Iraq, Oman, Qatar, Egypt, Tunisia, Lebanon, Yemen, Angola, Sudan, Nigeria, Ethiopia, DR Congo, Tanzania, Uganda, Ghana, Botswana, Zambia, Cote d’Ivoire and Kenya

Investment opportunities in the Middle East & Africa's frontier markets () are proliferating, but remain distinctly less well understood, whereas in Saudi Arabia, UAE and South Africa, the engine rooms of regional growth, opportunities are starting to diminish as incumbents – both domestic and international – entrench their market share. Against this backdrop, BMI's clients are reassessing their MEA growth strategies, whether based on organic expansion or acquisition. The Business Outlook for Middle East & Africa's Frontier Markets 2008 argues that, as your competitors gear up to the new era, it is imperative to start focussing now on the opportunities (and risks) in other high growth markets where the competitive environment is less challenging.

The Business Outlook for Middle East & Africa's Frontier Markets 2008 provides essential risk analysis and market forecasts for these high growth 'Frontier Markets'. It highlights the opportunities available for investors looking to exploit the domestic market, where growth rates will remain well in excess of more developed states. Furthermore, the report also evaluates the key trade offs that investors must make between the strong opportunities available and the political and operational risks.

Why Frontier Markets?

Strong macroeconomic growth - which translates into high earnings potential for domestic companies and investors
Rapid economic development - will means huge opportunities for capital investment across all sectors servicing local economy - utilities, communications, transport, industry
Diversification hedge - these states offer unique opportunities to exploit opportunities in states where growth dynamics do not correlate with more established states
'Last decade costs' - low labour costs in contrast to more developed states will confer competitive advantage to those able to unlock the potential

Why you need to order this report today:

Strategists - Scope out the commercial opportunities available within MEA's smaller markets, and, more importantly, the synergies available to your company's core regional strategy via diversification, cost reduction and new market acquisition.

Risk Managers - Develop a broader understanding of the risk/reward trade-off for both your existing business model and more innovative growth strategies via a more holistic view of the MEA market.

New Business Managers - Assess the relevance of your current portfolio of products/services for these rapidly-growing markets where those that offer greater differentiation stand to benefit most.

Financial Planners - Critically evaluate the assumptions underpinning your medium-term financial forecasts by incorporating BMI's economic assumptions of Frontier MEA states into your projections.

Extracts from The Business Outlook for Middle East & Africa's Frontier Markets 2008

Diversification benefits
While the performance of Frontier Markets is linked to the global economy, organic growth drivers – especially within commodity producing states – are more significant. The result is that while there are country-specific risks, investment and trade with these states offers a hedging strategy against falling performance elsewhere.

Immunity from the US downturn
There are demand-side risks to oil and other commodities associated with the US slowdown. However, with fears over supply constraints the key factor determining prices in 2008, energy and other commodity producing states will shrug off the 'credit crunch'. This leaves them well placed to maintain rapid growth rates in 2008 and beyond. In the Middle East at least, this will drive continued infrastructure investment, which will strengthen the development of non-energy sectors.

Political risks remain
While the rewards are significant, so are the risks. Political risk – both in terms of uncertainty, and the predictability of anti-market stances by senior regional politicians - are a key danger for investors. African states are more highly exposed in this regard, with institutional weakness in many of the states that we consider – including Nigeria and Kenya – posing key constraints to new investment.

Infrastructure bottlenecks constrain even greater potential
The infrastructure boom in the Middle East is vital. Electricity capacity constraints in many states - not least Kuwait and UAE - are impediments to more rapid growth. In Africa, similar concerns exist, with further fears about the predictability of the state's infrastructure and the transport network complicating analysis of the risk/reward trade-off.

Growing Fast On The New Frontier

BMI assesses the impact of frontier markets on the global economy using in-house projections to 2012. We expect robust nominal and per capita GDP growth in host of frontier market states to accelerate a trend towards greater domestic consumption. in turn, rising consumption will gradually lessen reliance on volatile commodity exports.

Chart: Global Distribution
Natural Gas Reserves By Region 2006 (tcm)
Chart: Mind The Gap
Natural Gas Prod & Consumption By Region 2006 (bcm)

Regional Energy Market Overview

Chart: Frontier Markets To Lead The Growth Race
Top 20 Countries Projected Real GDP Growth From 2008-2012,%
Table: Frontier Markets - Key data and projections for top 10 countries (2012)
Table: GDP per capita, US$ (in order of % increase)

Frontier Investment: Potential And Pitfalls

We quantify the diversification benefits gained through investment in frontier equity markets, relative to mainstream emerging markets, and examine the ongoing efforts to deepen market liquidity and facilitate greater levels of external investment.

Diversification Benefits

Table: Diversify through Frontier Markets - correlation coefficients Jan 2004 - April 2008

Index Development A Positive Step

Table: Frontier Market Indices

The Key Countries – Middle East & North Africa

We offer a comprehensive analysis of the business outlook in key frontier market states. Based around BMI’s in-house economic projections to 2012, we assess the structural factors driving our near and long-term outlook, with a particular focus on potential vulnerabilities. We also measure political risk, using our proprietary risk ratings and assess how strengths and weaknesses within respective business environments will impact growth and company activity.

From Yemen To Tunisia: A Region Of Huge Potential
Iraq – Investors Caught Between Iraq and A Hard Place

Chart: Dependent On Stability
Iraq–Oil Production, Consumption and Exports (‘000 b/d)
Chart: Tentative Room For Optimism
Number of Multiple Fatality Bombings, per month

Chart: Rocky Road
Iraq - Real GDP Growth (Oil and Non-Oil Sectors)
Table: Iraq - economic activity - HISTORICAL DA TA & FORECAS TS (2003-2012)
Period 2003-2012, Nominal GDP (Us$bn), real gdp growth (% change y-o-y), GDP per capita (US$),
Population (mn)
Table: Iraq - balance of payments - HISTORICAL DA TA & FORECAS TS (2003-2012)
Period 2003-2012, exports (Us$bn), imports (Us$bn), trade balance (Us$bn), current account
(Us$bn), current account (% of gdp), forex reserves (Us$bn), import cover (months g&s), oil
production (000 b/d), opec basket (Us$/b) ave
Chart: Capital Follows National Trend
Number of Iraqi Civilians Killed By Month

United Arab Emirates – Cracks In The Façade?

Chart: Property A Key Industry
UAE–GDP By Output 2007 (AEDmn, Constant 2000 Prices)
Chart: Housing Weighs Heavily On Inflation
UAE - CPI Relative Weights

Chart: Past Its Peak But Still A Concern
UAE Consumer Price Index (eop) and % Chg y-o-y
Table: United Arab Emirates - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (US$bn), real gdp growth (% change y-o-y), GDP per capita (US$),
Population (mn)

Oman – A Haven Of Growth, But Inflation Threat Looming

Chart: Non-Oil Sector Becoming More Important
Real GDP and Hydrocarbon Sector Growth (%)
Chart: Oil Output In Long Term Decline
Oil Production, Consumption & Exports

Table: Oman - economic activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (omrbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Table: Oman - balance of payments - Historical Data & Forecasts (2003-2012)
Period 2003-2012, exports (Us$bn), imports (Us$bn), trade balance (Us$bn), current account
(Us$bn), current account (% of gdp), forex reserves (Us$bn), import cover (months g&s), oil
production (000 b/d), opec basket (Us$/b) ave
Chart: No End In Sight
Oman – Muscat Consumer Price Index (% change, y-o-y)

Qatar - Hydrocarbons To Fuel Stellar Growth In Qatar

Chart: Strong Growth Set To Continue
Qatar – Real GDP Growth (LHS, %) & OPEC Basket Price (RHS, US$/bbl)
Chart: Still Dependent On Oil
Qatar – Hydrocarbon and Non-Hydrocarbon Sector (% of GDP, LHS) & GDP Current Prices (US$bn, RHS)

Chart: Hydrocarbons Still Driving Expansion
Qatar – Annual Hydrocarbons Sector Growth & Non-Oil Sector Growth (%)
Table: Qatar - economic activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (qarbn), Nominal GDP (Us$bn), real GDP growth (% change y-o-y),
GDP per capita (US$), population (mn)
Table: Qatar - balance of payments - Historical Data & Forecasts (2003-2012)
Period 2003-2012, exports (Us$bn), imports (Us$bn), trade balance (Us$bn), current account
(Us$bn), current account (% of gdp), forex reserves (Us$bn), import cover (months g&s), oil
production (000 b/d), opec basket (Us$/b)

Egypt – Powering Ahead But Fiscal Reform Looks Remote

Charts: Reforms Paying Of
Egypt – Real GDP Growth & Domestic Demand Growth (%)
Charts: Stellar Progress
Egypt – Exports (US$mn)

Table: Egypt - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (EGPbn), Nominal GDP (US$bn), real GDP growth (% change y-o-y),
GDP per capita (US$), population (mn), unemployment (% of GDP)
Table: Egypt - Fiscal Policy - Historical Data & Forecasts (2003-2012)
Period 2003-2012, fiscal revenue (egpbn), fiscal expenditure (egpbn) , budget balance (egpbn) ,
budget balance (% of gdp)
Chart: Inflows Coming >From Al Directions
Egypt – FDI Inflows (US$mn)

Tunisia – Stable Outlook Supports Investment

Chart: Promising Outlook
Tunisia – Real GDP Growth

Table: Tunisia - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (tndbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Chart: Steady Trade Growth
Tunisia Trade In Goods
Chart: Inflation Outpacing Wage Rises
Tunisia – Average Wage Increases (% ch q-o-q, private non-agricultural sector) & CPI (% ch q-o-q)

Saudi Arabia – Riding The Oil Wave

Chart: Non-Oil Growth Remains Solid
GDP Dynamics

Chart: Still Not Quite There On Diversification
Saudi Arabia – Exports By Sector
Chart: Historic Highs
Saudi Arabia – CPI (% ch y-o-y)
Table: Saudi Arabia - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (sarbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

Lebanon – Plenty Of Potential, But Instability Still Reigns

Chart: Not A Stellar Recovery
Real GDP Growth (%) and GDP Per Capita (US$)

Table: Lebabon - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (lbpbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Table: Lebanon - Fiscal Policy - Historical Data & Forecasts (2003-2012)
Period 2003-2012, fiscal revenue (lbpbn), fiscal expenditure (lbpbn) , budget balance (lbpbn) ,
budget balance (% of gdp)
Chart: Just What The Economy Doesn’t Need
Consumer Price Index (% change y-o-y)
Chart: A Volatile Few Years
Lebanon - Economic Indices (% change y-o-y)

Yemen – Huge Potential, But Don’t Bank On GCC Membership

Chart: A Definite Slowdown
Real GDP Growth and OPEC Basket Price (US$/bbl)
Chart: Hydrocarbons Growth A Thing Of The Past?
Real GDP Growth and (Oil and Non-Oil Sectors)

Table: Yemen - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (yerbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Table: Yemen - Monetary Policy - Historical Data & Forecasts (2003-2012)
Period 2003-2012, lending rate (% eop), real lending rate (% eop), consumer prices (% y-o-y eop),
consumer prices (% y-o-y ave), exchange rate (yer/us$ eop), exchange rate (yer/us$ ave)
Chart: Budget On The Slide As Well
Fiscal Revenues, Expenditure and Balance (YERbn and as % of GDP)
Chart: Exports Letting Side Down
Real GDP (by Component, % change)

The Key Countries – Sub-Sahran Africa

Sub-Saharan Africa Stepping Into The Limelight
Risks To Outlook
Angola – Oil: A Blessing And A Curse

Chart: Oil Price To Take Its Toll On Growth
Angola - Real GDP Growth, % & Oil Price, US$/bbl
Chart: Hard Kwanza
Angola - Exchange Rate, AOA/US$

Chart: Supportive Fundamentals
Angola - Total Reserves Minus Gold, US$bn & Consumer Inflation, % y-o-y
Table: Angola - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (aoabn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

Sudan – Robust Growth, But A Shaky Peace

Table: Angola - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (aoabn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Table: Angola - Balance of Payments - Historical Data & Forecasts (2003-2012)
Period 2003-2012, exports (Us$bn), imports (Us$bn), trade balance (Us$bn), current account
(Us$bn), current account (% of gdp), forex reserves (Us$bn), import cover (months g&s), opec basket
(Us$/b)

Nigeria – Oil-Fueled Growth Defies Constraints

Chart: Booming Surplus Funding Growth
Nigeria - Real GDP Growth, % Current Account, % of GDP

Table: Nigeria - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (ngnbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Table: Nigeria - Balance of Payments - Historical Data & Forecasts (2003-2012)
Period 2003-2012, exports (Us$bn), imports (Us$bn), trade balance (Us$bn), current account
(Us$bn), current account (% of gdp), forex reserves (Us$bn), import cover (months g&s), oil
production (000 b/d)opec basket (Us$/b) ave
Chart: Gross Capital Fixed Formation Leads
Angola - Real GDP By Expenditure

Ethiopia – Conflict Still A Major Risk

Chart: Staying Above 6%
Ethiopia - Nominal GDP, US$bn & Real GDP Growth, %
Chart: Trouble In The Neighbourhood
Ethiopia - Eritrea & Ethiopia

Table: Ethiopia - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (etbbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

The Democratic Republic of Congo – Mining Industry To Drive Growth

Chart: Inflation To Remain In Double-Digits
DRC - Real GDP Growth Inflation & Current Account Balance

Table: Congo, Dem. Rep.- Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (cdfbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

Tanzania – Strong L-T Growth Prospects If Banks Reform

Chart: A Regional Leader
Sub-Saharan Africa - Political Risk Ratings
Chart: The Farm Economy
Tanzania - 2006 Sector Share Of Real GDP, %

Table: Tanzania - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (tzsbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Chart: Picking Up Speed
Tanzania - Real GDP Growth Rate, %

Uganda – Structural Problems To Remain Key Risk

Chart: Meet The Neighbours
Map Of Uganda
Chart: Export - Driven Growth
Real GDP Growth Rate, Inflation & Current Account Balance

Table: Uganda - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (ugxbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

Ghana – Growth Path: Strong But Not Stellar

Chart: 2008 Zenith; Still Strong Thereafter
Ghana - Nominal GDP, US$bn & Real GDP Growth, %

Table: Ghana - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (ghcbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)
Chart: Import Dependence... So Far
Ghana Crude And Products Imports

Botswana – Investment In The Driving Seat

Chart: More Stable Outlook
Real GDP Growth Inflation & Current Account Balance

Table: Botswana - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (bwpbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

Zambia – Not Quite The Right Mix

Chart: Maintaining Higer Growth
Zambia - Real GDP Growth, %

Chart: Mining Not The Biggest Sector
Zambia - Components Of The Real Economy, 2007
Table: Zambia - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (zmkbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

Cote D'Ivoire – Politics To Weigh On Growth Potential

Chart: Improving Growth Prospects
Cote d'Ivoire - Real GDP Growt, Current Account Balance & Fiscal Balance

Chart: A Tough Divide To Bridge
Cote d’Ivoire - Map
Table: Cote d'Ivoire- Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (xofbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

Kenya – Growing Pains in 2008

Chart: 2008: Growth Nadir
Kenya - Nominal GDP (US$bn) & Real GDP Growth (%)

Chart: Further To Climb
Kenya - Headline & Underlying Inflation, % y-o-y
Table: Kenya - Economic Activity - Historical Data & Forecasts (2003-2012)
Period 2003-2012, Nominal GDP (kesbn), Nominal GDP (Us$bn), real gdp growth (% change y-o-y),
GDP per capita (US$), population (mn)

BMI's Affiliates and Partners in the Middle East and Africa

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