Gulf One’s Strategic Positioning inssef3.apricum-group.com/wp-content/uploads/2011/04/... ·...

BY

MOHAMMED SALISU

CHIEF ECONOMIST

GULF ONE INVESTMENT BANK

Gulf One’s Strategic Positioning in Supporting Sustainable Economic Growth

in the GCC Region

1(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).

Renewable Energy Financing Mechanism Workshop: Riyadh, 4 April 2011

2

AGENDA

CHALLENGES FOR PROMOTING SUSTAINABLE

ECONOMIC GROWTH IN THE GCC REGION

COMMERCIAL FINANCING CHALLENGES AND

OPTIONS

THE ROLE OF GULF ONE INVESTMENT BANK

CONCLUSION(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).

SUSTAINABLE ECONOMIC GROWTH CHALLENGES

(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 3

Real GDP Growth Rates in the GCC Countries


4.503.96

2.33

4.72

2.433.42

5.90

4.50 4.44 4.68

3.18

4.51

-6

-4

-2

0

2

4

6

8

GCC Bahrain Kuwait Oman UAE Saudi

2009 2010 2011f 2012f

15.96

18.58

0

2

4

6

8

10

12

14

16

18

20

QatarSource: IMF, January 2011

GCC economic growth prospects remain encouraging...

%%

… but large Output Gap is big concern, signifying under-utilization of resources ….

5

0

500

1000

1500

2000

2500

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Bill

ion

riy

als

Saudi Arabia: Actual GDP versus Potential GDP

Potential GDP Observed GDP

Expon. (Potential GDP ) Expon. (Observed GDP )

Source: G1 Bank estimates

(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).

6

....as reflected in high unemployment and low human capital in GCC countries ...

7.9%10.18%

34.35%

47.6%

0

10000

20000

30000

40000

50000

60000

70000

80000

Grad and Postgrad

Undergrad Secondary Primary and less

Saudis Job Seekers by Education Level(2008)

Source: Saudi Ministry of Labor, G1 Bank

5

7

9

11

13

15

17

19

21

23

25

27

29

31

4 5 6 7 8 9 10 11

You

th U

nem

plo

ymen

t (%

)

Total Unemployment (%)

Source: IMF, ILO, G1 Bank

*: Egypt, Jordan, Lebanon, Morocco, Syria and Tunisia

MENA6*

Saudi

Sub-Saharan Africa

SE Asia &Pac.

Developed Economies

World

East Asia

South Asia


... and a relatively low productivity, especially in the public sector!

7

0

50

100

150

200

250

2004 2005 2006 2007 2008

'00

0 R

iyal

s

Saudi Arabia: Labour productivity in the private & public sectors

Private Sector Public Sector Linear ( Private Sector )Source: Reuters and Gulf One Bank


Reducing Output Gap is a panacea for unemployment...


0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

%

Actual and Simulated Unemployment Rates in Saudi Arabia

Unempl Hypo Unempl

Source: Gulf One Bank

... and could boost economic GDP growth


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

%

Actual and Simulated GDP Growth in Saudi Arabia

Actual GD|P Growth Hypo GDP Growth


ENVIRONMENTAL CONCERNS


Sustainability of Economic Growth is constrained by environmental costs.......


250

350

450

550

650

750

850

950

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Bill

ion

riy

als

Gross Domestic Product (GDP) vs Socio-Economic-Ecological GDP (SGDP) for KSA

SGDP GDPSource: World Bank; Gulf One Bank

Environmental concerns will intensify with rapid economic growth unless investment in environmental products grows


-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

30 40 50 60 70 80 90

20

10

GD

P p

er

cap

ita

(US$

)

EPI 2010

Scatter Diagram of Capita GDP and Environment Pollution Index

SaudiBahrain

Qatar

CO2 Emissions in Saudi Arabia highest in the GCC Region & will grow as Kingdom industrialises


0

2

4

6

8

10

12

14

16

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Mill

ion

met

ric

ton

s

Source: World Resources Institute

CO2 emissions from industrial processes in the GCC countries

Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates

Electricity Generation the Biggest CO2 Emitter => Hence the relevance of investment in renewable energy!


FINANCING CHALLENGES


Global Infrastructure Financing Gap Is Huge


Total infrastructure required inGCC infrastructure by 2020 = US$1,500 billion

Equity required =

30% of total investment

Current regional infrastructure equity funds = < 5% of total equity required

US$450 billion

US$22 billion

GCC INFRASTRUCTURE EQUITY FUNDS GROSSLY INADEQUATE ....


...Despite Attractiveness of Infrastructure Asset Class


Financing problems more acute for Renewable Energy in the Region


Europe37%

Asia & Oceanic34%

North America17%

South America 10%

Middle East & Africa

2%

New Investment in Renewable Energy by Region 2009 (Global Total=US$119.3 Bn)

Source: Global Trends in Sustainable Energy Investment 2010, UNEP & Bloomberg NEF

Key Reasons for Low RE Financing in the GCC Region


Low domestic conventional energy prices driven by decades of subsidies, making it difficult to attract investment in the alternative energy sector

Limited domestic awareness of energy and environmental concerns

Lack of financial incentives, e.g. feed-in tariffs, that can boost the cost-competitiveness of renewables

Inadequate institutional capacity and inexperienced environmental authorities

ROLE OF ENVIRONMENTAL FUNDS


Australia, 5%Belgium, 2%

Cayman Island, 5%

Denmark, 2%

France, 5%

Germany, 5%

Luxembourg , 37%

South Korea, 2%

Switzerland, 2%

Taiwan, 10%

U.K., 12% U.S.A., 12%

Distribution of Environmental Funds in the World (%)

Source: Trevista and Gulf One Bank

EFs focusing on a wide range of sectors


39

14 1310 9 9 9

6 6 6 5 5 4 4 3 3 3 2 2 1 1 1 1 1 1

05

1015202530354045

Elec

tric

al &

Eq

uip

Mis

cella

neo

us

Man

ufa

ctu

rin

g

Ener

gy A

lter

nat

ive

Envi

ron

men

tal C

on

tro

l

Ch

emic

al

Sem

ico

nd

uct

ors

Wat

er

Div

ersi

fied

Fin

anci

al S

ervi

ces

Mac

hin

ery-

Div

ersi

fied

Tran

spo

rtat

ion

Bu

ildin

g M

ater

ial

Engi

nee

rin

g &

Co

nst

ruct

ion

Co

mm

erci

al S

ervi

ces

Oil&

Gas

Foo

d

Ph

arm

aceu

tica

ls

Tele

com

mu

nic

atio

n

Hea

lth

Car

e

Ret

ails

Aer

osp

ace/

Def

ense

Co

mp

ute

rs

Co

smet

ics/

Pers

on

al C

are

Fore

st P

rod

uct

& P

aper

Inte

rnet

Mu

nic

ipal

Nu

mb

er


Global Sectoral Allocation of Environmental Funds

Most EFs invest in equities


Derivatives, 27%

Equity, 68%

Equity & Derivatives, 5%

Investment Strategy of Environmental Funds


A knowledge-based investment bank for financing infrastructure in the GCC and MENA Regions

Mission: To mobilise local & global capital to execute infrastructure projects via innovative financial solutions

Strategy:a catalyst for unleashing the GCC's potential to achieve

sustainable economic growth and social prosperity by building on region’s resource strength and competitive advantagestructuring and investing in infrastructure projects and

energy-related mega-initiatives, by building of strategic partnerships and alliances with local and international investors and institutions in our core businessesProviding advisory and debt arranging services to

infrastructure, PPP/BOT sector(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 25

GULF ONE INVESTMENT BANK

SECTOR FOCUS KEY FOR ECONOMIC GROWTH AND DEVELOPMENT

SAUDI ARABIA INCOME MULTIPLIER

26

Sector Income multiplier (GDP / loans)

Crude oil -

Non-crude oil industries 4.3

Transport and communication 4.5

Water, gas and electricity 3.1

Finance 1.8

Construction 1.6

Commerce and tourism 1.2

Source: Gulf One analysis from official data


ONGOING INVESTMENTS

27

Fund / Deal Sector Market

Moya Holding Company B.S.C.

(c)Water sector MENA / India

Gulf One SME Opportunities

Fund SMEs GCC

Gulf One Buchanan Industrial

Technologies Fund I L.P.Industrial Technologies

Germany, Austria,

Switzerland

Montajat Veterinary

Pharmaceuticals Co.Pharma Saudi Arabia

Jao Investment Fund Aviation GCC

Z Aljazira Power Saudi Arabia

SCC & SCC–MENA Environment GLOBAL & GCC



Jeddah Hajj Terminal: Islamic Deal of the Year 2007 – Euromoney PF

28

Advisory:A 20-year BTO concession for the Hajj Terminal at King AbdulazizInternational Airport, Jeddah

Our Projects



Moya Holding Company

29

Our Projects



Investment:

A PE Company in partnership with the Bushnak Group investing inwater projects (desalination, wastewater treatment, distributionetc.) principally in the MENA region and the Indian Subcontinent

JAO Investment Fund

30

Our Projects

Jao Investment Fund



Investment:

A MENA focused private equity fund investing in attractiveopportunities within the aviation sector

31

Our ProjectsGulf One Buchanan Industrial Technologies Fund: DACH Fund

GULF ONE BUCHANAN

INDUSTRIAL TECHNOLOGIES

FUND I LP



Investment:A private equity fund developed in partnership with BIT, investing inattractive companies in the industrial technologies sectors withinthe DACH Mittelstand – a conduit for industrial technology transferto the GCC

Our Projects

32

Investment:An exclusive MENA joint venture operating company forthe carbon abatement, Clean Development Mechanismand alternative energy business in the MENA region


SCC MENA

INDEPENDENT RESEARCH CAPABILITY

33

Independent

Enhancing client and market knowledge base

Addressing relevant regional issues

Providing indigenous GCC perspective

Supported by international knowledge reach

Ongoing research on Environment Economics & Alternative Energy

Established by G1 Funding

Research focused on economic and financial developments in the Middle East and North Africa, particularly the GCC


GULF ONE - Every Little Helps!


CONCLUSION

Gulf One Investment Bank

35

Thank you

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