Global Speaker Series 2007 - 2008

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A Modern Spice Market: Exploring MENASA Cross-Border Trade and Finance

In ancient times, the Middle East, North Africa, and South Asia (MENASA) were a crossroads of booming commerce focused around the spice trade. Over time, this economic center fell out of popularity as merchants and markets moved on. Today there is a reemergence of interest in the region revolving around the new spice: finance and foreign investment. At an event cosponsored by The Fletcher School’s International Business Program and The Fares Center for Eastern Mediterranean Studies, Tariq Jawad, Director of Investment Banking at Rodman & Renshaw, discussed these changes and his company’s involvement in this flourishing industry.

Jawad spoke about the resurgence of interest in the region, related to the belief that the East is the future of global trade. He noted that the emerging markets of MENASA are a catalyst for the local economies of the region as well as for those of the West. The commodities, productivity, and high value cheap labor—especially in relation to India—are huge draws for investors. Current capital flows between the Gulf Cooperation Council (GCC) and Asia stand at $50 billion and are projected to rise to $300 billion by 2020. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE have been active in investing petro-dollars in the growing economies of India and China. While it remains to be seen whether the phenomenon of money flowing out of the United States and into emerging markets is a just a phase, investors have no choice but to take advantage of the opportunities.

 The accelerated pace of this shift in investment, combined with the ensuing rise of the commodity market and the prices therein, will have major economic and political repercussions. Already, Kuwait has chosen to de-peg its currency from the U.S. dollar, to instead use Euros, another currency, or combination of currencies for trade. Many MENASA states are looking inward to manage their debt by changing from exporters to importers; China’s growing investments in Africa are reflective of this trend. Emirates have imposed a quota for national employee figures, to offset high numbers of immigrant workers. Among other infrastructure priorities, Indians are seeking to reduce the number of perishable goods that rot before making it to market—only 60 percent currently arrive in time. 

Jawad explained that, in addition, Sovereign Wealth Funds (SWFs) are becoming more prevalent in the MENASA region. SWFs are composed of state monies and reflect investments in entities other than bonds, with the aim of establishing sustainable economies that will thrive in the post-oil world. While SWFs are relative newcomers to the investment world, the amount of money going into these kinds of funds is already high and is expected to reach $12 trillion by 2015.

In light of these shifting trends, Rodman & Renshaw serves a critical role in facilitating investment in the MENASA region. Jawad spoke about a recent project to connect investors with the Indian company, Indu, which is working to build a healthcare city outside of Bangalore. To be completed over the next ten years, the city will serve as a health destination and a middle class suburb with a population of 300,000. Included in the plans are hospitals, fitness centers, spas, recreation facilities, and high-cost housing. Indu hopes that the city will attract Indians commuting to Bangalore on the soon-to-be-completed highway, as well as health tourists from Europe and the United States.

In addition to securing capital for the healthcare city, Rodman & Renshaw has been involved with the urban planning of the healthcare city and has evaluated means for getting the highest return on the investment capital. The healthcare city is a development project that seeks to create sustainable economies and attract foreign investors and clientele. Such projects are evidence of the reinvention of the ancient spice market into a trade and investment-based spice market that meets contemporary needs.

— Christie Wren (MALD ’09)