Mena region companies managing $16bn funds

Dan Schwartz, Chairman and Chief Executive Officer of AVCJ, said the explosive growth in the Gulf Co-operation Council (GCC) region has caught the attention of leading private equity firms from the Middle East, Asia and the other financial centres of the world.

The three-day forum will host more than 300 fund managers to discuss issues linked to equities, sovereign funds and investments.

Schwartz said: “Private equity as an institution is new in the region. There is an enormous number of family businesses that are not called private equity but they do. It is a challenge to persuade these family leaders and business offices that it is in their interest to get private equity involved.

“We look at private equity as a catalyst to growth not only in terms of these companies but also building and funding new businesses in the Middle East region,” he added.

He said private equity is critical to the development of the capital markets in the region, “and that’s where the term capitalist comes from. We can come in by either divisions or by companies, add value and list them”.

Muhannad Qubbaj, Managing Director for Business Development of Abu Dhabi-based Gulf Capital, one of the key sponsors of the forum, said the regional governments are providing major opportunities to investors and new businesses.

He said in the past five years governments in the GCC countries have committed $900bn to the region. “In the next five to seven years, the commitment is going up to $2.4 trillion. It shows the government’s commitment is actually the largest catalyst in the region. And it is the most important catalyst that develops a platform for opportunities in the region.”

Qubbaj added that in 2007 the gross domestic product per capita income was $22,000 on average in the region – less than five years ago it was below $11,000. Qatar, he said, is expecting to have a GDP per capita income of $80,000, which will be highest in the world.

“The governments in this region play a very important role in creating a very sound platform for opportunities,” he said.

Nils Haugestad, Chief Executive Officer of Evolvence Capital, said the forum would be targeting countries from the Middle East through Asia with a prime focus on the GCC and India.

He said the GCC has an environment that allows equity firms to operate effectively.

Haugestad said India is growing rapidly with 7,000 to 8,000 publicly traded companies. However, he said though these companies are growing at a tremendous rate, they do not necessarily have access to capital and management to take them to the next level. “We have seen investments going up from $500 million to $1bn a year over some years. These figures increased from about $2bn in 2005 to $14bn in 2007,” he explained.

Both Haugestad and Schwartz shrugged off the concerns expressed by the United States and other Western countries about the region’s sovereign funds.

“I would not under-emphasise the just political factor. I think US politicians are just looking for an issue… to gain media attention,” Schwartz said.

Haugestad said: “Personally, it is an over done thing. I don’t see the risk issues that are being raised everywhere about what’s going on in sovereign funds and in any other types of funds. If you look at Japan’s history of economic boom, there were a lot of big issues as well. There are always fear factors when we see big changes in the world. There will always be people concerned about how to address things. But at the end there is no issue to either slow down things or stop them happening.”