GCC family firms need capital

Family businesses in Gulf oil producers need foreign financial and technical assistance as they start to recover from the repercussions of the global fiscal crisis, an Abu Dhabi investment official has said.

Nazem Al Kudsi, CEO of the government-owned Invest AD, said such a development and the strong demand for private capital make the Gulf one of the best destination for local and foreign capital.

Quoted by Oxford Business Group, Kudsi also urged investors to target Abu Dhabi, which he described as the “investment portal to the region.”

“The investment pipeline is very attractive… The MENA region is one of the better environments in which to acquire assets. Firstly the region as a whole is growing rapidly…we are witnessing the progression of family-owned companies, many of which need assistance as they grow,” he said.

“To step up to the next level, many will require sophisticated management techniques and an injection of capital.”

Kudsi said a second factor was the abundance and high demand for liquidity from government related entities in the region.

“Such a situation naturally has a crowding out effect. The corollary to this therefore is that the need for private capital to fuel the development of the private sector becomes even more vital,” he said.

“After all, private equity plays a very important function in any society….. unless we are able to assist the private sector with expansion, its dependency on the public sector will continue to be significant. Such a system is not in any society’s interest,” said Kudsi, whose company has launched four investment funds over the past two years to target the Middle East and North Africa.

In comments two months ago, a Saudi business executive said family companies in the six-nation Gulf Cooperation Council (GCC) control more than $two trillion in assets but that they face the specter of collapse in the absence of governance, transparency and measures to end corruption.

Majid Al Qaroob, Chairman of the second Gulf family companies forum, which will be held in Qatar in December, estimated the direct investments of those family businesse at more than $750 billion but said their consolidated wealth worldwide could now be worth above $two trillion.

He said these firms are facing challenges following the eruption of the 2008 global fiscal distress and the 2009 severe debt default problem caused by two financially-troubled Saudi business conglomerates—Saad and Algosaibi.

He noted that nearly 70 per cent of the GCC’s nearly 20,000 family companies are still dominated by the old founding members, who “control these firms with traditional methods and attitudes.”

Kudsi said Invest AD had attracted much attention to its four funds from MENA investors. “Surprisingly our emerging Africa products are garnering significant interest from European and Asian investors.”

 Asked about investment in Abu Dhabi, he said:” Of course it is an exciting prospect on its own, especially considering its economic plan for 2030. However, the real value of Abu Dhabi as I see it, is as an investment portal to the region….

“Therefore all entities that are interested in accessing the MENA market, no matter what sector or industry they come from, will find that coming and setting up in Abu Dhabi and using it as a window to the region is their best prospect… the reason for this is that the emirate has all the characteristics required—it is very stable politically and economically and it also has the hard and soft infrastructure necessary for investment.”