Abraaj Capital

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Strictly Private Confidential
Abraaj Capital
Middle East, North Africa South Asia (MENASA)
- Taking Stock in a Global Downturn
International Insurance Society, Amman, June 2009
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Abraaj Capital
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Abraaj Capital
Abraaj Capital (Abraaj) is a leading private
equity firm in the rapidly growing economies of
the Middle East, North Africa, South Asia
(MENASA) region Abraaj was founded in 2002 and
is headquartered in the Dubai International
Financial Centre, where Abraaj Capital Limited is
incorporated and regulated and licensed by the
Dubai Financial Services Authority Abraajs
network of shareholders, investors and
intermediaries has exceptional influence in the
financial and business communities across the
region
The Numbers
US 5.9 bn funds under management as at 31st
December 2008 US 6.9 bn cumulative funds
raised US 2.9 bn cumulative distributions
35 Investments 11 countries 20
exits to date
28 different nationalities
US 1.6 bn of total distributions to investors in
2008
Note Exits include those undertaken by Abraaj
senior management during their time at Cupola
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Regional presence
Saudi Arabia
Turkey
Pakistan
Qatar
UAE





Turkey
Denotes 5 Abraaj offices located in
Dubai, Cairo, Istanbul, Karachi, and Riyadh
Pakistan
Egypt
UAE
Saudi Arabia
Egypt
Jordan
India
Lebanon
Oman





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Note Distribution of companies across different
countries is based on the location of their
headquarters. Many of the above companies have
pan-regional operations.
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Where Are We Where Are We Going?
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From sub-prime through the financial sector to
real economy
Total losses estimated at US 4.1 trillion(1),
with nearly 3 million jobs lost in the US
Financial Institutions
Real Economy Impact
(1) Source IMF
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Socio-Political Impact
Unprecedented circumstances pose a test of global
leadership whose actions will determine the
outcome of the current crisis
are they good enough? Is there a Churchill, FDR,
Mandela in the making?
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Norms and Values
Consumers
The Next Crisis
Climate Change
Redefinition of Norms
Regulation
Corporate Social Responsibility
Employees
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Emerging markets vs. developed markets
The economic crisis is leading to a rethinking of
the traditional risk paradigm
Developed Markets Risks
Emerging Markets Risks
Political instability
Market fundamentals
Pre-Crisis Thinking
Low Risk Low Growth
High risk High growth
Structural issues
Legal / Regulatory
Developed Markets
Emerging Markets
Currency (F/X)
Environmental
High Risk Low Growth
High Risk High growth
Market fundamentals
Legal / Regulatory
Post-Crisis Thinking
Counterparty
Black Swan moment risk came from where
traditionally it was least expected the model
needs to be re-thought
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Recession is upon us but how long will it last?
Diminishing Sine Wave
Sharp and Staggered
Sharp and Shallow
Paradigm Shift
Long and Contracted
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MENASA
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Introduction to MENASA
MENASA has a combined GDP of US 3.7 trillion
growing at 4.8 p.a., and a population of 1.6
billion
The MENASA Region
2008 Population (million)
Turkey
Morocco
Tunisia
Lebanon
Jordan
Kuwait
Qatar
Pakistan
Algeria
Libya
Bahrain
Egypt
UAE
India
Saudi Arabia
Oman
2008 Nominal GDP (US billion)
Significant cultural, political, and economic
synergies have led to strong intra-regional trade
links, labor mobility and investment opportunities
Source Economist Intelligence Unit (May
2009) Note Middle East includes GCC states,
Jordan, Lebanon and Turkey. North Africa includes
Egypt, Libya, Algeria, Morocco, and Tunisia.
South Asia includes India and Pakistan.
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The real economies within the MENASA region
will continue to grow
Three main factors will continue to drive growth
in the MENASA region
Favorable Demographics
Creates demand, facilitates production growth,
encourages reform
MENASA Population
127 million
121 million
Nominal GDP / Cap
2,715
976
2,051
Facilitates economic growth, and creates investor
/ business friendly environments
Creates wealth, facilitates economic growth, and
infrastructure expenditure
Leading to Continued Growth
2008-2013 Real GDP CAGR
Government Reforms Diversification

• Reform agenda is being used to establish
  sustainable growth
• Thirteen MENASA countries are now part of the WTO
• Governments across the region have emphasized
  non-oil sector diversification within their
  economies
• Governments are looking to encourage greater
  private sector participation
• The privatization pipeline in the region is
  expected to exceed US 900 billion in the next
  ten years

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Source Economist Intelligence Unit (May 2009),
McKinsey Excluding MENASA countries China
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Favorable demographics
Young and growing population increasingly focused
on realizing their full economic potential
The demographic shift in population
has unleashed consumption-led growth
Private consumption to grow by US 0.8 trillion
by 2013

• Mobile low cost workforce
• Young and Growing Population
• More than 50 of the regions population is under
  the age of 25
• Immense Wealth Creation
• GCC GDP per capita to increase to over 28,000 by
  2013
• Burgeoning Middle-Class
• c. 31 million households are expected to join the
  middle class between 2006 and 2010 in India alone
• Urbanization
• Rapidly growing urban populations across the
  region

Nominal Private consumption growth (trillions)
7.2

• Main sectors
• Energy
• Food
• Infrastructure
• Healthcare
• Education
• Housing

...matched by a growth in working population
2005
2015
Est. total population 1,562 million
Est. total population 1,800 million
Males
Females
65
55-64
45-54
Working Population 43
Working Population 47
35-44
25-34
15-24
0-14
Almost 175 million people expected to join the
workforce in MENASA over the next decade
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Source Economist Intelligence Unit (May 2009),
McKinsey, Morgan Stanley (September 2008), Abraaj
analysis, United Nations
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Hydrocarbon-based liquidity will support growth
(1/4)
Highest reserves to production ratio in the world
Reserves and production as a of global total
1.6x
0.3x
0.5x
1.1x
Reserves / Production Ratio
Source McKinsey, BP Statistical Review of World
Energy 2008
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Hydrocarbon-based liquidity will support growth
(2/4)
with budgets balancing at US60 per barrel or
less
GCC breakeven budget oil price
based on official 2009 budget targets Source
Merrill Lynch (April 2008)
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Hydrocarbon-based liquidity will support growth
(3/4)
and consensus oil price forecasts above US 60
per barrel
Consensus Oil (Brent) Price Forecast (US per
barrel)
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Source Bloomberg consensus of analysts (May 2009)
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Hydrocarbon-based liquidity will support growth
(4/4)
resulting in continuing hydrocarbon driven
liquidity at several price points
Cumulative GCC Oil Revenues (US trillions)
Source McKinsey
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Government reform diversification
Government action has played an important role in
supporting regional growth

• Significant governmental investment and reform
  efforts
• High levels of infrastructure investment and
  government spending in attempt to diversify
  economies and facilitate job creation
• More than US 2.6 trillion worth of projects
  planned in the GCC alone
• King Abdullah Economic City in Saudi Arabia to
  create 800,000 jobs with seaport, light
  industries, tourism and financial services
• Move to knowledge-based economies
• Monetary and structural support for knowledge
  economy sectors (healthcare, information
  technology, media, telecommunications etc.)
• Set up of specialized infrastructure Dubais
  Knowledge City, Jordans Education initiative,
  and over 400 SEZs in India primarily catering to
  IT and related sectors
• High level of investment in primary and secondary
  education (e.g. 25 of UAE budget allocated to
  education spending)
• Reform agenda has spurred continued regional
  growth
• A generational change in the leadership of GCC
  countries has set the stage for the modernization
  of local economies
• Significant liberalization and privatization
  efforts in the banking, telecom and real-estate
  sectors have taken place
• Independent capital market regulators have been
  established and formal partnerships with leading
  global exchanges have been developed
• The Jordanian government plans to implement the
  National Investment Strategy to ease
  bureaucratic restrictions and overhaul the tax
  system
• The Egyptian government has launched a series of
  reforms including a new taxation law lowering
  corporate taxes and the establishment of numerous
  economic free-zones, causing FDI flows to grow
  20x between 2002 and 2007

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Source McKinsey, MEED Projects
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Structural demand-driven opportunities
Infrastructure
MENASA has experienced historic under-development
in key sectors creating pent up demand and high
growth potential
Oil Gas (Global Production vs. Global Reserve
)
Low Cost Carrier Market Share of Short-haul Market
Gap 16
Gap 22
Gap 13
Power Generation Capacity (Gigawatts)
Petrochemicals (MENA of world Ethylene Capacity)
2005-2010 CAGR 14
Investment requirement US 50bn
Investment requirement US 90bn
(by 2017)
(by 2015)
(by 2030)
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Source McKinsey, Economist Intelligence Unit,
Citi Research, Abraaj Capital Analysis
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Structural demand-driven opportunities
Healthcare Insurance
The healthcare and insurance industries in the
region have suffered from similar
underinvestment, lagging behind western
counterparts
Medical Labs (Lab Tests per Capita)
Healthcare (Total Hospitals Required)
Gap 400 M Tests
Gap 1.5 B Tests
Gap 39,000Hospitals
Insurance Penetration Total Premiums of GDP
(2007)
MENA Life Insurance Penetration 2007 ( of
Population)
Gap 3.7
Gap 5.7
Source World Bank, World Health Organization,
McKinsey, Swiss Re Sigma Note Hospital
calculation based on 1.2 4.1 beds / 1000
population in MENASA and OECD, respectively, as
well as current MENASA beds / hospital ratio
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Outlook on Jordan
Despite a recent slowdown due to decreased
tourism and trade, Jordans long-term growth
prospects remain strong
Macro Economic Data
Outlook

• Economy has recently achieved strong real GDP
  growth rates hovering around 6
• According to EIU, 2009 real GDP is forecast to
  grow at 2.6 as the prospects for the services
  sector, including tourism, continue to worsen
• 5 year growth however projected at 3.7, well
  above western countries, driven partly by
  successful reform agenda
• Foreign direct investment is also expected to
  decline in the short term given the lack of oil
  wealth being generated in the Gulf states
• The sharp falls in commodity prices as well as
  the countrys expansionary fiscal policy should
  support consumer demand
• Recent strengthening of the dollar, coupled with
  fall in commodity prices will also lessen
  inflation, with 2009 inflation expected to be 4
  compared to 15 in 2008
• The Central Bank is committed to maintaining the
  Dinar / USD peg as it has instilled monetary
  confidence and has not harmed competitiveness
  (mostly due to US role as largest export
  partner)
• Current account deficit expected to decrease
  sharply as commodity prices decrease and
  re-export trade in Iraq grows
• Expected to decrease from US9 billion in 2008 to
  US2.5 billion in 2009/10
• Long term recovery depends heavily on recovery in
  the US given that it is Jordans largest export
  partner

GDP Contribution
Source Economist Intelligence Unit, Department
of Statistics 2007 data
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Outlook on Egypt
Egypt has witnessed significant growth in the
past and is expected to continue growing at an
accelerated pace given favorable demographics and
increased government reform
Macro Economic Data
Outlook

• GDP/capita of US 2,093 grown at 18 pa over past
  3 years
• The banking sector remains strong in the face of
  the global credit crisis
• The economy is underleveraged, with private
  sector credit at 41 of GDP
• Egypt has built up significant net foreign assets
  since 2003 that will be drawn down as the current
  account deteriorates
• Recent reform initiatives have allowed government
  policy to be much more liberal than in the past
• Egypt is a consumer led economy, stimulated by
  investments, with its long term prospects assured
  by demographics and strategic location
• c.75 of economic growth driven by local demand
• The domestic consumer is largely un-levered with
  low penetration rates of consumer finance
  products, credit cards and mortgages (1 of GDP)
• Declining inflation will enhance purchasing power
  and drive up domestic demand
• Favorable factors of production will allow Egypt
  to attract FDI in the long-term
• Revised GDP growth of 08-13 CAGR 6 still well
  above global and regional average

Demographics as a key growth driver
Egypt Population Breakdown by Age (millions)
of Total
2005
2025
0-19
44
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38
20-44
45-64
18
15
65
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Source Economist Intelligence Unit (May 2009),
EFG Hermes (Jan 2009), United Nations
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Outlook on Algeria Morocco
Outlook dependent on global recovery although
natural resources will provide a strong buffer,
particularly for Algeria
Morocco Macro Economic Data
Algeria Macro Economic Data
Morocco Outlook
Algeria Outlook

• Morocco will record 2 growth this year
  officially, with risks on the downside given its
  dependence on the global economy.
• The poor outlook for European growth poses
  significant risks to Moroccos economy, since the
  euro zone is its main export market and employs
  some 2.5m Moroccan expatriates.
• A number of factors are pushing the market down
  including lower FDI, lower remittances (9 of
  GDP), lower tourism inflows and lower exports.
• Further to this the economy will continue to face
  risks associated with its dependence on rain-fed
  agriculture, which typically accounts for some
  14 of GDP but employs 42 of the workforce
• Over the longer term the non-agricultural
  sector's role will gradually increase as
  manufacturing develops and construction expands
  on the back of government housing and
  infrastructure projects, partly offsetting
  contraction in private-sector tourism
  developments.

• Algerias growth will slow down to just over 2
  in 2009
• Fundamentals however remain strong with close to
  140bn in reserves, keeping domestic demand
  afloat even as hydrocarbon income shrinks due to
  OPEC cuts and lower prices.
• Expect continued expansion of public works and
  construction.
• The business environment has deteriorated further
  on both investment and sales fronts. New
  restrictions are making a protectionist market
  even more complicated to manage.
• Economic growth is expected to accelerate in
  2010, to 4.5, on the back of a modest recovery
  in export markets and stronger hydrocarbons
  output as many large-scale projects begin to come
  on stream, including a gas pipeline to Spain

Source Economist Intelligence Unit (May 2009)
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Outlook on Saudi Arabia
Reform led growth continues to drive the largest
GCC economy
Macro Economic Data
Outlook

• Saudi is the largest economy in the GCC, both in
  terms of GDP and population
• Rapidly growing population of c. 25 million,
  growing at 2.5 pa (median age 22)
• GDP base of US 469 billion with real GDP growth
  of 4 in 2008
• Saudi is well positioned to weather the current
  financial crisis
• Has saved 76 of the oil windfall between 2002
  and 2008
• Low public debt at 13.5 of GDP
• Strong and growing domestic market accounting for
  a large portion of GDP
• Saudi has initiated a significant reform campaign
  to attract foreign investment and increase the
  countrys global competitiveness
• 2008 World Investment Report highlighted Saudi
  as the regions most attractive destination for
  investment
• Increase in net FDI inflows from US 2 billion in
  2004 to estimated at US 16 billion in 2008
• Despite potential slowdown, Saudi still seen as
  attractive market
• Revised GDP growth of 08-13 CAGR 2.8 still
  well above global average

GDP Contribution
Source Economist Intelligence Unit (May 2009),
CIA Factbook, Saudi Arabian Monetary Agency,
Merrill Lynch (Feb 2009)
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Outlook on the UAE
A push towards diversification has resulted in
the UAEs growth increasingly being driven by the
services sector with the non-oil sector
accounting for over 65 of GDP
Macro Economic Data
Outlook

• The UAE has emerged as the 2nd largest economy in
  the GCC and one of the most important in the
  region
• Diversified economic base with non-oil sector
  contributing greater than 75 of total GDP, with
  growth driven by services sector
• The UAE has become a regional hub for finance,
  tourism and logistics
• The UAE is positioned to weather the current
  crisis, however the main risk continues to be
  weakness in oil price
• Current account surplus of 5 of GDP is projected
  if oil averages 50 / bbl, while a deficit of 14
  projected if oil averages 35 / bbl
• However, the UAE sovereign wealth funds had
  accumulated c. US 600-900 billion in assets
  before the credit crisis
• Banking sector vulnerable in the short term given
  lack of liquidity, real estate exposure and
  capital markets decline
• Rebound is possible given continued government
  intervention, correction in real estate market
  and rebound in capital markets
• Historically, high inflation was driven by
  increases in the prices of food and commodities
  and most importantly sharp rises in real estate
  prices. It is estimated that in 2007 housing
  expenditures contributed to 65 of inflation
• Impact of correction in real-estate prices and
  strengthening US expected to ease inflationary
  pressure
• Inflation expected to decrease from 20 in 2008
  to 5 in 2009
• Revised GDP growth of 08-13 CAGR 4 still well
  above global average

GDP Contribution
Source Economist Intelligence Unit (May 2009),
HSBC, Merrill Lynch (Feb 2009), Global Research
(November 2008), HC Brokerage (March 2009)
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Dubai Overview Highlights
Dubai is considered the regions commercial,
financial services and tourism hub as it
continues to build landmark developments such as
the Burj Dubai and Dubai Metro
GDP Breakdown by Sector (20061)
Primary Growth Drivers
Jebel Ali Port

• Infrastructure development
• Dubai International Airport 10th busiest in the
  world
• Light Rail Line - Phase 1 to begin operation in
  2009
• Special Economic Zones
• Allows foreign companies to establish operations
  in Dubai, less regulations and reduced
  bureaucracy
• The most important being Jebel Ali Free Zone, one
  of the largest container ports in the world
• Hydrocarbon Revenues
• Indirect beneficiary of increased oil prices as
  GCC investors continue to bring oil revenues to
  the city
• Real-Estate
• Free-hold concept allowing foreign equity
  ownership in Dubai, drives increased liquidity

Downtown Burj Dubai
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Source TRI Consulting 1 Latest available data
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Outlook on Turkey
Underlying fundamentals ensure a strong long term
outlook for Turkey, which is on track to become
the 9th largest economy in the world by 2050
Outlook
Macro Economic Data

• Short Term Outlook Turkeys high current account
  deficit gives it a high beta to global economic
  downturns. Accordingly, the currency has
  substantially depreciated since September of last
  year but somewhat recovered in the past 2 months
• However, relative to 2001 the fundamentals are
  stronger with a healthy banking system and
  manageable public debt position
• Demographics Turkey benefits from one of the
  youngest populations of any emerging market
• Productivity 25 of Turkeys labor force is
  still employed in the agricultural sector
  however, a period of increasing urbanization
  (from 25 in mid-1900s to 70 today) will lead to
  further increases in productivity and employment
• Reform Turkeys economy is well positioned
  long-term due to a range of successful economic
  policies enacted after the 2001 crisis and
  political reforms executed in pursuit of EU
  membership

Turkey expected to emerge as the ninth-largest
economy in the world by 2050
GDP In 2050 (US trillions at 2007 prices)
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Source Goldman Sachs (October 2008), Economist
Intelligence Unit (May 2009)
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Concluding Thoughts
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Part of a pattern?
Paradigm shifts continue to alter the global
economic landscape and have resulted in Asia
regaining its position as the worlds dominant
growth engine
Agricultural Productivity
Industrial Productivity
Information Age
Distribution of Global GDP
Human Resources
Includes USA, Canada, Australia and New
Zealand Source Sir Paul Judge
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The outlook
MENASA will be the 2nd fastest growing region in
the world over the next 5 years
2008-2013 Real GDP CAGR
Source Economist Intelligence Unit (May 2009)
Excluding MENASA countries China
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MENASA in the long term
The MENASA region is projected to overtake the US
as the worlds 2nd largest economy by 2050
GDP (US trillions at 2007 prices)
The world in 2050
GDP (US trillions)

• however, challenges lie ahead
• Demographics a double edged sword
• Continuing reform balance between political,
  economic social
• Conflict and geo-political instability
• Oil dependence / economic diversification
• Climate change

The world in 2007
Source Goldman Sachs (November 2008) MENASA
excludes Jordan, Lebanon, Libya, Algeria
Tunisia. Latin America includes Argentina,
Brazil, Chile, Colombia, Mexico, Peru, Paraguay,
Uruguay Venezuela
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Disclaimer
The information contained in this presentation is
given without any liability whatsoever to Abraaj
Capital Limited, any of its affiliates or related
entities or their respective members, directors,
officers or employees (collectively "Abraaj") for
any loss whatsoever arising from any use of this
presentation or its contents or otherwise. No
representation or warranty, express or implied,
is made or given by Abraaj as to the accuracy,
completeness or fairness of the information or
opinions contained in this presentation. In
particular, no representation or warranty is made
that any projection, forecast, calculation,
forward-looking statement, assumption or estimate
contained in this presentation should or will be
achieved. There is a substantial likelihood that
at least some, if not all, of the forward-looking
statements included in this presentation will
prove to be inaccurate, possibly to a significant
degree. The information contained in this
presentation does not constitute investment,
legal, tax or accounting advice. Recipients of
this presentation should conduct their own due
diligence and other enquiries in relation to such
information and consult with their own
professional advisors as to the accuracy and
application of the information contained in this
presentation and for advice relating to any
legal, tax or accounting issues relating to a
potential investment in the MENASA region,
including in respect of a fund managed or
sponsored by Abraaj. This presentation does not
constitute a recommendation to invest in the
MENASA region, or in any such fund. Certain
information contained in this presentation
concerning economic trends and performance are
based on or derived from information provided by
independent third party sources. Abraaj cannot
guarantee the accuracy of such information and
has not independently verified the assumptions on
which such information is based. Abraaj disclaims
any responsibility for any errors or omissions in
such information, including the financial
calculations, projection, and forecasts in this
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Investing in Foresight
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CENTRE, GATE VILLAGE, BUILDING 8, 3rd FLOOR,
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