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Opportunities and Risks in the Middle East for Italian Trade Expansion

Explore the economic potential and challenges of trading with Middle Eastern countries such as Iran, Saudi Arabia, and Qatar. Learn about the shifting landscape of investments, infrastructure needs, and political risks in the region. Discover key sectors like machinery, electrical equipment, and metal products where Italy can expand its trade relations. Contact SACE for insights on navigating the business environment in the Middle East.

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Opportunities and Risks in the Middle East for Italian Trade Expansion

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  1. Middle-East : A Key Trading Partner for Italy, Beyond Risks Emanuele Baldacci Chief economist, SACE Milano, 18 ottobre 2006

  2. Is there more than risk? • Political risks, Islam radicalisms, conflicts, political violence, etc.: • GCC: Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman (eg, terrorism); • Iran (eg, nuclear power); • Iraq (eg, violence, ethnic conflicts); • Syria (eg, ties with radical groups); • Jordan (eg, terrorism); • Lebanon and West Bank (eg, political violence).

  3. A land of opportunities • Two thirds of world’s oil, half of world’s gas reserves; • Booming economies; • Awash with fx liquidity; • Large infrastructure needs (ports, roads, IT); • Appetite for investment.

  4. The region is running fast…

  5. … as oil prices have risen…

  6. …leading to a large surplus.

  7. As a result, credit is booming…

  8. …sustaining investment… • Both oil and non-oil sectors; • GCC countries: US$ 1 trillion in projects for infrastructure and energy; • Iran: investment to GDP over 37%; • Equity boom in Jordan; • But, low ICOR due to low-viability projects.

  9. …and capital markets • Booming equity and real estate markets; • But also more M&A (55% of Turk Telecom bought by Saudi Oger; minority stakes in Ferrari, Time Warner, DaimlerChrysler); • Strong portfolio investment in dollars.

  10. Still, fx reserves are on the rise

  11. Going forward? More of the same…

  12. …but “oil curse” symptoms… • Non-oil export share declining in GCC by 4pps in 2002-4; Iran non-oil export slow; • Non-oil CAB shows heavy deficits; • Non-oil fiscal deficit 20% of GDP in Iran, non-oil revenue flat at 10% of GDP in Syria • Energy subsidies more at 15% GDP in Iran, Syria, lower but high in Jordan • But non-oil growth strong in GCC, Syria and Iran

  13. …and weak private markets, may be a drag

  14. A Key Partner for Italy Machinery (34,5%), electrical equipment (10%), metal products (9,6%)

  15. SACE business in the region in % of total Iran 20,6% Saudi Arabia 6,4% Qatar 2,1% UAE 2,1% Oman 1,5%

  16. How important are these risks? • Political use of natural resources; • Unfavorable business environment; • Major infrastructure weaknesses; • Limited implementation capacity; • Ethnic/religious conflicts.

  17. Tel.: +39 06.6736 264 E-mail: m.proietti@sace.it ufficio.studi@sace.it Tel.: +39 06 6736 535 fax: +39 06 6789 835 E-mail: e.baldacci@sace.it Contacts Thank you

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