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Investing in the Middle East: Qatar

Stocks in this article: PMNA GULF MES

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.

"If Moses had taken a right instead of a left, we'd have the oil and they'd have the sand." -- Old Jewish proverb

NEW YORK ( TheStreet ) -- Four words define investing in the Middle East: Israel, oil, and hazardous and opportunity. Israel defines such investing in two ways. First, Israel is a principal in one of the two major conflicts in the region, specifically, the Israeli-Palestinian conflict (the other being the conflict in Iraq). Second, whereas Silicon Valley used to be the international center of innovation, Israel has begun to displace the Valley as that center.

As for oil, while not omnipresent in the Middle East, it is present in sufficient amounts that it's difficult to discuss Middle East investments without considering the impact of oil. Hazardous and opportunity go hat in hand when one considers investment in the developing world.

Having organized and run many Israeli investment clubs on the East Coast during the 1990s, I developed a lot of interest not only in companies in Israel but also those elsewhere in the Middle East. This series of articles will explore investing in one of the more volatile parts of the world. Is the potential reward worth the risk? That's something every investor has to assess for themselves.

Many might view investments in the developing world from the perspective of the stability of a given country's government. Israel ranks as the region's long-standing stable democratic government, but what about in countries in which a western-style democracy isn't present? There are, after all, a number of such countries in the Middle East. ( Egypt, anyone? )

In the past, one might have looked at Middle Eastern countries by their affiliation with the West, either Europe or the United States, with the mantra of avoiding those countries lacking such affiliation. During the past half century, that view has been frequently tested and found to be wanting. How, then, can one assess the "investability" of a given Middle Eastern country. One approach may be found in the work of economist Hernando de Soto Polar.

Based on his observations, de Soto suggested that the key to growing an economy, particularly those in the developing world, is in the ability and willingness of the legal system to enforce property rights. Countries with that legal system will see economic growth boom, and those without it will be hobbled economically.

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