While the capital markets are bullish, more needs to be done to attract Arab wealth and FDI, explains Karim El Solh Dubai: June 14, 2004: The fund investment environment is flourishing throughout the Middle East region, making it one of the most exciting and emerging investment markets in the world, but more is needed to be done to support the upsurge, according to The National Investor’s Chief Executive Officer, Dr. Karim El Solh.
“With a significant increase in the market capitalization of the listed companies in the six-nation Gulf Co-operation Council, which, according to the recent Arab Monetary Fund Report has peaked at nearly $377.6 billion since the beginning of the year, it is clear to see that the investment environment is in good shape. As companies perform better and start listing their companies on the region’s bourses, so the markets become more liquid, asset classes varied and funds more diverse.
“However, more is needed to be done in order to continue the growth and stimulate further investments from wealthy Arab investors and attract foreign direct investment to the region,” explained Dr. El Solh.
Dr. Solh’s comments came in a keynote speech which was delivered to leading stakeholders and delegates at the Fund World Conference which finishes at the Jumeirah Beach Hotel today (Tuesday).
“With projected GDP growth of 6.4% throughout the GCC over the next five years, the prospects for growth are very encouraging. This will trickle down to the private sector and lead to further investment opportunities. Looking further into the future, the GCC customs union and a common currency and unification will also help the development of the regional capital markets, as will the proposed Free Trade accord with the European Union and WTO accession. ”
But according to El Solh, there are still significant bottlenecks to attracting capital flows. “There is vast potential among wealthy Arab investors. There are more than 300,000 high net worth individuals – those who have $1million dollars of investible assets – in the region. It is estimated that they will account for $1.5 trillion worth of wealth by 2007. Even if the region manages to repatriate a small proportion of this it will impact positively on the region’s capital markets. This is already starting to happen. The recent IPO performances of companies like The Finance House pay testament to the liquidity levels of these investors.
The key is to attract more foreign direct investment to the region, according to Dr. El Solh, and the bottlenecks are both regulatory and product related.
“At this stage more must be done to attract foreign investment. Currently the markets discourage foreign investment and this should be addressed. For example, in the UAE, only 20% of the companies listed allow foreign investment so the environment is not very supportive. Add to that the fact that there is regional political instability, high levels of bureaucracy, low levels of transparency and a slow privatization process, the capital markets are still embryonic. Certainly, the region’s markets are unable to attract investment at the levels of countries like Poland, Turkey and Russia.”
“With more products and asset classes and the opportunities to invest, together with a leading role played by governments to encourage privatization, the capital markets will continue to develop. They will gain critical mass, attracting the attentions of foreign fund investors, especially if they are included on global indices such as the MSCI. If you take into consideration the impending IPOs that are slated to take place in the coming 18 months and the burgeoning private equity and fixed income markets, then the products are in place to attract incremental investment,” concluded Dr. El Solh.
The Funds World Conference is being held to discuss the investment prospects and opportunities faced within the Middle East region. It is currently taking place at the Jumeirah Beach Hotel and is attracting leading regional and international delegates from the international investment market.
About The National Investor The National Investor is a leading UAE investment and advisory firm with a distinguished track record in fundraising, advisory services, asset management and private equity investments. The Company is backed by over 60 UAE shareholders who come from the highest echelons of the business and political community. NI is actively involved in investment banking, private equity and asset management. The Company is currently ranked as the leading arranger of public share offerings, having lead managed the largest number of public offerings in the UAE to date (with total transaction value exceeding AED 2.6 billion).. NI is also actively involved in the local asset management scene, having launched innovative products such as the first Emirates Real Estate Fund. For more information on the National Investor, please visit the Web site at http://www.nationalinvestor.ae