The Emergence of the Arab Worlds Finance Industry

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The Emergence of the Arab Worlds Finance Industry

• Goals and Challenges within the Global Financial
  Marketplace

Sameer Al Ansari Chief Executive Officer
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Regional Macro-economic Overview
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• MENA Key Indicators (2004/2005)
• GDP 795 billion
• GDP growth 5.2
• Oil Reserves 60 of World Reserves
• Revenue from Oil 450bn (gt500 bn 2006 forecast)
• Population 290 million

• MENA Investment Environment
• High liquidity and low interest rates
• Increase in cross-border regional investment due
  to
• Excess liquidity (60 oil prices)
• Increased confidence in economic environment
• Ease in regulatory red tape
• Repatriation of funds

GCC

• Growth averaged 6.9 in 2005 among the GCC
  countries
• Average real growth rate in the GCC was 7.1 for
  the past three years
• Forecasted 2006 GDP growth for the GCC 5.6
• GCC citizens own an estimated more than 1
  trillion in assets held abroad throughout the
  global financial systems

GCC Key Indicators (2005) Population 36.4
mn GDP 487.29 bn Oil Gas ( of GDP) 42
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Cyclical and Structural Evolution
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• Cyclical Evolution The Oil Steroid
• GCC Revenues from oil are estimated at c.300
  Billion in 2005
• Sustained influx of petrodollars The GCC is
  expected to accumulate a budget surplus of 500
  billion between 2005-2010
• Structural Evolution Sustainable Development
• Renewed cautious strategy to avoid the sudden
  slowdown that followed the 1970s boom
• Economic Diversification and Sustainable
  Development
• Treatment of Current Oil Boom as Temporary
• Inward Approach
• Private Equity and Alterative Asset Classes

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Developmental Implications
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• Led by the excess liquidity and changes in the
  political environment in the region
• Increased demand for regional assets
• Sizeable investments mainly by GCC into other
  Arab countries from Morocco to Jordan
• Refocused strategy by most Arab governments to
  fuel sustainable development
• Linguistic and cultural comfort in regional
  investing

Emergence of Intra-Arab Trade and Development

• Shortage of asset classes has led to hugely
  speculative price rises in regional real estate
  and stock markets
• Opportunities for the development of the industry
  through introduction of alternative asset classes
• New asset classes need to be creative and
  proactive in their approach buyouts and
  acquisition targets very limited
• More significant potential in the development of
  start-up ventures and development plays

Limited Asset Classes, High Asset Valuations
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• Private equity is increasingly perceived as an
  attractive alternative asset class in the region
• Alternative and attractive choice for family
  businesses seeking expansion capital
• Family businesses moving away form non-sharing
  conservative notion towards ensuring the
  longevity of their businesses
• Private Equity considered an informed investment
  vehicle that is trustworthy to undertake such
  involvements
• Increase in government restructurings and
  privatizations
• Freeze on Greenfield IPO's in the region present
  an opportunity for Private Equity to fill the
  pre-IPO investment gap
• Changes in investors perceptions of attractive
  returns after recent crashed in regional stock
  markets

OPPORTUNITIES

• A sea of liquidity awash with newcomers
  scepticism regarding new vehicles managing large
  portfolios have been voiced by more developed
  Private Equity markets
• Infant industry in comparison with more mature
  markets
• Promoting the notion of Private Equity when other
  more common investment options, such as Real
  Estate, as available
• Lack of potential targets impediment for the
  entrance of international PE players

CHALLENGES
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• Development of SMEs
• Development of trend for Private Equity players
  to launch and back new projects
• Increase in sector-specific VC investors and seed
  capital providers or Angel Investors
• Government Regulation of the Finance Industry
• Increased tendency towards a less interventionist
  approach and adopting internationally accepted
  standards across the industry
• Creation of a number of independent public
  markets regulatory authorities such as the DFSA,
  QFA and BMA, which are detached from governmental
  influence
• Different stance towards managing volatility
  such as the Saudi Arabian governments equity
  fund allowing unsophisticated investors a
  risk-free investment opportunity
• Socially-responsible Investing
• Investments in projects are well-explored in
  terms of feasibility to ensure efficient
  allocation
• Significant consideration of the extent to which
  ventures may enhance the well-being of the local
  populations such as infrastructure investments
  and funds

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Dubai International Capital Active Financial
Player
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Direct International Investments Diversification
MENA Investments Inward Development
1.2 bn
272 m
150 m
1.5 bn
10 m
1 bn
19 m
MENA Initiatives Inward Development and
Socially-Responsible Investing
Fund Investments Diversification, Relationship
and Regional Awareness Building

• MENA Infrastructure Fund 500m
• Global Strategic Equities Fund 2bn

In Process