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17th – 18th NOVEMBER 2016
FLI NET FALL CONFERENCE
SINGAPORE, ASIA
INVESTING IN GCC
DR. SHABEER NELLIKODE (MD, UNIVERSAL)
&
P.V SHEHEEN(PARTNER, GOODWINS LAW CORPORATION)
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The Gulf Cooperation Council (GCC) Member Countries
The Gulf Cooperation Council (GCC) Member Countries
The Gulf Cooperation Council (GCC) Member
Countries
Sharjah
Ajman
Dubai
Umm Al Quwain
AbuDhabi
Ras Al Khamaih
Fujairah
UAE
QATARSAUDIA ARABIA
BAHRAIN
KUWAIT
OMAN
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The association forms a trade bloc and provides a common market, including coordinationof customs regulations and various trade-related laws
The unified economic agreement between the countries of GCC was signed on 11 November1981 in Abu Dhabi.
A regional intergovernmental political and economic union.
The GCC Customs Union was launched in 2003, eliminating internal tariffs, enabling thefree movement of labor and capital internally and creating a unified 5% external tariffon most imported products.
The GCC Convention for the Execution of Judgments, Delegations and JudicialNotifications, 1996 – established coordination and cooperation among the GCCCountries in judicial fields taking into consideration the principles of Islamic Sharia.
GCC countries have signed free-trade agreements with Singapore and the European FreeTrade Association.
The EU established bilateral relations with the GCC countries through the 1988Cooperation Agreement, aimed at strengthening stability in a region of strategicimportance.
The Gulf Cooperation Council (GCC) Features & Objectives
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Despite the drop in oil prices and the political unrest in neighbouring countries which have caused slightly subdued GDP growth in the short term, GCC economies are expected to recover on the back of supportive fiscal policies and continued growth in sectors such as, travel, tourism, healthcare, education and infrastructure
Robust growth is expected over the next decade both in terms of population and GDP.
GCC population is forecast to reach 53.5m, a 30% increase over the level in 2000 by 2020
GCC real GDP is expected to grow by 56% by 2020
GCC nominal GDP, which was US$ 341.6bn in 2000, is forecast to soar to over US$ 1trn in 2010 and US$ 2trn in 2020.
The GCC is the EU's fifth largest export market (€111.6 bn of exports in 2015, +15% year on year), and the EU is the grouping's biggest trading partner, with trade flows totaling €155.5 billion, or 14.7% of the GCC's global trade.
GCC’s Economic outlook
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GCC Economic Growth Forecast by Country (World Bank Report 2016)
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Upcoming world class events will provide a major
boost to the region’s tourism &
retail industry
Dubai world Expo 2020
FIFA World Cup 2022, Qatar
World Vision 2030 Saudi Arabia
Heavily investing in transportation,
logistics & infrastructure
Health Care spending is
expected to grow to US$71 bn in 2020
Developing a more stable health eco-
system
Demand is driven by the changing demographic
and epidemiological trends
Real Estate Sector is first choice for more
than half of investors in the
region
Education Sector shows upward
trend
GCC governments are supporting greater
private sector participation
Required to address the growing school
population that is expected to reach 15m by
2020.
9,301 schools in the private education
market by 2020
41,678 schools will be established throughout
the public education sector by 2020
A recent study revealed this is the preferred
investment, followed by stocks & precious metals
63% of GCC (HNWI) plan to invest in their preferred
real estate locations during 2016.
One of the fastest growing sectors across the
world and is likely to remain resilient
The GCC Rail Network – Already in
Construction
Increasing congestion, high traffic density & large events drive the
need for improved road transport
GCC Government spend on transport
infrastructure to reach $288 bn by 2020
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Why investors are attracted to the GCC?
Sizable and stable economy growth
Sector liberalization and privatization
Population growth
Economic diversification
Comparative industrial advantage
Infrastructure investment
Regulatory and economic restructuring
Macroeconomic conditions
Availability of capital
Greater exit opportunities
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Foreign investment rules in all GCC countries are intended to protect nationalentrepreneurs and to limit the circumstances in which foreigners are able to take fullownership of companies. Foreign investors usually have two options:
Joint venture – the investor identifies a local company which will contribute to thebusiness, share any financial risk and facilitate business development and operationson the ground; or
Arrangements with a local businessman (or company) – A partner in name only;even where such a local partner owns majority of the company, the foreign investorwill put in place side agreements which allow the foreign partner to retain almost allthe profit, carry all the risk and exercise full control over the business.
Foreign Investment
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Key GDP contributor Alba (aluminum producer)
increased net income to $79m in the second quarter of 2015
from $40.2m in the second quarter of 2014
Ranked the 18th most open economy worldwide by the
Heritage Foundation and Wall Street Journal’s 2016 Index of
Economic Freedom
Committed to maintaining the region’s most liberal business
environment, with zero taxation for private
companies, few indirect taxes for private enterprises &
individuals and free repatriation of capital
Low costs is a huge advantage. Office rents & industrial land are
the lowest in the region. The combination of subsidies &
privatisation in the utilities sectors, electricity, gas & water costs are
highly competitive. With low living costs, wages are also highly
competitive
Workforce is the most Educated and skilled in the Gulf means
minimised spending on expatriate packages & a long-
term, sustainable local workforce (Bahrainis comprise 2/3 (65%) of the financial services workforce, according to the Central Bank of
Bahrain
The only country in the region offering 100% foreign
ownership of business assets and real estate in most sectors.
Foreign investment is the key to ‘Bahrain’s Economic Vision 2030’ - the long-term plan for
improving the competitiveness of the
economy, creating skilled jobs & enhancing living standards.
Supportive visa policies are an important development, placing Bahrain among the
countries with the most flexible visa policies in the region, providing easier &
quicker access for businesses with operations in Bahrain
Financial services sector has been thriving for 40 years
and was recently judged the Gulf’s most sophisticated
financial market
Our position at the heart of the Gulf makes access to
every market in the Middle East quick and efficient –
by road, air and sea
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The GCC’s only parliamentary democracy remains relatively
stable and prosperous. It retains significant oil reserves.
Local infrastructure -Significant progress has
already been made to enhance its infrastructure through the
first public-private partnership projects (PPP) / independent water & power
project (IWPP)
About 40% of its 2.5 million population, enjoy some of
the highest disposable incomes.
Foreigners can apply for a license to own up to 100% of a
Kuwait onshore legal entity under new Direct Foreign
Investment Law, in a plan to diversify the economy
The local population is young and a great consumer. They
are very fond of foreign products, western brands and
high technology.
The country's authorities intend to attract investment to
develop infrastructure through the 2015-2020
National Development Plan
New finance & security techniques can be used e.g. allowing investors to assign
government proceeds & assets to lenders and the pledging of
shares prior to the two-year lock-out period in order to provide
security to lenders.
Endowed with a good financial management and a solid banking system & a stable legal framework for
business laws
The government has vast foreign assets and one of
the richest project environments in the GCC.
Ranks 100th out of 189 economies in the ’Doing
Business’ report established by the World Bank (2016)
The country's infrastructures are of high quality, the labor force is
inexpensive, cost of energy is very low and the absence
of taxes are some of the undeniable advantages to
foreign investors.
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M&A and general commercial activity in Oman remains
buoyant despite the low oil price environment.
The seafloor mining sector will be boosted following discovery of gold, iron & zinc as well as additional reserves of copper. While
copper, limestone and gypsum have been mined in Oman for many years, companies are now being granted exploration licenses
for other metals & minerals
Over the next few years, multinational companies can expect solid growth.
Hospitality, it is estimated that by 2020 the number of hotel rooms in the country will be
more than 20,000, giving a major boost to the country’s ambitious
tourism growth strategy that hopes to attract 5 million visitors
a year by 2040.
An expressway project set for completion in 2017 and the game-changing Oman rail network will only increase
interconnectivity between the Sultanate's ports and local and
regional markets.
Tourism is set to be one of the key pillars for economic
growth in Oman in the coming decades.
Independent studies have shown that the new port, Port of Duqm has the trappings of
a world-class, multi-purpose commercial gateway and will propel Oman to be one of
the top 10 logistics hubs in the world, doubling the contribution made by the logistics sector to Oman’s GDP by 2020.
Real GDP rose by 3.6% in 2015 and inflation remained
at comfortably low levels.
Large-scale projects in the maritime sector, such as Port
Sultan Qaboos Waterfront, could open the market for foreign
investors to gain a foothold in a highly attractive market that has a
good track record.
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Qatar, an oil rich peninsula, the wealthiest country in the GCC per capita and enjoys
vast gas reserves.
Development of the new Doha satellite city of Lusail is
underway with some government tenants already beginning to occupy the first
completed office blocks
After half a decade of strong growth, the banking sector is
well positioned to weather regional economic volatility.
In 2015 the country was home to the third-largest banking
industry in the GCC, boasting total assets of $293bn.
“Vision 2030”, a program with four pillars of development; economic, social, human and
environmental, Qatar wants to reach new peaks of prosperity
The Msheireb “Downtown Doha” regeneration project
that will revive the old commercial district and blend traditional Qatari heritage &
aesthetics with modern technology while focusing on
sustainability.
The Qatar railway project has seen significant progress and Doha metro project, with an estimated cost of USD 15.2
billion is expected to be completed by 2019.
The Ministry of Economy & Commerce through the vehicle of the new Commercial Companies
Law has set itself the goal of creating a one-stop shop
registration process & embedded in that law, a provision setting
down a requirement for efficient processing
The non-hydrocarbon sector, in particular
infrastructure related capital expenditure, is now
the main contributor to growth and is expected to represent in excess of 55% of GDP at the end of 2017.
Despite lower oil and gas prices the major stimulus to activity in Qatar remain the major infrastructure which must be built to permit the staging of the 2022 World
Cup
Tourism is now one of the main drivers of the
economy going forward.
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The largest economy and market in the GCC, 19th
largest economy in the world, with a population of 30.7
million
State-of-the-art communications, boasts a wide transport network with a particular strength in road
& airport transportation. Has a well-developed sea transport
network developed to support the transport of petrochemicals &
has 4 principal airports
Investors are offered tax incentives for training and
recruitment of Saudi labour
Receives 38% of the total Arab GDP, with the world's largest oil reserves and a wealth of
metal deposits providing competitively priced energy
and easy access to certain raw materials
The private sector is playing an increasingly larger role in the economy, it now accounts
for 39.5% of GDP and is expected to continue to grow,
especially as it opens its doors further to foreign investment
Vision 2030 – to reduce the country’s dependence on oil &to rely on alternatives diverse economy & the development
of service sectors such as health, education,
infrastructure constructive, recreation & tourism
The Kingdom is one of the fastest-growing countries
worldwide, with per capita income forecast to rise from $25,000 in 2012 to $33,500 by
2020
Signed bilateral trade and
investment agreements
with Singapore
8th largest investor in education and increasing its
commitment in this strategic area, hosting 24
public universities, 20 private colleges and 24
vocational colleges with a further 80 to be built
Ranks 49th out of 189 countries for the overall
‘Ease of Doing Business’, according to the
International Finance Corporation/World Bank’s ‘Doing Business’ report in
2015
G20 member with the 3rd biggest current account
surplus in the world (World Bank Data 2014)
16th largest exporter and the world’s
29th largest importer in the world
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A diverse, growing economy with investment incentives
such as 0% corporate tax, 0% income tax and up to 100% foreign ownership in free
zones are some of the advantage’s that attract
investors to the UAE
Crime rate at a all-time low within all the emirates
compared to most parts of the world, considered one of the
safest places within the Middle East, Asia and Africa.
Politically and economically stable within
the Middle East region located strategically
between Europe, Africa and Asia with over 1000 flights weekly to most countries
worldwide
First class modern infrastructure which includes metros, trams, strong private
local and international healthcare facilities
Education at one of the highest levels in primary, secondary and collegiate
education catering to various ethnic and linguistic groups
that are internationally accredited
Available sectors for a safe and secure investments would
include the precious metal industry, general trading,
hospitality sector, Tourism industry, Oil and gas and
obviously the biggest sector of all real estate
Tourism is playing a very important, luxury services,
amazing weather all year round with unlimited activities and will
be boosted again upon completion of world class
cultural attractions such as the Abu Dhabi Louvre Museum
Leading financial centre in the region as a result of its
superior lifestyle and infrastructure.
Major beneficiary of the difficulties elsewhere in
the Middle East
With lifting sanctions against Iran on the horizon,
there is a further upsurge predicted & expected to add
USD 13 billion to the economy between now &
2018 according to IMF.
Agreed to set up a infrastructure investment fund with India to boost
two-way trade between the two countries by 60% over
the next 5 years
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Kuwait awards $4bn contract for airport terminal & a $1bn contract with a joint venture for its planned South Al Mutlaa City project with Italy's Salini Impregilo and Turkey's Limak Construction.
Emas AMC and L&T nab $1bn-plus Saudi Aramco deal with India's Larsen & Toubro (L&T) and Singapore-based Emas AMC for the expansion of the offshore Hasbah sour gas field.
BK Gulf has landed a contract to undertake MEP activities on the construction of a new $1.6bn container terminal at Jebel Ali Port in Dubai.
Armada inks $626m Royal Estates construction deal with Dubai-based developer Texture to build the townhouses. Teaming up with Texture is Pacific Ventures and PAL Developments, with the companies aiming to complete the 350 townhouses in the third quarter 2017 and over 2,500 apartments a year later.
Mitsui-led consortium $2.3bn Oman power deal
Current Investment Projects
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Dubai Municipality hands $490m Jaddaf contract for the Dubai Conference Centre (Arena) project, worth $490.1m (AED1.8bn). The project will be carried out by the department implemented to host Dubai Expo 2020.
Egypt's Orascom bags $308m Cairo metro deal for work on Cairo's third metro line's third phase.
Dubai's RTA awards $91m Business Bay roads deal - Dubai's Roads and Transport Authority (RTA) has awarded a $91.3m (AED335m) contract for a Business Bay project - Upgrading Parallel Roads at Business Bay project is scheduled for completion in the first quarter of 2018.
Dubai-based developer Union Properties has awarded China State Construction Engineering Corporation Middle East (CSCEC ME) the contract to build its $119m (AED440m) Oia Residences project in Dubai’s Motor City. The project, designed by AK Design, will include 269 residential units including duplex
apartments with private gardens, terraces, and direct access to the swimming pools.
Dubai-based developer Azizi Developments awarded a contract worth $54.4m (AED200m) to KeilaniConstruction Company to construct two new serviced residences in Al Furjan.
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What the experts say...
“Q1 2016 has clearly been a busy period for GCC's construction industry, as dwindling oil prices led construction firms to recons ider their planned pipeline of projects and activities for the year. The GCC construction contractor awards across the building, i nfrastructure and energy markets are forecast to decrease from US$ 168,254 million in 2016 to US$ 165,710 million in 2017” (Cityscape Global Report).
“UAE’s real estate outlook in the long-term remains positive due to government’s commitment to infrastructure spending and development projects, stronger growth forecasts (IMF), and the UAE’s safe haven status making it a favourable real estate destination” (Knight Frank)
“Saudi Vision 2030 aims to boost the kingdom’s hospitality industry by more than half and attract 1.5 million tourists by 2020”, according to industry analysts. Religious tourism will remain a key demand driver and will get a further boost if the number of foreign pilgrims increases.
“The size of the Qatar’s retail sector is expected to triple by 2016, with another 14 malls due to enter the market, bringing the total to 1.7 sqm of shops” (Oxford Business Group estimates).
According to NBK, “real estate market sales in Kuwait totaled US$ 233.6 million by the end of Q1 2016’.
“In the hospitality real estate market, it is estimated that by 2020 the number of hotel rooms in Oman will be more than 20,000, giving a major boost to the country’s ambitious tourism growth strategy that hopes to attract five million visitors a year by 2040. To urism is set to be one of the key pillars for economic growth in Oman in the coming decades .” (Cityscape Global Report)
The low transactions costs in Bahrain position its real estate market in a privileged position offering high investment yields an d capital growth. Added to all this is the ease of doing business for property investors and the kingdom's relatively low cost of living for both citizens and expats. Bahrain is considered one of the most convenient locations worldwide for expats due to its low rental an d living prices. (Cityscape Global Report)