KSA Economy Offers Highly Attractive Landscape for Private Equity Investors

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)