In recent years we have seen the Middle East
and North Africa (MENA) region experience a number of
historic challenges; from the impact of the crisis when
foreign direct investment vanished overnight to the
complexities of the Arab Spring and, most recently, oil prices
falling to their lowest levels in over a
It is testament to the region’s resilience that
despite these many setbacks, and continued uncertainty, MENA
economies continue to forge ahead. Albeit at a slightly
diminished pace, given the current fiscal shortfall,
GCC countries in particular are maintaining their
commitment to the core infrastructure projects required to
sustain a growing demographic with over 60% of the population
under the age of 25.
Given the rapid rate of development underway it is easy to
forget that these are still frontier-to-emerging markets, and
while it is true to say the economies of the MENA region
continue to progress at differing speeds, one
consistent theme emerges – they have made tremendous
strides in a very short period of time.
The most prominent centres have moved from theoretical
aspirations, to practical application of increasingly
international standards, with the UAE and Qatar acceding to
MSCI and FTSE Emerging Market status in 2015 and now Saudi
Arabia expected to reclassify by 2018.
Even the smaller centres have kept pace, with Kuwait
relaunching an entirely new Bourse this year, Oman
updating its corporate governance legislation and Bahrain
adjusting its capabilities as a financial hub.
Markets across the Levant and North Africa continue to maintain
strong connectivity with international counterparts and
exceptional examples such as the Palestine Exchange stand out
as a model for dynamic investor engagement.
In several respects there is still a long way to go
for these markets to achieve the momentum needed to secure
upper emerging classification and gain access to the broader
capital flows they aspire to, but recent efforts prove intent
and determination to secure buy-in.
Of particular note are some of the more innovative
solutions being deployed to ensure regional
markets become more attractive to international
professional investor networks. From 2016 new regulations in
the UAE made it mandatory for listed companies to establish an
investor relations function and develop
proactive shareholder communications.
Qatar is exploring similar solutions and remains one of
the most active markets to drive best practice. Most
recently Saudi Arabia’s market authorities
have launched a combination of revised corporate governance
standards and a qualified foreign investor scheme that provides
professional investors with direct access to the Tadawul. So
while still relatively untested, these are important steps to
establishing the market infrastructure
requirements expected by both retail and
Now is not the time for complacency however. The
international indices demand high standards of transparency and
engagement, especially given the massive increase in
regulations and scrutiny among developed
markets. Moving from frontier to emerging status requires
real commitment, and this is only the start. In order to
retain these classifications, more work is needed to develop a
predictable culture of open accountability and access, building
trust over time. This is especially true where aspirations
might lead to bids for developed market status.