More profitable year forecast for private investing in the Middle East

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David Rubenstein, co-founder and co-executive chairman of the Carlyle Group (second from left), and Ammar Al-Khudairy, chairman of Samba Financial Group (third from left), with other panelists at the SALT Conference in Abu Dhabi. (AN Photo/Huda Bashatah)
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Ammar Al-Khudairy, chairman of Samba Financial Group. (AN Photo/Huda Bashatah)
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Updated 12 December 2019

More profitable year forecast for private investing in the Middle East

  • Saudi Arabia working on ‘very aggressive plan’ to privatize water-related assets and schools
  • Given its size, KSA will continue to have ‘attractive opportunities’ beyond the energy sector

DUBAI: On a day that Saudi Aramco shares opened at SR35.2 ($9.39) at the Riyadh’s Tadawul stock exchange, Ammar Al-Khudairy, chairman of Samba Financial Group, one of the banks managing the deal, made three main forecasts for the region’s economy.

“We will see capital markets doing better, which means private equity will start making some money again,” he said during a panel discussion on “the future of private investing” at the SALT conference in Abu Dhabi on Wednesday.

Al-Khudairy’s second forecast was some “bifurcation of private investing,” followed by private infrastructure. “Saudi Arabia has been talking about privatization, both greenfield and brownfield, for three years,” he said, adding that the government has piloted some projects and is working on a “very aggressive plan” to privatize 21 water-related assets and several thousand schools in 2020.

He said China is one of the top two or three relationships globally for Saudi Arabia, despite the few Chinese investments seen in the Kingdom.

While many experts say that private equity is enjoying a “golden era” in the West, the same cannot be said about the Middle East.

Recalling a time before the 2008 financial crisis, Al-Khudairy said there were 92 to 93 announced PE firms and PE funds then. “Today, we have six,” he said, attributing the figure to the unfavorable market in the region.

“If we look at Saudi Arabia, the biggest market in the region, it has been breaking even for the past five years,” he said, adding that the MENA region has had a total return of 4 percent during the same time.

As for the Aramco local initial public offering, Al-Khudairy said: “There was a last-minute call to make Aramco IPO a local IPO. So there was no proactive marketing outside the region.”

Aramco shares opened at 10 percent above their IPO price of SR32, reaching a record $26.5 billion on their first day.

Al-Khudairy noted that as a part of the final allocation, 23 percent went to non-Saudi entities and 37 percent went to institutional investors in Saudi Arabia.

“But a lot of it (international) is Gulf and also some American and European and Chinese money.”

Saudi Arabia was also the focus of remarks by David Rubenstein, co-founder and co-executive chairman of the Carlyle Group, in the same session on the final day of the Middle East’s first Salt conference.

The Carlyle Group is one of the world’s largest and most successful investment firms with $212 billion of assets.

Rubenstein said considering Saudi Arabia’s size, it will continue to have “attractive opportunities” beyond the oil and gas sector.

As an investor, he saw the Arab world as made up of four main areas, with the GCC emerging as the only one with attractive prospects. The Levant has experienced years of conflict and violence, while North Africa is known for the Arab Spring and, like Turkey, is blighted by uncertainties.

That does not mean the GCC region is not without its challenges. According to Rubenstein, the first is a lack of government-owned properties and private-owned estates for sale, which he attributed to the high number of family-owned business in the region that lack the incentive to sell.

“A lot of the money that has been invested here is money that is already in the MENA region,” Rubenstein said, adding that it could take some time before a large number of private equity firms are seen in the GCC.

Attracting Western capital is the second challenge, whether from the US, Western Europe or even Asia, which Rubenstein said is linked to public perceptions about the MENA region.

Lebanon cuts back on Iran flights amid coronavirus cases

Updated 22 February 2020

Lebanon cuts back on Iran flights amid coronavirus cases

  • Exports of medical equipment halted as supplies run low

BEIRUT: Lebanon is reducing flights to countries, including Iran, with confirmed cases of coronavirus.

The decision to include Iran was taken after a Lebanese national, who was traveling from the city of Qom to Beirut, was diagnosed with the virus. Lebanese authorities asked the flight’s 150 passengers to self-quarantine for 14 days from the date they left Iran. 

Iran’s Health Ministry on Friday reported two more deaths among 13 new diagnosed cases of the COVID-19 virus, doubling the total number of deaths in the country. The virus has also spread to the UAE, Egypt and Israel. 

Thousands of Lebanese people travel to Iran every year to visit Shiite holy sites in Qom and other cities.

Dr. Abdulrahman Al-Bizri, an infectious diseases specialist and a member of an emergency unit formed to counter the spread of the virus in Lebanon, said that while it was better to freeze some flights to Iran’s religious sites there remained challenges.

“It is easy to track down people who have returned from Iran through tour operators who have names and addresses, but our problem is with those who go to Iran for business (purposes), especially since the Lebanese do not need a visa to enter Iran, and these people cannot be reached to find out if they carried the virus to Lebanon or not,” he told Arab News. “The second problem that we face is at land-border crossings. There is a transport line between Lebanon and Iran through Syria and Iraq, and this matter needs urgent follow-up to monitor any cases that may enter Lebanon by land through legitimate or illegal crossings."

Two Iranian airlines, Iran Air and Mahan Air, have two daily flights between Iran and Lebanon. Their passengers normally travel for religious purposes. 

The detection of coronavirus has overshadowed other events in Lebanon, such as the arrival of locust swarms and the new coalition government’s ongoing struggle to resolve the country’s social and political crises.

Prime Minister Hassan Diab chaired a meeting about the spread of the coronavirus. The meeting called for strict measures at Beirut airport and all border crossing stations, with those attending urging people not to panic. 

Face masks became scarce at pharmacies once the confirmed coronavirus case was reported. 

Dealers of medical equipment who had large quantities of the masks and other protective clothing had re-exported them in recent weeks, especially to countries battling the virus. The dealers were paid in US dollars - a boon as Lebanese banks are currently restricting dollar transactions - and they were able to buy medical equipment. 

Lebanon’s Economy Minister Raoul Neama issued a decision preventing the export of devices, equipment, or medical personal protective equipment against infectious diseases until further notice.

“The Consumer Protection Directorate will monitor the prices of this equipment in pharmacies and will be strict with violators in order to prevent any exploitation that aims to make unjustified profits at the expense of the Lebanese,” he said.

The price of one face mask in some pharmacies reached around $5, compared to its pre-crisis price of $0.25 or less.

Lebanese Health Minister Hamad Al-Hassan visited government hospitals to see how ready they were to deal with coronavirus cases. 

“Fear is legitimate, so is caution, but excessive panic is unnecessary,” he said, emphasizing the need to strictly abide by procedures at the country’s entry points and border crossings. 

But fear of infection has not deterred people from demonstrating against corruption and institutions.

Mask-wearing protesters demonstrated in Beirut against banking policies under the slogan: “You will pay the price.”