KSA Economy Offers Highly Attractive Landscape for Private Equity Investors
4 November 2008
JEDDAH - Saudi economy offers a highly attractive economic landscape for private equity investors.
The nominal GDP of the economy has grown at a compound annual growth rate (CAGR) of 15 per cent during the period from 2002 to 2007 while the real GDP increased at a GAGR of 5 per cent for the same period, according to a Global report.
The private equity deal volume as a percentage of GDP is still among the lowest and is estimated to around 0.1 per cent, compared to around 1.5 per cent in the UAE, the Kuwait-based Global Investment House (GIH) states.
Sectors of high potential include sectors subject to privatisation and regulatory reforms such as air travel, telecom, financial services and services such as education, retail, healthcare, food and beverage, consumer goods, and transportation, it said in information made available to Khaleej Times here on Sunday.
“All the above offer a unique opportunity to tap this high potential market. However, a number of obstacles stand in the way of effective access to this attractive market,” it added.
According to a World Bank report, Saudi Arabia is the seventh fastest reformer globally, and second fastest within the Middle East and North Africa (MENA) region.
Also, the kingdom’s surge in ranking to 16th in the world and as the best in the MENA region in regards to ease of doing business is a reflection of the reformatory action taken by the government to de-risk its economy from oil.
With around 50 per cent of the population less than the 20 years age bracket and another 33 per cent in between the 20 to 40 age group, demographics remain attractive and this, coupled with high oil prices have ensured governments thrust on infrastructure and social spending remained high, it added.
“A physical presence with right contacts in the kingdom along with a deep understanding of the social and regulatory setting becomes the key to success for private equity players to benefit from the private equity boom that the kingdom is on the verge of witnessing,” states the report.
It added that with relatively cheap valuations of Saudi listed companies due to the current meltdown, coupled with an increasingly progressive regulatory environment, Global believes long-term institutional money will be attracted to the region.
It noted that the geographic focus of regional funds is changing and becoming more diverse as mandates and operations broaden to include other regions with many regional players opening offices in regions like Saudi Arabia, Turkey, Egypt and North Africa region.
The report states Egypt emerged as the preferred destination for investment in the Middle East and North Africa region, with $2.4 billion being invested in the last decade.
(Habib Shaikh)
25.11.08
6.11.08
Ithmar Capital focusing on healthcare-related acquisitions worth $1.2 billion
Dubai-based private equity firm Ithmar Capital will spend around $1.2 billion on international healthcare acquisitions within the next twelve months, according to its founder.
The acquisitions will take place under the banner of Ithmar’s new healthcare platform, Enaya, and are likely to include firms in the US and Europe.
“Enaya’s pipeline assumes deploying around $1.2 billion for healthcare acquisitions, and this is assumed over a 12 month period,” Faisal Belhoul, founder and managing partner of Ithmar Capital, said in an interview with Arabian Business.
Story continues below ↓
advertisement
“These acquisitions will be GCC-related opportunities, but outside the GCC.”
“We are looking to acquire one large international healthcare group, and our shortlist of five options includes companies in both the US and Europe,” he added.
“We are very advanced in launching Enaya, and before year end we will be able to make significant announcements on acquisitions.”
Currently managing proprietary investments in excess of $500 million, Ithmar is also planning to launch its third fund (Ithmar Fund III), targeting $1 billion.
Belhoul is also executive chairman of Belhoul Investment Office, a holding company with a portfolio of investments in hospitals, schools, pharmaceutical and medical equipment, travel and tourism agencies, construction and engineering, catering as well as garment manufacturing.
The acquisitions will take place under the banner of Ithmar’s new healthcare platform, Enaya, and are likely to include firms in the US and Europe.
“Enaya’s pipeline assumes deploying around $1.2 billion for healthcare acquisitions, and this is assumed over a 12 month period,” Faisal Belhoul, founder and managing partner of Ithmar Capital, said in an interview with Arabian Business.
Story continues below ↓
advertisement
“These acquisitions will be GCC-related opportunities, but outside the GCC.”
“We are looking to acquire one large international healthcare group, and our shortlist of five options includes companies in both the US and Europe,” he added.
“We are very advanced in launching Enaya, and before year end we will be able to make significant announcements on acquisitions.”
Currently managing proprietary investments in excess of $500 million, Ithmar is also planning to launch its third fund (Ithmar Fund III), targeting $1 billion.
Belhoul is also executive chairman of Belhoul Investment Office, a holding company with a portfolio of investments in hospitals, schools, pharmaceutical and medical equipment, travel and tourism agencies, construction and engineering, catering as well as garment manufacturing.
Unicorn Investment Bank earnings, profits jump in nine months to September
Unicorn Investment Bank (Unicorn) reports earnings rose by 121 per cent, from US$84.6 million in the first nine months of 2007 to US$186.7 million in the first nine months of 2008. Net profit increased from US$31.8 million in the first nine months of 2007 to US$53.4 million during the same period in 2008. Return on average equity increased to 21.2 per cent and earnings per share grew to 28.7 US cents per share.
Unicorn’s strong performance comes on the back of a series of high profile transactions closed during the course of the year. In the third quarter, the bank announced the sale of its shares in United Arabe Emirates-based Orimix Concrete Products LLC (Orimix), an investment held by the bank itself and the Unicorn Global Private Equity Fund I. The fund acquired a controlling stake in Orimix in November 2006, and the disposal of its shares in July 2008 resulted in a return on capital of 160 per cent and an Internal Rate of Return (IRR) of 98 per cent.
Unicorn also recently announced that it had reached agreement to acquire Bahrain Financing Company (BFC), the oldest and one of the leading foreign exchange and remittance houses in the GCC. Founded in 1917, BFC was Bahrain’s first foreign exchange company and the first financial services institution to be established in the GCC region. It is the market leader in foreign exchange and money transfer services in Bahrain. The company has an extensive correspondent network comprising leading institutions in over 60 countries worldwide. Unicorn’s acquisition of BFC includes Bahrain Exchange Company in Kuwait and EzRemit in the United Kingdom.
Commenting on the bank’s results, Majid Al-Sayed Bader Al-Refai, Unicorn’s Managing Director and Chief Executive Officer, said, “We are particularly pleased to have achieved such outstanding results in the first nine months of 2008 given the challenging global economic environment. Unicorn is committed to prudent risk management, sound corporate governance and strict Shari’ah compliance, and it is this commitment, and our adherence to these operating principles, that will allow us to achieve further success in the future inshaAllah.”
Unicorn’s strong performance comes on the back of a series of high profile transactions closed during the course of the year. In the third quarter, the bank announced the sale of its shares in United Arabe Emirates-based Orimix Concrete Products LLC (Orimix), an investment held by the bank itself and the Unicorn Global Private Equity Fund I. The fund acquired a controlling stake in Orimix in November 2006, and the disposal of its shares in July 2008 resulted in a return on capital of 160 per cent and an Internal Rate of Return (IRR) of 98 per cent.
Unicorn also recently announced that it had reached agreement to acquire Bahrain Financing Company (BFC), the oldest and one of the leading foreign exchange and remittance houses in the GCC. Founded in 1917, BFC was Bahrain’s first foreign exchange company and the first financial services institution to be established in the GCC region. It is the market leader in foreign exchange and money transfer services in Bahrain. The company has an extensive correspondent network comprising leading institutions in over 60 countries worldwide. Unicorn’s acquisition of BFC includes Bahrain Exchange Company in Kuwait and EzRemit in the United Kingdom.
Commenting on the bank’s results, Majid Al-Sayed Bader Al-Refai, Unicorn’s Managing Director and Chief Executive Officer, said, “We are particularly pleased to have achieved such outstanding results in the first nine months of 2008 given the challenging global economic environment. Unicorn is committed to prudent risk management, sound corporate governance and strict Shari’ah compliance, and it is this commitment, and our adherence to these operating principles, that will allow us to achieve further success in the future inshaAllah.”
5.10.08
Dubai mortgage lenders Amlak Finance and Tamweel in merger talks
Dubai lenders Amlak and Tamweel look to combine
DUBAI, United Arab Emirates: Dubai mortgage lenders Amlak Finance and Tamweel say they are considering a merger, but investors appear to have doubts about such a deal.
Shares of both companies sank Sunday despite the companies' assurances that a deal would bring benefits.
Amlak and Tamweel announced that they have begun exploring a tie-up Saturday. They say the combined company would have a balance sheet worth 27 billion dirhams (US$7.35 billion).
The merger talks come as global credit markets tighten amid the financial fallout on Wall Street.
AP
DUBAI, United Arab Emirates: Dubai mortgage lenders Amlak Finance and Tamweel say they are considering a merger, but investors appear to have doubts about such a deal.
Shares of both companies sank Sunday despite the companies' assurances that a deal would bring benefits.
Amlak and Tamweel announced that they have begun exploring a tie-up Saturday. They say the combined company would have a balance sheet worth 27 billion dirhams (US$7.35 billion).
The merger talks come as global credit markets tighten amid the financial fallout on Wall Street.
AP
28.9.08
Foreign Direct Investment in Qatar jumps by 700%
DI in Qatar rises seven-fold; outward flows jump 41 times
DOHA: Qatar saw a more than seven-fold rise in foreign direct investment (FDI) inflows, while the outward FDI jumped 41-fold in 2007, according to the World Investment Report (WDR) 2008 by United Nations Conference on Trade and Development.
In the WDR ranking of 141 world economies, Qatar is placed at 110 for inward FDI performance and 25 for outward FDI in 2007.
Bahrain is ranked 12 in inward FDI performance and ninth in outward FDI; Kuwait (134 and eighth); Oman (48 and 47); Saudi Arabia (51 and 41) and the UAE (34 and 23).
Qatar’s FDI inflows rose to $1.14bn in 2007 from $159mn a year ago, the report said.
In the case of other GCC countries – which come under West Asia in the WDR – Bahrain saw a 39.73% dip in FDI inflows to $1.76bn, while Kuwait saw a marginal rise of 0.82% to $123mn and the UAE’s by 3.43% to $13.25bn.
Oman’s inward FDI rose by 46.91% to $2.38bn and Saudi Arabia’s by 32.97% to $24.32bn.
Qatar’s outward FDI saw a 41-fold jump to $5.26bn; Saudi Arabia’s by 10-fold to $13.14bn; Oman’s by 73.78% to $570mn; Kuwait’s by 72.96% to $14.20bn and Bahrain’s by 70.31% to $1.67bn, while in the case of the UAE, it was 39.12% dip to $6.63bn in 2007.
FDI in the GCC rose by 20% to $43bn in 2007, the WDR said, adding these countries – especially Saudi Arabia, the UAE and Qatar – have seen relatively high inflows in recent years due to a growing number of energy and construction projects as well as notable improvements in the business environment.
“The most significant rise in FDI in the sub region was in Qatar where there was a seven-fold increase from the previous year,” the report said.
Although developed countries continued to be the major sources of FDI flows into the West Asian region, FDI by transnational corporations from developing countries has risen “substantially.”
In 2007, like the previous year, West Asia attracted Greenfield FDI primarily from the US, the UK, France and Germany. Inflows from South, East, South-East Asian countries, particularly China and India, was also significant, followed by intra-regional flows, particularly from the UAE and Saudi Arabia, the report said.
High oil prices have continued to boost economic growth rates in the oil-exporting countries of the West Asian region, WDR said. Rising revenues have encouraged the GCC governments to spend heavily on infrastructure, particularly for revamping water and energy industries and services, often in collaboration with private investors, including foreign ones, it said.
In addition, WDR said, export-oriented economic activity in some West Asian economies, especially in Turkey, benefited from higher demand in European economies. All these factors have contributed to sustaining high FDI inflows to the region.
On the outbound FDI, WDR said “the GCC countries, led by Qatar, accounted for 94% of the region’s outward FDI, with about $41bn in outflows.”
The GCC countries have built up a substantial windfall from oil exports since 2002 when global oil prices started to rise. High prices enabled them to accumulate huge stocks of net foreign assets estimated at around $1.8tn and to implement their diversification strategy, it said.
Sovereign wealth funds based in the sub-region are playing a key role in boosting outward FDI flows, WDR said. Several Islamic private equity firms and other alternative asset management companies from the GCC countries were also investing abroad, particularly in the developed countries, it said.
Although the US has attracted the largest share of investments from the GCC countries, a growing number of GCC investors are now moving to Asia, particularly China and India, to diversify their investment portfolio, WDR said.
“A growing amount of GCC capital is being invested in various sectors such as banking, telecom, real estate and manufacturing in West Asia and North Africa, including export-oriented manufacturing activities to supply to the European and West Asian markets, as a result of accelerating liberalisation, privatisation and the increasing use of Islamic financial instruments,” WDR said.
By Santhosh V Perumal
DOHA: Qatar saw a more than seven-fold rise in foreign direct investment (FDI) inflows, while the outward FDI jumped 41-fold in 2007, according to the World Investment Report (WDR) 2008 by United Nations Conference on Trade and Development.
In the WDR ranking of 141 world economies, Qatar is placed at 110 for inward FDI performance and 25 for outward FDI in 2007.
Bahrain is ranked 12 in inward FDI performance and ninth in outward FDI; Kuwait (134 and eighth); Oman (48 and 47); Saudi Arabia (51 and 41) and the UAE (34 and 23).
Qatar’s FDI inflows rose to $1.14bn in 2007 from $159mn a year ago, the report said.
In the case of other GCC countries – which come under West Asia in the WDR – Bahrain saw a 39.73% dip in FDI inflows to $1.76bn, while Kuwait saw a marginal rise of 0.82% to $123mn and the UAE’s by 3.43% to $13.25bn.
Oman’s inward FDI rose by 46.91% to $2.38bn and Saudi Arabia’s by 32.97% to $24.32bn.
Qatar’s outward FDI saw a 41-fold jump to $5.26bn; Saudi Arabia’s by 10-fold to $13.14bn; Oman’s by 73.78% to $570mn; Kuwait’s by 72.96% to $14.20bn and Bahrain’s by 70.31% to $1.67bn, while in the case of the UAE, it was 39.12% dip to $6.63bn in 2007.
FDI in the GCC rose by 20% to $43bn in 2007, the WDR said, adding these countries – especially Saudi Arabia, the UAE and Qatar – have seen relatively high inflows in recent years due to a growing number of energy and construction projects as well as notable improvements in the business environment.
“The most significant rise in FDI in the sub region was in Qatar where there was a seven-fold increase from the previous year,” the report said.
Although developed countries continued to be the major sources of FDI flows into the West Asian region, FDI by transnational corporations from developing countries has risen “substantially.”
In 2007, like the previous year, West Asia attracted Greenfield FDI primarily from the US, the UK, France and Germany. Inflows from South, East, South-East Asian countries, particularly China and India, was also significant, followed by intra-regional flows, particularly from the UAE and Saudi Arabia, the report said.
High oil prices have continued to boost economic growth rates in the oil-exporting countries of the West Asian region, WDR said. Rising revenues have encouraged the GCC governments to spend heavily on infrastructure, particularly for revamping water and energy industries and services, often in collaboration with private investors, including foreign ones, it said.
In addition, WDR said, export-oriented economic activity in some West Asian economies, especially in Turkey, benefited from higher demand in European economies. All these factors have contributed to sustaining high FDI inflows to the region.
On the outbound FDI, WDR said “the GCC countries, led by Qatar, accounted for 94% of the region’s outward FDI, with about $41bn in outflows.”
The GCC countries have built up a substantial windfall from oil exports since 2002 when global oil prices started to rise. High prices enabled them to accumulate huge stocks of net foreign assets estimated at around $1.8tn and to implement their diversification strategy, it said.
Sovereign wealth funds based in the sub-region are playing a key role in boosting outward FDI flows, WDR said. Several Islamic private equity firms and other alternative asset management companies from the GCC countries were also investing abroad, particularly in the developed countries, it said.
Although the US has attracted the largest share of investments from the GCC countries, a growing number of GCC investors are now moving to Asia, particularly China and India, to diversify their investment portfolio, WDR said.
“A growing amount of GCC capital is being invested in various sectors such as banking, telecom, real estate and manufacturing in West Asia and North Africa, including export-oriented manufacturing activities to supply to the European and West Asian markets, as a result of accelerating liberalisation, privatisation and the increasing use of Islamic financial instruments,” WDR said.
By Santhosh V Perumal
3.8.08
Dubai firm buys Egypt bank stake
Dubai firm buys Egypt bank stake
CAIRO: Commercial International Bank yesterday said a firm owned by Dubai's ruler had bought a 5.24 per cent stake in the bank, the emirate's second major investment in a year in Egypt's financial sector.
Dubai Capital Group, part of government-owned Dubai Holding, had accumulated the stake of Egypt's largest publicly traded lender from the Egyptian and London stock exchanges over the past few months, a CIB spokesman said.
Dubai Holding is owned by Dubai's ruler Shaikh Mohammed bin Rashid Al Maktoum.
"This investment (provides) us opportunities in an environment which has been challenged by the changes in the global financial services sector," Dubai Capital Group chief executive Mustafa Farid Geninah said.
Another Dubai government-owned firm bought a 25pc stake in EFG-Hermes in November.
CAIRO: Commercial International Bank yesterday said a firm owned by Dubai's ruler had bought a 5.24 per cent stake in the bank, the emirate's second major investment in a year in Egypt's financial sector.
Dubai Capital Group, part of government-owned Dubai Holding, had accumulated the stake of Egypt's largest publicly traded lender from the Egyptian and London stock exchanges over the past few months, a CIB spokesman said.
Dubai Holding is owned by Dubai's ruler Shaikh Mohammed bin Rashid Al Maktoum.
"This investment (provides) us opportunities in an environment which has been challenged by the changes in the global financial services sector," Dubai Capital Group chief executive Mustafa Farid Geninah said.
Another Dubai government-owned firm bought a 25pc stake in EFG-Hermes in November.
13.7.08
GCC sates may invest $9tr abroad
Several trends have emerged indicating where a mammoth $5 trillion to $9 trillion in oil revenues in GCC states like Qatar will be invested over the next decade.
In 2002, nearly 85 percent of the Gulf's wealth was invested abroad in financial instruments mostly linked to the US dollar. However, by 2007, this had fallen to 75 percent due to the rising investment within the Gulf region itself.
There will be increased investments onshore in the MENA region and in Asia, a shift in allocation to alternative investments and more direct investment strategies, an increased sophistication and institutionalisation of the Gulf region including the growing importance of corporate governance - a soaring demand for Islamic products and greater importance of Sovereign Wealth Funds (SWFs), according to Investcorp, a Bahrain-based investment products provider with over $15bn of assets under management.
Gary Long, Investcorp President and Chief Operating Officer (COO), speaking at the Harvard Club in New York, said the oil boom will translate into an investable asset pool in excess of $10tn by 2020.
Long, who addressed the Club along with Ramzi AbdelJaber, head of Investcorp's Business Development Unit, emphasised the new and increasing tendency of GCC investors to make local investments.
Increasing investment in the MENA region and Asia had in turn led to an increased demand for alternative investments such as private equity and hedge funds.
This shift in strategy has been driven by the need to invest more aggressively in hard and social infrastructure to cater to fast-growing populations following decades of under-investment and the emergence of more attractive onshore investment opportunities buoyed by the strong regional economic growth.
Fueling these trends are predicted record figures for the region's oil revenues which will far outstrip the region's current GDP of $800bn.
(MENAFN - The Peninsula)
In 2002, nearly 85 percent of the Gulf's wealth was invested abroad in financial instruments mostly linked to the US dollar. However, by 2007, this had fallen to 75 percent due to the rising investment within the Gulf region itself.
There will be increased investments onshore in the MENA region and in Asia, a shift in allocation to alternative investments and more direct investment strategies, an increased sophistication and institutionalisation of the Gulf region including the growing importance of corporate governance - a soaring demand for Islamic products and greater importance of Sovereign Wealth Funds (SWFs), according to Investcorp, a Bahrain-based investment products provider with over $15bn of assets under management.
Gary Long, Investcorp President and Chief Operating Officer (COO), speaking at the Harvard Club in New York, said the oil boom will translate into an investable asset pool in excess of $10tn by 2020.
Long, who addressed the Club along with Ramzi AbdelJaber, head of Investcorp's Business Development Unit, emphasised the new and increasing tendency of GCC investors to make local investments.
Increasing investment in the MENA region and Asia had in turn led to an increased demand for alternative investments such as private equity and hedge funds.
This shift in strategy has been driven by the need to invest more aggressively in hard and social infrastructure to cater to fast-growing populations following decades of under-investment and the emergence of more attractive onshore investment opportunities buoyed by the strong regional economic growth.
Fueling these trends are predicted record figures for the region's oil revenues which will far outstrip the region's current GDP of $800bn.
(MENAFN - The Peninsula)
3.7.08
More foreign players flocking to region as private equity industry witnesses growth
More foreign players flocking to region as private equity industry witnesses growth
The private equity (PE) industry in the Middle East and North Africa (Mena) region has been under the spotlight over the last few years with more and more foreign players flocking to the region, said Professor Dr Rasim Kaan Aytogu, Executive Director of Tanmiyat Group.
He said the PE industry in the GCC in particular and the Mena region in general ended 2005 with a record number of funds launched and announcements made.
More than 12 funds with a total of around $3 billion (Dh11bn) of commitments started their operations in that year. International PE funds, including The Carlyle Group, 3i, and CVC, for the first time started to look for deal flow from the Middle East after having considered the region solely as a source of limited partners in the past.
Since then, the industry never looked backed. By the end of 2007, funds under management in Mena increased to 76 funds under managing $13bn. This sudden take-off can be attributed to many factors within the context of the global prominence of PE as an investment class. Economic growth, high oil prices, increasing economic liberalisation, reduced restrictions on foreign investment, privatisation of state-owned assets, and greater liquidity of regional stock markets have all been put forward as stimuli for the impressive growth of PE in the GCC.
Starting from 2002, oil prices began their continuous climb from $20/barrel, rising around 30-40 per cent annually. Liquidity from petrodollars was compounded by the repatriation of capital from the West following the 9/11 events. The excess capital was first directed towards the capital markets, which appreciated 100 per cent annually between 2003 and 2005. Liquidity then filtered into real estate, which in the past few years witnessed a flood of announced mega real-estate projects (for example, the Palm, DubaiLand and Kind Abdullah Economic City). In 2005 some of the excess liquidity moved into private equity, jump starting the industry.
Fuelled by the increasing oil prices and production, GCC economics have witnessed stellar growth in the past three years. Future economic growth is expected to be maintained in the short and medium terms and to surpass global economic growth of five per cent. Aggressive financial policies and economic restructuring by the GCC governments will ensure that growth in the non-oil sector will be over five per cent and relatively isolated from the volatility of oil prices.
Despite the windfall from higher oil revenues, the GCC governments have started selling state-owned assets at an increasing rate. This is in light of the increasing economic benefits from private sector management which have led the governments to restructure their economies during a period in which a favorable environment exists.
Airlines, power stations, desalination plants, industrial assets, postal services, banks, stock exchanges, telecom operators, and ports are some of the assets that have been or will be sold to the private sector either partially or fully. The value of the assets in all GCC privatisation programmes is estimated at as high as $1 trillion.
Within this positive environment, the PE industry has risen quickly in the GCC. Not only it is viewed as an out-performing investment class, but also more importantly, governments and economist are preaching its positive role in developing the private sector and creating strong, globally competitive local corporations. Whenever an investment in PE fund is announced, the local media has consistently praised the announcement.
Industry experts keep on reiterating whether the industry has grown too fast on the back of the excess liquidity. Although the value of investments has increased considerably in 2007, the number of transactions has staggered to an extent. Moreover, the largest three transactions have been all in Egypt, whilst the GCC has only witnessed transactions mostly smaller that $100 million, as the flow of privatisation transactions in the GCC has not yet materialised.
Aytogu believes that the quality of deal flow continues to improve, influenced by favourable macroeconomic factors. Corporate Arabia profitability is increasing steadily, and this will create bigger companies that will sooner or later need serious capital injection to maintain their growth trajectory. Banks reluctance to extend additional lending against a backdrop of a global credit crunch will also increase the chances of opening capital to private equity funds.
Egypt has emerged as the leading destination for private equity money in 2006-07. The size of the Egyptian economy, its need for capital, and the government's liberal policies have all contributed to Egypt's attractiveness. The UAE, traditionally the leading destination, remained at No2. Saudi Arabia is rapidly increasing its share, albeit from a lower base. Jordan has also maintained its attractiveness at the fourth position, despite the small size of its economy.
It is interesting to note how sensitive private equity money is to macroeconomic policies. Countries like Kuwait – third largest economy in the GCC – attracted less investment than Jordan – fifth the size of Kuwait's economy. Saudi Arabia's share of private equity investments increased only after government policies became more investment-friendly. The PE industry quickly completed the investment cycle, and the number of exits soared in value in 2007 to more that $1.5bn. The internal rate of returns (IRRs) achieved by these exits have ranged between 31 per cent and 348 per cent, very healthy returns for a nascent industry.
Exits were split between IPOs, trade sale, and financial sales. Despite the robust activity in the IPO market, IPOs as an exit route are decreasing in importance as trade and financial buyers are becoming more active. Naturally, private equity players find trade and financial sales less complicated, and hence, are exploring such exit routes more aggressively than before.
With new plans sprouting up to develop Saudi Arabia's infrastructure, particularly in the transport and communication sectors, as well as down-market industries in the supply chain of goods and services, Saudi Arabia is a slow giant ripe for the introduction of management efficiency.
A slow relaxation of regulations on private equity firms is just one of the series of measures – along building the social infrastructure of education and healthcare – where the kingdom is thoughtfully giving a thumbs-up to private equity groups looking to enter the market. This is done through obvious contacts with regulatory and other government authorities, but also with the country's major family firms.
The noticeable difference between the Saudi market and those of its neighbouring economies are the following:
• Both the UAE and Bahrain have been leaders in creating regulatory and economic environments that have been inviting and welcoming to foreign investment, particularly the development of the banking and financial sector.
• Because Saudi Arabia is the biggest market in the Gulf Co-operation Council (GCC) and its economic powerhouse, the economy is slower, more deliberate and has a regulatory scheme that is changing on a more deliberate basis.
• But the kingdom has already made significant changes, for instance the Saudi government shifted from its traditional policy to spend 60-70 per cent of GDP on defence and infrastructure to the new plan whereby more than 50 per cent of the GDP is being spent on housing, education and healthcare. To prepare the country for an era of declining demand for oil and the possible price drops associated with it.
In addition, the Saudi regulators are in need of having to set criteria, they have to be careful, then they have to make a move attributing the caution to the relative size of the country and the potential for grave errors from a regulatory or economic missteps.
Culturally, however, entry into the Saudi market is a new frontier for private equity firms. They must understand how to navigate policies by deciphering them.
There is a need for liquidity and a formal capital structure in an increasingly competitive free-market economic environment, which will result in significant merger, acquisition and divestiture activity. Many companies have capitalised on these opportunities.
The numbers
$13bn: worth of funds, which increased to 76, were under management in Mena by 2007-end
$1trn: is the estimated value of total assets involved in all GCC privatisation programmes
Challenges and trends
Robustness of economic growth: As the subprime crisis snowballs in 2008 into a global economic slowdown, the impact of such a negative turn-around in the world's economy on growth in the GCC cannot be clearly assessed. However, it is expected that the GCC will be one of the least affected regions.
Entry of international players: The previously timid interest of international players in the region was suddenly emboldened when The Carlyle Group announced its plans to raise a MENA fund for up to $750 million by 2008. The Carlyle Group is following the footsteps of many international players like 3i, TPG, Duetsche Bank, Credit Suisse, CVC, Ripplewood, HSBC, and EMP. The entry of The Carlyle Group will definitely entice many other global heavy-weights to establish funds for the region.
Larger funds: The PE industry surpassed the $100m per fund milestone in 2003, the $500m in 2005, and the $1 billion in 2006.
Track record: As regional fund managers start exhibiting their investments, their track record is being established – in most cases showing 30 per cent plus net returns. The window of opportunity for new fund managers is starting to close, and 2007 has seen some fund managers is starting to close, and 2007 has seen some fund raising efforts being aborted.
Deal flow: Business and social habits, limited opportunities in the private sector, and delayed privatisation programmes have made good deals hard to come by. Proprietary access and extensive deep business networks are essential for succeeding in the region. Regional dynamics have not allowed intermediaries to play a significant role in maturing deal flow, and hence made deal sourcing process a competitive edge for some and frustrating issue for others.
The private equity (PE) industry in the Middle East and North Africa (Mena) region has been under the spotlight over the last few years with more and more foreign players flocking to the region, said Professor Dr Rasim Kaan Aytogu, Executive Director of Tanmiyat Group.
He said the PE industry in the GCC in particular and the Mena region in general ended 2005 with a record number of funds launched and announcements made.
More than 12 funds with a total of around $3 billion (Dh11bn) of commitments started their operations in that year. International PE funds, including The Carlyle Group, 3i, and CVC, for the first time started to look for deal flow from the Middle East after having considered the region solely as a source of limited partners in the past.
Since then, the industry never looked backed. By the end of 2007, funds under management in Mena increased to 76 funds under managing $13bn. This sudden take-off can be attributed to many factors within the context of the global prominence of PE as an investment class. Economic growth, high oil prices, increasing economic liberalisation, reduced restrictions on foreign investment, privatisation of state-owned assets, and greater liquidity of regional stock markets have all been put forward as stimuli for the impressive growth of PE in the GCC.
Starting from 2002, oil prices began their continuous climb from $20/barrel, rising around 30-40 per cent annually. Liquidity from petrodollars was compounded by the repatriation of capital from the West following the 9/11 events. The excess capital was first directed towards the capital markets, which appreciated 100 per cent annually between 2003 and 2005. Liquidity then filtered into real estate, which in the past few years witnessed a flood of announced mega real-estate projects (for example, the Palm, DubaiLand and Kind Abdullah Economic City). In 2005 some of the excess liquidity moved into private equity, jump starting the industry.
Fuelled by the increasing oil prices and production, GCC economics have witnessed stellar growth in the past three years. Future economic growth is expected to be maintained in the short and medium terms and to surpass global economic growth of five per cent. Aggressive financial policies and economic restructuring by the GCC governments will ensure that growth in the non-oil sector will be over five per cent and relatively isolated from the volatility of oil prices.
Despite the windfall from higher oil revenues, the GCC governments have started selling state-owned assets at an increasing rate. This is in light of the increasing economic benefits from private sector management which have led the governments to restructure their economies during a period in which a favorable environment exists.
Airlines, power stations, desalination plants, industrial assets, postal services, banks, stock exchanges, telecom operators, and ports are some of the assets that have been or will be sold to the private sector either partially or fully. The value of the assets in all GCC privatisation programmes is estimated at as high as $1 trillion.
Within this positive environment, the PE industry has risen quickly in the GCC. Not only it is viewed as an out-performing investment class, but also more importantly, governments and economist are preaching its positive role in developing the private sector and creating strong, globally competitive local corporations. Whenever an investment in PE fund is announced, the local media has consistently praised the announcement.
Industry experts keep on reiterating whether the industry has grown too fast on the back of the excess liquidity. Although the value of investments has increased considerably in 2007, the number of transactions has staggered to an extent. Moreover, the largest three transactions have been all in Egypt, whilst the GCC has only witnessed transactions mostly smaller that $100 million, as the flow of privatisation transactions in the GCC has not yet materialised.
Aytogu believes that the quality of deal flow continues to improve, influenced by favourable macroeconomic factors. Corporate Arabia profitability is increasing steadily, and this will create bigger companies that will sooner or later need serious capital injection to maintain their growth trajectory. Banks reluctance to extend additional lending against a backdrop of a global credit crunch will also increase the chances of opening capital to private equity funds.
Egypt has emerged as the leading destination for private equity money in 2006-07. The size of the Egyptian economy, its need for capital, and the government's liberal policies have all contributed to Egypt's attractiveness. The UAE, traditionally the leading destination, remained at No2. Saudi Arabia is rapidly increasing its share, albeit from a lower base. Jordan has also maintained its attractiveness at the fourth position, despite the small size of its economy.
It is interesting to note how sensitive private equity money is to macroeconomic policies. Countries like Kuwait – third largest economy in the GCC – attracted less investment than Jordan – fifth the size of Kuwait's economy. Saudi Arabia's share of private equity investments increased only after government policies became more investment-friendly. The PE industry quickly completed the investment cycle, and the number of exits soared in value in 2007 to more that $1.5bn. The internal rate of returns (IRRs) achieved by these exits have ranged between 31 per cent and 348 per cent, very healthy returns for a nascent industry.
Exits were split between IPOs, trade sale, and financial sales. Despite the robust activity in the IPO market, IPOs as an exit route are decreasing in importance as trade and financial buyers are becoming more active. Naturally, private equity players find trade and financial sales less complicated, and hence, are exploring such exit routes more aggressively than before.
With new plans sprouting up to develop Saudi Arabia's infrastructure, particularly in the transport and communication sectors, as well as down-market industries in the supply chain of goods and services, Saudi Arabia is a slow giant ripe for the introduction of management efficiency.
A slow relaxation of regulations on private equity firms is just one of the series of measures – along building the social infrastructure of education and healthcare – where the kingdom is thoughtfully giving a thumbs-up to private equity groups looking to enter the market. This is done through obvious contacts with regulatory and other government authorities, but also with the country's major family firms.
The noticeable difference between the Saudi market and those of its neighbouring economies are the following:
• Both the UAE and Bahrain have been leaders in creating regulatory and economic environments that have been inviting and welcoming to foreign investment, particularly the development of the banking and financial sector.
• Because Saudi Arabia is the biggest market in the Gulf Co-operation Council (GCC) and its economic powerhouse, the economy is slower, more deliberate and has a regulatory scheme that is changing on a more deliberate basis.
• But the kingdom has already made significant changes, for instance the Saudi government shifted from its traditional policy to spend 60-70 per cent of GDP on defence and infrastructure to the new plan whereby more than 50 per cent of the GDP is being spent on housing, education and healthcare. To prepare the country for an era of declining demand for oil and the possible price drops associated with it.
In addition, the Saudi regulators are in need of having to set criteria, they have to be careful, then they have to make a move attributing the caution to the relative size of the country and the potential for grave errors from a regulatory or economic missteps.
Culturally, however, entry into the Saudi market is a new frontier for private equity firms. They must understand how to navigate policies by deciphering them.
There is a need for liquidity and a formal capital structure in an increasingly competitive free-market economic environment, which will result in significant merger, acquisition and divestiture activity. Many companies have capitalised on these opportunities.
The numbers
$13bn: worth of funds, which increased to 76, were under management in Mena by 2007-end
$1trn: is the estimated value of total assets involved in all GCC privatisation programmes
Challenges and trends
Robustness of economic growth: As the subprime crisis snowballs in 2008 into a global economic slowdown, the impact of such a negative turn-around in the world's economy on growth in the GCC cannot be clearly assessed. However, it is expected that the GCC will be one of the least affected regions.
Entry of international players: The previously timid interest of international players in the region was suddenly emboldened when The Carlyle Group announced its plans to raise a MENA fund for up to $750 million by 2008. The Carlyle Group is following the footsteps of many international players like 3i, TPG, Duetsche Bank, Credit Suisse, CVC, Ripplewood, HSBC, and EMP. The entry of The Carlyle Group will definitely entice many other global heavy-weights to establish funds for the region.
Larger funds: The PE industry surpassed the $100m per fund milestone in 2003, the $500m in 2005, and the $1 billion in 2006.
Track record: As regional fund managers start exhibiting their investments, their track record is being established – in most cases showing 30 per cent plus net returns. The window of opportunity for new fund managers is starting to close, and 2007 has seen some fund managers is starting to close, and 2007 has seen some fund raising efforts being aborted.
Deal flow: Business and social habits, limited opportunities in the private sector, and delayed privatisation programmes have made good deals hard to come by. Proprietary access and extensive deep business networks are essential for succeeding in the region. Regional dynamics have not allowed intermediaries to play a significant role in maturing deal flow, and hence made deal sourcing process a competitive edge for some and frustrating issue for others.
11.6.08
Private equity wave forecast for Mideast
Private equity wave forecast for Mideast
LONDON: The Middle East is set to enjoy a surge in private equity investment as Western markets continue to be squeezed by the global credit crunch, according to a report published on Wednesday. UK financial consultant Deloitte predicts strong growth on the back of the large availability of capital and says an increasing number of funds are expected to target the region, with particular focus on the Gulf Cooperation Council (GCC) states and Egypt.
Deloitte's upbeat news comes just days after Egypt's Weather Investments, which has a controlling stake in Orascom Telecom, announced the sale of 10 percent of its shares for around $1.5 billion to a group of US private equity firms led by Apax Partners, Madison Dearborn Partners and TA Associates.
The report is the latest bullish assessment of the Middle East's financial sector. Earlier this month Standard & Poors (S&P) gave what in the current global financial crisis amounts to a vote of confidence in Middle East equity markets. In its report the rating agency noted that the region's markets "have been resilient" amid the current market turmoil.
Meanwhile, Deloitte points to what it describes as a "perfect storm situation" of high levels of liquidity due to high oil prices and the increasing sophistication of the market in the region - including improved regulation and the desire of people to invest more in their home markets.
Deloitte predicts the hotspots for the coming year will predictably be the states of the GCC, along with Egypt, the only Middle East country combining scale with a history of industrialization. But Deloitte also flags up Algeria, Libya and Sudan as emerging markets, which Deloitte says are very much like GCC nations 30 or 40 years ago with "natural resources and scope for investment."
The good news is largely a reflection of the abundance of capital swirling around the region, courtesy of the seemingly unending upward climb of oil prices. But S&P noted that the scarcity of investment opportunities is also a significant factor in the performance of the region's markets. And there of course is the rub. For while private equity is desperately seeking homes for its investment bucks, there is a currently lot of cash chasing a very small number of investment opportunities in the Middle East.
Chris Ward, Deloitte's global head of corporate finance agreed supply and demand is a problem.
"Confidence levels are high for long-term growth prospects in the MENA [Middle East and North Africa] region and there is a growing awareness of private equity. But more needs to be done to raise the profile of the industry which currently has more capital to deploy than investment opportunities," he said.
There is also the issue of still restrictive foreign ownership legislation in the region, which, while changing, remains an obstacle to much investment. The key for Western private equity funds, as ever, and as Deloitte notes, will be for them to partner with local groups.
The report notes that many regional family businesses are now more familiar with private equity and are more open to talking to private equity investors. It adds that the rise in initial public offerings in the region also offers opportunities for private equity investment because many companies are likely to take on a partner when they go public that can guide them through the process.
Deloitte believes this will pave the way for Western private equity groups to make inroads into the market here. Timothy Mahapatra, managing partner for transaction services with Deloitte said: "Whilst domestic players are expected to be most active within the MENA region in the next 12 months, we are seeing a rising number of international private equity firms looking towards the region as a new and exciting area, rich in growth opportunities in what is still a relatively untapped market, to deploy capital. The attractiveness of the region from an investor perspective cannot be underestimated, with an economic climate ripe for conducting business in."
That sounds fine, but as Deloitte's report makes clear, private equity funds are primarily interested in energy, real estate and financial services sectors, all of which still continue to have restrictions on overseas investment in most Middle East states.
And while a recent report by consultant group KPMG estimated that more than 200 privatizations valued at over $1 trillion are in the pipeline in the next 10 years, the reality, as the Deloitte report notes, is that the region is unlikely to see kind the multi-billion dollar private equity deals common in American and Europe but will instead have to be content with deals of between $100 million and $1 billion.
By Michael Glackin
LONDON: The Middle East is set to enjoy a surge in private equity investment as Western markets continue to be squeezed by the global credit crunch, according to a report published on Wednesday. UK financial consultant Deloitte predicts strong growth on the back of the large availability of capital and says an increasing number of funds are expected to target the region, with particular focus on the Gulf Cooperation Council (GCC) states and Egypt.
Deloitte's upbeat news comes just days after Egypt's Weather Investments, which has a controlling stake in Orascom Telecom, announced the sale of 10 percent of its shares for around $1.5 billion to a group of US private equity firms led by Apax Partners, Madison Dearborn Partners and TA Associates.
The report is the latest bullish assessment of the Middle East's financial sector. Earlier this month Standard & Poors (S&P) gave what in the current global financial crisis amounts to a vote of confidence in Middle East equity markets. In its report the rating agency noted that the region's markets "have been resilient" amid the current market turmoil.
Meanwhile, Deloitte points to what it describes as a "perfect storm situation" of high levels of liquidity due to high oil prices and the increasing sophistication of the market in the region - including improved regulation and the desire of people to invest more in their home markets.
Deloitte predicts the hotspots for the coming year will predictably be the states of the GCC, along with Egypt, the only Middle East country combining scale with a history of industrialization. But Deloitte also flags up Algeria, Libya and Sudan as emerging markets, which Deloitte says are very much like GCC nations 30 or 40 years ago with "natural resources and scope for investment."
The good news is largely a reflection of the abundance of capital swirling around the region, courtesy of the seemingly unending upward climb of oil prices. But S&P noted that the scarcity of investment opportunities is also a significant factor in the performance of the region's markets. And there of course is the rub. For while private equity is desperately seeking homes for its investment bucks, there is a currently lot of cash chasing a very small number of investment opportunities in the Middle East.
Chris Ward, Deloitte's global head of corporate finance agreed supply and demand is a problem.
"Confidence levels are high for long-term growth prospects in the MENA [Middle East and North Africa] region and there is a growing awareness of private equity. But more needs to be done to raise the profile of the industry which currently has more capital to deploy than investment opportunities," he said.
There is also the issue of still restrictive foreign ownership legislation in the region, which, while changing, remains an obstacle to much investment. The key for Western private equity funds, as ever, and as Deloitte notes, will be for them to partner with local groups.
The report notes that many regional family businesses are now more familiar with private equity and are more open to talking to private equity investors. It adds that the rise in initial public offerings in the region also offers opportunities for private equity investment because many companies are likely to take on a partner when they go public that can guide them through the process.
Deloitte believes this will pave the way for Western private equity groups to make inroads into the market here. Timothy Mahapatra, managing partner for transaction services with Deloitte said: "Whilst domestic players are expected to be most active within the MENA region in the next 12 months, we are seeing a rising number of international private equity firms looking towards the region as a new and exciting area, rich in growth opportunities in what is still a relatively untapped market, to deploy capital. The attractiveness of the region from an investor perspective cannot be underestimated, with an economic climate ripe for conducting business in."
That sounds fine, but as Deloitte's report makes clear, private equity funds are primarily interested in energy, real estate and financial services sectors, all of which still continue to have restrictions on overseas investment in most Middle East states.
And while a recent report by consultant group KPMG estimated that more than 200 privatizations valued at over $1 trillion are in the pipeline in the next 10 years, the reality, as the Deloitte report notes, is that the region is unlikely to see kind the multi-billion dollar private equity deals common in American and Europe but will instead have to be content with deals of between $100 million and $1 billion.
By Michael Glackin
27.5.08
$4tr in Middle East Capital Eyes Equity Investments
DUBAI — Led by Abu Dhabi Investment Authority — the world's largest Sovereign Wealth Fund (SWF) with estimated assets of $875 billion — up to $4 trillion capital available for investment from the Middle East is increasingly targeting equity investments around the globe.
According to a global management consulting firm, the region's high private and public sector investment power, bolstered by rising oil revenues and increasing foreign exchanges reserves, is underpinned by SWFs which currently have a combined $3.3 trillion assets under management, up 18 per cent between 2006 and 2007.
With the Middle East based SWFs currently accounting for 50 per cent, global assets under the management of these funds are expected to reach $5 trillion in 2010 and $10 to $ 15 trillion in 2015.
"This dramatic growth is supported by rising oil revenues and by increasing foreign exchanges reserves of some Asian countries. The objectives of these funds are to protect the budget and the economy from excess volatility in exports and / or to diversify from non renewable commodity exports," said A.T. Kearney in its latest report.
"With the rapid growth of assets, SWFs are under growing pressure to invest. They have accomplished a strategic shift in the way the money is being invested," Kearney said. Traditionally, countries turned their surpluses into risk-averse financial assets. China, for example, supported the US consumption economy by buying government bonds. SWF are now favouring equity-type investments to benefit from higher revenues and to gain exposure to strategic companies with more capabilities and know-how in industries that are crucial to their own economies.
"With the world's biggest Sovereign Wealth Fund — the Abu Dhabi Investment Authority (ADIA) — as one example, the UAE is moving towards these private equity-style deals," the report said.
Kuwait Financial Centre (KFC) in a recent research titled "The Golden Portfolio," said in the GCC 36 SWFs hold 131 Gulf-listed companies accounting for 27 per cent of region's market capitalisation valued at $300 billion.
KFC's Head of Research M. R. Raghu, and Sarah Al Khaled, an analyst, pointed out that apart from the big and most quoted names like ADIA or Kuwait Investment Authority (KIA), SWFs also include a variety of government agencies that manage money either directly or indirectly. The categories may include pension funds, ministries, fully owned companies.
The report said SWFs could also be an opportunity for developed countries, when most of their economies are slowing down. "In the short-term, the SWF can help to absorb the liquidity crisis; in the long run, they will be valuable partners for Western companies to back their growth and to finance innovation," said Cyril Garbois, Principal and expert for SWF, A.T. Kearney Dubai. Early this year, SWF from Asia and Middle East injected billions of dollars of new capital into troubled financial institutions and contributed this way to the stability of the whole system.
"Because of this new way to invest, concern about the political purpose and influence of these funds, and developing countries' investors in general, has risen among Western countries. The criticisms raised when Dubai Ports World planned to purchase operating rights to several US ports through the acquisition of P&O, or when the Chinese energy firm CNOOC tried to buy Unocal, are vivid examples. International bodies such as the International Monetary Fund and OECD are working on rules to prevent discrimination against SWF but also to answer to the need of more transparency in their investment processes," the report pointed out.
The rising power of the regional SWF and their private equity oriented investments are also an opportunity for the Middle East economy itself. The study revealed that private equity and SWF investments accelerate the growth of job creations. "More than one million jobs have been created through private equity investments in Europe in the last four years" said Dr. Dirk Buchta, Managing Director, A.T. Kearney Middle East.
"With $4 trillion available in the Middle East for investment and very healthy SWFs, the outlook for economic development in the region is very positive," said Dr. Alexander von Pock, Manager of Financial Services, A.T. Kearney Middle East.
The report shows that companies financed by private equity and SWF grow faster than those traditionally financed. Private equity firms often invest in mid-size companies, mostly former family owned businesses — of which the Middle East has many
By Issac John
According to a global management consulting firm, the region's high private and public sector investment power, bolstered by rising oil revenues and increasing foreign exchanges reserves, is underpinned by SWFs which currently have a combined $3.3 trillion assets under management, up 18 per cent between 2006 and 2007.
With the Middle East based SWFs currently accounting for 50 per cent, global assets under the management of these funds are expected to reach $5 trillion in 2010 and $10 to $ 15 trillion in 2015.
"This dramatic growth is supported by rising oil revenues and by increasing foreign exchanges reserves of some Asian countries. The objectives of these funds are to protect the budget and the economy from excess volatility in exports and / or to diversify from non renewable commodity exports," said A.T. Kearney in its latest report.
"With the rapid growth of assets, SWFs are under growing pressure to invest. They have accomplished a strategic shift in the way the money is being invested," Kearney said. Traditionally, countries turned their surpluses into risk-averse financial assets. China, for example, supported the US consumption economy by buying government bonds. SWF are now favouring equity-type investments to benefit from higher revenues and to gain exposure to strategic companies with more capabilities and know-how in industries that are crucial to their own economies.
"With the world's biggest Sovereign Wealth Fund — the Abu Dhabi Investment Authority (ADIA) — as one example, the UAE is moving towards these private equity-style deals," the report said.
Kuwait Financial Centre (KFC) in a recent research titled "The Golden Portfolio," said in the GCC 36 SWFs hold 131 Gulf-listed companies accounting for 27 per cent of region's market capitalisation valued at $300 billion.
KFC's Head of Research M. R. Raghu, and Sarah Al Khaled, an analyst, pointed out that apart from the big and most quoted names like ADIA or Kuwait Investment Authority (KIA), SWFs also include a variety of government agencies that manage money either directly or indirectly. The categories may include pension funds, ministries, fully owned companies.
The report said SWFs could also be an opportunity for developed countries, when most of their economies are slowing down. "In the short-term, the SWF can help to absorb the liquidity crisis; in the long run, they will be valuable partners for Western companies to back their growth and to finance innovation," said Cyril Garbois, Principal and expert for SWF, A.T. Kearney Dubai. Early this year, SWF from Asia and Middle East injected billions of dollars of new capital into troubled financial institutions and contributed this way to the stability of the whole system.
"Because of this new way to invest, concern about the political purpose and influence of these funds, and developing countries' investors in general, has risen among Western countries. The criticisms raised when Dubai Ports World planned to purchase operating rights to several US ports through the acquisition of P&O, or when the Chinese energy firm CNOOC tried to buy Unocal, are vivid examples. International bodies such as the International Monetary Fund and OECD are working on rules to prevent discrimination against SWF but also to answer to the need of more transparency in their investment processes," the report pointed out.
The rising power of the regional SWF and their private equity oriented investments are also an opportunity for the Middle East economy itself. The study revealed that private equity and SWF investments accelerate the growth of job creations. "More than one million jobs have been created through private equity investments in Europe in the last four years" said Dr. Dirk Buchta, Managing Director, A.T. Kearney Middle East.
"With $4 trillion available in the Middle East for investment and very healthy SWFs, the outlook for economic development in the region is very positive," said Dr. Alexander von Pock, Manager of Financial Services, A.T. Kearney Middle East.
The report shows that companies financed by private equity and SWF grow faster than those traditionally financed. Private equity firms often invest in mid-size companies, mostly former family owned businesses — of which the Middle East has many
By Issac John
18.5.08
There have been no examples of any SWF abuse
While the rest of the world is still split on whether they love or hate sovereign wealth funds, or SWFs, Lehman Brothers last month became the first investment bank to announce a fully fledged division to handle and grow its business from such funds.
Even the International Monetary Fund (IMF) has waxed hot and cold on the role that sovereign funds play or have the capability of playing in the world's financial markets. On the one hand, it has called sovereign wealth funds a stabilising force; on the other, it has demanded more transparency about their business because they have the potential to carry out transactions based on non-commercial motives. The IMF has estimated that deployable assets by these funds will grow to as much as $10 trillion (Dh36.73trn) in the next five years.
This is the universe in which Makram Azar, Lehman's freshly minted Global Head of Sovereign Wealth Funds, will operate. Azar dismisses the hype surrounding sovereign funds saying the headline-grabbing deals of the past six months in Western financial institutions such as Citibank and Merrill Lynch make up a minuscule percentage of SWF activity. The bulk of investments are not in the mergers and acquisitions arena, and therefore not on a newspaper's radar.
How would you classify a sovereign wealth fund? How does it differ from a state-owned investment company?
It does not, necessarily. Different countries have different ways of deploying their wealth. We want to capture the whole universe. So, I'm not focused so much on the name, I'm focused on the client base. Wherever the money comes from the sovereign, I'm there. Lehman was the first mover in this – and I cover Norway to Alaska, not just the Gulf. Some of these institutions do much more than just mergers and acquisitions – but it is the big deals such as Citigroup or Morgan Stanley that grab the headlines. Most of the investments are below the surface, people don't actually see them.
What's your view on the guidelines that the IMF wants sovereign funds to create and follow? How do you respond to fears that investments by these funds may have political undertones?
Up to now, most of these fears have not been well founded. There have not been any examples of an abuse or a deal made by a sovereign fund for the wrong reasons. If you own five per cent of a big bank, what does it really mean? Where is the concealed agenda? I don't see it. I think this has been used a lot for domestic political reasons. The DP World investment in United States' ports [as part of the Dubai-based company's acquisition of Peninsular & Oriental Steamship Company] is a perfect example of this. There was no security threat. DP World is not a sovereign wealth fund but it is a state-controlled company. That said, there are some sensitive sectors and industries that the US in particular may want to protect – more from the Chinese, I think, than from the Gulf. So let's see where it leads in terms of the guidelines.
What do you see happening in future that can ease such fears?
Well, for one thing, the US presidential campaign will soon be over. That's one aspect. And over time, when they see that there has been no abuse or misuse of the funds for any political agenda, the fears will ease off. You build trust in a relationship over time.
What kinds of guidelines do you see coming in?
I think a lot of the guidelines will have to do with transparency and some sort of limits on the amount of control that can be exerted on companies in the West.
Will that make your job easier or harder?
Frankly, I'm neutral on this. It might define more clearly what the sovereign wealth funds can or cannot do, rather than stumbling on an obstacle after the fact, similar to what happened with DP World.
Where do you see the biggest deals happening for you in this arena?
Again, you have the deals that grab the headlines – these are only a small fraction of the pie, which today may be $3.5 trillion. Of this the investments made in the Western institutions were $60-$80 billion – which is nothing. Abu Dhabi Investment Authority, for example, has hundreds of billions of dollars but their headlining deal was Citibank for $7.5bn. The rest of their investments are below the radar, so to speak, for the newspapers. They invest their money every day in the markets – and that's what we're going after, not just the M&A deals. For instance, if they have $100bn to invest they may put 50 per cent in fixed income, 40 per cent in equity, and 10 per cent in more aggressive asset classes spanning hedge funds and private equity etc. We offer all of that. We are not here to just work on the M&A deals.
What is the average internal rate of return that you would have to look at when you get a fund-management mandate from a sovereign wealth fund?
The IRR is not ours, it is theirs. In the monetary markets, it is small return and low risk; 10 to 15 per cent would be in more aggressive investments where the IRR is greater and more than 20 per cent in private equity deals.
Where does it average out?
Well, when you put your money in the bank you get two or 2.5 per cent. You go buy a piece of real estate, you can expect a higher return. That's how they do it. In the more aggressive markets, they can expect an IRR of 10 to 15 per cent. In the less aggressive, it can be single-digit or low double-digits.
Does the competition to get SWF fund-management mandates push investment banks like Lehman to structure specific products with higher average returns?
We work with our existing products. We can create products, but at the end of the day our products channel investments into the areas in which the SWF wants to invest. For example, they may say they want to be present in the Asian markets. We tell them what to invest in and do it for them. An IRR is not something we can guarantee. We show them the returns we have generated over the past five years – we show them our track record.
What slice of the global sovereign fund market are you targeting?
The biggest possible! Lehman is the only investment bank that has created a global division that spans all the products across asset classes. I'm surprised that we are the first to do this as a global co-ordinated effort.
How much of Lehman's business do you see coming from this segment?
An increasing amount. What we are targeting is not a percentage of Lehman's business but a percentage of the SWFs' market – as large a market share as possible.
Sovereign funds are a growing financial force – is it a force for good? Or is it a force that the world should be wary of?
I don't see anything to be wary of.
Do you see them as saviours?
In the past six months they may have looked like saviours. But that's not their objective – which is to make money and get good returns on their investment. They will continue to invest wherever they see the potential to make money. They did not invest in Western financials to be saviours. They invested because they thought the sector had hit bottom and was going to bounce back.
They were wrong.
Yes. Everyone lost money on that call but so did all other investors in the equity markets during that period, including Western ones. But in five to 10 years you will see them making money on that investment.
Does that make sovereign funds more stable investors?
Yes, they do take a long-term view.
Sovereign funds today generate a lot of heated argument. One either loves them or hates them. What's the reality check here?
The world is focusing on $60-$80bn of sovereign investments that have taken place in the past six or seven months in M&A deals. If you look at the total pool of sovereign investible funds – $2-$3trn – that is a minuscule percentage. Something like 90 to 95 per cent of their investing is being done in mundane, everyday things. You can't mystify them based on the small percentage that is in the headlines. Look at Norway. It has half a trillion dollars, but nobody is saying anything bad about them. So, yes, it's a group of different countries, different people, different agendas. We cannot put them all under one blanket. Sovereign wealth funds have more money than hedge funds and private equity combined. They are different from each other. Is China, for example, the same as Saudi Arabia? I don't think so. At the same time, however, if you look at the banking crisis, all of them rushed to invest in Western financials. So there are commonalities as well – in investment philosophies, for instance.
What quantum of sovereign funds does Lehman have the mandate to manage today and how do you see that growing?
Sovereign wealth funds themselves are expected to quadruple in size over the next five years. This will come from oil revenues, commodity prices, trade surpluses – multiple things – anything that comes into the sovereign coffers. We will grow at a similar rate, or higher, as we gain market share.
Do you think the whole move towards transparency and international best practices will hurt the image of sovereign funds in the huge percentage of business they do in the non-M&A segments?
Definitely not. The liquidity and depth they bring to financial markets worldwide is seen as a boon to those markets. Because the sovereign funds have an increasing amount of money, they have to put it to work. That's very healthy for the markets; it's a lifeline for the markets.
What are the critical success factors of your division?
One is relationship-building, building trust. Others do this as part of their day job, so to speak, not in a fully dedicated manner. I wake up every day thinking about how I can take our relationships further. Secondly, it is the quality of investment products and ideas in our portfolio. You can't have one without the other.
Why are you basing this effort in Dubai? Why are you moving in from London? Is that because the IMF says half of all sovereign funds will be in the GCC in five years?
I have a map of the world in my office. If you look at it – from Norway right up there to South Korea and Alaska, Dubai is perfectly located. And of course I can focus on the Gulf more easily as well. This week I'm flying to China. Dubai is like the centre of the universe – at least the universe that I will be looking at. New sovereign funds are expected to come up – India, for example, is one. Saudi Arabia, Japan… It's fascinating!
Makram Azar, Global Head of Sovereign Wealth Funds, Lehman Brothers
Makram Azar joined Lehman Brothers in 1990. Before his new posting as global head of SWFs, he led the media, consumer and retail investment banking businesses in Europe and the Middle East. Under his leadership, Lehman Brothers was named Media M&A Bank of the Year 2007 by MediaFinance magazine for having advised on most of the significant 2007 transactions in the media sector. These included the takeover of ProSiebenSat1 by KKR and Permira, merger of Canal+ and TPS, and the sale of Endemol.
A Lebanese by birth, Azar has developed strong relationships in the region, including advising Saudi Prince Alwaleed bin Talal on an investment in Berlusconi's media company, a deal that could be seen as a precursor to regional sovereign fund investments in the West, which started more recently.
His new cross-divisional role based in Dubai, says Azar, is all about "building relationships and then doing deals together".
By Yazad Darasha on Sunday, May 18, 2008
Even the International Monetary Fund (IMF) has waxed hot and cold on the role that sovereign funds play or have the capability of playing in the world's financial markets. On the one hand, it has called sovereign wealth funds a stabilising force; on the other, it has demanded more transparency about their business because they have the potential to carry out transactions based on non-commercial motives. The IMF has estimated that deployable assets by these funds will grow to as much as $10 trillion (Dh36.73trn) in the next five years.
This is the universe in which Makram Azar, Lehman's freshly minted Global Head of Sovereign Wealth Funds, will operate. Azar dismisses the hype surrounding sovereign funds saying the headline-grabbing deals of the past six months in Western financial institutions such as Citibank and Merrill Lynch make up a minuscule percentage of SWF activity. The bulk of investments are not in the mergers and acquisitions arena, and therefore not on a newspaper's radar.
How would you classify a sovereign wealth fund? How does it differ from a state-owned investment company?
It does not, necessarily. Different countries have different ways of deploying their wealth. We want to capture the whole universe. So, I'm not focused so much on the name, I'm focused on the client base. Wherever the money comes from the sovereign, I'm there. Lehman was the first mover in this – and I cover Norway to Alaska, not just the Gulf. Some of these institutions do much more than just mergers and acquisitions – but it is the big deals such as Citigroup or Morgan Stanley that grab the headlines. Most of the investments are below the surface, people don't actually see them.
What's your view on the guidelines that the IMF wants sovereign funds to create and follow? How do you respond to fears that investments by these funds may have political undertones?
Up to now, most of these fears have not been well founded. There have not been any examples of an abuse or a deal made by a sovereign fund for the wrong reasons. If you own five per cent of a big bank, what does it really mean? Where is the concealed agenda? I don't see it. I think this has been used a lot for domestic political reasons. The DP World investment in United States' ports [as part of the Dubai-based company's acquisition of Peninsular & Oriental Steamship Company] is a perfect example of this. There was no security threat. DP World is not a sovereign wealth fund but it is a state-controlled company. That said, there are some sensitive sectors and industries that the US in particular may want to protect – more from the Chinese, I think, than from the Gulf. So let's see where it leads in terms of the guidelines.
What do you see happening in future that can ease such fears?
Well, for one thing, the US presidential campaign will soon be over. That's one aspect. And over time, when they see that there has been no abuse or misuse of the funds for any political agenda, the fears will ease off. You build trust in a relationship over time.
What kinds of guidelines do you see coming in?
I think a lot of the guidelines will have to do with transparency and some sort of limits on the amount of control that can be exerted on companies in the West.
Will that make your job easier or harder?
Frankly, I'm neutral on this. It might define more clearly what the sovereign wealth funds can or cannot do, rather than stumbling on an obstacle after the fact, similar to what happened with DP World.
Where do you see the biggest deals happening for you in this arena?
Again, you have the deals that grab the headlines – these are only a small fraction of the pie, which today may be $3.5 trillion. Of this the investments made in the Western institutions were $60-$80 billion – which is nothing. Abu Dhabi Investment Authority, for example, has hundreds of billions of dollars but their headlining deal was Citibank for $7.5bn. The rest of their investments are below the radar, so to speak, for the newspapers. They invest their money every day in the markets – and that's what we're going after, not just the M&A deals. For instance, if they have $100bn to invest they may put 50 per cent in fixed income, 40 per cent in equity, and 10 per cent in more aggressive asset classes spanning hedge funds and private equity etc. We offer all of that. We are not here to just work on the M&A deals.
What is the average internal rate of return that you would have to look at when you get a fund-management mandate from a sovereign wealth fund?
The IRR is not ours, it is theirs. In the monetary markets, it is small return and low risk; 10 to 15 per cent would be in more aggressive investments where the IRR is greater and more than 20 per cent in private equity deals.
Where does it average out?
Well, when you put your money in the bank you get two or 2.5 per cent. You go buy a piece of real estate, you can expect a higher return. That's how they do it. In the more aggressive markets, they can expect an IRR of 10 to 15 per cent. In the less aggressive, it can be single-digit or low double-digits.
Does the competition to get SWF fund-management mandates push investment banks like Lehman to structure specific products with higher average returns?
We work with our existing products. We can create products, but at the end of the day our products channel investments into the areas in which the SWF wants to invest. For example, they may say they want to be present in the Asian markets. We tell them what to invest in and do it for them. An IRR is not something we can guarantee. We show them the returns we have generated over the past five years – we show them our track record.
What slice of the global sovereign fund market are you targeting?
The biggest possible! Lehman is the only investment bank that has created a global division that spans all the products across asset classes. I'm surprised that we are the first to do this as a global co-ordinated effort.
How much of Lehman's business do you see coming from this segment?
An increasing amount. What we are targeting is not a percentage of Lehman's business but a percentage of the SWFs' market – as large a market share as possible.
Sovereign funds are a growing financial force – is it a force for good? Or is it a force that the world should be wary of?
I don't see anything to be wary of.
Do you see them as saviours?
In the past six months they may have looked like saviours. But that's not their objective – which is to make money and get good returns on their investment. They will continue to invest wherever they see the potential to make money. They did not invest in Western financials to be saviours. They invested because they thought the sector had hit bottom and was going to bounce back.
They were wrong.
Yes. Everyone lost money on that call but so did all other investors in the equity markets during that period, including Western ones. But in five to 10 years you will see them making money on that investment.
Does that make sovereign funds more stable investors?
Yes, they do take a long-term view.
Sovereign funds today generate a lot of heated argument. One either loves them or hates them. What's the reality check here?
The world is focusing on $60-$80bn of sovereign investments that have taken place in the past six or seven months in M&A deals. If you look at the total pool of sovereign investible funds – $2-$3trn – that is a minuscule percentage. Something like 90 to 95 per cent of their investing is being done in mundane, everyday things. You can't mystify them based on the small percentage that is in the headlines. Look at Norway. It has half a trillion dollars, but nobody is saying anything bad about them. So, yes, it's a group of different countries, different people, different agendas. We cannot put them all under one blanket. Sovereign wealth funds have more money than hedge funds and private equity combined. They are different from each other. Is China, for example, the same as Saudi Arabia? I don't think so. At the same time, however, if you look at the banking crisis, all of them rushed to invest in Western financials. So there are commonalities as well – in investment philosophies, for instance.
What quantum of sovereign funds does Lehman have the mandate to manage today and how do you see that growing?
Sovereign wealth funds themselves are expected to quadruple in size over the next five years. This will come from oil revenues, commodity prices, trade surpluses – multiple things – anything that comes into the sovereign coffers. We will grow at a similar rate, or higher, as we gain market share.
Do you think the whole move towards transparency and international best practices will hurt the image of sovereign funds in the huge percentage of business they do in the non-M&A segments?
Definitely not. The liquidity and depth they bring to financial markets worldwide is seen as a boon to those markets. Because the sovereign funds have an increasing amount of money, they have to put it to work. That's very healthy for the markets; it's a lifeline for the markets.
What are the critical success factors of your division?
One is relationship-building, building trust. Others do this as part of their day job, so to speak, not in a fully dedicated manner. I wake up every day thinking about how I can take our relationships further. Secondly, it is the quality of investment products and ideas in our portfolio. You can't have one without the other.
Why are you basing this effort in Dubai? Why are you moving in from London? Is that because the IMF says half of all sovereign funds will be in the GCC in five years?
I have a map of the world in my office. If you look at it – from Norway right up there to South Korea and Alaska, Dubai is perfectly located. And of course I can focus on the Gulf more easily as well. This week I'm flying to China. Dubai is like the centre of the universe – at least the universe that I will be looking at. New sovereign funds are expected to come up – India, for example, is one. Saudi Arabia, Japan… It's fascinating!
Makram Azar, Global Head of Sovereign Wealth Funds, Lehman Brothers
Makram Azar joined Lehman Brothers in 1990. Before his new posting as global head of SWFs, he led the media, consumer and retail investment banking businesses in Europe and the Middle East. Under his leadership, Lehman Brothers was named Media M&A Bank of the Year 2007 by MediaFinance magazine for having advised on most of the significant 2007 transactions in the media sector. These included the takeover of ProSiebenSat1 by KKR and Permira, merger of Canal+ and TPS, and the sale of Endemol.
A Lebanese by birth, Azar has developed strong relationships in the region, including advising Saudi Prince Alwaleed bin Talal on an investment in Berlusconi's media company, a deal that could be seen as a precursor to regional sovereign fund investments in the West, which started more recently.
His new cross-divisional role based in Dubai, says Azar, is all about "building relationships and then doing deals together".
By Yazad Darasha on Sunday, May 18, 2008
4.5.08
Case for setting up sovereign wealth fund gets stronger
Case for setting up sovereign wealth fund gets stronger
Thursday, 01 May , 2008, 15:34
With India�s foreign exchange reserves at over $300 billion and growing, there has been renewed interest in establishing a sovereign wealth fund (SWF), using a part of those reserves.
An SWF is a separate pool of assets, primarily (but not exclusively) invested outside the country, and controlled by governments to achieve economic, financial, and strategic objectives.
While there are well-established conservative international norms for investing forex reserves, this is not the case with the SWFs, which can engage in more aggressive risk-management practices.
India is a significant recipient of investments by SWFs from abroad.
While the SWFs have existed for several decades, their vastly expanded scale and scope of activities is a relatively new phenomenon.
Currently, among the institutional investors, pension funds have the largest assets, totalling around $25 trillion, while the corpus of SWFs is around $5 trillion. Industry experts estimate that the SWFs will grow to $20 trillion by 2015, while the endowment funds and foundations increase to $10 trillion.
The current stock market capitalisation of the world is around $50 trillion.
As with other institutional investors, SWFs also engage in partnership with private equity companies and hedge funds. SWFs can potentially facilitate a more efficient allocation of revenue from commodity surpluses across countries; help recycle current account surpluses; and enhance market liquidity. They also have potentially longer time horizons; and scale to employ more sophisticated risk management strategies.
Unlike in case of pension funds, there are no robust databases, either domestically or internationally, to monitor the financial flows of the SWFs. There are concerns about transparency and accountability of the SWFs, both for the home and the recipient countries. There are also concerns about conflicts of interest, potential insider trading, and reduced regulatory effectiveness.
The IMF has begun work on developing a code of conduct for the SWFs, which will include disclosure, reporting, transparency, and governance. Efforts are underway to also develop such code for hedge funds.
In India, the regulatory regime governing capital inflows does not recognise SWFs, hedge funds and private equity as a distinct category. Their investments are subject to normal prudential provisions.
There is, however, a concern that such an approach may be too benign given the complexity of the nature of transactions and the size of the SWFs. At the least, more robust database on incoming flows needs to be developed by the Reserve Bank of India (RBI).
The case for establishing a SWF in India is mixed. Most analysts feel that while India�s international investment position is not very comfortable, its gross reserves are adequate, even after considering high precautionary needs due to its current account and budget deficits. Thus, unlike most other countries, India�s case for SWF does not rely on export surpluses, conversion of non-renewable assets into a more diversified portfolio of financial and physical assets, or contingent pension reserve.
Instead, in India, a major reason for setting up an SWF is the possible use of forex reserves to finance critical infrastructure needs; and to mitigate quasi-fiscal costs of sterilising reserves. These costs arise as returns on conventionally invested reserves are 3-4%, while domestic bonds need to be financed at 7-8%.
A more aggressive risk posture for 3-5% of forex reserves ($9-15 billion) could help mitigate the extent of quasi-fiscal costs, albeit at a higher risk.
Even if India does establish such an SWF, its size will be among the smallest globally.
The largest SWF in the World is Abu Dhabi Investment Authority, with assets exceeding $1 trillion.
Russia has recently announced its intention to use its excess revenue from oil through SWFs to increase its strategic leverage.
Establishment of an SWF will enable India to be on a learning curve in regards the complexities of establishing and operating such a fund. This, in turn, could assist in devising measures to better monitor the operations of foreign SWFs in India. It will also give India a standing in participating in international discussions concerning the governance code for SWFs. Also, as India�s pension assets (currently about 15% of GDP) continue to grow, some international risk diversification would become essential. The SWF experience could then prove useful.
The challenges in setting up a SWF in India include high initial setup costs, including specialised staffing, sustaining a transparent and accountable governance structure and managing the political economy. India�s democratic checks and balances will impose constraints on SWFs, which are usually not found in the state-capitalist economies most of the SWFs are located in.
The SWF may also distract the government�s urgent need to address more critical public policy issues concerning trade imbalances, fiscal consolidation, infrastructure and human resource development needs.
By some measures, India already has a SWF called the India Infrastructure Finance Company (IIFC). The government-owned firm has set up a subsidiary in London, and has borrowed $250 million from RBI in foreign currency by issuing it 10-year government-guaranteed bonds at Libor.
IIFC is mandated to lend to Indian companies to import capital goods for infrastructure projects in India, or to co-finance external commercial borrowings (ECBs) of Indian firms in select areas. But, while this does address the concern that using reserves domestically could create adverse liquidity and inflationary impact, this may adversely impact the domestic capital goods sector, and government guarantees may create severe moral hazard problem.
In a speech in Washington DC this month, RBI governor Dr Y Venugopal Reddy outlined the broad contours of a more traditional SWF, which would invest a part of India�s excess reserves in the global markets. Reddy suggested creation of a separate entity or company, which will purchase foreign currencies from the RBI, and in turn invest in higher risk-higher return assets internationally. He also suggested that the SWF be managed by an independent sovereign entity, and not by RBI.
More India business stories
It appears there is consensus emerging in official circles for setting up a traditional SWF. On balance, there is a case for such a move, but caution is needed in implementing it to ensure that appropriate safeguards are provided. Mukul Asher / DNA MONEY
Thursday, 01 May , 2008, 15:34
With India�s foreign exchange reserves at over $300 billion and growing, there has been renewed interest in establishing a sovereign wealth fund (SWF), using a part of those reserves.
An SWF is a separate pool of assets, primarily (but not exclusively) invested outside the country, and controlled by governments to achieve economic, financial, and strategic objectives.
While there are well-established conservative international norms for investing forex reserves, this is not the case with the SWFs, which can engage in more aggressive risk-management practices.
India is a significant recipient of investments by SWFs from abroad.
While the SWFs have existed for several decades, their vastly expanded scale and scope of activities is a relatively new phenomenon.
Currently, among the institutional investors, pension funds have the largest assets, totalling around $25 trillion, while the corpus of SWFs is around $5 trillion. Industry experts estimate that the SWFs will grow to $20 trillion by 2015, while the endowment funds and foundations increase to $10 trillion.
The current stock market capitalisation of the world is around $50 trillion.
As with other institutional investors, SWFs also engage in partnership with private equity companies and hedge funds. SWFs can potentially facilitate a more efficient allocation of revenue from commodity surpluses across countries; help recycle current account surpluses; and enhance market liquidity. They also have potentially longer time horizons; and scale to employ more sophisticated risk management strategies.
Unlike in case of pension funds, there are no robust databases, either domestically or internationally, to monitor the financial flows of the SWFs. There are concerns about transparency and accountability of the SWFs, both for the home and the recipient countries. There are also concerns about conflicts of interest, potential insider trading, and reduced regulatory effectiveness.
The IMF has begun work on developing a code of conduct for the SWFs, which will include disclosure, reporting, transparency, and governance. Efforts are underway to also develop such code for hedge funds.
In India, the regulatory regime governing capital inflows does not recognise SWFs, hedge funds and private equity as a distinct category. Their investments are subject to normal prudential provisions.
There is, however, a concern that such an approach may be too benign given the complexity of the nature of transactions and the size of the SWFs. At the least, more robust database on incoming flows needs to be developed by the Reserve Bank of India (RBI).
The case for establishing a SWF in India is mixed. Most analysts feel that while India�s international investment position is not very comfortable, its gross reserves are adequate, even after considering high precautionary needs due to its current account and budget deficits. Thus, unlike most other countries, India�s case for SWF does not rely on export surpluses, conversion of non-renewable assets into a more diversified portfolio of financial and physical assets, or contingent pension reserve.
Instead, in India, a major reason for setting up an SWF is the possible use of forex reserves to finance critical infrastructure needs; and to mitigate quasi-fiscal costs of sterilising reserves. These costs arise as returns on conventionally invested reserves are 3-4%, while domestic bonds need to be financed at 7-8%.
A more aggressive risk posture for 3-5% of forex reserves ($9-15 billion) could help mitigate the extent of quasi-fiscal costs, albeit at a higher risk.
Even if India does establish such an SWF, its size will be among the smallest globally.
The largest SWF in the World is Abu Dhabi Investment Authority, with assets exceeding $1 trillion.
Russia has recently announced its intention to use its excess revenue from oil through SWFs to increase its strategic leverage.
Establishment of an SWF will enable India to be on a learning curve in regards the complexities of establishing and operating such a fund. This, in turn, could assist in devising measures to better monitor the operations of foreign SWFs in India. It will also give India a standing in participating in international discussions concerning the governance code for SWFs. Also, as India�s pension assets (currently about 15% of GDP) continue to grow, some international risk diversification would become essential. The SWF experience could then prove useful.
The challenges in setting up a SWF in India include high initial setup costs, including specialised staffing, sustaining a transparent and accountable governance structure and managing the political economy. India�s democratic checks and balances will impose constraints on SWFs, which are usually not found in the state-capitalist economies most of the SWFs are located in.
The SWF may also distract the government�s urgent need to address more critical public policy issues concerning trade imbalances, fiscal consolidation, infrastructure and human resource development needs.
By some measures, India already has a SWF called the India Infrastructure Finance Company (IIFC). The government-owned firm has set up a subsidiary in London, and has borrowed $250 million from RBI in foreign currency by issuing it 10-year government-guaranteed bonds at Libor.
IIFC is mandated to lend to Indian companies to import capital goods for infrastructure projects in India, or to co-finance external commercial borrowings (ECBs) of Indian firms in select areas. But, while this does address the concern that using reserves domestically could create adverse liquidity and inflationary impact, this may adversely impact the domestic capital goods sector, and government guarantees may create severe moral hazard problem.
In a speech in Washington DC this month, RBI governor Dr Y Venugopal Reddy outlined the broad contours of a more traditional SWF, which would invest a part of India�s excess reserves in the global markets. Reddy suggested creation of a separate entity or company, which will purchase foreign currencies from the RBI, and in turn invest in higher risk-higher return assets internationally. He also suggested that the SWF be managed by an independent sovereign entity, and not by RBI.
More India business stories
It appears there is consensus emerging in official circles for setting up a traditional SWF. On balance, there is a case for such a move, but caution is needed in implementing it to ensure that appropriate safeguards are provided. Mukul Asher / DNA MONEY
29.4.08
Ithmar Capital enters into strategic investment partnership with Panceltica
Ithmar Capital enters into strategic investment partnership with Panceltica
Posted: 29-04-2008 , 10:40 GMT
Ithmar CapitalIthmar Capital, a leading private equity firm in the GCC, has partnered with Qatar-based Panceltica, principal provider of fast track housing across the Middle East, to support Panceltica’s aggressive growth and expansion strategy throughout the region.
Panceltica recently became the largest company to float on London’s Alternative Investment Market (AIM) this year. Ithmar Fund II was brought in as a strategic shareholder at pre-IPO phase with a 14pc stake as well as a board seat.
“We are uniquely placed to provide Panceltica with innovative investment and business development strategies to tap into the phenomenal growth potential of the region,” said Faisal Belhoul, Founder & Managing Partner of Ithmar Capital.
“Our highly-focused private equity specialist team is not only experienced in myriad local expansion opportunities, but is also able to leverage our global network and international expertise to deliver exceptional results for our clients,” he added.
Panceltica’s Group Turnover in 2007 was US $123.9 million and it had a market capitalisation on IPO of US $467.4 million, specialising in building onsite steel structures for housing and mixed-use projects in the Middle East.
The company hopes to benefit from the ongoing building boom in the Gulf and has plans to expand rapidly throughout the region. It is rolling out a new technology that enables it to build light-weight steel-framed structures up to eight times more quickly than traditional construction techniques.
“It’s our aim to position Panceltica as the region’s leading supplier of fast-track housing. We firmly believe our alliance with Ithmar Capital, with its true knowledge of the GCC investment landscape, will provide us with the necessary platform to achieve our ambitious regional expansion plans,” said Paul Fraser, Panceltica’s CEO.
Ithmar believes the UAE’s economic prospects remain robust with no apparent let up in the current boom. The sector remains upbeat, with analyst reports estimating the value of projects planned and underway in the GCC at US $1.1 trillion. Half of these are infrastructure development initiatives and of these, more than two thirds are still in the design and planning phase, a tenth are out to bid and 15% are currently under construction.
“The UAE is undoubtedly the largest of the GCC’s construction sector with the highest growth. The Emirates currently has US $300 billion worth of projects under way. Key drivers of the UAE’s real estate sector are its increasing population, strong GDP growth, high liquidity and pro-active government policies,” added Khaldoun Haj Hasan, Co-Founder and Managing Partner of Ithmar Capital.
“The Middle East’s construction industry is ripe for private equity involvement to assist partners in growing and realising their maximum value while providing an excellent vehicle for investors,” he concluded.
Posted: 29-04-2008 , 10:40 GMT
Ithmar CapitalIthmar Capital, a leading private equity firm in the GCC, has partnered with Qatar-based Panceltica, principal provider of fast track housing across the Middle East, to support Panceltica’s aggressive growth and expansion strategy throughout the region.
Panceltica recently became the largest company to float on London’s Alternative Investment Market (AIM) this year. Ithmar Fund II was brought in as a strategic shareholder at pre-IPO phase with a 14pc stake as well as a board seat.
“We are uniquely placed to provide Panceltica with innovative investment and business development strategies to tap into the phenomenal growth potential of the region,” said Faisal Belhoul, Founder & Managing Partner of Ithmar Capital.
“Our highly-focused private equity specialist team is not only experienced in myriad local expansion opportunities, but is also able to leverage our global network and international expertise to deliver exceptional results for our clients,” he added.
Panceltica’s Group Turnover in 2007 was US $123.9 million and it had a market capitalisation on IPO of US $467.4 million, specialising in building onsite steel structures for housing and mixed-use projects in the Middle East.
The company hopes to benefit from the ongoing building boom in the Gulf and has plans to expand rapidly throughout the region. It is rolling out a new technology that enables it to build light-weight steel-framed structures up to eight times more quickly than traditional construction techniques.
“It’s our aim to position Panceltica as the region’s leading supplier of fast-track housing. We firmly believe our alliance with Ithmar Capital, with its true knowledge of the GCC investment landscape, will provide us with the necessary platform to achieve our ambitious regional expansion plans,” said Paul Fraser, Panceltica’s CEO.
Ithmar believes the UAE’s economic prospects remain robust with no apparent let up in the current boom. The sector remains upbeat, with analyst reports estimating the value of projects planned and underway in the GCC at US $1.1 trillion. Half of these are infrastructure development initiatives and of these, more than two thirds are still in the design and planning phase, a tenth are out to bid and 15% are currently under construction.
“The UAE is undoubtedly the largest of the GCC’s construction sector with the highest growth. The Emirates currently has US $300 billion worth of projects under way. Key drivers of the UAE’s real estate sector are its increasing population, strong GDP growth, high liquidity and pro-active government policies,” added Khaldoun Haj Hasan, Co-Founder and Managing Partner of Ithmar Capital.
“The Middle East’s construction industry is ripe for private equity involvement to assist partners in growing and realising their maximum value while providing an excellent vehicle for investors,” he concluded.
5.3.08
Private equity deals set for big boom in and around Mideast
Private equity deals set for big boom in and around Mideast
http://archive.gulfnews.com/articles/08/03/04/10194638.html
03/04/2008 07:19 PM | By Babu Das Augustine, Banking Editor
Dubai: The Middle East North Africa and South Asia (MENASA) region is set for a big boom in private equity deals this year and the next few years, according to leaders of private equity industry in the region.
Speaking ahead of the Fourth Private Equity International Middle East Conference to be held in Dubai on Tuesday and Wednesday industry representatives said the region is fast emerging as a hot target for private equity investors from across the world as the regional private equity sector is becoming a part of the mature emerging market private equity industry.
Dubai International Capital, the private equity arm of Dubai Holding has about 10 per cent of its total assets under its management invested in the region. The company expects this share to increase substantially during the next few years.
New horizon
"The regional governments are keen to privatise, private family businesses are becoming more open to private equity participation and international private equity firms and professionals are seeing the region as an important investment destination. We see huge opportunities in the horizon and are ready to utilise them," said Sameer Al Ansari, executive chairman and chief executive of Dubai International Capital.
International speakers attending the conference said Middle East is fast maturing as a fundamentally strong market.
"Last year private equity firms across emerging markets raised $59 billion. Out of this about 10 per cent was from the Middle East. Within the region Gulf States are becoming a very important source of capital," said Sarah Alexander, founding president of the Emerging Market Private Equity Association.
The huge infrastructure developments underway in the region combined with the transition of family owned private enterprises are expected be a catalyst in the growth of private equity in the region, according to Arif Naqvi, Vice Chairman and Group Chief Executive Officer, Abraaj Capital.
"We see the boom for at least 10 years ahead. Even if the oil prices are to tumble by 50 per cent from the current level, the region will be still left with trillions of dollars in surplus to support the infrastructure development and the economic growth," said Naqvi.
The economic boom in the region, according to private equity industry players has increased the acceptability of the industry in the region.
"There is a huge funding gap in the region. While the banks have been typically into name lending and asset lending, the region lacks equity funding in the form of Angel funds, venture capital or private equity. What we see is just the beginning of a big trend," said Ansari.
Sovereign funds
While the big international private equity players have just started to make acquisitions here, experts said sovereign wealth funds would follow these funds into the region.
"Sovereign funds which have emerged big source of capital will soon turn their focus on assets closer home," said Howard S. Marks, chairman of Oaktree Capital.
Keeping up with the growth, the regional private equity industry witnessed substantial growth in fund raising activity.
According to latest figures from Abraaj Capital, PE firms raised a cumulative $22.8 billion from 2002 to 2007 with six firms accounting for 50 per cent of the fund raising activity in the region.
Leading private equity players in the region said yesterday that the international credit crunch would not affect the regional firms or deals.
"It is a fact that firms will have to accept some amount of widening credit spreads. However, availability of funds will be abundant because of the bulging regional liquidity and funds from the developed world looking for emerging opportunities," said Naqvi.
Acquisition: Abraaj buys 40% of Bosicor
Abraaj Capital, a leading regional private equity firm focused on Middle East, North Africa and South Asia (MENASA) announced yesterday that it has acquired a 40 per cent stake in the holding company of Bosicor Group (Bosicor), one of Pakistan's leading integrated oil companies.
The private equity deal provides Abraaj with 40 per cent shareholding in Bosicor's two group companies: Bosicor Oil Pakistan Limited and Bosicor Chemical Pakistan Limited. Abraaj will also acquire a minority stake in Bosicor Pakistan Limited (BPL.
The group's subsidiary, BPL, currently operates the fifth-largest oil refinery in Pakistan, with a rated capacity of 30,000 barrels per day (bpd) and a market share of 12 per cent. Established in 1995, BPL is listed on all three stock exchanges in the country. The investment in Bosicor was made through Abraaj Capital's $2 billion Infrastructure and Growth Capital Fund (IGCF).
The investment will fund the establishment of a petrochemical plant and a refining unit that will provide the Bosicor Group with an initial aggregate refining capacity of 145,000 bpd and create an integrated platform that operates across the full value chain in the oil sector.
"This investment in the future of Pakistan - one of many made by Abraaj Capital and the first by IGCF - will greatly enhance the country's ability to fuel its ongoing economic expansion," said Arif Naqvi, Vice Chairman and Group Chief Executive Officer, Abraaj Capital.
http://archive.gulfnews.com/articles/08/03/04/10194638.html
03/04/2008 07:19 PM | By Babu Das Augustine, Banking Editor
Dubai: The Middle East North Africa and South Asia (MENASA) region is set for a big boom in private equity deals this year and the next few years, according to leaders of private equity industry in the region.
Speaking ahead of the Fourth Private Equity International Middle East Conference to be held in Dubai on Tuesday and Wednesday industry representatives said the region is fast emerging as a hot target for private equity investors from across the world as the regional private equity sector is becoming a part of the mature emerging market private equity industry.
Dubai International Capital, the private equity arm of Dubai Holding has about 10 per cent of its total assets under its management invested in the region. The company expects this share to increase substantially during the next few years.
New horizon
"The regional governments are keen to privatise, private family businesses are becoming more open to private equity participation and international private equity firms and professionals are seeing the region as an important investment destination. We see huge opportunities in the horizon and are ready to utilise them," said Sameer Al Ansari, executive chairman and chief executive of Dubai International Capital.
International speakers attending the conference said Middle East is fast maturing as a fundamentally strong market.
"Last year private equity firms across emerging markets raised $59 billion. Out of this about 10 per cent was from the Middle East. Within the region Gulf States are becoming a very important source of capital," said Sarah Alexander, founding president of the Emerging Market Private Equity Association.
The huge infrastructure developments underway in the region combined with the transition of family owned private enterprises are expected be a catalyst in the growth of private equity in the region, according to Arif Naqvi, Vice Chairman and Group Chief Executive Officer, Abraaj Capital.
"We see the boom for at least 10 years ahead. Even if the oil prices are to tumble by 50 per cent from the current level, the region will be still left with trillions of dollars in surplus to support the infrastructure development and the economic growth," said Naqvi.
The economic boom in the region, according to private equity industry players has increased the acceptability of the industry in the region.
"There is a huge funding gap in the region. While the banks have been typically into name lending and asset lending, the region lacks equity funding in the form of Angel funds, venture capital or private equity. What we see is just the beginning of a big trend," said Ansari.
Sovereign funds
While the big international private equity players have just started to make acquisitions here, experts said sovereign wealth funds would follow these funds into the region.
"Sovereign funds which have emerged big source of capital will soon turn their focus on assets closer home," said Howard S. Marks, chairman of Oaktree Capital.
Keeping up with the growth, the regional private equity industry witnessed substantial growth in fund raising activity.
According to latest figures from Abraaj Capital, PE firms raised a cumulative $22.8 billion from 2002 to 2007 with six firms accounting for 50 per cent of the fund raising activity in the region.
Leading private equity players in the region said yesterday that the international credit crunch would not affect the regional firms or deals.
"It is a fact that firms will have to accept some amount of widening credit spreads. However, availability of funds will be abundant because of the bulging regional liquidity and funds from the developed world looking for emerging opportunities," said Naqvi.
Acquisition: Abraaj buys 40% of Bosicor
Abraaj Capital, a leading regional private equity firm focused on Middle East, North Africa and South Asia (MENASA) announced yesterday that it has acquired a 40 per cent stake in the holding company of Bosicor Group (Bosicor), one of Pakistan's leading integrated oil companies.
The private equity deal provides Abraaj with 40 per cent shareholding in Bosicor's two group companies: Bosicor Oil Pakistan Limited and Bosicor Chemical Pakistan Limited. Abraaj will also acquire a minority stake in Bosicor Pakistan Limited (BPL.
The group's subsidiary, BPL, currently operates the fifth-largest oil refinery in Pakistan, with a rated capacity of 30,000 barrels per day (bpd) and a market share of 12 per cent. Established in 1995, BPL is listed on all three stock exchanges in the country. The investment in Bosicor was made through Abraaj Capital's $2 billion Infrastructure and Growth Capital Fund (IGCF).
The investment will fund the establishment of a petrochemical plant and a refining unit that will provide the Bosicor Group with an initial aggregate refining capacity of 145,000 bpd and create an integrated platform that operates across the full value chain in the oil sector.
"This investment in the future of Pakistan - one of many made by Abraaj Capital and the first by IGCF - will greatly enhance the country's ability to fuel its ongoing economic expansion," said Arif Naqvi, Vice Chairman and Group Chief Executive Officer, Abraaj Capital.
3.3.08
Unicorn Global Private Equity buys into Bahraini firm
Unicorn buys into Bahraini firm
Manama: Tue, 04 Mar 2008
Unicorn Investment Bank said its unit Unicorn Global Private Equity Fund I
has acquired a 55 per cent equity stake in Manama-based Gulf Strategic Partners (GSP), which operates throughout the GCC and India.
The investment in GSP is the fifth one by Unicorn’s Private Equity Fund, an official said.
The company's previous investments include Orimix Concrete Products, a leading ready-mix concrete producer based in Fujairah, UAE; Al Assriya Industries Holding Company in Kuwait and US-based companies Precision Time in Utah and Ellington Leather in Oregon.
Established in 2004, GSP specialises in pre-operational cleaning services for petrochemical, power, oil and gas and process facilities.
GSP has partnerships with international companies to provide high-technology, world-class solutions to industry in the GCC.
GSP’s services include chemical cleaning, steam blows, hydromilling, high velocity flushing and decontamination cleaning.
GSP’s unique technology solutions allow cleaning of new and existing facilities much faster and more effectively than conventional technology. The demand for such services is growing rapidly as new plants are commissioned across the region.
Commenting on the acquisition, Aamir Khan, managing director of Global Private Equity at Unicorn, said: “GSP has developed outstanding technology solutions to serve the largest industries in the region – oil, gas and power. There is growing demand for their services and they have already developed relationships with some of the largest players in the region, which is remarkable for such a young company."
"We look forward to working with GSP’s highly experienced management team to support the company’s next phase of growth throughout the region," he noted.
Wayne Giles, managing director of GSP, said, "Our partnership with Unicorn will provide us with the capital we need to grow our business and take it to the next level. We are witnessing tremendous demand for our services and are excited at the opportunity of working with Unicorn’s team to explore regional expansion opportunities," he added.-TradeArabia News Service
Manama: Tue, 04 Mar 2008
Unicorn Investment Bank said its unit Unicorn Global Private Equity Fund I
has acquired a 55 per cent equity stake in Manama-based Gulf Strategic Partners (GSP), which operates throughout the GCC and India.
The investment in GSP is the fifth one by Unicorn’s Private Equity Fund, an official said.
The company's previous investments include Orimix Concrete Products, a leading ready-mix concrete producer based in Fujairah, UAE; Al Assriya Industries Holding Company in Kuwait and US-based companies Precision Time in Utah and Ellington Leather in Oregon.
Established in 2004, GSP specialises in pre-operational cleaning services for petrochemical, power, oil and gas and process facilities.
GSP has partnerships with international companies to provide high-technology, world-class solutions to industry in the GCC.
GSP’s services include chemical cleaning, steam blows, hydromilling, high velocity flushing and decontamination cleaning.
GSP’s unique technology solutions allow cleaning of new and existing facilities much faster and more effectively than conventional technology. The demand for such services is growing rapidly as new plants are commissioned across the region.
Commenting on the acquisition, Aamir Khan, managing director of Global Private Equity at Unicorn, said: “GSP has developed outstanding technology solutions to serve the largest industries in the region – oil, gas and power. There is growing demand for their services and they have already developed relationships with some of the largest players in the region, which is remarkable for such a young company."
"We look forward to working with GSP’s highly experienced management team to support the company’s next phase of growth throughout the region," he noted.
Wayne Giles, managing director of GSP, said, "Our partnership with Unicorn will provide us with the capital we need to grow our business and take it to the next level. We are witnessing tremendous demand for our services and are excited at the opportunity of working with Unicorn’s team to explore regional expansion opportunities," he added.-TradeArabia News Service
2.3.08
Middle East IPO firms appreciate by 201% in 2007
Middle East IPO firms appreciate by 201% in 2007
INTERNATIONAL. GCC stock markets are poised for a glut of over 80 Initial Public Offerings (IPOs) which could be worth in excess of US$ 10.5 billion over the next three years. Significantly, IPOs measured in 2007, appreciated on average by 201%, even with over-subscription per IPO falling to a more realistic 6.3 times, according to industry reports.
“To realise an average return of 201% despite regional market depreciation of 9% last year, is an extraordinary achievement. Investors, both regional and international will undoubtedly be drawn to the upcoming IPOs over the next three years,” commented Deep Marwaha, Senior Conference Manager of the 3rd Middle East IPO Summit.
Abu Dhabi-based Gulf Capital identified 83 maiden offers in the GCC, for which, managers have been assigned for 42 and another 41 have announced their intention to tap the equity market. The total number of IPOs in the GCC during the 2007-2010 period is expected to exceed 116, including 33 in 2007 and 83 offers in the coming years.
Morgan Stanley estimates a total of 110 IPOs in Saudi Arabia alone by the end of next year. The bank's Saudi unit has mandates to manage seven IPOs this year, including one by Saudi Basic Chemical Industries (SABIC) that may raise US$80 million.
In the UAE, the National Bank of Abu Dhabi (NBAD) has already announced it expects to manage at least eight IPOs this year, with three aiming to raise at least US$1 billion by the end of June. NBAD managed three IPOs last year and one so far this year.
The total raised by IPOs increased by 40% year-on-year to US$10.5 billion during 2007 with the UAE witnessing US$5.1 billion, followed by Saudi Arabia (US$4.81 billion), Qatar (US$389 million), Oman (US$156 million) and Bahrain (US$69 million).
One reason for such a market-bucking performance is widely put down to the pricing strategy of public offerings in the GCC. “Many IPOs last year were sold at a discount to book value and to earnings and appreciated quickly once on the market,” said Marwaha.
The nerves of investors have also been soothed by the sound regional market fundamentals and high levels of liquidity, not to mention GDP growth and record budget surpluses. “The GCC oil revenues are currently US$ 1.2 billion per day. With tensions over Iran and political posturing by Venezuela, any notion of softening prices were dispelled recently when oil prices shot back up towards US$ 100 per barrel,” added Marwaha.
In addition the region’s non-oil sectors are now beginning to make sizeable contributions towards GDP growth. "Most GCC governments have outlined more than US$1 trillion in capital expenditure for oil and non-oil sectors in the next five-to-six years, which will have a multiplier effect for the private sector which will require more funds to be raised in the stock markets," noted Marwaha.
Middle East’s IPO Summit which takes place on 16-19 March 2008 at the Abu Dhabi Intercontinental Hotel, will host investment experts, regulators and market leaders who will examine regulatory issues as well as new products and issues impacting the investment environment and includes a Middle East Investment Day with an Executive Masterclass by contrarian investment guru, Hong Kong-based Dr Marc Faber.
The Middle East IPO Summit Chairman is Mamdoh Al Rouhani, Managing Director of MS&L, Saudi Arabia. "With large IPOs in the pipeline across many Middle Eastern markets, the need for professionals to share information and network with each other is more important than ever," he said.
Among the market movers and shakers taking part in the Summit will be speakers from the Global Investment House, Deutsche Bank, Ithmar Capital, Abraaj Capital, Algebra Capital, AB Capital, The National Investor, NBK Capital, Jeffries, KPMG, Emirates Financial Services, Rasmala Investments, Calyon, UBS, Alpen Capital, Samba Financial Group and Bank of New York Mellon.
For more information on the 3rd Middle East IPO Summit visit www.iposummit.com
Author: Moussa Ahmad
Source: BI-ME
Published: 02 March 2008
INTERNATIONAL. GCC stock markets are poised for a glut of over 80 Initial Public Offerings (IPOs) which could be worth in excess of US$ 10.5 billion over the next three years. Significantly, IPOs measured in 2007, appreciated on average by 201%, even with over-subscription per IPO falling to a more realistic 6.3 times, according to industry reports.
“To realise an average return of 201% despite regional market depreciation of 9% last year, is an extraordinary achievement. Investors, both regional and international will undoubtedly be drawn to the upcoming IPOs over the next three years,” commented Deep Marwaha, Senior Conference Manager of the 3rd Middle East IPO Summit.
Abu Dhabi-based Gulf Capital identified 83 maiden offers in the GCC, for which, managers have been assigned for 42 and another 41 have announced their intention to tap the equity market. The total number of IPOs in the GCC during the 2007-2010 period is expected to exceed 116, including 33 in 2007 and 83 offers in the coming years.
Morgan Stanley estimates a total of 110 IPOs in Saudi Arabia alone by the end of next year. The bank's Saudi unit has mandates to manage seven IPOs this year, including one by Saudi Basic Chemical Industries (SABIC) that may raise US$80 million.
In the UAE, the National Bank of Abu Dhabi (NBAD) has already announced it expects to manage at least eight IPOs this year, with three aiming to raise at least US$1 billion by the end of June. NBAD managed three IPOs last year and one so far this year.
The total raised by IPOs increased by 40% year-on-year to US$10.5 billion during 2007 with the UAE witnessing US$5.1 billion, followed by Saudi Arabia (US$4.81 billion), Qatar (US$389 million), Oman (US$156 million) and Bahrain (US$69 million).
One reason for such a market-bucking performance is widely put down to the pricing strategy of public offerings in the GCC. “Many IPOs last year were sold at a discount to book value and to earnings and appreciated quickly once on the market,” said Marwaha.
The nerves of investors have also been soothed by the sound regional market fundamentals and high levels of liquidity, not to mention GDP growth and record budget surpluses. “The GCC oil revenues are currently US$ 1.2 billion per day. With tensions over Iran and political posturing by Venezuela, any notion of softening prices were dispelled recently when oil prices shot back up towards US$ 100 per barrel,” added Marwaha.
In addition the region’s non-oil sectors are now beginning to make sizeable contributions towards GDP growth. "Most GCC governments have outlined more than US$1 trillion in capital expenditure for oil and non-oil sectors in the next five-to-six years, which will have a multiplier effect for the private sector which will require more funds to be raised in the stock markets," noted Marwaha.
Middle East’s IPO Summit which takes place on 16-19 March 2008 at the Abu Dhabi Intercontinental Hotel, will host investment experts, regulators and market leaders who will examine regulatory issues as well as new products and issues impacting the investment environment and includes a Middle East Investment Day with an Executive Masterclass by contrarian investment guru, Hong Kong-based Dr Marc Faber.
The Middle East IPO Summit Chairman is Mamdoh Al Rouhani, Managing Director of MS&L, Saudi Arabia. "With large IPOs in the pipeline across many Middle Eastern markets, the need for professionals to share information and network with each other is more important than ever," he said.
Among the market movers and shakers taking part in the Summit will be speakers from the Global Investment House, Deutsche Bank, Ithmar Capital, Abraaj Capital, Algebra Capital, AB Capital, The National Investor, NBK Capital, Jeffries, KPMG, Emirates Financial Services, Rasmala Investments, Calyon, UBS, Alpen Capital, Samba Financial Group and Bank of New York Mellon.
For more information on the 3rd Middle East IPO Summit visit www.iposummit.com
Author: Moussa Ahmad
Source: BI-ME
Published: 02 March 2008
18.2.08
GCC has the Best Global Investment Climate
The six Gulf Co-operation Council states are witnessing the best investment climate and marking the highest growth in a decade. "This is substantiated by huge market capitalisation which has taken place and a likely entry of new initial public offerings (IPOs)", Hassan Salim Al-Ammari, CEO, Al-Tawfeek Co. for Investment Funds, said on June 15. The occasion was the launch of Shariah-compliant GCC Equity Fund, a Bahrain Monetary Agency-approved open-ended fund with a target capital of $100m.
The company has decided to invest the fund in listed and unlisted Shariah-compliant equity and equity-related securities in the GCC countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Ammari said: "We'll invest 70% of it in listed and the remaining 30% in unlisted Shariah-compliant equity and equity-related securities in the region".
The new fund offers an opportunity to invest in the GCC equity markets. It reflects Al-Tawfeek's confidence on the outlook of the GCC economies. It will broaden Al-Tawfeek's range of investment funds and provide an opportunity to invest in an exciting era of the GCC, dominated by ongoing economic reform and a period of extraordinary growth reminiscent of the oil boom of the 1970s.
Al-Tawfeek company is a member of the Saudi Dallah AlBaraka Group, a leading provider of Shariah-compliant investment funds in the region. Dhafer Salih Al-Qahtani, general manager of the company, gave a presentation on the fund and its focus on the GCC. The fund offers bimonthly liquidity after three months with a minimum subscription of $15,000 for individuals and $100,000 for institutions.
The fund was launched at a time when the region was at the centre of world attention. In 2004, the GCC posted its highest growth in a decade. The region's corporate earnings had a growth of more than 50% compared to 40% in 2003. The combined net oil exports of the GCC exceeded $180 bn in 2004, up $35 bn from 2003.
With over $765 bn in market capitalisation and a number of new entrants (new IPOs) expected from the Saudi-based National Commercial Bank and Almarai, a number of new investment opportunities are bund to follow. With plans underway for a new capital market law in Saudi Arabia and Qatar, the introduction of Bahrain's Financial Harbour and the launch of the Dubai International Financial Centre, the region aims to position itself among international financial markets, creating further depth and diversity.
Dubai-based SHUAA Capital has been appointed as the investment manager of the fund. "SHUAA Capital has a 25-year history and a strong track record of investing in the GCC equity markets", its Managing Director, Asset Management Group, Haissam Arabi, said. SHUAA Capital has won the 2004 Euromoney award for excellence for being the "best equities house in the UAE". In addition, SHUAA Capital has successfully completed a variety of transactions for a number of institutions in the UAE.
Bahrain-based Gulf Clearing Co. has been appointed as custodian and administrator of the fund. The firm is a big fund custody and administration service provider with assets under custody exceeding $5 bn, according to its Vice President Ali Al-Laith.
A Shariah board will advise on the fund's Shariah-compliance. The board includes Dr. Abdul Sattar Abu Ghuddah, Abdullah Ibn Suleiman Al-Manai, Dr. Abdul Latif Al-Mahmoud, Dr. Ezzedine Bin Mohammed Khouja, and Dr. Ahmad Mohieldin Ahmad.
Al-Tawfeek is a specialised financial firm incorporated in 1992 in the Cayman Islands. It is one of the financial arms of Dallah AlBaraka Group. The group is one of the largest conglomerates in Saudi Arabia with total assets exceeding $12 bn, and with companies operating from more than 40 countries. Since its inception, Al-Tawfeek has launched a number of Shariah-compliant investment funds covering a variety of asset classes including equities, corporate debt, real estate, private equity, venture capital, leasing and reconstruction. It has yielded high returns for its investors in a number of Shariah-compliant investment funds.
The company has decided to invest the fund in listed and unlisted Shariah-compliant equity and equity-related securities in the GCC countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Ammari said: "We'll invest 70% of it in listed and the remaining 30% in unlisted Shariah-compliant equity and equity-related securities in the region".
The new fund offers an opportunity to invest in the GCC equity markets. It reflects Al-Tawfeek's confidence on the outlook of the GCC economies. It will broaden Al-Tawfeek's range of investment funds and provide an opportunity to invest in an exciting era of the GCC, dominated by ongoing economic reform and a period of extraordinary growth reminiscent of the oil boom of the 1970s.
Al-Tawfeek company is a member of the Saudi Dallah AlBaraka Group, a leading provider of Shariah-compliant investment funds in the region. Dhafer Salih Al-Qahtani, general manager of the company, gave a presentation on the fund and its focus on the GCC. The fund offers bimonthly liquidity after three months with a minimum subscription of $15,000 for individuals and $100,000 for institutions.
The fund was launched at a time when the region was at the centre of world attention. In 2004, the GCC posted its highest growth in a decade. The region's corporate earnings had a growth of more than 50% compared to 40% in 2003. The combined net oil exports of the GCC exceeded $180 bn in 2004, up $35 bn from 2003.
With over $765 bn in market capitalisation and a number of new entrants (new IPOs) expected from the Saudi-based National Commercial Bank and Almarai, a number of new investment opportunities are bund to follow. With plans underway for a new capital market law in Saudi Arabia and Qatar, the introduction of Bahrain's Financial Harbour and the launch of the Dubai International Financial Centre, the region aims to position itself among international financial markets, creating further depth and diversity.
Dubai-based SHUAA Capital has been appointed as the investment manager of the fund. "SHUAA Capital has a 25-year history and a strong track record of investing in the GCC equity markets", its Managing Director, Asset Management Group, Haissam Arabi, said. SHUAA Capital has won the 2004 Euromoney award for excellence for being the "best equities house in the UAE". In addition, SHUAA Capital has successfully completed a variety of transactions for a number of institutions in the UAE.
Bahrain-based Gulf Clearing Co. has been appointed as custodian and administrator of the fund. The firm is a big fund custody and administration service provider with assets under custody exceeding $5 bn, according to its Vice President Ali Al-Laith.
A Shariah board will advise on the fund's Shariah-compliance. The board includes Dr. Abdul Sattar Abu Ghuddah, Abdullah Ibn Suleiman Al-Manai, Dr. Abdul Latif Al-Mahmoud, Dr. Ezzedine Bin Mohammed Khouja, and Dr. Ahmad Mohieldin Ahmad.
Al-Tawfeek is a specialised financial firm incorporated in 1992 in the Cayman Islands. It is one of the financial arms of Dallah AlBaraka Group. The group is one of the largest conglomerates in Saudi Arabia with total assets exceeding $12 bn, and with companies operating from more than 40 countries. Since its inception, Al-Tawfeek has launched a number of Shariah-compliant investment funds covering a variety of asset classes including equities, corporate debt, real estate, private equity, venture capital, leasing and reconstruction. It has yielded high returns for its investors in a number of Shariah-compliant investment funds.
17.2.08
NBAD to launch GCC equity fund; bullish on Gulf and Mena markets Monday, February 11, 2008
NBAD to launch GCC equity fund; bullish on Gulf and Mena markets
Monday, February 11, 2008
ABU DHABI — The National bank of Abu Dhabi (NBAD) which is bullish on GCC and Mena markets will be launching a GCC equity fund in the first quarter of 2008.
"We are very optimistic on the GCC and Mena region due to accelerating liberalisation of markets and economies, more privatisation, more regional integration, sustainable and strong organic domestic growth. Our newly formed internationally credentialed team will be launching a very exciting GCC equity fund in the first quarter of 2008," revealed Nazem Al Kudsi Chief Investment Officer, Asset Management Group, NBAD.
He expects 2008 and 2009 will be positive years as well but cautioned investors to be patient. "The UAE, GCC and Mena markets are relatively new and are emerging. Hence, just like any growing market there will be huge growth spurts, followed by slowdowns and consolidations. It will not be a straight line up," he said.
But, for the patient, non-emotional investors who can ignore the day-to-day coughs and sneezes of the market the rewards should be plentiful. "We think the outlook for IPOs in 2008 and 2009 is very good, the broad economy is still strong and there is still an appetite from foreign investors for an attractive investment in the region," Al Kudsi concluded.
National Bank of Abu Dhabi (NBAD)'s local funds swept Gold, Silver and Bronze medals as they outperformed the market and other local funds in 2007, according to a study by Zawya-Dow Jones.
"NBAD research and portfolio management team put together outstanding performance numbers in 2007 as NBAD Growth fund, the top performing fund in the UAE, was up almost 63 per cent on a total return basis and beating the market by nearly 18 per cent or 1,800 basis points," he said.
NBAD UAE Trading Fund, the second top performing fund in the UAE, was up 60.31 per cent while NBAD UAE Distribution Fund, the third top performer in 2007, was up 59.23 per cent. NBAD UAE Growth, Trading, and Distribution Funds were the first three in the top 10 list of all funds in the UAE based on their performance in 2007 while NBAD Islamic Fund also featured in the top 10 list. NBAD UAE Growth Fund features in the top 10 list of all funds in Mena as the 6th best fund in the entire region last year.
Monday, February 11, 2008
ABU DHABI — The National bank of Abu Dhabi (NBAD) which is bullish on GCC and Mena markets will be launching a GCC equity fund in the first quarter of 2008.
"We are very optimistic on the GCC and Mena region due to accelerating liberalisation of markets and economies, more privatisation, more regional integration, sustainable and strong organic domestic growth. Our newly formed internationally credentialed team will be launching a very exciting GCC equity fund in the first quarter of 2008," revealed Nazem Al Kudsi Chief Investment Officer, Asset Management Group, NBAD.
He expects 2008 and 2009 will be positive years as well but cautioned investors to be patient. "The UAE, GCC and Mena markets are relatively new and are emerging. Hence, just like any growing market there will be huge growth spurts, followed by slowdowns and consolidations. It will not be a straight line up," he said.
But, for the patient, non-emotional investors who can ignore the day-to-day coughs and sneezes of the market the rewards should be plentiful. "We think the outlook for IPOs in 2008 and 2009 is very good, the broad economy is still strong and there is still an appetite from foreign investors for an attractive investment in the region," Al Kudsi concluded.
National Bank of Abu Dhabi (NBAD)'s local funds swept Gold, Silver and Bronze medals as they outperformed the market and other local funds in 2007, according to a study by Zawya-Dow Jones.
"NBAD research and portfolio management team put together outstanding performance numbers in 2007 as NBAD Growth fund, the top performing fund in the UAE, was up almost 63 per cent on a total return basis and beating the market by nearly 18 per cent or 1,800 basis points," he said.
NBAD UAE Trading Fund, the second top performing fund in the UAE, was up 60.31 per cent while NBAD UAE Distribution Fund, the third top performer in 2007, was up 59.23 per cent. NBAD UAE Growth, Trading, and Distribution Funds were the first three in the top 10 list of all funds in the UAE based on their performance in 2007 while NBAD Islamic Fund also featured in the top 10 list. NBAD UAE Growth Fund features in the top 10 list of all funds in Mena as the 6th best fund in the entire region last year.
Daman: IPO flow will be more robust for UAE and GCC
The Dubai International Financial Exchange (DIFX) will list its first United States-based company this week, paving the way for a series of similar public offerings set to come on board from the North American markets.
According to Dubai’s Daman Investments, lead manager of the initial public offering of Buffalo-based Nanodynamics, the move will go some way to cement the emirate’s place as a global exchange.
Shehab Gargash founded Daman (now Daman Investments) in 2001 and serves as Chief Executive Officer of the Dubai-based private joint stock company.
His company is capitalised at Dh200 million and is a privately held, non-bank financial services group focused on developing capital market opportunities within the UAE and the Middle East.
During his 12 years in the UAE banking industry, Gargash’s previous roles have been in marketing, distribution, trade finance and investment banking, first with Citibank, from 1989 to 1993 and later with the Emirates Bank Group (1993 to 2001).
With an MBA from the George Washington University in the United States, Gargash (pictured above) is also a founding board member of Young Arab Leaders and the Arabian Real Estate Investment Trust, and was appointed to the Dubai Chamber board of directors last March. He is a frequent public speaker and is well known for his popular daily column – now in its 10th year – in the Arabic newspaper Al Ittihad.
Gargash discussed with Emirates Business the regulatory hurdles facing regional stock markets, concerns over fair equity research and valuations, and monitoring front-running.
He gave his forecasts for the regional stock markets this year, and talked about the challenges that could slow down the rise in foreign investment in the UAE.
Gargash also warned the region’s asset managers to have “a sharper knowledge” of events happening beyond their borders, as the correlation gets closer between local and global markets.
What does the listing of the first US firm on the DIFX, announced last week, mean for the exchange?
I think it’s very significant because it’s exactly the reason an exchange such as the DIFX was set up. It was established to attract quality listings from around the world and to create a marketplace for people to be able to trade those securities.
Having a US company come in on the bourse is a fulfillment of that promise. I think it has put the DIFX on the road to a global-quality exchange.
What is the significance of an alternative energy and clean technology company listing on the DIFX and do you see this sector becoming an industry that will see gains in 2008?
Yes, with increased worries about environmental issues – and about the economic logic behind environmental matters – clean technology is becoming an area of increased importance for corporations.
Nanodynamics is a pioneer at utilising nano technology advances that enable companies to have more potent solutions, which are more cost-effective and very friendly for the environment.
Any other companies you are talking to for the UAE or regional stock markets?
We will give more details later but Nanodynamics is one of a chain of similar IPOs we are working to bring into the DIFX from the US markets.
All of them will be very nice IPO stories – very good management behind good business models. We are very selective in picking those companies we believe will be successful and those that show an ability or potential for continued success.
What do you think are the reasons behind the slowdown of the flow of initial public offerings?
I don’t think initial public offerings have been slow, I think they are a function of demand and we have just exited two years of a negative period in our stock markets. So by definition you are going to have fewer IPOs than usual.
But we have not seen them stop and that’s very important. We had some very important local IPOs over the past year and going forward into this year it looks very promising. So I think the IPO flow will be more robust going forward because the markets have sort of picked up now.
At the DIFX specifically we have seen a very successful IPO with Dubai Ports World. This one [IPO of Nanodynamics] hopefully is running very nicely and indications are good for the first US initial public offering on the DIFX.
And 2008 promises to be a very positive year for in terms of getting more companies on board and more activity through the exchange.
In the first half of 2007, foreign investor buying volume on the Dubai Financial Market tripled and foreign investors accounted for about 30 per cent of the total DFM trading, it was reported. It then retreated. Where do you think this figure will stand for the first half of 2008?
I think foreign institutional investors have discovered the UAE markets, both local markets and regional, such as the DIFX. They have discovered the Gulf is a very promising emerging market. The risk-reward proposition makes a lot of sense to them. So I expect to see more participation from them in local and daily activity here.
That will increase the volatility from one side but it will certainly increase the amount of traffic and volume we will see through our local exchanges on a daily basis.
What are other possible hurdles impeding the rise in foreign investment in the UAE?
The foreign investors are going to bring their own processes and logic to the market so we’re going to see a quantum shift in the way the market transacts.
We’ve seen that, if you compare today and five years ago, there is a big difference in that as well. But I think going forward we are going to see a more rigid interpretation of things like profitabilities, of reading the results of the companies, in daily trading volumes, in triggering stops, in short-selling eventually and in margin trading.
All of those will be new concepts coming into our market as it becomes a closer market, a closer reflection of what an international market looks like.
What is your 2008 forecast for regional stock markets?
I think it is a very significant shift we are seeing. We are seeing a natural shift, there is closer correlation than previously between what is happening locally and globally, and I think that’s why it’s very evident in the quick dip and pick up that we saw last week or the week before on the local exchanges.
Approximately 30 per cent of the daily volume is from foreign institutional investors on the DFM. That itself is a telltale sign that the correlation is going to increase and not decrease going forward.
So asset managers in the region today have to have a sharper eye and a sharper knowledge of what happens beyond their borders.
They could get away without that knowledge in the past but not anymore. For 2007, I remember I said 10 to 15 per cent from 2006 and I was proven wrong because until October we were negative. But then we jumped up about 30 per cent so I think quarter four made up for our expectations and exceeded it.
This year I will be anxious because of the volatility of the international markets, which was not as big a factor a few months ago as it is today.
Also, with oil price high it makes things a little more uncertain. I wouldn’t venture a guess but I would be very comfortable that 2008 will be a positive year and will be based on the results we are seeing in terms of the fourth quarter earnings from 2007 and going very early on into 2008.
I think the growth will remain healthy for the companies. Also, we can’t forget a new factor in 2008, which is the listing of private companies.
We have a whole batch of two-year-old companies on the local markets that are going to be listed. For instance Al Qudra announced it would list this year.
So you’ve got several of the similarly aged, two-year-old companies that are due for listing and will create a whole new cycle of momentum, at least on the speculative side that will be positive for the stock market indices.
So I will not give a number this time but I think 2008 will be a positive year and I think it’s going to be interesting. It won’t be for the faint-hearted because I think it’s going to be a roller coaster in terms of the dealings with short-term volatilities.
What do you think are some of the regulatory challenges facing the stock markets here?
I think the main thing is to successfully regulate the shift from a small, fairly quiet local market into the next emerging market.
You have to put in place proper guidance and enforce proper regulations to enable you to successfully do that so you don’t have a chaotic situation.
What do you think about the Securities and Commodities Authority’s recent concerns about equity research and the way some analysts are reaching their valuations? Do you think this type of research should be regulated?
I think the SCA has a reason to worry because while some research we see out there is very good, some other leaves a lot to be desired.
I think it will be important that we don’t put in place too many guidelines that stifle research, which get researchers worried about what they say so they end up saying nothing.
Because I think research is an important component of the environment and it gives good guidance to the investors in making their final investment decisions.
Do you think the SCA should monitor front-running?
The SCA needs to put in place a lot more practical and convenient guidelines for investors in general. It has done a lot since it was set up, but there is a lot more to do. I think it is on the right track.
How do you deal with front-running at Daman?
We comply [laughs]. We are regulated by the SCA or by the Central Bank, and by the Dubai Financial Services Authority. So we are regulated in three environments depending on which business it is.
We are in constant and very constructive discussions with the regulators because it’s very important for the regulators to also positively interact with the companies in the market to come up with an environment that is protected from one side, but that is also conducive to business.
How do you ensure that your brokerage research that is provided to clients is not mixed with the buy side?
We do not publish our research; it is done for our internal purposes now. In the future we will be publishing research but for now we do not have published research.
According to Dubai’s Daman Investments, lead manager of the initial public offering of Buffalo-based Nanodynamics, the move will go some way to cement the emirate’s place as a global exchange.
Shehab Gargash founded Daman (now Daman Investments) in 2001 and serves as Chief Executive Officer of the Dubai-based private joint stock company.
His company is capitalised at Dh200 million and is a privately held, non-bank financial services group focused on developing capital market opportunities within the UAE and the Middle East.
During his 12 years in the UAE banking industry, Gargash’s previous roles have been in marketing, distribution, trade finance and investment banking, first with Citibank, from 1989 to 1993 and later with the Emirates Bank Group (1993 to 2001).
With an MBA from the George Washington University in the United States, Gargash (pictured above) is also a founding board member of Young Arab Leaders and the Arabian Real Estate Investment Trust, and was appointed to the Dubai Chamber board of directors last March. He is a frequent public speaker and is well known for his popular daily column – now in its 10th year – in the Arabic newspaper Al Ittihad.
Gargash discussed with Emirates Business the regulatory hurdles facing regional stock markets, concerns over fair equity research and valuations, and monitoring front-running.
He gave his forecasts for the regional stock markets this year, and talked about the challenges that could slow down the rise in foreign investment in the UAE.
Gargash also warned the region’s asset managers to have “a sharper knowledge” of events happening beyond their borders, as the correlation gets closer between local and global markets.
What does the listing of the first US firm on the DIFX, announced last week, mean for the exchange?
I think it’s very significant because it’s exactly the reason an exchange such as the DIFX was set up. It was established to attract quality listings from around the world and to create a marketplace for people to be able to trade those securities.
Having a US company come in on the bourse is a fulfillment of that promise. I think it has put the DIFX on the road to a global-quality exchange.
What is the significance of an alternative energy and clean technology company listing on the DIFX and do you see this sector becoming an industry that will see gains in 2008?
Yes, with increased worries about environmental issues – and about the economic logic behind environmental matters – clean technology is becoming an area of increased importance for corporations.
Nanodynamics is a pioneer at utilising nano technology advances that enable companies to have more potent solutions, which are more cost-effective and very friendly for the environment.
Any other companies you are talking to for the UAE or regional stock markets?
We will give more details later but Nanodynamics is one of a chain of similar IPOs we are working to bring into the DIFX from the US markets.
All of them will be very nice IPO stories – very good management behind good business models. We are very selective in picking those companies we believe will be successful and those that show an ability or potential for continued success.
What do you think are the reasons behind the slowdown of the flow of initial public offerings?
I don’t think initial public offerings have been slow, I think they are a function of demand and we have just exited two years of a negative period in our stock markets. So by definition you are going to have fewer IPOs than usual.
But we have not seen them stop and that’s very important. We had some very important local IPOs over the past year and going forward into this year it looks very promising. So I think the IPO flow will be more robust going forward because the markets have sort of picked up now.
At the DIFX specifically we have seen a very successful IPO with Dubai Ports World. This one [IPO of Nanodynamics] hopefully is running very nicely and indications are good for the first US initial public offering on the DIFX.
And 2008 promises to be a very positive year for in terms of getting more companies on board and more activity through the exchange.
In the first half of 2007, foreign investor buying volume on the Dubai Financial Market tripled and foreign investors accounted for about 30 per cent of the total DFM trading, it was reported. It then retreated. Where do you think this figure will stand for the first half of 2008?
I think foreign institutional investors have discovered the UAE markets, both local markets and regional, such as the DIFX. They have discovered the Gulf is a very promising emerging market. The risk-reward proposition makes a lot of sense to them. So I expect to see more participation from them in local and daily activity here.
That will increase the volatility from one side but it will certainly increase the amount of traffic and volume we will see through our local exchanges on a daily basis.
What are other possible hurdles impeding the rise in foreign investment in the UAE?
The foreign investors are going to bring their own processes and logic to the market so we’re going to see a quantum shift in the way the market transacts.
We’ve seen that, if you compare today and five years ago, there is a big difference in that as well. But I think going forward we are going to see a more rigid interpretation of things like profitabilities, of reading the results of the companies, in daily trading volumes, in triggering stops, in short-selling eventually and in margin trading.
All of those will be new concepts coming into our market as it becomes a closer market, a closer reflection of what an international market looks like.
What is your 2008 forecast for regional stock markets?
I think it is a very significant shift we are seeing. We are seeing a natural shift, there is closer correlation than previously between what is happening locally and globally, and I think that’s why it’s very evident in the quick dip and pick up that we saw last week or the week before on the local exchanges.
Approximately 30 per cent of the daily volume is from foreign institutional investors on the DFM. That itself is a telltale sign that the correlation is going to increase and not decrease going forward.
So asset managers in the region today have to have a sharper eye and a sharper knowledge of what happens beyond their borders.
They could get away without that knowledge in the past but not anymore. For 2007, I remember I said 10 to 15 per cent from 2006 and I was proven wrong because until October we were negative. But then we jumped up about 30 per cent so I think quarter four made up for our expectations and exceeded it.
This year I will be anxious because of the volatility of the international markets, which was not as big a factor a few months ago as it is today.
Also, with oil price high it makes things a little more uncertain. I wouldn’t venture a guess but I would be very comfortable that 2008 will be a positive year and will be based on the results we are seeing in terms of the fourth quarter earnings from 2007 and going very early on into 2008.
I think the growth will remain healthy for the companies. Also, we can’t forget a new factor in 2008, which is the listing of private companies.
We have a whole batch of two-year-old companies on the local markets that are going to be listed. For instance Al Qudra announced it would list this year.
So you’ve got several of the similarly aged, two-year-old companies that are due for listing and will create a whole new cycle of momentum, at least on the speculative side that will be positive for the stock market indices.
So I will not give a number this time but I think 2008 will be a positive year and I think it’s going to be interesting. It won’t be for the faint-hearted because I think it’s going to be a roller coaster in terms of the dealings with short-term volatilities.
What do you think are some of the regulatory challenges facing the stock markets here?
I think the main thing is to successfully regulate the shift from a small, fairly quiet local market into the next emerging market.
You have to put in place proper guidance and enforce proper regulations to enable you to successfully do that so you don’t have a chaotic situation.
What do you think about the Securities and Commodities Authority’s recent concerns about equity research and the way some analysts are reaching their valuations? Do you think this type of research should be regulated?
I think the SCA has a reason to worry because while some research we see out there is very good, some other leaves a lot to be desired.
I think it will be important that we don’t put in place too many guidelines that stifle research, which get researchers worried about what they say so they end up saying nothing.
Because I think research is an important component of the environment and it gives good guidance to the investors in making their final investment decisions.
Do you think the SCA should monitor front-running?
The SCA needs to put in place a lot more practical and convenient guidelines for investors in general. It has done a lot since it was set up, but there is a lot more to do. I think it is on the right track.
How do you deal with front-running at Daman?
We comply [laughs]. We are regulated by the SCA or by the Central Bank, and by the Dubai Financial Services Authority. So we are regulated in three environments depending on which business it is.
We are in constant and very constructive discussions with the regulators because it’s very important for the regulators to also positively interact with the companies in the market to come up with an environment that is protected from one side, but that is also conducive to business.
How do you ensure that your brokerage research that is provided to clients is not mixed with the buy side?
We do not publish our research; it is done for our internal purposes now. In the future we will be publishing research but for now we do not have published research.
11.2.08
KSE trading seen surging after 8.4% growth in Jan
KSE trading seen surging after 8.4% growth in Jan
GCC markets witnessed mixed trends as four out of six regional indices recorded monthly gains in Jan-08. However, the biggest bourse in the region in terms of market capitalization , Saudi Arabia, witnessed strong selling pressure as it benchmark index reported monthly decline of 13.4% in Jan-08. However, buying interest was seen in the Kuwait markets as its index recorded 8.4% growth during the month. We believe that the trading activity is likely to increase in the coming month as the investors take positions after analyzing annual results and corporate announcements.
Kuwait Budget 2008/09
Kuwait’s Cabinet has approved the country’s budget for the fiscal year 2008/09 (Apr’08 to Mar’09) which still needs to be sanctioned by Kuwait’s Parliament. The revenues estimated for 2008/09 is KD12.68bn, around 52.4% up from KD8.32bn estimated in the 2007/08 budget. As expected, a majority of Kuwait’s estimated revenues for 2008/09 will be on account of oil revenues. The oil revenue is projected to comprise around 92% of the total revenues for 2008/09. The oil revenues for 2008/09 is estimated at KD11.65bn, up 56.4% from KD7.45bn estimated for 2007/08. The non-oil revenues for 2008/09 is estimated at KD1.03bn, up only 17.9% from KD0.87bn estimated for 2007/08. The rise in non-oil revenue is attributed to an increase in taxes on net income and earnings for non-oil companies and fees on goods and services.
Similarly the total expenditures for 2008/09 is estimated at KD17.80bn, up 57.5% from KD11.30bn estimated in the 2007/08 budget. The higher expenditure projected for 2008/09 is due to the cabinet decree targeting the settlement of the KD5.47bn deficit to be paid in installments to the Public Institute For Social Security (PIFSS), which is Kuwait’s social security system. As per IMF Article IV report published in April 2006, PIFSS has accumulated a substantial actuarial deficit, which amounted to around KD7bn in 2004 and this move appears to be an attempt at recapitalization. However it is important to note that this expenditure of KD5.47bn is non-recurrent in nature. On account of this significant increase in the expenditure, Kuwait’s Cabinet has estimated a deficit of KD5.12bn for 2008/09. And considering the fact that around KD1.27bn of national revenue will be contributed to Reserve Fund for Future Generations (RFFG), the overall deficit for 2008/09 is estimated at KD6.39bn.
Without considering the transfer of KD5.47bn to PIFSS (which is non-recurrent in nature), the total expenditure projected for 2008/09 is KD12.33bn, which is 9.1% higher than the previous year. Though the break-up of this expenditure is not available at this point of time, we expect to see higher allocation of capital expenditure. Increase in capital expenditure has positive impact on the overall economy with maximum impact on sectors like construction, cement and real estate. This will have a trickle-down effect on other areas of economy as well by contributing to achievement of targeted rates of growth and creation of new jobs.
It is important to note that historically Kuwait has projected the budget on a conservative basis. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait achieved an actual budget surplus of KD5.20bn as against an estimated budget deficit of KD2.60bn. For the fiscal year 2007/08, Kuwait has estimated a deficit of KD2.98bn. However during the first six months of current fiscal, the country has already recorded a revenue surplus of KD5.75bn.
For the budget for the fiscal year 2008/09, sources at the Ministry of Finance have quoted that the oil revenue was estimated on the basis of a daily production of 2.2 million barrels of crude. We believe the Kuwait has again projected the budget revenues on a conservative basis. The actual average production for the first nine months of current fiscal was 2.48mb/day and we do not foresee a substantial reduction in view of higher prevailing oil prices. On the expenditure side, Kuwait has also historically spent less than budgeted figure. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait’s actual expenditure was KD10.31bn as against an estimated expenditure of KD11.12bn.
However the fiscal year 2008/09 might be different than the previous years. We might see an actual deficit in 2008/09 (unlike the previous years) in case the entire amount of KD5.47bn is paid during the year to PIFSS. As per our estimates, the actual deficit for 2008/09 will be lower than the projections by Kuwait’s Cabinet.
IPO frenzy in 2007
The number of new companies which offered parts of its shares to public (IPOs) reached 41 during the year 2007. Out of these 41 companies, 38 have been listed at the time of writing of this report and three are yet to be listed. Out of these, 36 issues were listed in 2007. Out of the 41 companies which floated their shares in 2007, 28 companies were from Saudi Arabia, six from UAE and two each from Oman, Qatar and Kuwait and one from Bahrain.
Out of 41 issues, maximum number (16) were from insurance sector, followed by services (9) and Industrial (8). Alahli Takaful Co has been the biggest gainer since float, gaining 1,017.5%, followed by Al Ahlia Cooperative Insurance Co. and Malath Cooperative Insurance and Reinsurance gaining 915% and 825% respectively. It is notable that we have found a negative correlation between the price change (on listing and after one month of float) and oversubscription. It means that appreciation in the price of any offering in secondary market is heavily determined by its fundamentals rather than just frenzy.
Improved capital market conditions have been driving the IPOs in the GCC region which have resulted in investors’ growing interest in the regional equity markets. Private companies and family businesses are opening up to the prospects of a public listing. There is also tremendous rise in disposable income and savings on the back of increasing oil prices has enabled investors to lap up the offerings made by the companies. This is also attracting corporate to go for listing as can be seen from the fact that more than 50 companies are looking to tap the market in the medium term.
Market activity
GCC bourses saw 39.9bn shares being traded in the month of Jan-08 as compared to 27.5bn in the previous month. Also, the value of shares traded on the bourses increased to US$136.7bn in Jan-08 as compared to US$100.5bn reported in the previous month.
The breadth of GCC stock markets was skewed towards decliners in Jan-08 as 280 stocks registered monthly decline as compared to 249 advancers. The strong sell-off seen in the Saudi market can be seen from the fact that the Saudi bourse saw only 13 advancers as compared to 97 decliners in Jan-08.
GCC markets witnessed mixed trends as four out of six regional indices recorded monthly gains in Jan-08. However, the biggest bourse in the region in terms of market capitalization , Saudi Arabia, witnessed strong selling pressure as it benchmark index reported monthly decline of 13.4% in Jan-08. However, buying interest was seen in the Kuwait markets as its index recorded 8.4% growth during the month. We believe that the trading activity is likely to increase in the coming month as the investors take positions after analyzing annual results and corporate announcements.
Kuwait Budget 2008/09
Kuwait’s Cabinet has approved the country’s budget for the fiscal year 2008/09 (Apr’08 to Mar’09) which still needs to be sanctioned by Kuwait’s Parliament. The revenues estimated for 2008/09 is KD12.68bn, around 52.4% up from KD8.32bn estimated in the 2007/08 budget. As expected, a majority of Kuwait’s estimated revenues for 2008/09 will be on account of oil revenues. The oil revenue is projected to comprise around 92% of the total revenues for 2008/09. The oil revenues for 2008/09 is estimated at KD11.65bn, up 56.4% from KD7.45bn estimated for 2007/08. The non-oil revenues for 2008/09 is estimated at KD1.03bn, up only 17.9% from KD0.87bn estimated for 2007/08. The rise in non-oil revenue is attributed to an increase in taxes on net income and earnings for non-oil companies and fees on goods and services.
Similarly the total expenditures for 2008/09 is estimated at KD17.80bn, up 57.5% from KD11.30bn estimated in the 2007/08 budget. The higher expenditure projected for 2008/09 is due to the cabinet decree targeting the settlement of the KD5.47bn deficit to be paid in installments to the Public Institute For Social Security (PIFSS), which is Kuwait’s social security system. As per IMF Article IV report published in April 2006, PIFSS has accumulated a substantial actuarial deficit, which amounted to around KD7bn in 2004 and this move appears to be an attempt at recapitalization. However it is important to note that this expenditure of KD5.47bn is non-recurrent in nature. On account of this significant increase in the expenditure, Kuwait’s Cabinet has estimated a deficit of KD5.12bn for 2008/09. And considering the fact that around KD1.27bn of national revenue will be contributed to Reserve Fund for Future Generations (RFFG), the overall deficit for 2008/09 is estimated at KD6.39bn.
Without considering the transfer of KD5.47bn to PIFSS (which is non-recurrent in nature), the total expenditure projected for 2008/09 is KD12.33bn, which is 9.1% higher than the previous year. Though the break-up of this expenditure is not available at this point of time, we expect to see higher allocation of capital expenditure. Increase in capital expenditure has positive impact on the overall economy with maximum impact on sectors like construction, cement and real estate. This will have a trickle-down effect on other areas of economy as well by contributing to achievement of targeted rates of growth and creation of new jobs.
It is important to note that historically Kuwait has projected the budget on a conservative basis. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait achieved an actual budget surplus of KD5.20bn as against an estimated budget deficit of KD2.60bn. For the fiscal year 2007/08, Kuwait has estimated a deficit of KD2.98bn. However during the first six months of current fiscal, the country has already recorded a revenue surplus of KD5.75bn.
For the budget for the fiscal year 2008/09, sources at the Ministry of Finance have quoted that the oil revenue was estimated on the basis of a daily production of 2.2 million barrels of crude. We believe the Kuwait has again projected the budget revenues on a conservative basis. The actual average production for the first nine months of current fiscal was 2.48mb/day and we do not foresee a substantial reduction in view of higher prevailing oil prices. On the expenditure side, Kuwait has also historically spent less than budgeted figure. This is illustrated from the fact that for the fiscal year 2006/07, Kuwait’s actual expenditure was KD10.31bn as against an estimated expenditure of KD11.12bn.
However the fiscal year 2008/09 might be different than the previous years. We might see an actual deficit in 2008/09 (unlike the previous years) in case the entire amount of KD5.47bn is paid during the year to PIFSS. As per our estimates, the actual deficit for 2008/09 will be lower than the projections by Kuwait’s Cabinet.
IPO frenzy in 2007
The number of new companies which offered parts of its shares to public (IPOs) reached 41 during the year 2007. Out of these 41 companies, 38 have been listed at the time of writing of this report and three are yet to be listed. Out of these, 36 issues were listed in 2007. Out of the 41 companies which floated their shares in 2007, 28 companies were from Saudi Arabia, six from UAE and two each from Oman, Qatar and Kuwait and one from Bahrain.
Out of 41 issues, maximum number (16) were from insurance sector, followed by services (9) and Industrial (8). Alahli Takaful Co has been the biggest gainer since float, gaining 1,017.5%, followed by Al Ahlia Cooperative Insurance Co. and Malath Cooperative Insurance and Reinsurance gaining 915% and 825% respectively. It is notable that we have found a negative correlation between the price change (on listing and after one month of float) and oversubscription. It means that appreciation in the price of any offering in secondary market is heavily determined by its fundamentals rather than just frenzy.
Improved capital market conditions have been driving the IPOs in the GCC region which have resulted in investors’ growing interest in the regional equity markets. Private companies and family businesses are opening up to the prospects of a public listing. There is also tremendous rise in disposable income and savings on the back of increasing oil prices has enabled investors to lap up the offerings made by the companies. This is also attracting corporate to go for listing as can be seen from the fact that more than 50 companies are looking to tap the market in the medium term.
Market activity
GCC bourses saw 39.9bn shares being traded in the month of Jan-08 as compared to 27.5bn in the previous month. Also, the value of shares traded on the bourses increased to US$136.7bn in Jan-08 as compared to US$100.5bn reported in the previous month.
The breadth of GCC stock markets was skewed towards decliners in Jan-08 as 280 stocks registered monthly decline as compared to 249 advancers. The strong sell-off seen in the Saudi market can be seen from the fact that the Saudi bourse saw only 13 advancers as compared to 97 decliners in Jan-08.
7.2.08
Middle East on Front Lines of Global Talent War
Middle East on Front Lines of Global Talent War
Middle Eastern markets are booming, unlike those in Europe and the U.S. Now, the Gulf is attracting investors seeking to tap into the vast resources of the region. Wall Street banks are also expanding overseas in search of high-growth markets with the potential to boost revenue and offset volatility at home. Goldman Sachs, Morgan Stanley and other investment banks have already secured banking licenses and set up shop there. Meanwhile, Islamic finance is shaping up to be one of the fastest-growing sectors in global finance. A recent Lipper Hedge World report notes that demand is soaring for alternative investments that comply with Shariah law to take off in the second half of 2008.
Amid the trend, the need for talent in the Middle East is surging. A new study conducted by international communications consultancy, Hill and Knowlton, shows that the demand for talent has never been greater. According to executive search firm, A.E. Feldman, there is a lot of investment in the Gulf and with that comes increasing demand for talent. The firm reports that salaries are skyrocketing as banks seek to lure top candidates. Investment bankers as well as risk, private equity and real estate professionals are among those in short supply. Those able to demonstrate strong modeling skills, transaction experience and excellent communication skills are in a prime position to gain from the trend.
Soaring oil prices have made the Gulf not only one of the fastest-growing regions in the world, but also a pool of great wealth. The sovereign investment arms of Saudi Arabia, Bahrain, Qatar, United Arab Emirates (UAE), Oman and Kuwait have an estimated $1.5 trillion at their disposal, according to Reuters. The Dubai International Financial Centre (DIFC) is creating new infrastructure as part of its efforts to become a global Islamic finance hub, according to a Gulf News report.
As investors flock to the Middle East, job opportunities in the region are exploding. The Middle East is on the front line of the global war for talent, according to the results of the 8th Annual Corporate Reputation Watch study by international communications consultancy, Hill and Knowlton. Dave Robinson of Hill and Knowlton Middle East, says the report has highlighted a critical issue for the region. “With governments and companies in the Middle East adopting aggressive growth strategies and with the move towards international business practices, the need for the best graduate talent has never been greater.”
Meanwhile, interest in the Middle East as a market for alternative investments is at an all time high, according to a recent Hedge Week report. The report states, “The development of the Dubai International Financial Center and the growth of the financial industry in Qatar and Bahrain have focused attention on opportunities for asset managers in a region characterized by rapidly growing wealth and increasing investor sophistication.”
Islamic finance in the Gulf is gaining popularity and assets of banks in the sector are growing faster than their counterparts in conventional banking, reports Gulf News. Globally, assets of Islamic financial institutions are estimated to be more than $500 billion.
The main principle of Islamic finance is that all forms of interest are forbidden. All money must also be invested in purely ethical industries. And the Islamic financial model works on the basis of risk sharing. Banks and individuals share the risk of any investment on agreed terms, and divide any profits between them.
Though Shariah law obviously poses certain challenges for the hedge fund industry, financial engineers are examining how to create structures that provide attractive levels of performance while conforming to Shariah principles, according to Hedge Week. In fact, Lipper Hedge World reports that Deutsche Bank’s regional head of Middle East structuring said he expects demand for hedge funds that comply with Shariah law to take off in the second half if the year.
Middle Eastern markets are booming, unlike those in Europe and the U.S. Now, the Gulf is attracting investors seeking to tap into the vast resources of the region. Wall Street banks are also expanding overseas in search of high-growth markets with the potential to boost revenue and offset volatility at home. Goldman Sachs, Morgan Stanley and other investment banks have already secured banking licenses and set up shop there. Meanwhile, Islamic finance is shaping up to be one of the fastest-growing sectors in global finance. A recent Lipper Hedge World report notes that demand is soaring for alternative investments that comply with Shariah law to take off in the second half of 2008.
Amid the trend, the need for talent in the Middle East is surging. A new study conducted by international communications consultancy, Hill and Knowlton, shows that the demand for talent has never been greater. According to executive search firm, A.E. Feldman, there is a lot of investment in the Gulf and with that comes increasing demand for talent. The firm reports that salaries are skyrocketing as banks seek to lure top candidates. Investment bankers as well as risk, private equity and real estate professionals are among those in short supply. Those able to demonstrate strong modeling skills, transaction experience and excellent communication skills are in a prime position to gain from the trend.
Soaring oil prices have made the Gulf not only one of the fastest-growing regions in the world, but also a pool of great wealth. The sovereign investment arms of Saudi Arabia, Bahrain, Qatar, United Arab Emirates (UAE), Oman and Kuwait have an estimated $1.5 trillion at their disposal, according to Reuters. The Dubai International Financial Centre (DIFC) is creating new infrastructure as part of its efforts to become a global Islamic finance hub, according to a Gulf News report.
As investors flock to the Middle East, job opportunities in the region are exploding. The Middle East is on the front line of the global war for talent, according to the results of the 8th Annual Corporate Reputation Watch study by international communications consultancy, Hill and Knowlton. Dave Robinson of Hill and Knowlton Middle East, says the report has highlighted a critical issue for the region. “With governments and companies in the Middle East adopting aggressive growth strategies and with the move towards international business practices, the need for the best graduate talent has never been greater.”
Meanwhile, interest in the Middle East as a market for alternative investments is at an all time high, according to a recent Hedge Week report. The report states, “The development of the Dubai International Financial Center and the growth of the financial industry in Qatar and Bahrain have focused attention on opportunities for asset managers in a region characterized by rapidly growing wealth and increasing investor sophistication.”
Islamic finance in the Gulf is gaining popularity and assets of banks in the sector are growing faster than their counterparts in conventional banking, reports Gulf News. Globally, assets of Islamic financial institutions are estimated to be more than $500 billion.
The main principle of Islamic finance is that all forms of interest are forbidden. All money must also be invested in purely ethical industries. And the Islamic financial model works on the basis of risk sharing. Banks and individuals share the risk of any investment on agreed terms, and divide any profits between them.
Though Shariah law obviously poses certain challenges for the hedge fund industry, financial engineers are examining how to create structures that provide attractive levels of performance while conforming to Shariah principles, according to Hedge Week. In fact, Lipper Hedge World reports that Deutsche Bank’s regional head of Middle East structuring said he expects demand for hedge funds that comply with Shariah law to take off in the second half if the year.
Dubai’s commitment to world class institutions profiled by Oxford Business Group
Dubai has committed to establishing world-class institutions in a variety of fields, from finance to communications, and from health care to education, says The Report: Dubai 2007, published by Oxford Business Group (OBG), the highly acclaimed UK-based publishing, research and consultancy service organization.
As a result of this determination to invest in development as a centre for finance, technology, communications, advertising and many other sectors, the emirate's nationals now enjoy one of the highest per capita incomes in the world, and yet, says The Report, Sheikh Mohammed bin Rashid Al Maktoum, ruler of Dubai, likes to mention that he has realized only 10% of what he wants to build for Dubai.
Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince of Dubai and Chairman, Dubai Executive Council, highlights this when he tells The Report in an exclusive interview: "The success of the government relies heavily on the availability and skills of the public sector workforce.
"We need to ensure that the government continues to maintain and develop its capabilities of attracting, developing, motivating and retaining skills and talent to ensure it keeps pace with the evolving requirements of the economy and the citizens.
"In addition, a structured focus on quality and efficiency is necessary to ensure that service levels are continuously upgraded through the streamlining of processes and leveraging of IT."
Referring to the Mohammed bin Rashid Al Maktoum Foundation for Dubai, Sheikh Hamdan says: "Sheikh Mohammed bin Rashid Al Maktoum launched this personal initiative to develop future leaders and create a knowledge-based society throughout the region.
Based in the UAE, the foundation aims to promote knowledge and human development, focusing specifically on research, education and promoting equal opportunities for the personal growth and success of youth in the region. The foundation's programmes are also aimed at further enhancing the standing of scholars and intellectuals throughout the Arab world.
"Another objective of the foundation is to encourage efforts to find innovative answers to obstacles that are preventing economic and social development. Therefore, it will help establish small and medium sized enterprises and create a panel of decision makers in all relevant fields to communicate with one another and exchange insights that will go towards finding fast and efficient solutions.
"The foundation's mandate is significant since it is seeking to reverse a negative trend in the Arab world by identifying gaps and investing its efforts in filling them. Job creation, for instance, is a critical matter considering the fact our region now needs 15m jobs in the next 20 years. The Arab world needs 74m-85m new jobs. Emphasis needs to be placed on improving the work environment.
Currently, the Arab world is ranked 107 among 170 countries in terms of establishing new businesses. These figures represent major obstacles to the region's development - challenges, essentially, which the foundation intends to turn into opportunities for improvement and growth."
The Report: Dubai 2007, available in print form or online, is regarded as the premier guide for foreign direct investment into the emirate's vibrant economy, and an invaluable guide to many facets of Dubai, including its macroeconomics, infrastructure, political landscape and sectoral developments.
As a result of this determination to invest in development as a centre for finance, technology, communications, advertising and many other sectors, the emirate's nationals now enjoy one of the highest per capita incomes in the world, and yet, says The Report, Sheikh Mohammed bin Rashid Al Maktoum, ruler of Dubai, likes to mention that he has realized only 10% of what he wants to build for Dubai.
Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince of Dubai and Chairman, Dubai Executive Council, highlights this when he tells The Report in an exclusive interview: "The success of the government relies heavily on the availability and skills of the public sector workforce.
"We need to ensure that the government continues to maintain and develop its capabilities of attracting, developing, motivating and retaining skills and talent to ensure it keeps pace with the evolving requirements of the economy and the citizens.
"In addition, a structured focus on quality and efficiency is necessary to ensure that service levels are continuously upgraded through the streamlining of processes and leveraging of IT."
Referring to the Mohammed bin Rashid Al Maktoum Foundation for Dubai, Sheikh Hamdan says: "Sheikh Mohammed bin Rashid Al Maktoum launched this personal initiative to develop future leaders and create a knowledge-based society throughout the region.
Based in the UAE, the foundation aims to promote knowledge and human development, focusing specifically on research, education and promoting equal opportunities for the personal growth and success of youth in the region. The foundation's programmes are also aimed at further enhancing the standing of scholars and intellectuals throughout the Arab world.
"Another objective of the foundation is to encourage efforts to find innovative answers to obstacles that are preventing economic and social development. Therefore, it will help establish small and medium sized enterprises and create a panel of decision makers in all relevant fields to communicate with one another and exchange insights that will go towards finding fast and efficient solutions.
"The foundation's mandate is significant since it is seeking to reverse a negative trend in the Arab world by identifying gaps and investing its efforts in filling them. Job creation, for instance, is a critical matter considering the fact our region now needs 15m jobs in the next 20 years. The Arab world needs 74m-85m new jobs. Emphasis needs to be placed on improving the work environment.
Currently, the Arab world is ranked 107 among 170 countries in terms of establishing new businesses. These figures represent major obstacles to the region's development - challenges, essentially, which the foundation intends to turn into opportunities for improvement and growth."
The Report: Dubai 2007, available in print form or online, is regarded as the premier guide for foreign direct investment into the emirate's vibrant economy, and an invaluable guide to many facets of Dubai, including its macroeconomics, infrastructure, political landscape and sectoral developments.
Abonohu te:
Postimet (Atom)