ECONOMIC TRENDS

Strong Economic Growth …

Tables included in this review set out the key indicators relevant to cable markets for the countries of the region. Over the last two years GDP in US dollar terms has surged ahead, as a result of both real GDP growth and exchange rate movements. There has been even faster growth in GFCF (Gross Fixed Capital Formation, i.e. investment in fixed assets), reflecting the high investment activity in MENA.

 

… Drives up Cable Demand

In practice, the most obvious result of the strong level of investment has been a boom in the construction sector, especially in some parts of the Gulf. This has led to very strong demand for building wire and LV power cables in markets such as the UAE. In parallel with this boom in construction, there has also been strong growth in infrastructure development, not only in power transmission and distribution but also in tele­coms. This has led to strong growth in demand for power cables, overhead conductors and fibre optic cables. CRU estimates that total demand for cable in the GCC countries grew in volume terms by 38% from 2006 to 2007!

 

High Oil Price Drives Growth

The high prices of oil and gas mean that in the countries producing these commodities there is no shortage of funds for investment in projects of all types. Other countries in the region, notably Tunisia and Morocco, have had economic growth through increasing industrial output. Even those countries that do not participate directly in the oil and gas boom have benefited since the oil-rich countries have been looking to invest in industrial and commercial projects elsewhere in MENA. We discuss below the region’s reserves of oil and gas, as this determines which countries benefit most from high fuel prices. In view of the high level of reserves that exist in several MENA countries, output of oil and gas could be sustained at current levels for many years, so it seems likely that there will continue to be no shortage of funds for investment, sustaining strong economic growth, unless the oil price collapses completely.

Oil Reserves

MENA in total accounts for 66% of the world's proved reserves of oil. The main countries of the MENA region with major reserves of oil are Saudi Arabia, Iran, Iraq, Kuwait, the UAE, Qatar and Libya. Each of these countries has oil reserves of more than 2 billion tonnes. To put this figure in perspective, it is helpful to note that, now that North Sea oil production has begun to run down, the Western European country with the largest amount of remaining oil reserves is Norway, but even Norway has only 1.0 billion tonnes of reserves. Smaller, but substantial, oil reserves (less than 2 billion tonnes) are present in other MENA countries: Algeria, Egypt, Sudan, Yemen and Syria. Saudi Arabia is by far the most important oil producing country in the region in terms of both production and reserves. Iran and Iraq are the two largest countries after Saudi Arabia.

 

Gas Reserves

MENA in total accounts for 46% of the world's proved reserves of natural gas. Within the region, there are major proved reserves of natural gas in Iran, Qatar, Saudi Arabia, the UAE, Algeria, Iraq, Egypt, Kuwait and Libya. Each of these countries has proved reserves of more than one trillion cubic metres. Compared to some European gas producing countries where reserves are becoming depleted, it is useful to note that even the smallest of these MENA countries with major reserves, Libya, with 1.50 × 1012 m3 has gas reserves larger than those remaining for the UK (0.41 × 1012 m3) or the Netherlands (1.25 × 1012 m3). Smaller amounts of gas reserves (less than 1 trillion cubic meters) are present in some other MENA countries: Oman, Yemen and Syria.