Alex GoodmanThe Middle East and North Africa, or MENA, is a varied region that stretches from Sudan in Africa to Iran in southwest Asia and from Morocco in northwest Africa. The area is a significant source of global economic and energy resources because it is home to a large portion of the world’s oil and natural gas reserves. Yet, the region has also been impacted by significant local disputes and foreign power meddling.
In a Nutshell
- MENA, which stands for the Middle East and North Africa, refers to the nations between Iran to the east and Tunisia and Morocco to the west. At least 19 nations make up the region, although the number can be increased to 27.
- More than half of the world’s oil reserves and two fifths of its natural gas reserves are located in the MENA area. Saudi Arabia, Iran, Israel, and Egypt have the greatest economies in the region.
- Some economies in the MENA area are purposefully reorienting their economies to lessen their dependency on the export of fossil fuels, although many investment opportunities there are concentrated on the energy sector.
- Both local conflicts and international meddling, such as the American invasions of Iraq and Afghanistan and the 2011 Arab Spring demonstrations, have both had an impact on the region.
Understanding MENA
Many of the 13 OPEC countries are in the MENA region. Although there is no standardized list of countries included in the MENA region, the term generally covers the area from Morocco in northwest Africa to Iran in southwest Asia and down to Sudan in Africa.
The following countries are often included in the MENA region (non exhaustive list): Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Malta, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, Palestine, United Arab Emirates, United Arab Emirates and Yemen.Facing a tough recovery due to COVID 19, economic growth in the MENA region fell by 3.8% in 2020, according to the World Bank.
Some Key MENA Economies
Kingdom of Saudi Arabia
The Kingdom of Saudi Arabia, by far the largest economy in the MENA region, recorded a Gross Domestic Product of $700 billion in 2020. The country relies heavily on oil and natural gas, which provide around 90% of its export revenues.
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Although it controls the world’s second largest proven oil reserves, Saudi Arabia has announced efforts to reduce its dependence on oil exports through investments in the technology and tourism sectors.
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Islamic Republic of Iran
Iran is the fifth largest economy in the MENA region. Like Saudi Arabia, oil exports play a key role in the country’s economy, although it is more diversified than many other Middle Eastern oil exporters.
Serena ChenHowever, Iran is also under strict international economic sanctions for being a state sponsor of terrorism, a growing nuclear threat and a perpetrator of cyber intrusions against foreign countries. As a result, it is difficult for the Iranian economy to experience a boom. Iran’s currency has been greatly weakened and sanctions greatly restrict international trade.
State of Israel
With a GDP of $482 billion in 2021, Israel is the second largest economy in the MENA region, behind the much larger Saudi Arabia geographically. Unlike many of its neighbors, Israel is not an energy exporter, but its economy is largely focused on industrial manufacturing, diamond cutting and high technology. In fact, Israel is among the world’s top 10 high tech ecosystems. Israel has a worldwide reputation as the “start up nation” and leads the world in the number of start-ups per capital.
Although a comparatively advanced industrial country with a high average income and a strong currency, Israel’s position has often been complicated by geopolitical conflicts with its neighbors.
Egypt
With a GDP of $365 billion in 2020, Egypt represents the largest economy in North Africa, as well as the third largest in the MENA region. Following the overthrow of President Hosni Mubarak during the 2011 Arab Spring protests, the Egyptian economy began to undergo major market reforms, which helped attract outside investors and address domestic unemployment. In addition to hydrocarbons, Egypt is a major exporter of textiles and agricultural products.
Investing in the MENA Region
With more than half of the world’s proven oil reserves, most of the investment opportunities in the MENA region are focused on the energy industries. There are numerous financial products that allow retail and institutional investors to gain exposure to the oil and natural gas markets of specific countries, as well as ETFs targeting North Africa, the Middle East or the MENA region as a whole.
Several economies in the Middle East and North Africa are deliberately reorienting their economies to reduce their dependence on fossil fuel exports. For example, the United Arab Emirates has a thriving technology sector and Qatar is expanding into financial services.
There are currently no Middle East and North Africa specific ETFs in the United States that cover the entire region. Instead, there are several sub regional or country specific ETFs that U.S. investors can access. These include:Note that investors from other countries may have access to more and different MENA specific funds.
Quick Fact
There is no specific border for the Middle East, North Africa or the MENA region as a whole. Border cases such as Turkey, Afghanistan and Sudan may or may not be included in the MENA region.
Conflicts in the MENA Region
Due to the strategic importance of their oil reserves, the countries of the MENA region have been affected by major local conflicts, as well as by the interference of foreign powers.In particular, the U.S. invasions of Iraq and Afghanistan caused major disruptions to regional economic activity, while the Arab Spring protests of 2011 sparked several revolutions and civil wars, most notably in Libya and Syria, as well as what the World Bank described as “the largest refugee crisis since World War II.”
Other conflicts in the area include Israel’s clashes with Palestinian terrorists, ongoing wars in Syria, Yemen, Iraq and Afghanistan, political instability in Lebanon and the growing rivalry between Iran and Saudi Arabia as a regional power.
Wrap Up
In conclusion, the energy markets and global economy both heavily rely on the complexity and diversity of the MENA area. Investors have prospects for growth in the region, but there is still a significant likelihood of regional violence. It will be crucial to constantly watch changes as the region develops and weigh their possible effects on international markets.
FAQs
MENA stands for Middle East and North Africa, referring to the countries between Iran to the east and Tunisia and Morocco to the west.
The countries that make up the MENA region are not clearly defined, but it is generally accepted that at least Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Malta, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, Palestine, United Arab Emirates, and Yemen are included in it. Mauritania, Somalia, Sudan, Turkey, and Western Sahara, to name a few, are also occasionally included.
The Middle East is generally considered to include countries located on or near the Arabian Peninsula. According to the CIA World Factbook, the Middle East includes Armenia, Azerbaijan, Bahrain, Georgia, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates, and Yemen. Afghanistan and Pakistan are often grouped with the Middle East, but are not usually included in considerations of the MENA region.
North African countries typically include Algeria, Egypt, Libya, Morocco, Sudan, Tunisia and Western Sahara. This term can also be expanded to include some East African countries, such as Djibouti and Somalia.
The Kingdom of Saudi Arabia, the Islamic Republic of Iran, the State of Israel, and Egypt are some of the major economies in the MENA area.
The majority of investment opportunities in the MENA region are concentrated in the energy industries, which account for more than half of the world’s proven oil reserves. Retail and institutional investors can access a wide range of financial products, including ETFs that target North Africa, the Middle East, or the MENA region as a whole, as well as the oil and natural gas markets of specific nations.
Countries in the MENA region have been impacted by significant local conflicts as well as involvement by foreign powers due to the strategic importance of their oil reserves. Israel’s battles with Palestinian terrorists, the ongoing wars in Syria, Yemen, Iraq, and Afghanistan, the political unrest in Lebanon, and the intensifying rivalry between Iran and Saudi Arabia as a regional force are just a few of the conflicts in the region.
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