JOHANNESBURG (miningweekly.com) - State-owned miners will continue to drive mining output in the Middle East and North Africa (Mena), with governments slowly encouraging foreign direct investment (FDI) into the sector, however, political instability will keep investment rates relatively low compared with other regions, according to research firm BMI.

In its latest outlook for the region, BMI said it expected the removal of Western sanctions in the fourth quarter of 2017 to accelerate the growth of Iran's mining sector, which contains vast, underdeveloped reserves.

In the short term, however, Iran’s mining sector will face major challenges, owing to the country's inefficient bureaucracy, inadequate infrastructure and low mineral prices.

BMI expects a multitude of restrictions to prevent a rapid influx of investment into the country's mining sector.

“We expect after-effects of the sanctions to continue to drag on mining growth in Iran over the next two to three years.”

Meanwhile, the research firm expects “robust expansion” in Egypt's gold mining sector, as producers start to ramp up production and the government invites international miners to the country. “However, other than gold, there remains relatively little commercial mining activity, partly owing to ongoing concerns surrounding the stability of the economy and the political climate,” said BMI.

Egypt launched an international tender for gold mining concessions in January for the first time since 2009.

Despite this, foreign investment will remain weak owing to political turbulence in Egypt and the wider Middle East and African region, compounded by unfavourable domestic mining laws.

“Red tape, as well as outdated and strict laws, will remain hindrances to growth in Egypt’s mining sector.”

Further, the nation’s government remains adamant on mining rules and regulations, especially on the production-sharing method of raising revenue from miners, despite calls for change.

“Despite efforts by governments in Mena to attract foreign mining investment, political instability, bureaucracy, corruption and inadequate regulatory framework will keep investors at bay,” BMI concluded.