Ali, accompanied by several heads of Middle-Eastern family offices, discussed the outlook for the Middle East and how it will affect capital flows for international investors.

Ali is the Managing Director of 3Sixty Strategic Advisors, a boutique consultancy firm based in London. He specialises in emerging markets and is focused on geo-economic and geo-strategic developments, including the decoupling of East and West and the implications of China’s Belt and Road Initiative.
Ali, accompanied by several heads of Middle-Eastern family offices, discussed the outlook for the Middle East and how it will affect capital flows for international investors.

KEY TAKE-AWAYS

  • There is not one promising market in the region. It has suffered for too long from ‘masochism’ at home and ‘sadism’ from abroad. The pandemic has further exacerbated fundamental problems like food and water security.
  • The demographics mean that the old guard is dying off and there is an expanding and increasingly dissatisfied youthful generation thirsting for change and progress.
  • The region potentially has a demographic dividend and ultimately youth does consume but capital investment will need to be very patient. China is ready and well placed to play this long game.
  • The legacy of the past 20 years of international (Western) foreign policy/intervention in the region is little more than widespread ‘scars’. In contrast the Chinese BRI promises to leave something positive behind and for this reason Iran in particular and the region in general is increasingly tilting Eastward (China-ward).
  • Massive re-construction (infrastructure, healthcare, education) is needed to varying degrees in the different countries across the region. The necessary capital to fund this will largely come from China in the form of all-embracing ‘packages’ consisting of technology, know-how, and financing – the recipient states will yield political leverage in return. This trend, including (but not only) the BRI, will be amplified in the post-Covid world. Make no mistake, China’s BRI won’t stop in Europe and could even extend across the Atlantic (eg Cuba).
  • Sanctions are crippling and stifle any potential for constructive mentoring and shared R and D – both essential elements for a propitious entrepreneurial environment.
  • In the past ruling families throughout the region expected their share of the profits from successful multi-nationals to fall at the end of each financial year thanks to an obligation to co-invest. But this did not equate to constructive inward entrepreneurial investment in their own countries. The majority of local wealth is invested outside the region, not locally.
  • There can be legitimate hope that a Biden administration will look to bring some healing to the region but only if pressing domestic priorities allow and if it can be done in the face of an increasingly strong Chinese influence. That said there is not much to suggest that the US-Iran relationship will be any less painful going forward under Biden.