Change is like a pin to the balloons of conventional wisdom. Just when people settle into their views, here comes the pin.
For instance, it’s become widely accepted when talking about emerging economies to focus on the so-called BRIC countries – Brazil, Russia, India and China. But there is a very important region that gets lost in that discussion.
In fact, this region collectively has a bigger economy than Brazil, Russia or India. And in terms of growth, it is growing faster than any of these countries. In terms of population, it’s bigger than the U.S. and nearly as populous as the EU. It holds 60% of the world’s proven oil reserves and nearly half of its natural gas.
That last clue probably gives it away. I’m talking about the Middle East and North Africa, or MENA.
Among its largest economies are Saudi Arabia and the United Arab Emirates.
In one of my presentations at Vancouver, I focused on the growth in these economies because it touches on nearly everything we’ve talked about here recently – water and food scarcity issues, infrastructure needs, energy and the growth in non-U.S. trade. To start, let’s look at a couple of basic facts that push this along.
The first is explosive population growth. MENA is one of the fastest-growing regions in the world. Over the last 50 years, MENA’s population is up more than fourfold. And the population is still young, with the majority of the population under 25 years old. Over the next 30 years, MENA’s population will grow more than 60%, to nearly 700 million people.
The second is that trade is expanding in this part of the world, as I highlighted in last month’s letter. To show this in a different way, let’s look at Syria.
Yes, Syria. Long a pariah state with which the U.S. maintained frosty relations, all that is beginning to change. In July, the U.S. made a couple of announcements that I thought signaled an important shift. First, the U.S. would send an ambassador to Damascus after a four-year absence. Second, the U.S. would ease export bans to Syria.
But more important than this political thaw is the economic story. Syria has been a mercantile crossroads between East and West since its days as a link on the old Silk Road.
The ancient city of Aleppo, for instance, was a key stop along the old Silk Road. Even today, it still has the longest covered market in the Middle East – a souk seven miles long. There you can find goods that take you back in history – soap made from olive oil or silk scarves and keffiyehs of a variety of colors. Head down an alleyway and find gold jewelry and stands of fresh pistachios and sacks of spices and more. Then there are the backstreets of hawkers with lamb – always plenty of lamb – and you smell the scent of lime, garlic and mint.
Syria is basically following the “China model” of maintaining a closed political order but carving out free zones and allowing trade.
The most interesting thing about this growth is that it is happening in a part of the world where it is most difficult to grow food. Water is scarce. MENA consumes far more water than it gets via rainfall. In some places, the disparity is dramatic. In Kuwait, for instance, annual water consumption is 22 times annual rainfall. No wonder the whole area is a net importer of food.
The Middle East is the world’s largest regional importer of food. Egypt, for instance, actually imports more wheat than China. The GCC countries – or Gulf Cooperation Council countries – will import 60% of their food by 2010. And it’s likely to get worse. Saudi Arabia aims to phase out wheat production by 2016 to conserve water.
For this reason, these MENA countries are looking to invest in farmland overseas. The Saudis have grabbed farmland in Indonesia. The UAE has locked down farmland in the Sudan and Pakistan. As Eckart Woertz of the Gulf Research Center in Dubai says: “In a global food crisis, you may find it difficult to secure food supplies at any price no matter how many oil revenues you have.”
Move over BRIC! There’s a new acronym in town, and its name is MENA!
Source: Chris Mayer