Beyond BRIC's: Middle East & Africa

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A brief look at investment opportunities in the Middle East and Africa

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  • 01/27/09
  • 01/27/09
  • 01/27/09
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  • 01/27/09
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  • Beyond BRIC's: Middle East & Africa

    1. 1. -BEYOND the BRIC’s Middle East and Africa - Daniel Scheeringa, Senior Consultant Cornerstone International Strategy Advisors LLC
    2. 2. <ul><li>Demographic pressures </li></ul><ul><ul><li>The youngest population in the world </li></ul></ul><ul><ul><li>Insufficient private sector job growth </li></ul></ul><ul><li>Increasing demand for global integration </li></ul><ul><ul><li>Political, social, economic modernization </li></ul></ul><ul><ul><li>Tech-savvy modern youth culture </li></ul></ul><ul><li>Geopolitical concerns </li></ul><ul><ul><li>The Iranian question </li></ul></ul><ul><ul><li>Israeli-Palestinian impasse </li></ul></ul><ul><ul><li>Presence and influence of US </li></ul></ul><ul><li>Economic diversification </li></ul><ul><ul><li>Problem of petrochemical-based economies </li></ul></ul><ul><ul><li>Government efforts to attract job-creating FDI </li></ul></ul>Middle East and Africa Overview *Indicates 2007 data Source: UNCTAD
    3. 3. Country Snapshots: Turkey and Israel <ul><li>What’s Encouraging… </li></ul><ul><li>Market Size </li></ul><ul><li>Double-digit growth in bilateral trade </li></ul><ul><li>New laws liberalizing FDI </li></ul><ul><li>17 th in worldwide GDP </li></ul><ul><li>Solid banking system </li></ul><ul><li>Estimated 4.5% annual growth after 2010 </li></ul>TURKEY ISRAEL <ul><li>What’s Concerning… </li></ul><ul><li>EU membership looking less likely </li></ul><ul><li>Overdependence on EU market </li></ul><ul><li>Consequences of failed EU accession </li></ul><ul><li>-5.1% GDP in 2009 </li></ul><ul><li>Regional disparity </li></ul><ul><li>Currency </li></ul>The Bottom Line… Although in deep recession, long-term prospects are promising <ul><li>What’s Encouraging… </li></ul><ul><li>Large market for US exports </li></ul><ul><li>Global center for hi-tech R&D </li></ul><ul><li>Most trade barriers with US eliminated </li></ul><ul><li>Israeli shekel appreciating against USD </li></ul><ul><li>Educated, English speaking population </li></ul><ul><li>What’s Concerning… </li></ul><ul><li>Economy heavy-dependent on high-tech exports </li></ul><ul><li>Political /geopolitical risks </li></ul><ul><li>High tax rates </li></ul><ul><li>Red tape </li></ul>The Bottom Line… Israel is a liberal and innovative economy
    4. 4. Country Snapshots: South Africa and Saudi Arabia <ul><li>What’s Encouraging… </li></ul><ul><li>US is 3 rd largest exporter to South African market </li></ul><ul><li>Sub-Saharan Africa’s largest economy </li></ul><ul><li>Sophisticated financial sector </li></ul><ul><li>2010 World Cup </li></ul>SOUTH AFRICA SAUDI ARABIA <ul><li>What’s Concerning… </li></ul><ul><li>Poor infrastructure </li></ul><ul><li>Low labor productivity </li></ul><ul><li>Poor education and health care </li></ul><ul><li>Crime </li></ul><ul><li>High Inflation </li></ul>The Bottom Line… South Africa is well positioned for future growth, but constrained by social issues <ul><li>What’s Encouraging… </li></ul><ul><li>Government spending will support domestic demand </li></ul><ul><li>Infrastructure investment </li></ul><ul><li>Better prospect for long-term domestic demand </li></ul><ul><li>What’s Concerning… </li></ul><ul><li>Succesion risks </li></ul><ul><li>Regional political leadership </li></ul><ul><li>Burdensome bureaucracy </li></ul><ul><li>FDI limits </li></ul><ul><li>Corruption and weak legal system </li></ul>The Bottom Line… Saudi Arabia’s economic fate remains linked to the price of oil
    5. 5. Country Snapshots: Nigeria and Egypt <ul><li>What’s Encouraging… </li></ul><ul><li>Large market </li></ul><ul><li>Energy market poised to take off when global economy leaves its downturn </li></ul><ul><li>Growth in non-energy sectors </li></ul><ul><li>Improving fiscal position </li></ul>NIGERIA EGYPT <ul><li>What’s Concerning… </li></ul><ul><li>Insurgency in Biafra </li></ul><ul><li>Poor education and health care </li></ul><ul><li>Poor electricity infrastructure </li></ul><ul><li>High tariff and non-tariff barriers </li></ul><ul><li>Estimated 14.2% inflation in 2009 </li></ul>The Bottom Line… Nigeria is trying to diversify the economy, but political and social barriers remain <ul><li>What’s Encouraging… </li></ul><ul><li>4.1% growth in 2009 </li></ul><ul><li>Tariff reduction & new industrial zones </li></ul><ul><li>Government responsiveness to FDI </li></ul><ul><li>Cost leader for IT outsourcing </li></ul><ul><li>Low taxes </li></ul><ul><li>What’s Concerning… </li></ul><ul><li>Political risk </li></ul><ul><li>12% inflation </li></ul><ul><li>Inconsistent protection of property and IP rights </li></ul><ul><li>Outdated infrastructure </li></ul>The Bottom Line… Egypt is a traditional regional leader, but it faces significant challenges
    6. 6. <ul><li>What’s Encouraging… </li></ul><ul><li>Government investment in transport infrastructure </li></ul><ul><li>Labor market </li></ul><ul><li>Regulatory environment </li></ul><ul><li>Government incentives for FDI </li></ul>TUNISIA OMAN <ul><li>What’s Concerning… </li></ul><ul><li>Workforce availability </li></ul><ul><li>Cost of labor increasing </li></ul><ul><li>Political instability </li></ul><ul><li>Surrounding countries </li></ul>The Bottom Line… Tunisia offers a stable platform into European and Middle Eastern markets <ul><li>What’s Encouraging… </li></ul><ul><li>Low political risk </li></ul><ul><li>Currency pegged to US dollar </li></ul><ul><li>Free Trade agreement with US </li></ul><ul><li>Investment incentives </li></ul><ul><li>Good transport infrastructure </li></ul><ul><li>What’s Concerning… </li></ul><ul><li>Burdensome labor regulations </li></ul><ul><li>Small market </li></ul><ul><li>Import/export regime </li></ul><ul><li>Lack of scientists and engineers </li></ul>The Bottom Line… Oman is actively working to diversify its economy with FDI and tourism. Country Snapshots: Tunisia and Oman
    7. 7. <ul><li>Insights </li></ul><ul><li>Ranking out of 134 countries </li></ul><ul><li>Turkey and Egypt: Large markets, but score low on most criteria </li></ul><ul><li>Oman: Appears exceptionally stable </li></ul><ul><li>Israel most notable for high tech and innovation </li></ul><ul><li>Tunisia appears to have exceptional infrastructure and openness to foreign investment </li></ul>Global Competitiveness Report 2008-2009 ISRAEL TURKEY SOUTH AFRICA SAUDI ARABIA NIGERIA EGYPT TUNISIA OMAN Institutions 47 80 46 34 106 52 36 19 Infrastructure 37 66 48 41 120 60 22 32 Macroeconomic Stability 59 79 63 9 26 125 75 13 Higher Education and Training 24 72 57 53 108 91 27 66 Market Size 49 15 23 22 39 27 62 75 Business Sophistication 23 60 33 41 61 77 40 54 Innovation 6 66 37 34 65 67 27 44 Aggregate GCI Ranking 23 63 45 27 94 81 36 38 Regional Ranking 1 6 5 2 8 7 3 4
    8. 8. 1,000 5,000 30,000 8 7 6 5 Population Size Large Medium Small Country Risk Rating Higher Risk Moderate Risk Lower Risk Business Environment Rating* 15,000 25,000 Economic Freedom Rating Constrains Business Neutral to Business Facilitates Business Oman Tunisia Egypt Turkey Sources: Heritage Foundation, OECD Rankings, World Competitiveness South Africa Saudi Arabia Israel Nigeria 4 3 2 1 Percapita GDP Turkey 12 Israel 28,200 Saudi 20,700 S Africa 10 Nigeria 2300 Egypt 5400 Oman 20200 Tunisia 7900 Freedom Israel 42 Thin Oman 43 Thin Saudi 59 Thin S Africa 61 thin Turkey 75 Med Egypt 97 Med Tun 98 Med Nigeria 117 Med Risk Nigeria Red All others Yellow Population Egypt 83m Israel 7 mil Saudi 28 mil S Africa 49 mil Turkey 78 mil Tunisia 10 mil Oman 3 mil Nigeria 149 mil Five Independent Variables Reflect Opportunities and Risks
    9. 9. Cornerstone’s team of strategy and operations consultants support executives in decision-making related to the international component of their business <ul><li>About us: </li></ul><ul><li>Cornerstone’s team of internationally-oriented business professionals specialize in supporting strategic and tactical initiatives by offering executives a broad range of advisory services related to defining, building, and revamping the international component of their business. </li></ul><ul><li>Experience across many industry sectors: </li></ul><ul><li>Clients have engaged Cornerstone to provide analysis and recommendations on: </li></ul><ul><li>Airlines </li></ul><ul><li>Appliances </li></ul><ul><li>Automotive </li></ul><ul><li>Banking </li></ul><ul><li>Business Services </li></ul><ul><li>Business Equipment </li></ul><ul><li>Chemicals </li></ul><ul><li>Computers </li></ul><ul><li>Construction Equipment </li></ul><ul><li>Medical Devices </li></ul><ul><li>Plastics </li></ul><ul><li>Publishing </li></ul><ul><li>Sales and marketing strategy </li></ul><ul><li>Regulatory compliance </li></ul><ul><li>Currency risk </li></ul><ul><li>Tax incentives and subsidies </li></ul><ul><li>Corporate structuring </li></ul><ul><li>Market entry /exit strategy </li></ul><ul><li>Business case development and strategic planning </li></ul><ul><li>Partnerships and alliances </li></ul><ul><li>Real estate and facilities </li></ul><ul><li>Logistics and supply chain </li></ul><ul><li>Import/ Export </li></ul><ul><li>Customs and Duties </li></ul><ul><li>Manufacturer sourcing </li></ul><ul><li>Manufacturing deployments </li></ul><ul><li>Procurement optimization </li></ul><ul><li>Labor attraction/retention strategies </li></ul><ul><li>Utilities and transport infrastructure </li></ul><ul><li>Cornerstone has conducted desk-top and/or field research in over 65 countries: </li></ul>Argentina Bahamas Brazil BVI Canada Chile Colombia Mexico Panama USA Austria Belgium Bulgaria Czech Rep. Denmark Estonia Finland France Germany Hungary Ireland Italy Latvia Lithuania Luxembourg Netherlands Norway Poland Portugal Romania Russia Slovakia Slovenia Spain Sweden Switzerland Turkey Ukraine UK Algeria Egypt Ghana Libya Morocco South Africa Tunisia Australia Bangladesh Brunei PR China Hong Kong India Indonesia Israel Japan South Korea Lebanon Macau Malaysia New Zealand Philippines Singapore Taiwan Thailand UAE Vietnam
    10. 10. Although terms of engagement depend on the scope, duration, and complexity of the project, Cornerstone offers clients a straightforward, transparent, and competitive fee structure: <ul><li>Cornerstone prepares a detailed ‘Scope of Work and Fee Agreement’ to summarize all the elements of the engagement, including: </li></ul><ul><li>Compensation : Fees depend on the number practitioners involved, their level, and pre-agreed hours dedicated to the engagement. Hourly rates range from $70/hour to $150/hour depending on the practitioners level </li></ul><ul><li>Duration : Typically 2 to 4 weeks of full-time desktop work </li></ul><ul><li>Travel : Aside from a one or two trips to the client’s office, Initiative Building generally requires limited field-work </li></ul><ul><li>Costs : One potential cost associated with Initiative Building includes a market, country, or industry research report from a 3 rd party research firm. Such reports can provide hard data to evidence opportunities otherwise not available. </li></ul>Initiative Building Platform Development Performance Management - For reference only, and subject to further discussion - <ul><li>Cornerstone prepares a detailed ‘Scope of Work and Fee Agreement’ to summarize all the elements of the engagement, including: </li></ul><ul><li>Compensation : Fees depend on the number practitioners involved, their level, and pre-agreed hours dedicated to the engagement. Hourly rates range from $70/hour to $150/hour depending on the practitioners level </li></ul><ul><li>Duration : Typically 3 to 7 weeks, combining desktop and field-work. </li></ul><ul><li>Travel : Field-work could start as early as the second week. The client may join as deemed necessary </li></ul><ul><li>Costs : Travel related expenses arising from field-work or trips to the client office are incurred by the client at cost. </li></ul><ul><li>Cornerstone prepares a detailed ‘Scope of Work and Fee Agreement’ to summarize all the elements of the engagement, including: </li></ul><ul><li>Compensation : Fees depend on the number practitioners involved, their level, and pre-agreed hours dedicated to the engagement. Hourly rates range from $70/hour to $150/hour depending on the practitioners level </li></ul><ul><li>Duration : Typically 2 to 5 weeks of full-time desktop work. An alternative model includes Cornerstone on a pre-agreed schedule (e.g.: quarterly, annually, etc.) </li></ul><ul><li>Travel : Field-work may be helpful, but depends on complexity. The client may join as deemed necessary </li></ul><ul><li>Costs : Travel related expenses arising from field-work or trips to the client office are incurred by the client at cost. </li></ul>
    11. 11. Contact Mr. Daniel Scheeringa Senior Consultant Mobile: +1 312.505.5588 Email: djs@cornerstone-international.net Cornerstone International Strategy Advisors LLC 200 East Randolph Street Suite 2200 Chicago, IL. 60601 Tel: +1 312.924.1889 www.cornerstone-international.net

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