Page 27 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

Introducing Dubai & Co. 13

capital, and its 2005 current account surplus, according to the IMF,
was $155 billion. GCC investors hold equity stakes in key companies
worldwide, as well as huge quantities of US Treasury notes and
corporate bonds. Some of the world’s most influential investment
agencies—including the powerhouse Abu Dhabi Investment
Authority (ADIA)—are GCC based. ADIA does not disclose its
assets under management, but estimates range from $250 billion to
over half a trillion dollars.
Local equity markets in GCC countries experienced a
tremendous boom from 2002 to early 2006, followed by a sharp
market correction leading to more realistic market valuations. Local
real estate has similarly boomed and, at the time of this writing, is
yet to experience a serious market correction. Volatility in the local
investment market has been both a reflection of GCC investors’
increased preference for local assets and a reminder to US-based
investors of the importance of investing abroad.
Multinationals should view the GCC as a source of potential
capital, both for regional activity and for their firms globally. Local
joint ventures or acquisitions, for example, can be largely self-fund-
ing if firms take on local partners or list on local exchanges. Savvy
firms can find ways to locally fund capital-intensive activities,
thereby reducing market risk for the global parent. Some firms can
even draw on GCC capital for general, global activity. Road shows
for global debt and equity offerings increasingly include visits to
key GCC investors. Many firms are even offering Sharia-compliant
structures—which comply with Islamic law—to attract GCC capi-
tal. Asian firms, particularly in Malaysia, have been doing so for
years. In recent times, even Boeing has used Islamic structures in its
global sales.
The GCC also offers interesting opportunities to enhance
firms’ operations and logistics strategies. As we discuss in Chapter
9, GCC markets offer superb infrastructures, including ports, air
links, power, roads, and telecom facilities. Dubai, in particular,
offers outstanding facilities at Jebel Ali, the world’s largest man-
made harbor. Managing the day-to-day operations of a GCC busi-
ness does introduce a handful of logistical complexities. Weekends,
for example, are on a Friday-Saturday or Thursday-Friday sched-
ule, and companies need full-time staff just to deal with often-cum-
bersome government regulations.