Saudi Arabia spearheads GCC investments in 2019
February 4, 2019 | 07:00 PM
February 4, 2019 | 07:00 PM
Last Updated: February 4, 2019 | 07:00 PM
3 minute read
AA
Resize
JEDDAH/DUBAI —The macroeconomic picture has improved significantly across the GCC over the last 12 months. Increased oil production and the more benign fiscal environment translated into improved GDP growth. Saudi Arabia, the UAE and Qatar returned to fiscal surpluses in 2018, Oman’s deficit narrowed very sharply, while Bahrain pulled back from crisis, after receiving support from Saudi Arabia, the UAE and Kuwait.
Global law firm Hogan Lovells launched Monday its third annual Investment Outlook report, which investigates the fiscal environment in the Gulf, the key macroeconomic factors impacting the region, as well as investment trends and capital inflows over the next 12 months.
There are some challenges from 2018 which will make the transition into 2019. GDP growth has not yet delivered a better environment for the private sector. The low hanging fruit has gone, hindering the high growth rates we have become used to. The global and regional framework grows ever more challenging and harder to navigate.
However, there are also key opportunities shaping Gulf markets this year, including growing trade and investment ties. With the US becoming a less predictable partner, Gulf countries are making efforts to develop ties in new markets. Sovereign Wealth Funds are investing into global ventures, the UAE holds a strong position as a gateway for investment into Africa, China’s relations with the Gulf have undergone a transformation over the past year, and Brexit, whilst causing financial markets to suffer, could be seen as an opportunity for GCC nations to strike mutually beneficial trade deals directly with the UK.
The Gulf region has emerged as Silicon Valley’s leading venture investor, with key players establishing offices there to focus their high-value tech investments. Within the Middle East, a wave of tech start-ups, mostly founded after the recession, are now reaching critical mass and attracting serious capital investment.
GCC governments continue to attract foreign investment by offering far-reaching reforms, unlocking state-owned assets and loosening restrictions. New regulations such as the PPP law in Saudi Arabia, and possibly Oman, as well as the Foreign Investment Laws in the UAE and Qatar are encouraging investors to take a real look at the Middle East.
Rahail Ali, Managing Partner of Hogan Lovells Middle East, said: “GCC economies have proved to be resilient in the face of, at times, depressed oil prices. The growth potential of these markets is huge and the reform drive is continuing, while government infrastructure spending has grown - a key hook for foreign investment.”
He further said: “That is not to say that there isn’t room for further development. Privatization, for example, takes time and local businesses need to adjust to the new regulatory environments. However, government initiatives, such as Saudi Arabia’s Vision 2030, are committed to positive change – which we can already see in the development of sustainable market sectors.”
Key developments expected in 2019
In Saudi Arabia, a number of privatization deals, currently in the pipeline, are likely to be completed in 2019.
Saudi Aramco is likely to move ahead with the acquisition of a 70% stake in SABIC, financed by debt markets and banks.
An increased number of public-private partnership (PPP) projects will get off the ground around the region, with a growing focus on renewables, transportation, education and healthcare.
The impact of key market regulations will become clearer as they are approved and implemented: PPP law in Saudi Arabia and possibly Oman; Foreign Investment Law in UAE and Qatar.
Emirati investors will continue to expand out of their slowing home market and take advantage of growth potential in Saudi Arabia, as well as increasing ties in Africa, China, India, Russia and Latin America.
Sovereign wealth funds like Mubadala and Saudi’s Public Investment Fund (PIF) will expand their investment in global ventures, increasingly financed by loans. They could start investing more actively into their home economies to make up for lack of foreign investment and struggling private sectors. — SG
Global law firm Hogan Lovells launched Monday its third annual Investment Outlook report, which investigates the fiscal environment in the Gulf, the key macroeconomic factors impacting the region, as well as investment trends and capital inflows over the next 12 months.
There are some challenges from 2018 which will make the transition into 2019. GDP growth has not yet delivered a better environment for the private sector. The low hanging fruit has gone, hindering the high growth rates we have become used to. The global and regional framework grows ever more challenging and harder to navigate.
However, there are also key opportunities shaping Gulf markets this year, including growing trade and investment ties. With the US becoming a less predictable partner, Gulf countries are making efforts to develop ties in new markets. Sovereign Wealth Funds are investing into global ventures, the UAE holds a strong position as a gateway for investment into Africa, China’s relations with the Gulf have undergone a transformation over the past year, and Brexit, whilst causing financial markets to suffer, could be seen as an opportunity for GCC nations to strike mutually beneficial trade deals directly with the UK.
The Gulf region has emerged as Silicon Valley’s leading venture investor, with key players establishing offices there to focus their high-value tech investments. Within the Middle East, a wave of tech start-ups, mostly founded after the recession, are now reaching critical mass and attracting serious capital investment.
GCC governments continue to attract foreign investment by offering far-reaching reforms, unlocking state-owned assets and loosening restrictions. New regulations such as the PPP law in Saudi Arabia, and possibly Oman, as well as the Foreign Investment Laws in the UAE and Qatar are encouraging investors to take a real look at the Middle East.
Rahail Ali, Managing Partner of Hogan Lovells Middle East, said: “GCC economies have proved to be resilient in the face of, at times, depressed oil prices. The growth potential of these markets is huge and the reform drive is continuing, while government infrastructure spending has grown - a key hook for foreign investment.”
He further said: “That is not to say that there isn’t room for further development. Privatization, for example, takes time and local businesses need to adjust to the new regulatory environments. However, government initiatives, such as Saudi Arabia’s Vision 2030, are committed to positive change – which we can already see in the development of sustainable market sectors.”
Key developments expected in 2019
In Saudi Arabia, a number of privatization deals, currently in the pipeline, are likely to be completed in 2019.
Saudi Aramco is likely to move ahead with the acquisition of a 70% stake in SABIC, financed by debt markets and banks.
An increased number of public-private partnership (PPP) projects will get off the ground around the region, with a growing focus on renewables, transportation, education and healthcare.
The impact of key market regulations will become clearer as they are approved and implemented: PPP law in Saudi Arabia and possibly Oman; Foreign Investment Law in UAE and Qatar.
Emirati investors will continue to expand out of their slowing home market and take advantage of growth potential in Saudi Arabia, as well as increasing ties in Africa, China, India, Russia and Latin America.
Sovereign wealth funds like Mubadala and Saudi’s Public Investment Fund (PIF) will expand their investment in global ventures, increasingly financed by loans. They could start investing more actively into their home economies to make up for lack of foreign investment and struggling private sectors. — SG
