(For other news from Reuters Middle East Investment Summit,
* Banks, telcos among companies outgrowing home markets
* Gulf firms have competitive advantage in some nations
* North Africa a major focus since Arab Spring
* Asia expected to follow
* Gulf's bond investors moving beyond comfort zone
* Bond investors build on business, cultural ties abroad
By Dinesh Nair and Rachna Uppal
DUBAI, Nov 22 Gulf firms and state-backed
investors, flush with petrodollars and facing limited growth
options at home, are stepping into emerging markets in Africa
and Asia to get a foothold in key sectors such as banking and
Investors from the Gulf have for years put their oil wealth
into developed markets in the United States, Europe and Japan.
The consistent focus on less developed countries is new, and may
have big implications for the economies receiving the money.
Emirates NBD, Dubai's largest bank, is one example
of the trend; it is looking at potential acquisitions in areas
including Africa, Chief Executive Rick Pudner told the Reuters
Middle East Investment Summit this week.
"If you can find something that isn't betting the bank on
but is a good opportunity to take advantage of weaker asset
prices in the region, then you need to look at it," Pudner said.
Data from the Arab Investment and Export Credit Guarantee
Corp show the start of the trend. Foreign direct investment
outflows from Arab countries, the vast majority from the Gulf,
rose 24 percent to $24.6 billion last year; FDI outflows from
all nations in the world climbed 17 percent, to $1.69 trillion.
The rise in Arab FDI was striking because it occurred during
the Middle East's Arab Spring uprisings, which might have been
expected to stifle outflows by making most firms risk-averse.
Two major motives are behind the Gulf's investment push into
One is the fact that Gulf companies are outgrowing their
home markets and are being forced to go abroad to continue
expanding. Qatar, for example, has nearly 20 banks catering to a
population of only around 1 million.
Qatar National Bank (QNB), the Gulf state's
flagship lender with a market value of over $25 billion, is in
the advanced stages of negotiations to buy the Egyptian arm of
Societe Generale .
State-owned Qatar Telecom agreed in June to double
its stake in Iraq's No. 2 mobile telephone operator Asiacell to
60 percent for $1.47 billion. It may bid for a stake in Maroc
Telecom, after France's Vivendi's said last
month it had received four expressions of interest for the
potential sale of its 53-percent stake in the Moroccan firm.
The other motive is more positive: Gulf companies think
their skills and backgrounds give them a competitive advantage
in pursuing some emerging market opportunities.
One area which they plan to dominate is Islamic banking,
which is expected to take off in North Africa after last year's
overthrow of authoritarian regimes there.
"We're seeing great interest from Gulf and regional banks
wanting to enter the Libyan market, mainly those operating
according to Islamic sharia," said Jamal Abdelmalek, chairman of
Libya's Bank of Commerce and Development.
Countries such as Sudan, plagued by wars, poverty and a
decade-long conflict with South Sudan, are forbidding to Western
investors but look more accessible from the Gulf because of
cultural and political ties.
Investors in Bank of Khartoum, mostly owned by Gulf banks
including Dubai Islamic Bank, Sharjah Islamic Bank
and Abu Dhabi Islamic Bank, plan to boost its
capital, Bank of Khartoum's General Manager Fadi Faqih said.
He told the Reuters Summit that capital would rise within
two years to 1 billion Sudanese pounds ($225 million according
to the official exchange rate) from 300 million pounds, allowing
the bank to expand its financing of agricultural and mineral
projects in the country.
Pudner at Emirates NBD said Dubai's position as a financial
and trading hub linking several major groups of emerging markets
made it logical for the bank to consider investment in those
"Our longer-term strategy is to use Dubai's growing
influence in terms of location to facilitate trade and capital
flows between Africa, the Middle East and Asia... We think that
Dubai is ideally positioned to link those flows together."
Gulf firms have been slower to move into Asia than Africa,
but many bankers think an Asian push is inevitable and may begin
soon. In February last year, QNB completed the acquisition of a
majority stake in Indonesia-based Bank Kesawan.
With oil prices high, the Gulf has more money to invest
abroad than it can spend on corporate acquisitions and
investments, so some of its cash is starting to move into
emerging market bonds.
Traditionally, the Gulf's bond investors have focused on
their own region. But in September, Gulf investors bought nearly
60 percent of Turkey's first issue of a sovereign Islamic bond,
which totalled $1.5 billion in size.
This was seen as a sign that Gulf funds were willing to
leave their comfort zone, and could be followed by Gulf
investment in bond issues planned by North African states
seeking to repair their state finances after the Arab Spring.
"Gulf investors are already looking at North African
opportunities, with existing relationships strengthened further
by the funding that is being provided by Gulf sovereigns to
their neighbours post-Arab Spring," said Dilawer Farazi,
portfolio manager at Invest AD in Abu Dhabi.
Morocco is considering a possible dollar-denominated bond
issue in coming days and plans to launch its investor meetings
in Abu Dhabi on Thursday this week. "It's where the money is," a
regional banker said.
Follow Reuters Summits on Twitter @Reuters_Summits
(Additional reporting by David French and Mirna Sleiman;
Editing by Andrew Torchia and Tom Pfeiffer)