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Investment opportunities will continue to increase in the UAE

Al Bawaba, Jordan

Investment opportunities will continue to increase in the UAE

12 December 2005

Investment opportunities will continue to increase in the UAE, according to the principal of one private Equity fund, who pointed to anticipated changes in the federal Company Law as further indication of the country’s liberal economy.

W. Jonathan Wride, managing director of Capital Partners FZ LLC, said that a flexible fiscal regime, free zone set-ups and a stable business-minded government had all contributed to the country’s position as an area ripe for investment from overseas.

Wride said: “In the UAE, we have a federal government that has recognised the role that the private sector can play in driving forward infrastructure growth. As a result, the number of joint ventures between private and public sector - especially in developing some of the signature projects that are on the drawing-board - is rising exponentially.”

Capital Partners is responsible for one such investment, the $1 billion iconic Riverwalk development, which is the single largest foreign direct investment (FDI) to Dubai, and the first funds to flow in from America.

Wride points out that expected amendments to the country’s Company Law, which currently restricts non-free zone foreign ownership to 49 per cent, but could rise to up to 100 per cent, will result in a more beneficial business environment to foreign companies. The changes are expected to be revealed at the end of the year and implemented by end of the first quarter 2006.

“If the Company Law is amended, this will produce a further influx of capital into the UAE,” said Wride. “Everything is now in place, including a stable share market on the rise, the oil-driven economic boom resulting in continued infrastructure investment and flush liquidity.”

Key to the economic growth of the UAE is the increasing number of private and public-sector ventures. This theme was picked up by Sheikha Lubna Al Qasimi, the UAE’s Minister for Economy and Planning, at the recent session of the UN General Assembly in New York.

She pointed to the creation of private sector opportunities through a conducive climate for easy attraction of foreign investment to various sectors of the economy.

Meanwhile, also on the table is the free trade agreement (FTA) between the USA and UAE. A Trade and Investment Framework Agreement was ratified in April 2004 by the UAE federal government and the full agreement is anticipated in early 2006.

The FTA will open up America, the largest consumer market in the world, to the UAE. As an example, Jordan’s FTA with the USA has resulted in an increase in bilateral trade from $11m to $1.2bn in just five years, and America is now Jordan’s number one trade partner.

Wride said: “At present, there is very little international capital flowing into the region, particularly from the US - but the funds will start to come with the relaxation of trade barriers. Capital Partners was the first and there have been growing pains, but we need to keep confidence high with respect to the UAE market.

“A successful case study like Capital Partners has already encouraged American firms to look to the UAE for investment opportunities. With all of the right mechanisms in place, including the support for private sector initiatives, high levels of transparency, and a commitment to FTA initiatives, American companies will set up operations here.”

The Middle East currently attracts less than 1 per cent of the estimated world pool of FDI funds. The GCC attracted $1.81 billion of FDI in 2003, compared with $7 billion in the wider Arab region. According to the United Nations Conference on Trade and Development, $480 million of those figures flowed into the UAE, primarily into its capital city Abu Dhabi.

Wride explained: “The real estate, leisure and hospitality sectors are booming in Dubai, and will continue to be instrumental in securing regional investment; meanwhile oil & gas, power, water and industry continue to show huge potential.”

The Middle East has the second largest share of project finance in the world, and major projects in the UAE alone amount to a total value of well over $200 billion across industries.

Capital Partners, the American private equity firm spearheading investment between the United States and Dubai, is the master developer of Riverwalk, a signature $1 billion project to be built in Dubai Internet City.

Riverwalk was the first freehold residential development to have been announced in TECOM, and the first by a Western company. Phase One of the total Riverwalk development is currently underway and consists of 1.5 million square feet of residential and commercial space.

Plans call for Riverwalk to have waterways flowing through the development, with a central island of restaurants, galleries, studios and boutique shops. The entire Riverwalk project will consist of three phases of development. DAR Consult is the designer and architect, and Al Habtoor has done all the enablement work to date.