Page 240 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

222 Dubai & Co.

TABLE 8.1
Contrasting the Booms: Investment Strategies

Element of Strategy 1970s 2000s
Geographic allocation Primarily OECD OECD and developing
of capital markets markets plus more local
allocation
Local investment Basic infrastructure and Advanced infrastructure,
priorities institutions “knowledge”
infrastructure, and
centers of excellence
Instruments used Traditional asset classes Traditional asset classes
plus alternative investments
Engagement of private Minimal Central component of
sector strategy
Investment Overseas Overseas plus local
management expertise (including expatriates)

opportunities and the risk of “overheating” the local market was
clear. The most prudent investment strategy at the time was to
invest in developed markets where the return would be safe, wealth
could be stored in dollars, and Gulf investments (sizable as they
were) would not disrupt the market. Applying large amounts of
capital to small markets would also drive prices up and yields
down, as well as limit large investors’ liquidity and ability to exit
with good returns. Investing heavily in small markets such as the
GCC or other emerging markets would have exposed Gulf
investors to undue market risk. It is therefore not surprising that
GCC investors focused heavily on Western markets, with limited
exposure to more developed Asian markets like Japan (which in the
1970s was still not fully developed).
In the boom of the 2000s, however, Gulf investors have taken a
broader approach to capital allocation. While the bulk of assets are
still being channeled to OECD markets, emerging markets receive
far greater attention and consideration. Kuwait’s role as the largest
subscriber in the Industrial and Commercial Bank of China’s 2006
IPO is one illustration of the increased appetite for high-growth
Asian markets. Gulf investors and corporations are also investing
more in South Asia than ever before—the property developer
Emaar, for example, has undertaken a large-scale project in