THE information revolution has created new ways of doing business and has turned the whole world into one community, HE Dr Mohamed Khalfan bin Khirbash, the UAE Minister of State for Finance and Industry, told delegates in his opening address at yesterday’s (Tuesday, Feb 20) Broader MENA Investment Summit in Dubai.
“Closer dimensions and integrated interests have led the corporate world to restructure and re-engineer on diff levels so that the world is now a virtual market that can be reached from anywhere,” he said.
“This transformation has largely contributed to raising importance of talking about the efforts needed by countries to boost the flow of foreign investment and to minimise risk factors that could affect the interests of investors and financiers.”
Dr bin Khirbash referred to a recent United Nations report highlighting the importance of foreign investment as a major contributor to economic development and its role creating job opportunities, increasing productivity, and boosting export trade, saying:
“The flow of long term investment – especially foreign direct investment – is major reforming tool for many problems that economies suffer from, enabling integration into the new world economy, the strengthening of national development structures, increased job opportunities, and better competitive advantages.”
The need for economic diversification and increased investment in human capital by governments and institutions was a recurrent theme at the opening sessions of the summit.
Speakers discussing ‘Investment Challenges in the Broader MENA Region’ highlighted continued success in attracting foreign direct investment, but called for accelerated programmes of economic liberalisation, creating a more attractive business environment, and generating employment opportunities.
HE Sheikh Mohammad Ali Reza, chairman of the Xenel Group, told delegates that despite the region’s good economic growth, the public sector must become more open to private participation and reduce the dependence on oil.
“Governments must make the investment climate more inviting and invest in human capital, improve education, support small and medium enterprises, and encourage continued private sector investment in technology, media, and healthcare,” he said.
His views were echoed by Khalid Howladar, vice-president, Middle East and Islamic Structured Finance, Moody’s Investor Services, who defined the regional challenge as “mainly educational”.
He said that GGC countries must be aware that higher returns go hand-in-hand with higher risks, and that improvements are needed in market regulations and transparency.
“The region is on the right track, but a lot more is needed. Equity losses highlight the need for alternative investments, but MENA markets are still very young. GCC ratings are very high and I believe 2007 will see a dramatic increase in the number of credit ratings assigned as more local companies qualify.”
Monika Malik, Standard Chartered Bank’ senior economist for the Middle East, told delegates that the region’s foreign direct investment is currently stronger than Asia – including China, fuelled by structural reforms and privatisation progammes.
“Most countries have increased foreign direct investment – led by the UAE – and Jordan has also done very well,” she said. “Kuwait has performed relatively poorly because of lack of economic reforms. Governments must improve the business environment and provide labour opportunities, especially in GCC countries with their huge populations.
“There is a strong need to diversify economies, and with most investment going to oil and gas, real estate, and infrastructure, job creation and diversification are the key challenges.”
HE Mohammad Hasan Omran, chairman of Etisalat cited the need for more financing, contrasting its relative ease in the UAE compared to being a major obstacle to growth in Africa, where negotiations could take up to a year and with interest rates as high as 15 per cent.
Etisalat is now No 4 in telecommunications in the entire Middle East, having started in 1976 in a very small way. It now operates in 15 major countries and has 46 billion dirhams in direct assets, with 2006 revenues up 25 per cent on the previous year.
About 250 delegates comprising top-level business executives and financiers from the Middle East, North Africa, Turkey, Sudan, and Pakistan are attending the two-day Broader MENA Investment Summit being held under the patronage of HH Sheikh Hamdan bin Rashid Al-Maktoum, Deputy Ruler of Dubai, Minister of Finance and Industry of the United Arab Emirates.
The event is organised by the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA), along with the Islamic Corporation for the Insurance of Investment and Export Credit, a member of the Islamic Development Bank Group, in association with Dubai International Financial Centre, and is planned and managed by the Al Iktissad Wal Aamal Group.
Speakers include Ms Yukiko Omura, executive vice-president of the MIGA/World Bank Group; Dr Abdel-Rahman Taha, general manager of the Islamic Corporation for the Insurance of Investment and Export Credit; Etisalat chairman HE Mohammad Hasan Omran, HE Sheikh Mohammad Ali Reza, chairman of the Xenel Group, and Hussain al Qemzi, DIFX member.
Today’s closing sessions of the summit will comprise parallel workshops on risk mitigation, as well as matchmaking sessions between investment promotion agencies and investors/ and lenders.
About the Islamic Development Bank Group (ICIEC)
The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) is a member of the Islamic Development Bank Group (IDB), a AAA rated multilateral development institution based in Jeddah, Saudi Arabia.
ICIEC was established in 1994 with the objective to increase the scope of trade transactions from, and to facilitate foreign direct investment into its 36 Member Countries in the Middle East, North Africa, Asia and sub-Saharan Africa. ICIEC fulfils these objectives by providing Islamic Sharia’ah compatible credit and country risk insurance and re-insurance instruments. These products cover a variety of risks including non-payment of export receivables, expropriation, civil wars/disturbances, and breaches of contract.
ICIEC also manages the Investment Promotion Technical Assistance Program of the IDB - a grant assistance program aimed at improving the investment climate of the IDB member countries.
For more details, please visit www.iciec.com
About MIGA
The World Bank Group’s MIGA provides guarantees (insurance) against political risks for cross-border investments into developing countries and emerging markets. With 169 member countries and over $16 billion in insurance issued, MIGA is the largest multilateral agency of this type.
MIGA’s guarantees protect investors against the political risks of expropriation; inconvertibility/transfer; war/civil disturbance/terrorism; and breach of contract. Equity investors and lenders benefit from improved risk/return profiles for projects, and MIGA guarantees are often required before banks will lend to projects in certain markets. MIGA has a special focus on supporting investors and lenders from Broader MENA who are venturing into frontier markets, and has assisted companies from Saudi Arabia, Egypt, Turkey, Lebanon, and Tunisia for projects in the Middle East, Asia, and Africa.
See www.miga.org for more details.
