Real estate, alternative real assets and other diversions

The GCC: opportunity born from positive momentum Why the GCC is geared to become one of the most rewarding investment destinations in 2018

Investor's Notebook

Burj Khalifa in Dubai at night

The GCC (Gulf Cooperation Council) region has historically been a source of capital raising and outflow of funds that invested in everything global. Sovereign wealth institutions in the region are among the wealthiest in the world, and the investment appetite for diversifying national sources of revenue has always been healthy. However, today we are seeing a fundamental change. The GCC is increasingly becoming a destination for capital deployment with ample opportunities for investment in various sectors such as hydrocarbons, healthcare, education and real estate to name a few.

Ever since the decline of oil prices during the recent economic downturn, the region’s governments have had the prospect of looking at different avenues of sustainable national revenues and capital preservation. The oil crisis has had a positive impact in allowing the regional regimes to explore new avenues of income. Now as we see higher oil prices come into play, diminishing fiscal deficits, and the continued public spending, this surely is providing much needed support for a stable and solid 2018. In Abu Dhabi in particular, being home to 6% of the world’s proven oil reserves, the economic condition has been supported by the recovery in oil output that is expected next year post the OPEC-led agreement to maintain reduced production. 

A big theme I predict in 2018 is consolidation, as well as acquisitions outside of the region that will help with the diversification of funding sources and capital inflows. Capital markets regionally and globally are also geared to see an uptick in activity as the year kicks into play. Although as the year winds down we see a softening of the equities markets, it is in my view the settling down before year end, marginal profit taking to close out the books, and more notably the quiet before the storm of 2018. The region will see the best and fastest to come in the next few years.

The robust economies of the UAE and Saudi Arabia continue to lead the pack. The UAE has seen some slowdown since 2015 due to many macroeconomic factors, but is expected to have a robust bounce back in 2018. Government spending is increasing in areas such as infrastructure, renewable resources and real estate. The IMF has projected a 3.4% growth in real GDP in 2018 which is higher than the year end 2017 growth of 1.3%.

Furthermore, Saudi Arabia is in a positive momentum given the recent reforms implemented by HH Sheikh Mohammed Bin Salman the Crown Prince. The fight against corruption surge that has been going on in the last few months has given great hope to the people and to the positive growth momentum of the economy in general. The initiatives are moving Saudi Arabia away from secular and rigid Islam, to more moderate and mainstream Islamic beliefs and practices. The announcement that women will be able to drive next year has been seen as a positive indication by the international community of good change. Hence, the IMF is now predicting that the Saudi GDP will strengthen over the medium term, while non-oil growth is projected to grow and be a positive contributor to an estimated 1.1-1.3% growth in GDP in 2018.

The regulators in these two regional powerhouses are also looking at easing business conduct and providing support to a previously ailing SME market. Both nations have additionally made significant progress in establishing medium and long term budgetary frameworks and at both federal and local levels.

Investor's Notebook

About Mustafa Kheriba

Mustafa Kheriba

Mustafa Kheriba is the Group Chief Operating Officer of Abu Dhabi Financial Group (ADFG), and Executive Director of the Company's Investment Manager, ADCM Ltd. He manages the investment activities and platforms of ADFG and its subsidiaries, including business development, deal origination, fund raising and key investments globally. Mustafa also currently serves as Executive Director of Integrated Alternative Finance, Board Member of Spadille Ltd., Executive Director of Northacre Plc, Board Member and Managing Director of Reem Finance, Executive Director of Integrated Securities and Integrated Eastern European Fund, in addition to being Non-Executive Director at Qannas Investments Limited. Additionally, Mustafa is a Board Director and Managing Director of Gulf Finance Company UAE and KSA. Mustafa previously held senior posts in financial services and investment companies in the GCC, USA and Canada. He has been named among the top 50 MENA Fund Managers in the 2015 and 2016 annual survey conducted by MENA FM. Mustafa holds a BA from the University of Toronto, and an MBA from Ohio Dominican University with Magna Cum Laude honours.

Articles by Mustafa Kheriba

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