The Middle East and North African (MENA) economies will be driven by unique ‘forces of change’ according to new analysis from Frost & Sullivan. Here are some of the key mega trends that will drive the region by 2025.
Around 65.4 per cent of the total population (483.5 million) in MENA would be living in urban regions by 2025 with countries such as Bahrain, Kuwait, Lebanon, and Qatar witnessing urbanisation rates of over 90 per cent. Emerging mega corridors (for example, the Cairo-Dakar Highway and GCC Etihad Rail) will foster inter-regional trade that currently accounts for less than 10 per cent of the region’s total trade.
Integrated hubs along these corridors will become the future centres of business and logistics attracting massive infrastructure investment from foreign companies and international governments alike. This explosive growth in urbanisation will drive cities like Abu Dhabi and Cairo to become key economic powerhouses of the future, contributing 48 and 77 per cent to their respective countries’ GDPs in 2020.
The Middle East has already experienced the power of social networking. The service that has quickly emerged as not just a social community, but also a social platform, that has given voice to the common person.
Frost & Sullivan estimates that close to 75 per cent of MENA’s online population will be involved in social networking by 2015. While current social networking services in the region are basic, the next platform of social networking will rely on geographic services and capabilities such as geocoding and geo-tagging. These collaborative web-mapping techniques will result in new trends of networking, digital marketing, and innovative ways of socialising thus furthering the evolution of interaction between individuals, governments, and organisations.
Future of Power
Europe will import 20 per cent of its electricity demand from the MENA through the transcontinental energy and power linking across EU-MENA, a significant portion of which will be from renewable sources.
The Desertec Initiative aims to provide 15 per cent of European electricity demand and a significant proportion of domestic demand in North Africa. Transcontinental power grids will not only help in meeting intercontinental power demands, but also in significantly reducing carbon emissions, meet fluctuations in electricity demand, reduce operating costs, and lower the overall level of environmental pollution in the EU-MENA region. Over the past 20 years, total investment in various Arab Interconnection Projects has reached $2 billion.
The MENA is the world’s most water-scarce region. By 2030, lack of water availability will become a severe constraint to health and socio-economic development in all 17 MENA countries. By 2050, two-thirds of these countries could have less than 200 m3 of renewable water resources per capita per year.
Groundwater and desalination are the only two sources of water for the region, both of which require huge amounts of power. About 30-50 per cent of the desalinated water cost is the energy cost.
The increasing demand on energy to meet water shortages in MENA is likely to have serious consequences on energy security in general and the economies of oil-exporting countries in particular.
Future Infrastructure Development
Global dynamics in the demand for power and energy are changing the course of infrastructure development in MENA. Majority of the infrastructure investments and developments will focus on the power and trade corridors of the region. The MENA countries are undertaking a range of infrastructure projects including building/upgrading state of the art airports, ports, highways, bridges, economic cities, high-speed rail, urban transport facilities, and social infrastructure projects (land reclamation from sea).
The Middle East, with 58 per cent dependency on food imports, is one of the most vulnerable regions in the world with regard to food security.
The MENA countries spend as high as 0.15 to 0.62 per cent of their GDP on food subsidies. Algeria, Libya, Egypt, Morocco, and Tunisia are already facing food security challenges. Many of the countries that experienced the food demonstrations of 2007-08 are the countries experiencing the Arab Spring – for example, Egypt.
Short-term measures for assuring food security include increasing public sector wages, increasing government expenditure on bread and other food subsidies, reducing tariffs on imported food items, as well as increasing direct cash transfers to the poor. However, these measures place a heavy burden on government budgets.
The Middle East is, therefore, now looking at investing in food production in countries from where food is imported, to secure its food supplies.
Saudi Arabia is already providing funds, credit, and logistics to Saudi investors to invest abroad in agriculture. It is also establishing a strategic reserve for basic food commodities, to meet local needs for food and avoid future food crisis. This is soon likely to be a key trend for all oil exporting
countries in the Middle East.