middle East still makes up only a tiny proportion of the region’s total, accounting for only 3.9% in 2009. There are no comprehensive data on investment flows, but since 2001 there has been a clear trend of increased intra-Arab investment flows. GCC investment in the region is expected to grow in the next ten years. While the domestic capital Iraqi reconstruction; a boon for the GCC? scale infrastructure projects. UAE companies have already started entering the Iraqi market. According to Dunia Frontiers, a The prospect of higher than regional annual average consultancy, UAE-based investors had committed growth in Iraqi GDP will be looked at with some almost US$38bn in 2009 alone. FiberPro, a Dubai- interest in the GCC. Many sectors in the country are based consulting company, has recently signed developing from a low starting point after the years a US$1.5bn contract to build 30,000 new homes of sanctions and insecurity. The increasing inflow in the country. Kuwaiti investors have also been of revenue from oil has allowed the government active, and have been involved in a number of to increase its capital budget by 22% this year, large-scale projects, including the construction of allocating almost US$25bn to spend on capital an international airport in Najaf in southern Iraq, projects in 2011. This is in addition to two overlapping and the Kuwaiti prime minister, Sheikh Nasser al plans outlined by the Ministry of Planning and the Mohammad al Sabah, recently travelled to Iraq for National Investment Commission, which envision the first time since the 1990 war between the two investment of US$186bn and US$150bn over the next countries, telling reporters that “There is a wide five and 15 years, respectively, to be spent on large- desire to invest in the Iraqi infrastructure.”21 © The Economist Intelligence Unit Limited 2011
  23. 23. GCC trade and investment flows The emerging-market surge markets are too small to be able to absorb the massive investments made by sovereign wealth funds, investment in previously troubled economies has been cited as being a particularly attractive possibility. A senior UAE government official told us that “In the next ten years, we see our investments increasing in the MENA region, particularly in challenging countries, such as Syria, Libya and Iraq, where economies are opening up and governance structures are improving.” Opportunities: Synergies: Outside the GCC and Iraq, most Arab countries have a much smaller hydrocarbon reserve: population ratio. They are poorer in financial capital, but richer in labour and skills, meaning there are clear synergies to be exploited. Sharia-compliant investment: Growing GCC investor interest in sharia-compliant investment opportunities, which Mr Damirji of Trinity says is becoming a priority for many of the investors he deals with from the Middle East, will also help to drive intra-regional investment in relevant areas like property and infrastructure development. Risks GCC exports to Iran accounted for 50% of total exports to the wider region (Iraq, Iran, Jordan, Yemen and Syria) in 2009. The importance of Iran as a trading partner for the GCC, the UAE in particular, is therefore unequivocal, but could be jeopardised by increasingly stringent trade sanctions placed on the country by the UN and the US. The GCC states, including the UAE, have made it clear that they will abide by the sanctions.22 © The Economist Intelligence Unit Limited 2011
  24. 24. GCC trade and investment flows The emerging-market surge Latin America The current picture Of the emerging-market regions analysed in this paper, Latin America appears to have the weakest trade ties with the Gulf countries. Trade between the two regions has increased by a paltry 4% on annual average in the past 30 years, the lowest among all the other emerging-market regions. Reflecting this, our interviewees generally focused on regions other than Latin America. Ms Ziemba of Roubini notes that “The big obstacles are distance and lack of cultural and long-standing ties. The ties are primarily with Brazil and not really with the rest of the region.” Brazil accounted for 85% of total Latin American trade with the GCC in 2009, mainly owing to food-related exports. Yet there are often-overlooked opportunities to develop links with other rapidly growing Latin American countries, including Peru, Chile, Argentina and Colombia, in areas such as agriculture, ports, real estate and tourism, with an increasing number of air routes now opening up between the Gulf and Latin America. Drivers of growth: The region has witnessed annual average growth of 3.4% in the past 15 years and the rate is expected to increase marginally to 3.5% in the next three years, primarily driven by domestic demand and infrastructure needs. Opportunities l Agriculture: The GCC, which imports around 80% of its food, will look to Latin America as a vital food source, with investment in land acquisitions likely to increase. Qatar has led the way with Hassad Foods, a company with a mandate to secure and improve food supplies, which was established after the 2008 price hikes in global food commodities. According to the company’s chairman and managing director, Nasser al-Hajri, it spent around US$700m in 2010 to acquire farmland across the world, with Brazil targeted for the production of poultry, beef, sugar and grain production, Argentina for grain and Uruguay for rice, grain and meat. Brazil is one of the world’s leading food exporters, with around 11% of food-related exports sold to the Middle East, according to the Arab-Brazilian Chamber of Commerce. Around one-third of Brazil’s poultry exports go to the Middle East and it is a significant exporter of Halal products to the region. l Ports. Dubai’s DP World has moved into Latin America, where it has invested in Peru’s Callao Port. In February 2011, Peruvian deputy trade minister, Carlos Posada, said Arab countries were interested in developing more projects in ports, tourism and water resource management in his country. l Financial services. Latin American banks were relatively well protected from the global financial crisis by their high levels of capitalisation and limited exposure to toxic assets. Rapid growth in Brazil in particular is expected to drive demand for a wider range of financial services. In 2009 Aabar, an Abu Dhabi investment fund, bought a US$328m stake in a Brazilian bank, Banco Santander. l The political will to enhance the trade relationship exists on both sides and a number of Latin American embassies have opened up in the region.23 © The Economist Intelligence Unit Limited 2011
  25. 25. GCC trade and investment flows The emerging-market surge Risks The main deterrent to trade and investment between the two regions is the adoption of protectionist policies. Negotiations to establish a free-trade agreement (FTA) between the GCC and the Mercado Común del Sur (Mercosur, the Southern Cone customs union, consisting of Brazil, Argentina, Paraguay and Uruguay, with associate members including Bolivia, Chile, Columbia, Ecuador and Peru) have stalled as the two blocs struggle to agree on issues regarding exports. The Gulf countries are pushing for the removal of import duties on petroleum and associated products from the GCC to Latin America, but the Mercosur members, who produce around 8% of the world’s oil, oppose this. In addition, Brazil’s government is actively promoting the use of bio-fuels, such as ethanol, as an alternative to oil-derived products.24 © The Economist Intelligence Unit Limited 2011
  26. 26. GCC trade and investment flows The emerging-market surge Eastern Europe and CIS The current picture: Trade with Eastern Europe and Russia accounts for less than 1% of the GCC’s total, which, despite growing by an average 17% per year over the last 30 years, amounted to only US$8.7bn in 2008 (and dipped to US$4.7bn in 2009). The weak trade ties can be attributed to a number of factors, not least the legacy of the cold war, in which the GCC countries were firmly allied with the west. Russia accounts for 25% of total trade between the GCC and this region. Ms Ziemba argues that “The relationship between Eastern Europe and Russia and the GCC is limited because they are producing the same products.” Both regions are oil and gas producers, but there are real opportunities in the retail sector. Opportunities may also arise in particular niches, especially as many Eastern European countries are in need of capital; several had IMF assistance to offset the severe impact that the global recession had on the region. Drivers of growth: Eastern Europe does provide opportunity for investors. The economy there grew by more than 7.6% per year in 2003-08 (2009 saw a decline, largely owing to the global economic downturn), and is expected to register growth of over 5% over the next five years, more than double the growth expected in the OECD, making it attractive to investors seeking higher yields. Opportunities Retail: The region offers opportunities in the retail sector as it is home to 335m people, but has a relatively underdeveloped retail industry. The region has grown at an average of 5% per year in the past 15 years. Russia and Ukraine, the two most highly populated countries in the region are the most attractive retail destinations. According to a report published in March 2010 by PMR Publications, a research company that focuses on Central and Eastern Europe, Russia accounted for 73.5% of the total retail turnover in the Commonwealth and Independent States in 2008, followed by Ukraine (12.4%). Foreign retailers, such as Kuwait’s Al Shaya Group, have shown increasing interest in these markets. Mohammed Alshaya, executive chairman of M.H. Alshaya Company, a Kuwait-based trading company that operates throughout the Middle East and in some CIS countries, says “We could see the same opportunities in Eastern Europe as we saw here in the Middle East: an increasingly brand- literate market demanding international brand names, plus a growing affluence.” M.H. Alshaya has established 175 stores in Russia since 2005 and is expanding elsewhere in Eastern Europe, notably Poland. Although the economic recession in 2009 has affected these countries, they provide promising new markets for GCC retailers.25 © The Economist Intelligence Unit Limited 2011
  27. 27. GCC trade and investment flows The emerging-market surge 4. Implications for the OECD T he OECD countries will remain important economic partners for the GCC, but will face increasing competition. A striking example is the success of a South Korean consortium in bidding for the UAE’s first nuclear plant, winning the contract ahead of a French consortium. OECD businesses will need to focus on maintaining their technological edge. For instance, Mr Wildi of Dow argues that “In the foreseeable future, from a manufacturing standpoint, North America and Europe will not diminish in relevance and impact, as these mature economies still represent the technology hubs.” Shin-Ichiro Fukushima of the Japan External Trade Organisation highlights education and healthcare as two priority sectors where Japanese countries can compete in the GCC markets, both being knowledge-intensive sectors. Here, the main competition will come from Asian countries that have invested heavily in RD, such as South Korea and India. Western businesses that target the consumer market will also benefit from established brands. Mr Alshaya argues that the West will face little competition for well known international brands: “I think that local consumers are primarily looking for well known international brands and, in my view, creativity and design will stay with the West, while manufacturing and consumption stays with the East.” In the area of investment, a senior UAE government official told us that, while he thought the emerging markets will eventually replace the OECD as investment destinations, governance structures must evolve for this to happen, something he did not envision taking place within the next decade. Investments in the OECD are also expected to remain strong, as the effects of the 2008-09 global economic downturn fade from investor memory. Developed markets will continue to be seen as a secure investment destination by the more risk-averse GCC funds.26 © The Economist Intelligence Unit Limited 2011
  28. 28. GCC trade and investment flows The emerging-market surge Conclusion T he increasing importance of emerging-market countries provides significant opportunities for the GCC. Trade and investment between the bloc and countries that have not been traditional partners has seen the market share of non-OECD countries in GCC trade increase to around 45%, up from just 15% in 1980. The shift towards these markets has been exponential, and has been led by China and India, although nascent markets in Africa and Latin American also present ample opportunity for GCC trade and investment. The GCC’s investments in emerging markets are likely to focus on tried and tested areas of competitive strength, chiefly energy and services sectors such as port operations, tourism, retail, financial services (especially sharia-compliant finance) and telecoms. Financial investments will also go into agriculture, minerals and real estate. Overall, the GCC’s trade, investment and political ties with emerging markets are expected to develop in the next ten years, and although doubt has been raised as to the ability of these emerging markets to eclipse trade and investment with the traditional partners, Western Europe and North America, it is certain that emerging economies will continue successfully to eat into the share of the market controlled by the OECD. This will be led by manufacturing trade and, just as importantly, by the growing demand for GCC oil and gas among rapidly industrialising economies.27 © The Economist Intelligence Unit Limited 2011
  29. 29. GCC trade and investment flows The emerging-market surge OECD/ non-OECD global nominal GDP (share of total) OECD Non-OECD 1987 2010 2015 16 31 41 59 84 69 Growth in oil demand (%) OECD Non-OECD 8 8 6 6 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6 2009 10 11 12 13 14 15 Source: Economist Intelligence Unit.28 © The Economist Intelligence Unit Limited 2011
  30. 30. GCC trade and investment flows The emerging-market surge OECD GDP growth vs emerging markets GDP growth forecast (%) OECD Emerging markets 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 Avg 1995-2009 Forecast 2010-12 Source: Economist Intelligence Unit. Africa growth trajectory vs world average and emerging markets average - 1995 - 2009 (%) Africa avg Emerging markets 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 1995 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 Source: Economist Intelligence Unit.29 © The Economist Intelligence Unit Limited 2011

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