In 2015, the Middle East and North Africa (MENA) will continue to present a complex picture for investors, who will face political volatility intensified by the region’s “thin” rule of law. The “thin” rule of law is characterized by functioning courts, with the protection of personal and property rights and equality before the law being applied only to those actors who are necessary for keeping the economy afloat – including foreign investors. By contrast, a “thick” rule of law, prevalent in advanced economies, applies those principles to the whole of society.
A thin rule of law is a somewhat unifying factor across the region. Similarly, popular demands by citizens for a thick rule of law will remain a persistent feature of the years ahead, precipitating instability. Yet, business environments across the region vary greatly in terms of investor favorability and risk. The United Arab Emirates (UAE), Egypt and Tunisia demonstrate the variation across this spectrum. Egypt and Tunisia will remain highly volatile; the economic challenges facing Tunisia’s newly elected parliament, as well as Egypt’s springtime elections, are bound to keep these two countries in the headlines. Meanwhile, the UAE, will likely remain a safe haven for business in the region, despite economic pressures created by low oil prices.
Most importantly, the examples of the UAE, Egypt, and Tunisia highlight the complex relationship between corruption, foreign investment and investor confidence in the region as a whole.