Navigating a Changing Global Economy | Middle East and Africa Summit 2024

Milken Institute Strategic Focus

• The Institute operates as a global think tank with four pillars: finance, health, philanthropy, and international development.
• Its mission is to generate shared solutions for global challenges by convening neutral, nonpartisan platforms for peer-to-peer exchange between global investors and leaders.
• The 6th Annual Middle East and Africa Summit, held in Abu Dhabi in December 2024, serves as a call to action for collaboration in healthcare, economic development, and environmental sustainability.
• The organization aims to bridge gaps between the philanthropic, science, business, and government sectors to create fair and equitable futures.

Economic and Wealth Trends in the Middle East and Africa

• According to the latest UBS wealth report (based on Credit Suisse data), the wealth of the Middle East and Africa has reached 67% of the wealth of the Americas, a significant shift from two decades ago.
• Australia currently holds the highest median net worth globally, driven by its $3 trillion superannuation plan.
• Clinical trials historically lack diverse patient representation, and the average path to bring a new therapy to market takes 12 years and costs $1.4 billion.
• The UAE and Saudi Arabia are transitioning from being mere capital providers to becoming hubs for advanced medical technology, including the Imperial College Diabetes Center and Cleveland Clinic Abu Dhabi.

IFC Investment Priorities and Strategies

• The International Finance Corporation (IFC) is present in 186 countries as the private sector arm of the World Bank, with a target to mobilize approximately $65 billion in capital this year.
• IFC's top priority is addressing the creation of 1.2 million new jobs annually in the next decade to ensure global stability and reduce migration pressures.
• IFC invests in for-profit entities with ownership stakes up to 20%, targeting returns consistent with market standards while maintaining a historical loan loss ratio of only 3%.
• To de-risk investments in emerging markets, IFC is leveraging blended finance by mobilizing capital from philanthropy to offset risks for private sector investors.
• The IFC is expanding its focus on green and blue bonds, noting that 40% of renewable energy investments in emerging markets are now "south-south" partnerships.
• A specific strategy involves "originating to distributing," where IFC prepares development projects and securitizes assets to make them attractive to large institutional investors who typically require deals exceeding $1 billion.

Philanthropy and Private Sector Impact (Mansour Group)

• Mohamed Mansour highlighted the "Right to Dream" academy in Ghana, which has evolved from housing 15 children to producing 140 professional footballers and awarding 120 scholarships to top global universities.
• The Mansour Group expanded this model to Egypt, identifying "100 potential Mo Salas" and recently helping the Egyptian women's national football team qualify for the Champions League and win a bronze medal.
• Mansour Group operates in 100 countries via its family office, Man Capital, with a strategic focus on education and healthcare philanthropy as a core business responsibility.
• The group's educational initiative, "Inspired," has grown from 4 schools in South Africa to 80 schools globally.
• Estimates suggest $40 to $50 trillion could move into philanthropic structures over the next 20 years, with major foundations like the Novo Nordisk foundation (valued over $120 billion) leading the sector.

The "Four Ds" Framework for Global Economic Shifts (Alan Schwartz)

• Demographics: Major economies are shifting from high working-age populations to aging and declining demographics, necessitating a pivot toward regions with young populations like Africa (median age 19).
• Debt: High government debt levels, particularly in the US where interest expenses now exceed defense spending, require significant fiscal adjustments.
• De-globalization: Supply chains are being restructured to reduce dependency on single nations, driven by geopolitical risks and the need for resilience against disruptions.
• Dysfunction: Political polarization and perceived economic unfairness in Western democracies are driving a backlash against the current system.
• The Middle East is positioned to become the hub that connects capital and technology from the Global North to the young labor force and resources of the Global South.

Geopolitical Stance and Peace Initiatives (Prince Turki Al-Faisal)

• Prince Turki emphasized that "education is stupid" (a misstatement corrected in context as "It's education, stupid") is the critical component for human capacity building in Saudi Arabia and the region.
• He identified a fifth "D": Destruction, citing ongoing conflicts in Ukraine and Gaza as primary drivers for the need to rebuild the international rule-based order.
• In a letter to President-elect Trump, the Prince urged a renewed commitment to Middle East peace, referencing the diplomatic successes of the previous Trump administration and the need to end the "trauma" of October 7th.
• Prince Turki highlighted the King Faisal Center for Research in Islamic Studies, which runs the "Gateway KSA" program to bring students worldwide to Saudi Arabia for 10-day immersive experiences to foster cultural understanding.

Key Challenges for Investment and Development

• Regulatory uncertainty is cited as the primary barrier to investment in emerging markets, requiring stable frameworks to attract capital.
• Currency mismatch is a critical risk, where investors hold dollar-denominated assets but receive local currency returns; the IFC now allocates 40% of its work to local currency financing.
• Political and commercial risk guarantees are essential for investors hesitant to enter markets with instability or neighboring conflicts.
• The perception of risk in Africa is often overstated; the IFC has developed a public database (GEMs) to provide accurate credit ratings and default risk data for African countries.
• To attract institutional capital, the IFC is focusing on creating asset classes of sufficient scale and providing patient capital to fill equity gaps in low-income countries.