Middle East to see further China interest as BRI expands: Savills
Foreign inward investment will continue to drive growth, with logistics and infrastructure playing an essential role
Global investment has changed dramatically since it is undergoing transformation driven by technological, demographic and geopolitical factors, regional and international economic and real estate experts highlighted in a Middle East webinar conducted by global real estate advisors Savills.
The panel members participating in the webinar included director research, Savills Hong Kong, Simon Smith; head of Dubai, Savills, Murray Strang; and chief economist, Peninsula Real Estate, DR. Christopher Payne.
The session was moderated by head of Savills, KSA, David O'Hara, who discussed how investment strategies are evolving in the backdrop of trade embargoes and the growing protectionist behaviours.
In the Middle East, the total Belt and Road Initiative funding (BRI) was $71.1bn between 2014-2017, with Egypt being the largest recipient.
In Egypt, economic reforms instituted by the Government have improved macroeconomic stability and strengthened investor confidence in the country.
In 2019, the UAE was the largest FDI recipient in the sub-region, with an influx of almost $14bn, growing by a third from the previous year. This was largely due to major investment deals in oil and gas, primarily in Abu Dhabi. In the same year, the country further strengthened its commitment to foreign investment by launching a broad-based initiative to enhance the commercial ecosystem.
Annual Investment Meeting (AIM), which is an initiative of the UAE Ministry of Economy, and China Venture Capital Research Institute (CVCRI) inked a memorandum of understanding (MoU) for a long-term strategic partnership to share resources, enhance trade, and boost investment opportunities in China’s trillion-dollar Belt and Road Initiative (BRI).
China is key to Oman's plans to develop its industrial zones and has pledged to spend $10.7bn by 2022 in the sultanate's Duqm special economic zone.
Capital flows to Saudi Arabia also increased for the second consecutive year by a further 7% to $4.6bn. The new investment policy and a broader economic reform programme under the Saudi Vision 2030 initiative are intended to improve the country’s investment environment and promote economic diversification.
Several large non-oil investment deals took place in 2019, for instance, the large greenfield project implemented by Pan-Asia Pet Resin (China), which launched a facility in Jazan City valued at approximately $1bn.
The discussion also covered the scope of foreign investment in Oman and the kingdom of Bahrain. Oman has set out a series of laws governing public-private partnerships, privatization and foreign capital investments, with the aim of creating a more favourable regulatory environment.
In Bahrain, full foreign ownership of companies involved in the activities of oil and gas drilling is now allowed, the panellists discussed.
However, as per the UN Conference on trade and development, global flows of capital will be under severe pressure this year and is expected to witness a sharp decline from the 2019 levels of $1.5 trillion.
The immediate impact on FDI flows will be due to COVID-19. However, in the long-term a push for supply chain resilience, policy shifts towards more economic nationalism and more autonomy in productive capacity could have lasting consequences.
Speaking about the growing investment opportunities from China and Far East Asia in the region, head of Savills Dubai, Murray Strang, said: "Savills reports shows how China now plays a significant role in the Gulf and North African regions. Between 2014-2017, the Middle East’s total belt and road funding was $71.1bn. This investment trend from China but also far east Asian countries is expected to further increase in the region as they recognize the strong value of the market and its fundamentals."
Head of Savills KSA, David O' Hara, said: "The Middle East has traditionally been a net exporter of capital. Sovereign wealth funds and private equity have been some of the biggest investors into equities and trophy real estate assets over the past decade. However, in the last few years, governments in the region have been encouraging foreign inward investment to drive growth and diversify their economies.”