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Region’s economies to encourage strategic FDI and exploit opportunities generated by economic pressures

Unique investment advantages and opportunities in Saudi, Omani and Kuwaiti markets

Over the last 40 years, the successes achieved in the region’s investment markets have been instrumental to the continuity and growth of all financial and economic sectors. These successes have varied between one market and another and been spread over different time periods, according to the investment perspectives and plans being implemented. Taking into consideration the impact of economic crises, market fluctuations, as well as the short and long-term economic repercussions that follow, the region’s markets have proven to be resilient, having adopted strategies that continually support growth and development.

Financial indicators can be read or interpreted based on the level of development and competitiveness of investment markets, at the regional and international levels, in addition to their ability to provide quality investment opportunities – in all market conditions. The success of the region’s economies has largely been supported by the inflow of foreign investments and their ability to generate opportunities and cash flow that attracts diverse forms of investment.

Al Mazaya Holding Company’s Weekly Real Estate Report holds that real estate and other investment vehicles are important for attracting local and foreign investments; however, the tools and mechanisms for attracting investment are not always as easy as may be perceived. Considerable preparation, action, planning, resources and expertise are all required to identify the right strategy. This can often require a lot of time, effort and patience in order to achieve their goals.

With world markets all competing for foreign investment, qualitative investment prospects in the real estate sector – in terms of products, target groups and potential goals – have witnessed active expansion over the past ten years.

 Investment Drivers

The Dubai economy has managed to attract almost unlimited amounts of foreign investment through its outstanding preparation, packaging and planning. The Turkish economy has also succeeded in attracting increasing amounts of Gulf-based and international investment through the diversification of opportunities and the development of new laws and regulations. The UK market kept its position at the top of favourite investment destinations for Gulf-based capital, which exceeded GBP120 billion in 2015, with significant focus placed on real estate activities, capital markets and banks.

KSA

As we enter Q2 2016, Al Mazaya’s Report is optimistic about investment activity in KSA, despite the many diverse challenges and the long periods required to obtain ROI on foreign investment plans and programmes. The kingdom, however, is seeking to extend its economic base and allow foreign investors to have freehold ownership – at 100 per cent – and also intends to provide investors with more incentives and facilities, including granting land to build factories or loans to finance foreign industrial investments for up to 75 per cent of the project cost. In return, KSA seems increasingly ready to enter the global investment market with a sovereign fund of USD 2 trillion. The world’s financial community is also waiting to see the outcome of government plans for the privatisation of Aramco.

Through these initiatives, the Kingdom is also attempting to develop medium and long-term investments that will focus on a variety of assets including property, stocks, bonds and other solid investments. Privatisation will drive further deals, which should reflect positively on the investment climate and the increasing role of the private sector in the kingdom.

UAE

The UAE experience, which is based on comprehensive domestic development, is a prime example of how to attract and encourage foreign investment into all sectors of its economy. The UAE government also intends to approve a new investment law, to further drive investment into the country. This is expected to come into effect by the end of 2016.

It is clear that the UAE government actively targets non-oil economic sectors, especially those sectors that contribute most to GDP such as tourism, trade, re-export and ports, as well as petrochemicals and aluminium industries. UAE authorities pay close attention and follow-up to the provision of a developed legislative environment and law making.

Successful experiences in many economies across the world have largely depended on making laws and regulations more attractive to foreign investors, with incentives and clear advantages over competing markets driving the most successful proponents of this strategy. The UAE has achieved many successes in global competitiveness and continues to develop its capacity to facilitate business, as well as being a favourable destination and supportive environment for investors to visit.

Oman

Al Mazaya’s Report also highlights the fact that the Sultanate of Oman has many unique investment opportunities and advantages that are attracting local and foreign investment. The Sultanate depends on its strategic location to activate its economic sectors, while investment plans and strategies continue to assign a bigger role to the Omani private sector – thereby allowing companies to more freely contribute to the comprehensive infrastructure and development plans taking place in the country.

Authorities in Oman are also keen to support local and foreign investors by providing facilities and investment initiatives that will smooth out difficulties and challenges that may deter foreign investment. The Sultanate is also dispatching Omani business delegations to many countries around the world and organising visits for foreign delegations to acquaint them with investment opportunities across all areas of its economy. Currently, Oman promotes its direct investment opportunities through direct meetings and the media and it is to be noted that seaport projects are some of the most prominent opportunities at this time.

Kuwait

Of course, the Kuwaiti economy does not operate in isolation from the activities being recorded in other regional economies and the authorities there are also seeking to adopt laws and legislation that will encourage investment and attract foreign investors.

That said, the Kuwaiti economy is badly in need of foreign investment, although it is not due to a lack of investment opportunities available. It is worth noting that the Kuwaiti economy is a favourite investment destination for a large number of Asian companies, in view of the perceived low investment risks for the foreseeable future. It also provides indefinite investment potential – particularly due to its financial strength. Further development is needed in legislative and legal frameworks so as to get rid of bureaucracy, which hinders the current business environment and deters potential investors. Efforts are also needed to encourage partnerships between the public and private sector, in order to support domestic and foreign investments in the future.

Conclusion

Al Mazaya’s Report notes that, in the immediate future, the aviation, transport, industrial, finance and real estate sectors will be the main focus for regional investment programmes for foreign investors.

Al Mazaya also highlighted the need for mutual investment agreements, in order to alleviate the impact of sovereign funds’ investment concentration abroad and the inability to attract foreign investment. This strategy will enable the region’s economies to attract foreign investment in conjunction with a mutual increase in their economies’ activities in international markets.

Al Mazaya Report holds that the region’s countries are capable of attracting foreign investments from all over the world and, in view of their economic flexibility, diversity of opportunities and financial capacity, they hold many advantages over other global regions and competing economies.