The political unrest in North Africa and the Middle East is unlikely to produce significant investment opportunities for multinational corporations in the near future, according to three analysts of the region.
“Right now there is a lot of investor fear” about Egypt, Ian Bremmer, president of the New York-based research firm Eurasia Group, said yesterday at the Bloomberg Markets 50 Summit in New York.
“You have to rebuild investor confidence,” he said. It will take “many, many years” for a stable, attractive investment environment to emerge.
Bremmer, Nobel Prize-winning economist and Columbia University Professor Edmund Phelps and Angus Blair, head of corporate development at Cairo-based Beltone Financial, were asked to assess the investment climate as the so-called Arab Spring generates new leadership and economic orders.
For the moment, “any important move toward much greater economic development must be grassroots,” Phelps said. “I’d like to see the U.S. government get behind the idea of grassroots development in Egypt.”
That isn’t likely when the U.S. unemployment rate is 9.1 percent and the 2012 presidential election campaign has begun, Bremmer said.
“There is not a lot of support for getting involved in this part of the world,” Bremmer said, adding that it is more likely that Turkey and the Persian Gulf nations will have to step in with funding for much needed infrastructure development.
“How do you encourage small entrepreneurs?” Blair said. “It is very difficult to create Capitalism 1.0. Hardly anyone knows the language.”
A big impediment in Egypt, Blair said, is ingrained corruption.
“If we want to take Egypt and make it another Turkey, you have got to get rid of the corruption,” Blair said. “A variety of factors that caused the revolution have to be addressed. It will take a long time for this to get back to a new kind of normal.”
At the same time, Blair said Western nations shouldn’t overly fear Islamic influence in Egypt because many members of the Muslim Brotherhood “run small businesses.”
Bremmer said he doesn’t envision “Chavez-style nationalists sweeping the region,” referring to concerns that new leaders may seize control of businesses in the manner of Venezuela’s President Hugo Chavez.
“They are going to have to be open to the international investment community,” Bremmer said of new leaders. “They can’t afford to rip up contracts.”
Bremmer said Tunisia, site of the first revolt against an authoritarian regime, is a “model of smallness.”
Libya, where dictator Muammar Qaddafi was just deposed, “could surprise,” Blair said, though Bremmer said Libya’s rebounding oil production will go mainly toward domestic consumption for up to two years.
It’s too soon to say what’s going to happen politically in Syria or whether there will be investment opportunities when and if President Bashar al-Assad’s regime falls, all three analysts said.