Populist measures could hit MENA market, says region specialist

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Attempts to install populist political measures in the wake of the Arab Spring uprisings could have negative implications for investors, a regional investment specialist has warned.

Speaking to Citywire Global, Ibrahim Masood, manager of both the Bahrain and Dublin domiciled versions of Mashreq’s Arab Tigers fund, said measures undertaken by the Egyptian transitional government, for example, meant sectors with high government subsidies were at risk from sweeping changes.

In particular, the Dubai-based manager said, the fertiliser and cement sectors in Egypt are liable to undergo ‘major changes’ as the transitional government dismantles or amends existing government funding programmes in order to better compensate working civilians.

Assessing his own fund’s dealings in the region, Masood said he was aware of the need for the temporary governments to do what they could to reflect public sentiment.

‘We are anticipating more populist measures and some measures, which on balance, may not be as market friendly,' he said. ‘I think, politically, it [government subsidies] is a pretty easy target to focus on and I would be pretty surprised if that didn’t come through.’

However, Masood did suggest the North African and Middle Eastern markets would benefit from moves by transitional government to redirect money to the general public.

‘On a relative basis, on the back these populist political measures, salaries are likely to increase which will only help consumption,’ he said.

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And, while the region is vying to get its collective house in order, Masood said the MENA countires were still aware of the potential knock-on effects both in the eurozone and the United States.

‘The jury is still out on what the global growth outlook is,’ he said. ‘There is some fear over a double-dip in the US but I think that will probably take a few months. We expect a fair bit of volatility in the region because of what is happening in the rest of the world.’

Discussing continued issues in the region, most noticeably with the current civil war in Libya, Masood said prospects for long-term investment in North Africa and the Middle East were very strong.

‘Libya might be a very interesting opportunity when things are resolved,’ he added. A transitional government, replacing Muammar Gaddafi, would potentially make the country more attractive to outside investment, he suggested.

The Arab Tigers fund was launched in Europe in August 2008 and is a mirror of the existing Makaseb Arab Tigers fund.