GREs will remain crucial for ‘foreseeable future’

Though governments in the UAE and Arab world are cutting exposure in state-sponsored capitalism by spinning out units, the role of government-related entities (GREs) will still remain very vital for the region’s growth during the coming decades, said a senior official of Abu Dhabi-based sovereign wealth fund Mubadala Development Company.

Though "state-related entities will be important in our part of the world for the foreseeable future, there is a clear direction toward increased private-sector innovation," said Waleed Al Mokarrab Al Muhairi, chief operating officer of Mubadala.

Muhairi said the sovereign fund will take many companies to public during the next decade as part of move to shift away from 100 per cent government ownership to create opportunities for non-governmental actors.

In an interview with McKinsey & Co., he said Mubadala's mission is compatible with the Abu Dhabi Economic Vision 2030 by investing in highly innovative industries that play to Abu Dhabi's general strengths and competitive advantages, such as those that are capital intensive or rely on world-class logistics. "Such industries help meet our aspiration to increase innovation and the role of intellectual property in the Abu Dhabi economy."

Mubadala had $24 billion assets under management in 2009 with subsidiaries spanning multiple industries including aerospace, energy, healthcare, hospitality, infrastructure, real estate and technology. Its revenues from sales of goods reached $3.564 billion at the end of last year while total equity reached $13.33 billion.

He said the fund looks at a number of filters and figures out what makes sense for it. Those filters range from goodness of fit — meaning playing to its strengths — to things like how significant a sector could be over time and the types of jobs an investment might create.

“We take a very deliberate approach to picking sectors, picking clusters, and understanding what’s needed to get from a large investment to a thriving, productive contributor to and, ultimately, driver of the GDP and the economy,” he said.