Safe haven status boosts investment scope in UAE

The UAE offers tremendous investment opportunities due to its safe haven status and incredible infrastructure, however it needs to check inflation and rising cost of doing business for sustainable longer term growth, says an expert.

Jahangir Aka, managing director, SEI Middle East, said investors can avail opportunities in key sectors i-e. logistics, manufacturing, hospitality, aviation services, tourism and retail through direct and private investment as most of these services are being provided through unlisted companies.

“This is why there is so much excitement about the Emaar Hospitality listing,” Aka told Khaleej Times during an interview.

SEI is a global asset management and investment services provider with $240 billion under management and over $580 billion under administration. It has 2,700 employees located in over 20 offices across the globe, with London and Oaks as the key hubs. SEI’s Middle East office started operations in Dubai in 2008 and targets sovereign wealth funds and pensions funds, end of service benefit schemes and family offices and endowments to boost its business in the region.

Aka, who joined the SEI team in February 2006, said the UAE is more than just the safe haven of the Middle East. “The emirate also plays the same role for many parts of Africa, South East Asia and Central Eastern Europe. In addition, it is great tourism hub, major logistics centre with Emirates airline and Jebel Ali Free Zone, great place to do business given the zero tax environment, and as my wife will tell you, the best place to shop!”, he said.

The industry veteran said ‘a very positive approach’ to restructuring and handling problems over the last three to four years, coupled with incredible infrastructure, has boosted economic confidence in the country.

“I expect another great year for UAE in 2014 and the Expo 2020 win has taken this momentum further. My big concern on the UAE story though is unofficial inflation. The cost of living is rapidly rising again, and this means the cost of doing business from Dubai and the broader UAE is rising.

“Last time this started hurting businesses that looked for alternative locations from which to operate. Dubai and UAE need to maintain a very aggressive focus on remaining business and family friendly. This is no easy task given huge external factors, such as renewed regional and global interest in the real estate market, limited supply of quality schools, and let’s not forget traffic!”

New projects in Dubai

Referring to recent announcements of new infrastructure developments and hospitality projects in Dubai, Aka said: “Dubai is back! Some people seem quite scared by this statement, but frankly it is very exciting, and I believe it is different this time, as a lot has changed.”

He said Dubai wasn’t built by looking backwards, but by looking forwards and was created by a vision. A vision that most only understand once it is delivered, he says.

Elaborating, he said anyone who runs a business will tell you that only five or six of 10 decisions need to be right, and if you get wrong, just don’t take too long to know about the mistakes and then fix them or stop them. “Is it that different when you are launching a portfolio of initiatives? Not all of them will work, but frankly Dubai hasn’t got many wrong in the past!”

About the property sector, he said: “Personally, I don’t believe the real estate market is over-heated, and there are too many people who look to the past and assume everything is the same. So much has changed, both locally in Dubai and globally. In the last five to six years, the position of Dubai on the global map has changed. It’s a major top 10 city.”

“The political situation in the region has made Dubai into a magnet for families from across the region to set up home and establish regional or global offices for their businesses. With low yields, investors globally flushed with cash are looking for somewhere to invest, and UAE real estate is now a maturing asset class.

“But you can’t just buy anywhere anymore, and that is part of the maturity of the market. There is a differentiation between a good location, and a bad one, a good property and a bad one, so choose wisely!”

Regional growth forecast

Aka said many countries in Middle East and North Africa (Mena) are still not out of the woods in post-Arab Spring era and still facing some issues hampering their growth prospects.

“I believe we have hit our regional low from a political perspective,” he said, adding that there are definitely three 3 tiers in the Mena region. He said the GCC countries have started reigning back some of the government spending boom that started three years ago,

“At the moment I only see the UAE as having sufficient momentum in the private sector to replace some of that reducing government spending. So unsurprisingly, my top pick for 2015 is the UAE.

“In the second tier, we have the five other GCC countries that will maintain a similar economic pattern as 2014. Slight pull back in government spending, but on the whole, huge infrastructure development continuing.

“In the third tier, we have the ‘post-Arab Spring’ countries. Things definitely don’t feel great from a social perspective at the moment, but to define the future direction of these economies, unfortunately the bumps are essential. Egypt and Tunisia are looking very positive over the next three years!”

SEI performance

Aka said SEI remains committed to growing its Middle East business, and is enjoying very positive progress. He said SEI has a long term focus and has been committed to building a business in region.

“Dubai has been our Middle East regional office since February 2008. In Dubai, we are team of four, but are highly integrated with SEI’s global resources, and have very active participation from our London office.”

To a question about SEI plans to expand presence in the region, he said: “We don’t feel the need to expand beyond the UAE. The UAE provides us with the perfect platform to operate around the region with the convenience of Emirates airline. Additionally, the domestic market itself already presents a strong opportunity for us.

“The UAE in general and Dubai in particular is naturally positioned as a regional hub as most companies based in the region operate out of Dubai or at the very least have a presence on the ground here. There is no other market that can become our new home base because the domestic opportunity in the UAE is the strongest and the area of coverage is the widest,” Aka concluded.

— muzaffarrizvi@khaleejtimes.com