Cash-rich Gulf Arab corporates are looking to spend billions of dollars to buy up competitors and expand this year as the region's economy reaps a windfall from skyrocketing oil prices since 2001.
Executives from Middle Eastern corporates, who attended the World Economic Forum in Davos which ended on Sunday, told Reuters they are eyeing Asia for investment, while concerns about protectionism in the United States have hardly deterred them from the world's largest economy. Mashreqbank, the United Arab Emirates' fifth-biggest lender by market value, is looking at India or Pakistan.
"We are looking at a local acquisition or a joint venture because I think we can bring our Middle Eastern connection and our technology... I'm looking for the market cap of $100 million to $1 billion," Chief Executive Officer Abdul-Aziz Abdulla Al-Ghurair said in an interview.
He added the bank's target areas of expansion start in the neighbouring Gulf Arab region, then the wider Arab world, followed by the two South Asian countries. Mashreqbank allocates 80 percent of its entire investment portfolio in US dollar-based assets, such as US Treasuries.
Tarek Sultan, chairman and managing director of Kuwaiti logistics firm Agility, said he wants to boost revenues from Asia by 20 to 25 percent this year. Agility has a large presence across Asia, including China and India, bringing the firm around 20 percent of total revenues or $1 billion annually.
Mohammad Hassan, chairman of Abu Dhabi-based Emirates Telecommunications Corp said it is prepared to pay up to $3 billion to bid for state-run Algerie Telecom, while its expansion areas included Pakistan, Egypt and West Africa. Gulf Arab markets have an estimated total capitalisation of $850 billion, about 15 percent of the value of all emerging markets.
Data from Dealogic shows investors from Gulf states ploughed $25.5 billion into acquisitions outside the region in the year to November 2005 - around eight times as much as in 2004 and dwarfing the total of $11.1 billion for the previous five years.
"Our ability to handle cargoes, whatever we have now, we expect to grow by 50 percent in the next three years," Chairman Sultan Ahmed bin Sulayem said. "We are looking at the IRR (internal rate of return) of 20 percent in five years and that's on whatever cash we put in."
Dubai World's investment arm Istithmar has been buying up US property aggressively. Last year, it bought a 73 percent stake in the Mandarin Oriental New York, acquired retailer Loehmann's, the Knickerbocker Hotel in New York, and office block 280 Park Avenue in April. Bin Sulayem, who is about to buy a hotel in Paris, sees US assets as very attractive even after a political row last year over its US operations.
DP World agreed to sell its US operations to an American International Group unit in December after relinquishing control to allay concerns about US national security.
"The United States is a very attractive market... The US is the major ally. There is huge co-operation between the governments. There have been maybe some events (related to protectionism) but ... whether there is protectionism or not, we go after opportunities," bin Sulayem said.
In the case of Qatar, it is keen to shift its petrodollar assets away from the United States to countries which are its customers, including Asia. "Regionally there is less evidence of enthusiasm to be the major owner of US assets. It doesn't mean US investments will go away but you will find governments and agencies looking at a wider range of opportunities," said Phillip Thorpe, chairman and chief executive officer of Qatar Financial Centre Regulatory Authority.
Thorpe said Qatar bodies were enthusiastic to "follow the gas" by putting assets in the countries which buy the country's energy exports. He added that by 2012 the UK and Europe would roughly account for a third of Qatar's energy exports. Asia would also take a third and the United States the rest.