World Affairs Board - View Single Post

Ray · 05-13-2008, 12:11 PM

Quote:

Shifting Cash Away from U.S. towards China

Written by Sherin Deghedy
Published Sunday, May 11, 2008

Abu Dhabi] Major Arab Gulf investors are shifting towards Asian markets, and to China in particular. This trend is considered a slight move away from the United States and Europe, where both economic and political considerations are entangled, including strains in relations with the U.S. since 9/11.

More specifically, United Arab Emirates (UAE) investors are focusing on investing in China since the aborted Dubai Ports World deal, whereby Dubai Ports World, a company owned by the government of Dubai, would have obtained control over loading and unloading ships at a half-dozen major U.S. ports.

The DP World controversy has reinforced some fears in the Middle East that investments in the United States have become politically risky for Gulf investors.

According to the Associated Press, the promise of a new French base in the UAE is the latest sign that Arab Gulf countries are expanding their commercial and military contacts to bolster security without appearing too dependent on the United States.

French President Nicolas Sarkozy has announced that next year France will become the only Western country other than the U.S. to have a permanent defense facility in the Gulf.

Recent announcements and projects confirm this alluring shift. According to Arabian business portal, Dubai International Capital (DIC), it is shifting its focus away from Europe and North America towards emerging markets.

"It is not the time to invest in the U.S.," DIC CEO Sameer al-Ansari said at a conference in Dubai. "We believe we can invest in China and can do good deals."

He added that the countries of central Asia, such as Kazakhstan, were also interested in investment areas, although DIC had to study them further. Ansari said he hoped emerging markets would make up 30 percent of DIC's investment portfolio.

Moving ahead with its plans, DIC, together with leading Chinese equity firm First Eastern Investment Group, has launched a new fund to target opportunities in China’s growing economy. The fund, called China Dubai Capital, will invest in a wide range of sectors, including infrastructure and health care, according to Thaindian business portal.

“Through this fund, we will invest in feasible and profitable business opportunities in commercially attractive sectors,” Ansari said in a statement.

He added that the establishment of China Dubai Capital provided investors with the opportunity to participate in a vehicle, which would generate superior returns. The first closing of the fund will take place in May 2008 with at least $500 million from investors predominantly in Asia and the Gulf Cooperation Council (GCC) countries – Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Oman and Bahrain.

Moreover, major UAE companies are eager to explore business in China. According to the Gulf News, Sultan Ahmed bin Sulayem, chairman of Dubai World said, “China is a major trading partner for Dubai and we give high importance to further strengthening the relationship between the two countries.”

Bin Sulayem added that Dubai World was a major investor in China through its projects in Qingdao and Shanghai ports, and was looking to expand into other areas.

Dubai World has been investing $500 million in port development in Tianjin, China. These projects and many others have been initiated in China, which has become a major buyer of energy from the Gulf countries. In return, China is boosting its investments in the Gulf region to establish a steady stream of oil and gas.

China continues to play a remarkable role in trade events that are focused on priority sectors for Dubai, such as Big 5 for construction, Arab Health for medical and pharmaceuticals, Gulfood for the food industry and GITEX, the region's largest technology event.

China's builders, engineers, labor suppliers and equipment companies have begun winning shares in the $1 trillion in projects planned or underway in the Gulf. The total volume of trade between the UAE and China grew by an annual average of 40% to $20 billion in 2007, making the UAE China's second-largest trading partner in the GCC after Saudi Arabia.

Non-oil trade between Dubai and China, which has been increasing steadily over the past five years, has registered an increase of 47% at $19.4 billion, while trade between the GCC states and Asia doubled between 2000 and 2005, reaching $240 billion, according to published data.

These investments are set to grow dramatically. The six GCC countries will invest nearly $250 billion in Asian markets, including China, over the next five years.

"This is the beginning of a long-term trend of investors from the Gulf region investing in the Far East," said Michael Philipp, CEO of Credit Suisse Europe, Middle East and Africa, during a recent conference in Doha, Qatar. "The flows are tremendous. The interest is tremendous. This will continue to grow."

It is predicted that within the next five years, China and India will surpass the United States and Europe as the largest Gulf investment destinations. A survey completed last year by consultancy McKinsey said that Gulf investors would shift their portfolio allocations toward Asian assets by 10% to 30%, which "represents an important change in the pattern of global capital flow," according to Philipp.

In 2006 Gulf investors bought around 20% percent of the shares when the Industrial & Commercial Bank of China launched its $22-billion public offering, he said.

Meanwhile, the increasing number of business travelers from China to this region is also having a positive economic impact. Statistics from the Department of Tourism and Commerce Marketing indicate that more than 68,000 tourists from China stayed in Dubai from January to September 2007 alone.

Last year, Dubai had a strong presence at the debut event of the Asia Luxury Travel Market (ALTM 2007) in the Chinese city of Shanghai and UAE travel agencies are thrilled to be entering the Chinese travel market.

In April Abu Dhabi Securities Market (ADSM) discussed its development plans, including exchange traded funds and foreign listings, with representatives of some of Asia’s leading stock exchanges during a road show in Singapore and Tokyo.

Aldar Properties, Sorouh Real Estate, Abu Dhabi Commercial Bank (ADCB), National Bank of Abu Dhabi (NBAD), Dana Gas, Agthia, Fujairah Cement, and Waha Capital will all be accompanying the ADSM on the road show, the bourse said.

"This is the first time that the Abu Dhabi market has gone to Asia to educate investors about our listed companies, and we are confident of a good response," director-general of the ADSM, Tom Healy, said in a statement.

Dubai World Trade Center (DWTC) recently announced a targeted strategy to build solid business opportunities with China. Last year, DWTC hosted the China Sourcing Fair in Dubai, which attracted suppliers from across the Greater China region.

This year, DWTC plans to host the second Global Sources' China Sourcing Fair in Dubai at the Dubai International Convention and Exhibition Center (DICEC) from June 9-11. Executives expect this event will be 80% larger than last year's fair, reflecting the huge interest in bilateral trade between the two economies.

The China Sourcing Fair exhibition in Dubai, one of the major events being held to explore the Chinese market in 2008, is aiming to serve the needs of importers and volume buyers in the Middle East region that seek high quality products from competitive suppliers in Greater China. Based on last year's success, the range of companies for the 2008 event will expand to include specialists in fashion accessories and electronics.

In April B2B company Tejari joined an official UAE Business Mission to develop trade between China and the UAE. Launched by the Government of Dubai, Tejari is one of the leading B2B online marketplaces in the emerging markets. During this mission Tejari unveiled its export promotion packages to Chinese suppliers and plans for a series of 10 offices to be opened in the country during the coming months.

However, this shift is not only focused on China but on other Asian countries as well. In February the head of the Investment Corporation of Dubai (ICD), Mohammed Al-Shaibani, said that Dubai planned to invest up to $20 billion in South Korea, according to WAM news agency.

In addition, Abu Dhabi Commercial Bank (ADCB) plans to double profits over the next two years by making acquisitions in countries such as Malaysia, ADCB chief executive officer Eirvin Knox told shareholders at meeting in Abu Dhabi, according to Reuters.

The bank said earlier this month it had won ministerial approval to buy 25% of Malaysia’s fourth-largest lender, RHB Capital, to tap growing Asian demand for Islamic bank services.

The Media Line

What is the repercussion?