Thursday, Dec 04, 2008

Gulf News

Despite the global economic turmoil, North African countries remain attractive for Gulf-Cooperation Council (GCC) investors as an alternative to developed countries that have been hit more severely by the financial crisis.

Gulf investors, from property developers to power companies, have for years been looking to the Maghreb region (Morocco, Algeria and Tunisia) as well as Egypt and Libya.

These investors have already announced many projects in North Africa, from business parks and waterfront villas to industrial and energy projects. As recently as last month two Gulf companies launched projects worth $1.7 billion (Dh6.25 billion) in Morocco. The first was Kuwaiti Gulf Holding CompanyGulf Holding Company which laid the foundation stone of a $1.3 billion real estate project in Tangiers.

A few days later, Abu Dhabi Investment House (ADIH)Abu Dhabi Investment House (ADIH) inagurated in Marrakech the first phase of a $7 billion project to build fashion cities in several parts of Asia and Africa. The $400 million Porta Moda Marrakech is planned to be followed by similar projects in Tunisia, as well as Qatar, Abu Dhabi and India. The Tunisian phase is expected to be announced in the near future, according to company executives.

So why the strong interest in North Africa?

"The reason is very simple," said Egyptian economist Jamal Bayoumi.

"The markets of the developed nations have betrayed (us). The systems (there) have let us down and led to the current financial crisis as a result of a lack of proper monitoring," he told Gulf News in an interview.

Bayoumi, Secretary-General of Cairo-based Arab Investors Union, added that any investor who can liquidate his business is now looking for a safe haven. "The markets that have proven safe and maintained ethical standards are the developing countries' markets," he said.

Not new trend

Gulf investments in North Africa are not a new trend or solely a response to the recent financial crisis. The trend was noted shortly after the 9/11 terrorist attacks in the United State, and the subsequent exodus of Arab investors from Western countries.

During the past few years, Morocco attracted Gulf-financed real estate projects worth $30 billion. Algeria reached agreements worth $25 billion, while Tunisia is seeking investments between US$50 and US$60 billion from Gulf Arab investors, according to press reports.

Last month, "because of its limited foreign investments," Emmad Nesnas, chairman and managing director of BonyanBonyan, a real estate development company based in Bahrain, said Morocco had no (major) problems due to the catastrophe in the gobal markets.

He said the impact of the crisis on Morocco was "limited" not only because of Moroccan investors' marginal exposure to international markets but also because it was safe to invest in Morocco.

Morocco seems to be a "beneficiary of the crisis, as many investors will look towards investing there, including the European companies that have been badly hit by the financial predicament," according to Nesnas.

BonyanBonyan is involved with real estate development and project management in many Arab countries. BonyanBonyan and a French company won the tender to manage the recently announced project in Tangiers of Gulf Kuwait Holding Company.

The Nothern African countries have "proven to be attractive for investments," Rashad Janahi, board member and managing director of ADIHADIH said. "We are looking forward to more investments in these countries," adding that the company had no dealings or connections with any of the international financial institutions that collapsed.

Many Arab investors describe the present concerns and fears of the impact of the crisis on the Arab markets as "exaggerated".

One way to deal with any impact of the credit crisis on the local markets, economists suggest, is to redirect part of Gulf wealth into investments in the region, rather than abroad.

Some investors don't seem to agree.

"Investments can be [good] anywhere in the world, if [the investment decision] is well-studied," Mosabah Saif Al Mutairi, Acting Manager of the Royal Guard of Oman Pension Fund, told Gulf News in an interview.

If an investment decision is rushed, "any investment can be risky, even if they were in your own market," Al Mutairi said. "To focus on just one field also carries risks."

"We are not the biggest investment arm in Oman, but we are probably the most diversified one," he said.

Al Mutairi who attended the launch ceremony of the ADIHADIH Marakech project said the fund is weighing the possibilities of taking part in the project.

Meanwhile, strong Moroccan economic indicators have encouraged Gulf companies to go ahead with their plans despite the crisis.

"Indicators predict that the economy of Morocco will record 6 per cent growth in 2009," Ahmad Al Ameer, vice-chairman and CEO of Gulf Holding CompanyGulf Holding Company, told reporters during the launch of its real estate project in Tangiers. "These indicators are positive and encouraging."

Moreover, "the infrastructure in Morocco is at a high level and close to that of Europe, whether it be road, airport or port infrastructure," Ameer added.

Infrastructure

Providing the necessary infrastructure is one of the required vital elements to attract investments, Bayoumi stressed.

"The first [element is] the interest in investing in the Arab region, which is there," he said.

"Secondly, the ability of an Arab country to allow capital to move freely in and out of the country, as well as the existence of the necessary infrastructure," Bayoumi said.

He added that Arab countries are not capable of absorbing huge amounts of investments, and they lack opportunities for small investments.

It's not enought to provide a safe enviroment for investments. Updating legislation and investment laws, as well as transparency are among the factors that make the investment environment attractive.

In addition to North African countries, other countries in the Levant such as Jordan, Syria and Lebanon have succeeded in attracting Gulf investments in the past few years.

Their investments were in a variety of fields, such as real estate, stock markets and communication.

For example, Jordan's share of Gulf investments is estimated at $12 billion, and Lebanon during the first nine months of 2008 attracted nearly $3 billion investments in its real estate sector, out of the country's total foreign investment of $4 billion.

Meanwhile, Egypt, Lebanon and Tunisia, as well as the United Arab Emirates, Saudi Arabia and Jordan were also recipients of foreign investments, Bayoumi added.

Between 2006 and 2007, the total amount of investments poured into Arab countries jumped from $7 billion to $37 billion, according to Bayoumi.

Nearly 83 per cent of these investments were in the real estate sector, such as hotels and housing, 9 per cent in manufacturing, mainly the food industry, and 2 per cent were in the field of agriculture.

© Gulf News 2008. All rights reserved.

 

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