Industry Trend Analysis - Institutional Strength Key To Market Attractiveness Across MENA - OCT 2017

BMI View: Adherence to the rule of law, the quality of regulatory regimes, and levels of corruption will remain key factors underpinning the greater attractiveness of MENA countries like Qatar and the United Arab Emirates.

The G20 has released a series of metrics measuring the relative attractiveness of infrastructure markets globally, allowing us to correlate the performance of these markets with their ranking on BMI's Infrastructure Risk Reward Index. In assessing the impact of rule of law, the quality of the prevailing regulatory regime, and levels of corruption on construction sector performance across five MENA countries (Morocco, the United Arab Emirates, Egypt, Saudi Arabia, and Qatar), we find that positive ratings on these metrics are associated with higher rankings across our RRI.

We examined the above indicators due to their outsized influence on the bidding, procurement, construction, and operating phases of successful infrastructure project delivery and the degree to which they inform investor sentiment towards emerging markets in particular. High levels of corruption negatively can affect each stage of the project cycle, with the potential to skew the bidding process in favour of politically connected companies, inflate the cost of building materials during procurement and construction, and undermine trust in the long-term commitment of public sector entities in the operational phase. Given the paramount importance of legal contracts - such as off-take agreements, sub-contractor agreements, and mandated debt covenants -- in underpinning costly and complex project financing structures across multi-decade time horizons, a country's commitment to the rule of law (and the ability of an investor to seek legal redress) will remain crucial in assessing the attractiveness of specific markets.

Qatar & UAE With Favourable Market Dynamics
Rule Of Law, Regulatory Quality, & Control Of Corruption
Note: Scores range from -2.5 (worst) to +2.5 (best). Source: G20 Global Infrastructure Hub, BMI

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