Investments continue to increase in GCC
New report sees positive growth in the region
January 22, 2014 8:31 by kippreport
The recent report from Standard Life Investments, titled ‘Letter From the Gulf’ summarises the region’s markets, while highlighting investment insights.
In the case of Saudi Arabia, the Arab spring has been given renewed impetus to the long-established aim of expanding the non-oil economy. The private sector accounts for approximately 15 per cent of employed Saudis, while only 20 per cent of Saudi nationals are in employment at all and youth unemployment is an eye-watering 30 per cent.
A number of ‘Saudisation’ measures, have been designed to incentivise the recruitment of Saudi nationals over foreigners. Combined with many other initiatives, including encouraging more women into work and the establishment of unemployment benefits, these policies are already boosting consumption. This is helping to maintain GDP growth expectations around four to five per cent as consumer spending offsets lower oil production.
Comprising 157 companies worth $432 billion, the Saudi Tadawul All Share Index is larger than indices in Indonesia, the Philippines, Thailand, Turkey and Israel, yet it is not even classed as a frontier market.
Five years ago, with its growing economy, Saudi Arabia employed scarcely any women, now approximately 1,500 of its 5,000 surveyed employees in the report are female.
The Gulf infrastructure investments are directed towards the 2022 World Cup’s impact on Qatar, yet tournament-related capital expenditure is estimated to be $2.75bn. This is a paltry sum compared with its massive $94.7bn infrastructure spending plan, which is designed to diversify the economy.
Additionally, the UAE-based budget airline Air Arabia, unlike its European peers, enjoys preferential access to its Sharjah hub. Given the importance of cheap airports to the low-cost model effectively controlling your hub is a significant advantage and minimises capacity constraints. The company has grown significantly from 0.5 million passengers in 2004 to 5.3 million in 2012, yet low-cost carriers still only represent six per cent of the Mena market compared with more than 35 per cent in Europe.