GCC emerging as an attractive investment destination

JEDDAH – “GCC offers strategic advantages, such as availability of cheap energy and feedstock supply, low tax environment, well-developed infrastructure, growing population and increasing income levels, conducive for the development of various industries in the region. All these advantages if properly showcased could attract substantial investment flows from Indian corporates, who are looking to expand their global footprints and scouting for distinctive cost advantages to remain globally competitive,” said Sameena Ahmad, Managing Director, Alpen Capital.
“The GCC is emerging as an attractive investment destination for Indian companies. We as Alpen Capital specialize in the GCC-India corridor and have concluded several transactions in this sphere. There are several opportunities that exist in the GCC for Indian companies and we see a lot of interest from Indian corporates to establish a presence in the GCC. This trend is on the rise and we will continue to work closely with our clients and the respective governments to facilitate these transactions,” said Sanjay Vig, Managing Director, Alpen Capital.
A variety of catalysts for investment growth exist in GCC. While the oil industry is undeniably a pillar for the GCC economies, the region’s priority is to achieve sustained economic growth through development of non-oil sectors. This can be achieved by increasing private sector participation, strengthening local technological capabilities, developing a skilled workforce, improving the competitiveness of exports in global markets and by attracting substantial overseas investments.
Continued government spending to boost competitiveness, self-reliance and developing local skilled work force would offer potential investment opportunities in sectors such as Petrochemicals, fertilizers, plastics, pharmaceutical, sugar refining, aluminium & steel. In addition government support and infrastructure is expected to grow in sectors such as Information & Communication technology (ICT) and agriculture, food processing, education, financial services and EPC.
GCC offers substantial cost advantage for industries like petrochemicals, fertilizers, pharmaceuticals and metallurgy among others, as the region boasts of one of the lowest energy costs globally due to abundant availability of resources. Natural gas prices in GCC range between $0.8-1.5 per million British thermal units (mmbtu) compared with the global average of $4.0-6.0 per mmbtu. The availability of low-cost feedstock provides the region with distinctive competitive advantage. Average electricity prices for end users in GCC states are much lower at $3.7cents/kWh compared to countries that enjoys the reputation of being generation powerhouses ($10.5cents/kWh in USA and $9.4cents/kWh in China).
GCC’s twin surplus condition leads to economic stability: GCC’s large fiscal surplus (averaging ~9.2 percent of GDP over 2007-11) and trade surplus (averaging ~ 16.9 percent of GDP over 2007-11), low levels of public debt (averaging ~4.5 percent of GDP over 2007-11), and low external debt translate into a better rating, in terms of macro-economic health, than developed counterparts. On the other hand, economic diversification initiatives, growth in non-hydrocarbon sectors, pegged currencies, large forex reserves, well-developed infrastructure, and a moderate inflation environment provide an overall attractive business environment vis-à-vis emerging economies.