With parts of the Middle East and North Africa (Mena) reeling from the after-effects of the Arab Spring, optimism that substantial foreign investment is set to flood in anytime soon looks misplaced, agree regional veterans.

At the recent Doha Conference on Asset Management hosted by Bloomberg and the Qatar Financial Centre Authority, Abdulrahman Ahmad Al-Shaibi and Shashank Srivastava of QFC Authority struck an upbeat note. But many speakers were less positive in some of their comments, while at the same time highlighting the region’s potential*.

Although the consensus is that the Gulf Cooperation Council countries benefited from intra-regional safe-haven asset flows amid the recent turmoil, issues remain for Mena as a whole.

As Amin El-Kholy, head of asset management at investment bank Arqaam Capital, says of the GCC countries: “The major challenge is to shift people’s perceptions from seeing the region as a source of capital to seeing it as a typical emerging market story, with a need for infrastructure investment, interesting demographics and profit to be made from various sectors."

The GCC doesn’t need to import capital like other parts of the Mena region, noted El-Kholy during a panel debate, but there’s also an advantage in having budget surpluses and governments that are ready to invest in infrastructure. The existence of decent liquidity in local capital markets gives investors confidence that opportunities exist.

“There have been small, selective flows and deals,” adds El-Kholy, “but the generalised massive flows that everybody was waiting for are not going to happen anytime soon, until the structure of the region’s markets and economies changes.

“We need to wake up to fact that despite the waves of investment in 2005-2007, this remains a niche investment region. It is not yet likely to enter the mainstream of emerging markets flows – for 101 different reasons.”

Yet the potential for growth in the GCC, let alone Mena, is clear. Akber Khan, director of asset management at Al Rayan Investment, a Qatari-based firm running $500 million, points to a very young nation.

“One-third of the GCC population is under 15, so a very significant number of people are going to need jobs in the next decade.” And there is a significant lack of infrastructure: “It’s insufficient today, let alone for future needs.

“The kicker is that in a region with a cumulative GDP of $1.5 trillion and reserves of over $2 trillion, the money is there to help solve these problems,” he says, arguing that the Arab Spring actually improved the situation in this regard. “Reserves were previously being put to use very slowly, and the Arab Spring put an afterburner behind their deployment across the region.”

As for intra-regional flows, clearly there is significant activity, but it continues to be largely in the form of direct and/or self-made investments by institutions or families. One attendee at the Doha forum said Middle Eastern investors want to be able to “touch and feel” what they are buying, and see commingled or mutual funds as blind, non-transparent pools of capital.

Khan argues that the biggest opportunities for local asset managers lie with foreign investors. “Unless there’s a step change in how governments and big institutions in [the GCC] region allocate, the majority of AUM growth will probably come from outside the region.”

Certain local players are clearly of this mindset. Kuwaiti firm Asiya Investments has spent the past year building a presence in Hong Kong and officially unveiled the office last month, as reported.

*A full feature on the Middle East will appear in the upcoming (May) issue of AsianInvestor magazine.