In a highly uncertain world dominated by the dynamics of a global pandemic, it is not easy to make predictions or define trends, particularly for FDI in a region as vast and diverse as the Middle East and Africa (MEA). Over the past decade, the financial crisis and the Trump era demonstrated how lack of regulatory frameworks and unconditional protectionism can irritate fragile and interwoven global economic structures.
Over the next decade, the world will have to deal with the consequences of a simple virus that has so painfully demonstrated the limits of globalism in all its dimensions.
Nevertheless, despite a truly unpredictable future, there are a few FDI-related aspects in the MEA region that should be monitored closely. In the light of the upcoming Biden administration in the US, the future of the Joint Comprehensive Plan Of Action (JCPOA) or the so-called ‘Iran Deal’ will be a key component, not only for Iran, but for the entire Middle East.
Despite mistrust on all fronts, and highly complex economic and political status quo, a re-entry of the US into JCPOA will boost FDI flows into Iran to pre-Trump levels. Simultaneously, the US–Iran relationship will have a direct impact on the newly announced Abraham Accords between Israel and the United Arab Emirates, and other Arab nations in the Gulf. All parties in this historic peace treaty have high hopes for the newly established, sensitive social and economic relationship, which could be irked through a new version of JCPOA.
The African continent must be seen from two different perspectives. Externally, the spotlight will be once again on the Biden administration and its Africa strategy, not only to compete with the well-established Chinese community, but also to address challenges such as extreme poverty and mass migration as consequences of the Covid-19 pandemic and a global climate change crisis.
Internally, the focus must be on conflict resolution, development of infrastructure, optimisation of governance structures and the fight against corruption to be able to attract and maintain FDI. Further, a shift from ‘traditional FDI’ (agriculture and mining) towards knowledge-based sectors is crucial to harvest the sustainable effects of foreign investment. Africa’s thriving startup and tech ecosystems are a great example of this, having attracted record-breaking investments from many countries, including, predominantly, the US.
The new decade will have to address many existential global crises which already have a devastating impact, not only in the MEA. But there is a good reason for hope, after hearing Linda Thomas-Greenfield, the future US ambassador to the UN, say “America is back. Multilateralism is back. Diplomacy is back.” Many of these crises can only be solved when the world comes closer together.
Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME adviser to the joint Emirati-German Chamber of Commerce. E-mail: firstname.lastname@example.org
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.