While fears over an immediate US military strike on Syria may have abated, political tensions across the Middle East are running high. “This is not a good environment for investors. There is a lack of appetite to invest more money in the region,” one local banker recently opined.
To some extent, Dubai is bucking the trend. The emirate, it seems, continues to be seen as the safe haven for deal making. Meanwhile, Saudi Arabia continues to appeal as an investment destination. As an example of the country's buoyant investment landscape, Saudi Arabian fast-food chain Kudu is expected to attract bids from private equity firms KRR of the US and Abraaj Group of the United Arab Emirates. The deal could see a 60% stake in the company – put up for sale by two of its four investors – valued at between SR1.5bn ($400m) and SR2bn.
Saudi Arabia’s ICT sector is also set for expansion, offering significant investment opportunities. According to a recent survey, nearly one-third of the country’s small and medium-sized enterprises (SMEs) said they use cloud computing, and this is projected to rise to 54% within the next three years. Another 53% said that, over the next three years, they expected to utilise mobile technology, up from 37% today. When it comes to social media, the 37% of SMEs using it today is projected to rise to 43% by 2016.
Unfortunately, however, it is developments in Egypt, rather than Syria – where deal flow has been limited because of sanctions – that are causing investors the greatest concern. Some deals are being cancelled. Recently the Egyptian Stock Exchange announced it would neither be privatised nor converted to a shareholding company for the time being. And investment into Egypt from the Gulf countries tends to depend on the politics of their respective governments. For example, Egypt recently returned $2bn that Qatar had deposited with its central bank before the ousting of former president Mohamed Morsi. However, Saudi Arabia, Kuwait and the UAE have pledged $12bn between them to Egypt’s military regime.
Lucia Dore is the head of GCC and Middle East at mergermarket, part of The Financial Times Group. E-mail: firstname.lastname@example.org