Since we wrote about Israel last fall, stocks in that Middle Eastern country have risen more than 25%. Over the past year, they've jumped some 80%, led by names like Teva Pharmaceuticals (TEVA), Check Point Software (CHKP) and Blue Square (BSI), which I wrote about in October.

Of course, Israel isn't the only economy of note in the Middle East. Despite considerable political challenges, there exists a considerable potential for upside in the region, particularly in those countries inching toward capitalism which have heretofore been dominated by a centralized control.

Egypt is the third-largest economy in Africa and the most populous in the Arab world. Beginning in the early 1990s, the country has undertaken substantial efforts toward reform, including reducing subsidies, taxes and price controls. Egypt's GDP increased fourfold in the 25 years ended 2006 and was sustaining a brisk 7% growth rate before the global downturn.

Although progress has been slow, the government is again considering privatizing its wholly owned Bank of Cairo. Only three Egyptian companies are listed among Forbes Global 2000 list of top publicly-owned firms.

The country is also streamlining its convoluted tax code. Those who advocate for higher taxes as a means of improving the American economy should note that Egypt's 2005 tax cuts, which reduced rates from 40% to 20%, resulted in an increase of tax filings by 100%. Lower taxes led to more revenue.

We know that the freest economies are also the most prosperous, even from recent history. Privatizing the state-owned assets of the Soviet Union created massive wealth for investors and for the Russian people. Every step China has taken toward a market-based economy has resulted in prosperity and growth.

Yet it's never a smooth ride. The MSCI Egypt Total Return index fell nearly 70% from May of 2008 to February of 2009. Just this past Sunday, published rumors suggested Egyptian President Hosni Mubarak died after surgery in Germany. Like Vietnam, this is a highly volatile, risky but promising part of the world.

Holdings of the Van Eck Egypt ETF

U.S. investors can now gain easy access to Egypt via Market Vectors Egypt ETF, which tracks an index of companies listed in Egypt or that generate at least 50% of their revenues there.

Most surprising is the fund's sector allocations. Financials account for 42% of holdings, along with large allocations to telecommunications (17%), industrials (16%) and materials. Energy, the commodity for which the region is most known, makes up only 4% of the fund, less than half of weight within the S&P 500.