Sezer Sherif, Founder and CEO of investment group Vector Capital , explores the increasing appeal of the UAE for investors.
Catastrophe And Opportunity
The investment landscape has, for the past year, been characterised by uncertainty. It does not take a degree in economics to recognise that global pandemics, and their associated social restrictions, do not cultivate a desire for reckless speculation or needless risk-taking. It is doubtless for this reason that, according to a recent report from the United Nations Conference on Trade and Development, global foreign direct investment (FDI) suffered a total collapse during the course of 2020. The fall of 42% took total FDI from $1.5 trillion in 2019 to approximately $859 billion.
Though the upsides to such catastrophes are neither numerous nor overt, these challenging economic waters provide something of a litmus test for prospective investors. According to James Zhan, director of UNCTAD’s investment division, “[i]nvestors are likely to remain cautious in committing capital to new overseas productive assets.” There is, however, a more rewarding outlet for this kind of caution. The trials occasioned by the pandemic can be understood as a simplifying force in a world of overseas investment that can – especially for first-time investors – feel difficult, complex, and inaccessible. Where does a new investor begin? Lengthy and time-consuming analyses of various countries’ suitability for investment can instead be whittled down, at least in terms of initial impressions, to a single, straightforward metric: how well have they performed in pandemic conditions?
The principle of gauging investment potential through pandemic-related data has been neatly exemplified in a recent Tweet published by the Vice President and Ruler of Dubai, Sheikh Mohammed bin Rashid. He wastes no time in signposting the favourable contrast between the aforementioned global FDI figures and those currently enjoyed by the UAE. As he notes, “[d]espite the UN’s estimates that global foreign direct investment flows decreased by 42% in 2020 over COVID-19, the UAE witnessed 44% growth in FDI flows in 2020.” This kind of stark contrast demonstrates that the ongoing economic crisis can point the way towards fruitful investment opportunities, including FDI mainstays such as real estate, retail trade, manufacturing, and mining, alongside exciting high potential sectors including aeronautical services, natural resources management, and renewable energies – especially through, per Santander, the country’s huge photovoltaic potential.
The Continued Rise Of The UAE
The UAE’s suitability for photovoltaics is unsurprising: it is a region doused with eternal sunshine which encompasses the natural beauty of its sand dunes and the opulent reaches of its skyscrapers alike.
Having spotted data that suggests that the UAE is an attractive region for investors and recognising the physical attractiveness which makes the region worth forming ties with, it is worth considering what economic qualities make the country so favourable. The UAE’s remarkable growth in FDI is reflected in the 2021 Kearney FDI Confidence Index, in which the region was promoted from 19th place in 2020 to 15th in 2021.
A recent report from PwC Middle East places recovery and growth first on its list of predicted economic themes for the UAE in 2021, noting that the country is likely to “return to economic growth on a real GDP basis.” In fact, since the publication of the above report, the International Monetary Fund (IMF) has considerably upgraded the UAE’s growth forecast for 2021 from 1.3% to 3.1%.
Of course, no region can provide iron-clad economic stability. Ongoing global moves towards decarbonisation, for example, may have troubling repercussions for oil-rich economies like that of the UAE. Moreover, as an article from the World Bank suggests, the UAE’s “large tourism industry” will, in line with that of most parts of the world, continue to be impacted by the pandemic.
A Confident Future
On the whole, however, investor confidence will be heightened by the UAE’s moves to capitalise upon its favourable position for prospective investors. June 1 2021 represents a notable landmark for the UAE as a hub of investment opportunity: this date sees the launch of an amended Commercial Companies Law which will, as Gulf Today reports, “make the UAE a more investment-friendly destination” by allowing companies to apply for business licences without requiring a UAE national to act as a 51% shareholder.
As Economy Minister Abdulla Bin Touq Al Marri has said, this move gives the UAE a “competitive edge”, allowing for the free flow of foreign direct investment and facilitating the movement of money in the region. Other recent measures to attract investment for the UAE include the ability for investors to receive 10-year visas and a path to full citizenship. The country is evidently committed to nurturing a spirit of free entrepreneurialism which can only strengthen its attractiveness for investors, while its offers of extended visits can only sweeten the deal for those interested in the UAE’s expansive shopping malls, growing upscale dining scene, and unique architecture.
With a background in finance and economics, Abdullah has spent the last 18 years of his professional career working in various sectors in Kuwait. He has previously held senior positions at Sarh Real Estate Company, The Roots for Brokerage (Egypt), Danah Al Safat Foodstuff Company and at Al-Ezdehar Real Estate in Lebanon. His extensive experience has given him plenty of insights into different sectors and regions out of Kuwait. Today, in addition to his position as Al Safat Investment's Chairman, he is also the Head of Committee of the Politics and Economics Committee at the Union of Investments Company (UIC) and is a board member of local establishments like UIC and Shuhaiba Industrial Company, as well as the Executive Manager of Gulf Cable and Electrical Industries Co for the investment sector. It is indeed inspiring to see someone of his calibre and young age achieve so much in the past few years. His professional achievements are not only limited to the ones on his resume - the 35-year-old award winner also has a long list of certifications in Marketing, Finance, Investment Management and has completed a Financial Services Program from Harvard Business School. He is currently pursuing an EMBA from the London School of Economics. AlTerkait lives by the words of Benjamin Franklin: “An Investment in knowledge pays the best interest”. Education has always been at the forefront of his priorities and his hunger for learning never ceases.
There are not many leaders who, at the very young age of 29, are able to take charge and turn a company around in the middle of a financial crisis. Al Safat Investment was going through a rough couple of years prior to 2013 when AlTerkait was appointed Chairman of the company. Debts were high, employees were in a stressful situation, shareholders and clients were extremely unhappy and there was immense pressure from the banks. At the time, it seemed like salvaging the company and bringing order out of this chaos would be a tedious challenge. Al-Safat Investment Company underwent comprehensive restructuring and embedded the institutional aspect in all of its businesses while setting clear goals with the efforts of the company’s board of directors and the executives. The company’s direction and performance improved as a result. Thereafter, Al Safat saw three consecutive years of profits due to the restructuring initiatives of Abdullah, the senior management and other departments.
Al Safat Investment is an ideal example of how teamwork could yield impressive results. The Chairman strongly believes in teamwork and encourages all departments to work together. Battling all fronts, he has put in efforts to establish a gender-equal atmosphere in the company by hiring qualified women to fill roles in the human resources and other departments of investments. His initiatives are not only beneficial for the bottom line, but they are also in tandem with his ethics and strong beliefs in Corporate Social Responsibility. Last year, for example, the company carried out a very successful Ramadan event with all employees and management personally visiting the group’s subsidiaries and distributing food packages to the labourers who work for the companies.
Al Safat Investment Company was founded in 1983 and has grown rapidly since then. All investments and financial services held or offered by Al Safat are in accordance with the highest standards of Islamic Shariah compliance, which is supervised by a CMA-Certified Islamic finance consultancy company. The company invests in real estate, financial, healthcare, industrial, energy and other economic sectors through participation in the establishment of specialised companies or purchase of stocks and bonds in these companies, or by the management of projects in various sectors.
The company is about to establish a mass investment system capable of generating substantial revenues, to be allocated for venture capital. In addition, the latter will target the investment with some strategic shares in many Kuwaiti startup companies. Part of AlTerkait’s vision for Al Safat’s future is to be involved in SMEs and to support young entrepreneurs. The Chairman strongly believes that leaders should support the next generation of leaders in the business world and promote a good relationship between corporate and small businesses. Kuwait’s 2035 vision plans to attract KD 400million to various sectors including petrochemicals, information technology, services, and renewable energy. The country plans to promote an atmosphere that enables SMEs to participate in the nation’s economic development. The National Fund for Small and Medium Enterprise Development is one of the country's key initiatives tasked with enabling the private sector to drive growth. With nearly 80% of the population still employed in the government sector, there has been a rise in young entrepreneurs and startups. Through Al Safat, AlTerkait would like to support these small businesses by offering financial advice and services and possibly a co-working space for those who work from home or coffee shops. He hopes his initiatives will help pave the way for a better future for the economy of Kuwait, while being in line with the vision of His Highness, Emir of Kuwait, to transform Kuwait into a financial hub. While supporting startups, the Chairman will also be personally looking into investment opportunities for the company, in SMEs that stand out, particularly in the innovation and tech space. 2018 had some noticeable developments in the investment activities area at both local and regional levels. This targeted the startups, tech companies and VC funds resulting in a significant rise in investment deals. The Middle East and North Africa region managed to conclude 366 deals with a total investment of USD893 million, subject to the indication of some independent statistics concerned with following up the activities of venture capital. Subsequently, there was also a notable rise in Mergers and Acquisitions declared by the commercial entities and multiple sectors. AlTerkait predicts that 2019 will witness the same trending rise of such deals, in addition to the notable growth of the investment funds and the finance sector targeting startups and SMEs. These trends will continue to attract the interest of investment and financial companies who would be keen to capitalise on this vital and promising sector.
The company is in the process of rebranding with the view of transitioning from traditional to modern while offering multiple new investment products and services to its clients. When it comes to the securities market, Al Safat Investment Co. holds a license issued from Capital Markets Authority to practice managing the investment portfolios business in its various kinds for the benefit of the company’s clients, in Kuwait and globally. The company has a team that specialises in working to achieve profitable returns on the managed portfolios of the company. The total managed funds account for over USD 120 Million as of January 2019. It manages local and regional investments of USD 300 Million. The company is also working on creative strategies and solutions in partnership with international consultants in order to provide the best opportunities for the benefits of its corporate and private individual clients.
The administration of Al Safat Investment Co. is applying a secure and comprehensive strategy while managing the direct investments and the managed financial portfolios for the clients. Such portfolios target the operational companies, the leading stocks, fast-growing stocks and constant revenue stocks together with keeping up the ultimate geographical and sectoral distribution. With the company’s direct portfolio being distributed over seven sectors within five countries, the intent is to reduce the accompanying risks for these investments in addition to protecting the direct and client portfolios from the severe fluctuations of the market and the vulnerability the local and regional securities markets may be exposed to. Al Safat applies a conservative and safe strategy in the management of direct investments; managed portfolios of customer accounts are looking to further privatise government entities after the privatisation of the stock exchange and is also looking forward to being a listed company again.
Some highlights of Abdullah’s strategy for the company are:
- Set minimum investment returns that meet the company’s cost of capital.
- Grow the equity base through solid constant profits and cash dividend distributions to shareholders.
- Divest any non-performing assets.
- Ensure that the investments are aligned and maintain synergies.
- Improve management control which is a key factor.
- Set adequate policies and procedures within the group.
- Apply proper corporate governance for the best interest of the shareholders.
Under the guidance of Abdullah AlTerkait, represented by the board of directors and the executive management, the company is seeking to restructure the financial position, address the recent financial issues, leave the unprofitable and non-strategic investments, re-employ the investments in some strategic sectors and instruments, while also promoting the expansion activities of associated companies. The Chairman hopes this plan would benefit the years to come so that a concrete plan will be established for 2023. In fact, through its subsidiaries, the company is currently focusing on the various operational and industrial activities and is seeking to establish a new chemicals factory in Kuwait. Similarly, they have also developed an interest in the Oil and Gas sector and are looking for opportunities to invest. The company has a subsidiary called ‘The Carpet Factory’ which is looking to expand and invest in state-of-the-art technology to improve business and its products. Real estate is another sector AlTerkait is keen on embarking on and is in the process of developing a commercial and industrial complex in the Al-Ahmadi Industrial area of Kuwait. The group is also participating in the health sector through Kuwait Hospital, which will start operating this year and is also looking for acquisitions in various sectors, especially since there are attractive investment opportunities with outstanding profits in the local market. Abdullah AlTerkait and the management of Al Safat hope to reach their ultimate goal of being amongst the best investment companies in Kuwait in the next five years.
Website: https://alsafatinvest.com/
In 2018 RAK ICC made two key appointments to its team. The appointment of Alan Bougourd as Registrar in February was followed in April by the appointment of Dr Sameer Al Ansari as CEO. These appointments were made as part of the firm’s journey towards achieving global brand recognition as a premium jurisdiction for company formation.
Dr Sameer, a UK qualified Chartered Accountant brings over 30 years of expertise and deep industry knowledge in private equity and investment banking, having managed private equity (PE) funds, investment banks (Shuaa Capital) and investment companies (Dubai International Capital). Dr Sameer was also a Board Member of Dubai International Financial Centre (DIFC) for 12 years.
Commenting on Dr Sameer’s appointment at the time, RAK ICC Chairman, His Highness Sheikh Ahmed bin Saqr Al Qasimi, said: “We are extremely pleased to welcome Dr Sameer as the CEO of RAK ICC. As a much-respected senior figure, his time as a Board Member at the DIFC and Hawkamah as well as his extensive knowledge of the private equity and institutional investment markets reflects his tremendous know-how and it is clear that he will lend substantial credibility to RAK ICC.”
Alan joined as Registrar after having worked in the Guernsey financial services industry for over 25 years, including six years as the Head of the Registry on the island and brings the experience needed to ensure world-class standards of compliance and service at RAK ICC. To hear more about their appointments and the company, Finance Monthly speaks with Dr Sameer and Alan.
RAK ICC is responsible for the registration and incorporation of international companies in Ras Al Khaimah - what are the most important legal considerations that should be taken into account by your clients? How can non-residents avoid difficulties when attempting a company formation in Ras Al Khaimah?
Alan Bougourd: The most important legal considerations to be taken into account, once establishing a sound rationale for operating an International Business, are the stability of the jurisdiction and the legal certainty it provides. As the leading business jurisdiction in the region, the UAE provides a business-friendly environment in a strategically important location. RAK ICC operates under Common Law legislation and companies have access to the Common Law Courts of the Abu Dhabi Global Markets (ADGM) and the Dubai International Finance Centre (DIFC), as well as the local courts in Ras Al Khaimah.
What would you say are the typical issues that RAK ICC faces when advising during the first stages of company registration and incorporation?
Sameer Al Ansari: I am pleased to say that the formation of a RAK ICC company is a relatively straightforward process. We work in close partnership with a large number of agents. Some of them are global firms and others are local businesses, so there is an agent suited to meet the requirements of every potential shareholder. Some of the global firms will have representation in the location of the shareholders and others deal directly with their clients from the UAE - whatever the scenario, the agents are well placed to explain the benefits of, and the requirements for, a RAK ICC company in meeting the international requirements for compliance.
How are these resolved?
Sameer Al Ansari: Choosing the right agent for the individual circumstances of the client is key to a successful on-going relationship. We are updating our Register of Agents to make this process easier. The agent will of course need to meet its own compliance requirements and many of the these are around identifying the client, the underlying beneficial owner, the activities of the company and the source of funds, so being able to provide this information comprehensively is key to getting the relationship off to a good start.
Alan Bougourd: We know that in addition to the RAK ICC company, clients will be looking to open bank accounts, either in the UAE or in other financial centres or indeed in their locality. RAK ICC and its agents work closely with many banks to ensure that their requirements are understood and can be clearly conveyed to clients. As banks increase their due diligence, the key requirement is an understanding not only of the company but also its counterparties in the jurisdictions in which it operates.
You were both appointed as CEO and Registrar respectively earlier this year – what are the responsibilities that you were tasked with and what are the changes/achievements that are expected from you?
Sameer Al Ansari: As CEO, I am tasked with the transformation of RAK ICC into a leading premium jurisdiction whilst also maximising the growth of value-added, knowledge-based, technically advanced and innovative business practices in Ras Al Khaimah – a task I have enormous confidence in meeting, despite global challenges. Reputational risk is a serious matter for our government, however, we are well positioned to become a high-quality jurisdiction and I am delighted to now be a part of RAK’s journey as it plays an increasing role in this sector.
HH Sheikh Ahmed said at the time of Alan’s appointment that: “Evolving client priorities are driving a shift from traditional offshore centres to high quality jurisdictions. Mr Bougourd’s appointment is a clear signal of RAK ICC’s goal of achieving global recognition as a premium jurisdiction for the provision of company formation services with a focus on high-level compliance in line with global standards. We trust that, together, they will work to further align the strategy of RAK ICC to the government of RAK in its overall drive towards building a diversified economy.”
The appointment of Alan and myself, marks the beginning of a journey and will be followed by key appointments to further develop the reach of RAK ICC in the global marketplace. We will be making key appointments to support development in key markets as we look to develop strong long-term relationships and I would encourage anyone that is interested in developing a relationship with the UAE to contact us. We have seen an increased demand from companies looking to move to a quality jurisdiction that is strategically located and is able to meet their requirements is an efficient, sustainable and cost-effective manner. More and more companies are investing time and effort in our systems, processes and product offering, so we ensure that we continue to develop these strengths.
How have the first few months of your appointments been thus far?
Alan Bougourd: Both of us have very much enjoyed meeting with Agents to understand their requirements and to ensure we build long-term relationships with them, in support of their own business objectives, to our mutual benefit. For Dr Sameer, it has been fascinating to adapt his extensive business knowledge to this key market for economic growth and for me, to adapt living and working in the UAE. However, I am enjoying working in a multi-cultural environment and aligning working practices to the highest international standards.
We both have travelled internationally to understand the requirements of international clients and to ensure that RAK ICC’s practices are aligned to the global market and international registry environment.
Dr Sameer, as the organisation’s CEO, what are your short and long-term objectives and goals for the development of RAK ICC?
Sameer Al Ansari: My short-term objectives are to ensure that RAK ICC is meeting the needs of the market it serves and longer term, we want to ensure that we have the appropriate strategy to take full advantage of the changes to the market for International Business Companies. We recognise that the market will be adapting to changing requirements for transparency and substance and are committed to ensuring that RAK ICC will develop its Regulations and Products to align with the future requirements of this market place. We are at the final stages of developing a five-year strategy which we look forward to rolling out in 2019.
Finance Monthly explores corruption in East African organisations and FBW Group’s efforts towards upholding ethical standards within their offices.
According to the EY’s Europe, Middle East, India and Africa Fraud Survey 2017, companies need to work harder to encourage their staff to successfully uphold ethical standards all over the world.[1]
63% of Africans working in corporate environment believe that regulation has a positive impact on ethical behaviour. In South Africa alone 79% of the population believes that bribery and corruption remains widespread in the country.
One in four Generation Y employees (ages 25 to 35) can justify offering cash payments to win or retain a business. Since Generation Y staff are the future leaders of our businesses, if the problem is not combated now, there is bound to be an overall problem with ethical behaviour in organisations in the future.
Kenya, through the Law Society of Kenya, adopted a code of ethics and standards of professional practice and ethical conduct for its members. These standards were benchmarked against The Commonwealth. However, many professional fields in East Africa remain unregulated.
According to the organisation for Economic Co-operation and Development (OECD), the real estate, construction and associated industries are among the sectors with the highest level of corruption risk: 40% of foreign bribery cases occurred in construction, transportation, and information and communication; however the Uganda 2017 corruption report does not prioritise the construction sector as corrupt.
Organisations like FBW Group are doing their best to uphold ethical standards within their offices. Using the UK Bribery Act 2010 as their baseline, FBW holds itself to world-class standards of anti-bribery.
Their internal policy goes into details like describing what a bribe is, assuring their staff that they will not be retaliated against should they whistle blow against something, intolerance of kickbacks of any sort, and keeping of adequate financial records to evidence payments made to third parties among other things.
Many property developments are compromised because of concessions made by those in charge of putting them up. A number of criminal issues can arise in the construction industry as Architects may find themselves involved in these if they participate in a project on which violations of law take place.
The violations may take the form of giving money to owner representatives in exchange for their agreement to select a certain team’s proposal, trading information to ensure a particular team gets the job and bid rigging.
Joseph Debuni, the Director of Engineering at FBW Uganda, discusses the need for the architectural and engineering firm to adhere to a strict anti-bribery policy to retain the reputation it has developed over the past 20 years.
According to Mary Rose Atubo, FBW Uganda’s Section Manager, it has come to a point where: “many of the people in the industry see our logo and tie it back to the fact that we do not hand out “wheel oilers” and in other words, do everything as the book says it should”.
“In doing so, initially we met our challenges, but we feel that others are slowly adapting to our way,” added Debuni.
“In order to change our narrative, we need to get back to our drawing board, change our attitudes towards work, enhance our productivity and polish up on the outlook of organisations in Africa. Then, we will be a stronger economy and will eventually rebuild the reputation of organisations in Africa.”
Website: http://www.fbwgroup.com
[1]http://www.ey.com/Publication/vwLUAssets/EY-EMEIA-Fraud-Survey-2017/$FILE/EY-EMEIA-Fraud-Survey-2017.pdf
Investors should expect an increase in market volatility and ensure that they are properly diversified, warns the senior analyst at deVere Group.
The warning from Tom Elliott, International Investment Strategist at deVere Group, comes as US President Donald Trump announced Tuesday that the United States will exit the Iran nuclear deal and impose “powerful” sanctions.
Mr Elliott comments: “Investors should expect an increase in market volatility following Trump’s announcement that he is quitting the Iran nuclear deal.
“There will be global stock market sell-offs as the world adjusts to the news.”
He continues: “Due to the severity of the US President’s approach, in the shorter term at least it is likely gold and the US dollar may rally on growing fears of further conflicts in the Middle East breaking out; and risk assets, namely stocks and credit markets, may weaken. Oil may rally strongly.
“We will need to wait for the full Iranian response. However, I expect that they will try to continue to appear the reasonable partner and work with Russia and the Europeans, playing them off against the US If they take a more aggressive stance, oil, gold and the dollar will go considerably higher.”
Mr Elliott concludes: “Geopolitical events such as these underscore how essential it is for investors to always ensure that they are properly diversified - this includes across asset classes, sectors and geographical regions – to mitigate potential risks to their investment returns.”
The recent fall in oil prices will present challenges and opportunities for the Middle East and North Africa (MENA), according to the latest regional report by the Institute of International Finance (IIF).
"While overall growth in the oil exporting countries will moderate and their large fiscal surpluses will decline or shift to significant deficits, low oil prices may encourage these countries to accelerate and deepen structural reform efforts to improve energy efficiency and diversify their economies," said George Abed, Senior Counsellor and Director for Africa and the Middle East." Non-oil exporting countries in the region will benefit from the fall in oil prices through reduced oil import bills and lower fuel subsidies."
The IIF said that the 40% oil price drop from 2014 prices implies a massive shift in external and fiscal accounts. Exports from the MENA oil exporters will be reduced by $300 billion (€280 billion) in 2015. For the Gulf Cooperation Council countries (GCC), the aggregated current account surplus will shrink from $266 billion (€250 billion) in 2014 to about $40 billion (€38 billion) in 2015, and the fiscal position will shift from a surplus of 4.6% of GDP to a deficit of 7.4%.
The IIF projected average growth in the Middle East and North Africa (MENA) region will pick up slightly from 2.8% in 2014 to 3.2% this year, driven by the recovery in Egypt, Morocco, and Iran.
The IIF reduced their growth forecast for the GCC by 0.4 to 3.4% in 2015. However, growth outside the oil sector will remain strong at 4.5%, only slightly lower than last year.
For more on the oil price debate, read our Energy Economics roundtable here
