Political turmoil across the Middle East and north African continues to be the main determinant of foreign investment flows. As it stands, the spectre of increased sectarian conflict, as a consequence of the ongoing war in Syria and the recent ousting of the Islamist Egyptian president Mohammed Morsi by the country’s military, turning protesters on both sides increasingly violent, draws a pall over future investment across the entire region.

Foreign investors often do not distinguish between different parts of the Middle East – between those countries that are relatively stable politically – such as the United Arab Emirates, Saudi Arabia and Qatar – and those that are not. This is not surprising, since foreign investors are generally cautious, with risk mitigation a priority.

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Yet what should be highlighted is the importance of Dubai, in the UAE, in the regional investment market. Although investment into the emirate is restricted because of a 49% limit on foreign companies operating outside of a free zone, Dubai is an important hub for servicing a combination of regional, inbound and outbound deals across not only the Middle East, but also Turkey and, increasingly, Africa.

Saudi Arabia also continues to be a key target for investment, especially in infrastructure such as transportation and power projects that are either under way or in the pipeline. Family-owned businesses sometimes look for outside investors, for the purposes of improving corporate governance and transparency as well as succession planning.

Immediately after the Arab Spring, investors began to see north Africa – Morocco, Algeria, Libya and Tunisia – as countries offering strong investment opportunities. But unresolved political issues are making it hard for investors to remain committed to deal making. For example, a growing Islamist threat and unclear rules and regulations in Libya are reducing the risk appetite of many investors in that country, even though more investments are being put up for sale as authorities unfreeze assets belonging to former president Muammar Gaddafi.

The outlook for investment in Tunisia and Morocco, which once looked so promising, is also starting to look less rosy as these countries begin to face their own political crises. 

Lucia Dore is the head of GCC and Middle East at mergermarket, part of The Financial Times Group.