Gateway to the Middle East: aiming for prosperity and profit
7th February, 2008
Gateway to the Middle East: aiming for prosperity and profitCross-border capital flows between the Gulf’s six-member trade bloc, the Gulf Co-operation Council, and Asia are forecast to climb from an annual USD 15 billion today to USD 300 billion in 2020, according to international consultants, McKinsey & Company.
That highly-respected forecast of huge trade growth underlines just how fast the Gulf Arab States – and Dubai, United Arab Emirates, in particular – are becoming a gateway for business from India, as well from North Africa, the Levant, Saudi Arabia and Europe.
The Gulf’s oil-fuelled economic boom has created a surge in financial liquidity. Its emerging market status has attracted significant capital from high-profile international investors. And agile home investment – not least Dubai’s building frenzy to secure its future as a world tourist destination – has laid foundations for the region to become an international hub for business exchange.
With Asia’s biggest economies competing to secure energy imports from the Gulf to fuel their own growth, there’s talk of a ‘New Silk Road’ – goods and services are once again flowing along the route that connected the Middle East and Asia until the 13th century.
If more evidence were needed, the MENA (Middle East and North Africa) region now ranks as the fastest-growing economy behind China and India – it recently clocked up one of its best performances since its heyday of the 1970s.
The Middle East – roughly defined as the area from the south-eastern Mediterranean Sea to the Arabian Gulf – encompasses more than a dozen oil-producing countries with distinct economic and social characteristics, but at least one in common: young, rapidly growing populations in need of employment. Only 4% of the population is over 65 as opposed to 12.5% in the US.
With governments aware that they can no longer provide full employment for their citizens, an enormous need for private-sector jobs is fundamental to their strategic plans to attract foreign investment.
“Their primary need is the technology required to create long-term economic opportunities for their citizens,� says managing partner Rajiv Saxena, of UHY Saxena in Dubai. “For anyone, like myself, tracking Dubai’s development as an international hub and gateway for business exchange, it soon becomes apparent that there are attractive opportunities for sector interests across the board – particularly in construction, telecommunications and financial services – not least to service the expatriate community.�
The British, for example, now make up a substantial 10% of the population. Less than 50% of the population is Arab. Large groups of the community are Indian, Pakistani and South East Asian.
Dubai itself is billed as a “global city under construction� by its ruler. It is part of a larger vision of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. “People think we‘re just building Dubai,� he says. “But no, we’re accommodating 1.5 billon people in the central world between the East and West. When we say the West, we think of Europe and America. When we say East, we think of Japan and China.�
Telecommunications is a prime sector opportunity. With the decision by the UAE government to open its telecoms market to additional operators, every country in the region is heading towards market liberalisation, generating massive opportunities for companies operating in network development, satellite applications, and infrastructure solutions.
According to industry analysts Arab Advisors Group, even though penetration of communications infrastructure is increasing throughout the Arab world, the region still lags behind with broadband Internet access. However, this gap is expected to narrow soon, due in large part to significant telecoms investment in the region.
But budding investors would have to move quickly – regional telecom operators raised a combined USD 14.7 billion from investors in the first four months of 2007 alone to support expansion and acquisition strategies.
A recent World Bank report endorses this regional growth. The report, The Middle East and North Africa Region, Economic Developments and Prospects 2007, states that the region “for the fourth year in a row enjoyed a robust pace of economic growth. Strong oil revenues, along with European recovery, a more dynamic private sector, and a shift toward more investment provided the momentum needed for another year of first-rate economic performance�. GDP increased by 6.3%, up from 4.6% in 2004.
�It is clear that what attracts business to the Middle East is the dynamic and viable trading environment, and the bridge it offers
between time zones,� says Saxena. “In Dubai, in particular, the creation of the Jebel Ali Free Zone draws private investors and commercial businesses from around the world, tempted by exemption from import, export and personal taxation; business laws allowing 100% foreign ownership; total repatriation of profits; and the consistent and easily convertible currency.�
In the past in Dubai, says Saxena, petrodollars tended to be
deposited in international banks and left to accumulate without being actively managed. Today, new Arab financial institutions,
many of them based in Dubai, are doing the investing themselves. Government investment arms are also diversifying across asset classes and regions. Islamic investment is showing strong momentum. The world’s appetite for Shari’ah-compliant investment products that invest outside the Muslim world is increasing.
.
A significant amount of Gulf money is going to India and a significant amount of Indian trade going through the Gulf. The Middle East, it seems, has much stronger cultural ties with the Indian subcontinent than China.
“Economic and business indicators point to a bright future as the region builds linkages that draw the countries within it further into the global economy,� says Saxena. “Cultural differences – including the blurring of state treasury and private finances, and top-down economic policy set by a closed ruling family or ruler – are being smoothed over by an expanding class of cosmopolitan facilitators with one common aim: prosperity and profit. So far, it’s a game in which all sides are winning.�
Contact: Rajiv Saxena
Email: rs@uhyuae.com
 top
|
