abraaj capital middle east, north africa & south asia (menasa) - taking stock in a global...
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Abraaj CapitalMiddle East, North Africa & South Asia (MENASA) - Taking Stock in a Global Downturn
International Insurance Society, Amman, June 2009
Strictly Private & Confidential
Abraaj Capital
Abraaj Capital
Abraaj Capital (“Abraaj”) is a leading private equity firm in the rapidly growing economies of the Middle East, North Africa, South Asia (“MENASA”) region
Abraaj was founded in 2002 and is headquartered in the Dubai International Financial Centre, where Abraaj Capital Limited is incorporated and regulated and licensed by the Dubai Financial Services Authority
Abraaj’s network of shareholders, investors and intermediaries has exceptional influence in the financial and business communities across the region
US$ 5.9 bn funds under management as at 31st December 2008US$ 6.9 bn cumulative funds raisedUS$ 2.9 bn cumulative distributions
35+ Investments | 11 countries | 20 exits to date
US$ 1.6 bn of total distributions to investors in 2008
The Numbers
28 different nationalities
Note: Exits include those undertaken by Abraaj senior management during their time at Cupola
Regional presence
Egypt
Saudi ArabiaTurkey
Jordan
India
Pakistan
Note: Distribution of companies across different countries is based on the location of their headquarters. Many of the above companies have pan-regional operations.
Lebanon
Oman
Qatar UAE
Denotes:5 Abraaj offices located in Dubai, Cairo, Istanbul, Karachi, and Riyadh
Egypt
Turkey
Saudi Arabia
UAE
Pakistan
4
Where Are We & Where Are We Going?
Financial Institutions
Total losses estimated at US$ 4.1 trillion(1), with nearly 3 million jobs lost in the US
Real Economy Impact
(1) Source: IMF
From sub-prime through the financial sector to real economy
6
7
Socio-Political Impact
Unprecedented circumstances pose a test of global leadership whose actions will determine the outcome of the current crisis
…are they good enough? Is there a Churchill, FDR, Mandela in the making?
8
Norms and Values
Redefinition of Norms
The Next Crisis
Consumers
Climate Change
Regulation Corporate Social
Responsibility
Employees
9
10
The economic crisis is leading to a rethinking of the traditional risk paradigm
Emerging markets vs. developed markets
Emerging Markets Risks Developed Markets Risks
Political instability
Currency (F/X)
Market fundamentals
Counterparty
Market fundamentals
Structural issues
Legal / Regulatory
Low Risk
Low Growth
High risk
High growth
High Risk
Low Growth
High Risk
High growth
Pre-Crisis ThinkingD
eve
lop
ed
Ma
rketsE
me
rgin
g M
ark
ets
Post-Crisis Thinking
Legal / Regulatory
Environmental
‘Black Swan’ moment; risk came from where traditionally it was least expected; the model needs to be re-thought
11
Diminishing Sine WaveParadigm Shift
Recession is upon us but how long will it last?
Long and Contracted
12
Sharp and ShallowSharp and Staggered
MENASA
1,821
510
1,335
Middle East North Africa South Asia
122 159
1,314
Middle East North Africa South Asia
14
Saudi Arabia
Bahrain
MENASA has a combined GDP of US$ 3.7 trillion growing at 4.8% p.a., and a population of 1.6 billion
Significant cultural, political, and economic synergies have led to strong intra-regional trade links, labor mobility and
investment opportunities
Source: Economist Intelligence Unit (May 2009)Note: Middle East includes GCC states, Jordan, Lebanon and Turkey. North Africa includes Egypt, Libya, Algeria, Morocco, and Tunisia. South Asia includes India and Pakistan.
Introduction to MENASA
The MENASA Region 2008 Population (million)
2008 Nominal GDP (US$ billion)
Qatar
Egypt
Turkey
LibyaAlgeria
Tunisia
JordanLebanon
Oman
UAEIndia
Pakistan
Kuwait
Morocco
Hydrocarbon Based Liquidity
The GCC nations will receive c.$5 trillion of revenue even if oil stays at an average of $50 per barrel over the next ten years
700
3,800
6,400
8,800
2007 2012 2016 2020
Oil P rice $100
Oil P rice $70
Oil P rice $50
Oil P rice $30
GCC Oil Revenues (US$ billion)
3,200
1,500
1,500
2,600
Leading to Continued Growth
7.7%
4.8%
2.1% 2.0%0.6% 0.2% -0.1%
Chi
na
ME
NA
SA
LAT
AM
EM
*
Nor
thA
mer
ica
OE
CD
EU
-15
15
Government Reforms & Diversification
The ‘real’ economies within the MENASA region will continue to grow
Three main factors will continue to drive growth in the MENASA region
Reform agenda is being used to establish sustainable growth
Thirteen MENASA countries are now part of the WTO
Governments across the region have emphasized non-oil sector diversification within their economies
Governments are looking to encourage greater private sector participation
The privatization pipeline in the region is expected to exceed US$ 900 billion in the next ten years
Favorable Demographics
121million
127million
Nominal GDP / Cap
$2,715
MENASA Population
$976 $2,051
2008-2013 Real GDP CAGR
Source: Economist Intelligence Unit (May 2009), McKinsey *Excluding MENASA countries & China
Creates wealth, facilitates economic growth, and infrastructure expenditure
Facilitates economic growth, and creates investor / business
friendly environments
Creates demand, facilitates production growth, encourages reform
1,448
1,569
1,696
2002 2007 2012
$1.9$1.8
$1.9$2.2
$2.4$2.7
2008 2009 2010 2011 2012 2013
South Asia GCC North Africa Other Middle East
1616
7.2%
Favorable demographics
The demographic shift in population … has unleashed consumption-led growth
...matched by a growth in working population
Almost 175 million people expected to join the workforce in MENASA over the next decade
Mobile low cost workforce
Young and Growing Population
– More than 50% of the region’s population is under the age of 25
Immense Wealth Creation
– GCC GDP per capita to increase to over $28,000 by 2013
Burgeoning Middle-Class
– c. 31 million households are expected to join the middle class between 2006 and 2010 in India alone
Urbanization
– Rapidly growing urban populations across the region
Main sectors: Energy Food Infrastructure Healthcare Education Housing
Nominal Private consumption growth
(trillions)
Private consumption to
grow by US$ 0.8 trillion by 2013
Young and growing population increasingly focused on realizing their full economic potential
Source: Economist Intelligence Unit (May 2009), McKinsey, Morgan Stanley (September 2008), Abraaj analysis, United Nations
Males Females
16%
9%
8%
6%
4%
3%
3%
17%
10%
8%
6%
5%
3%
2%
14%
9%
8%
6%
5%
4%
3%
15%
10%
9%
6%
5%
4%
3%
2005 2015Est. total population: 1,562 million Est. total population: 1,800 million
65+
55-64
45-54
35-44
25-34
15-24
0-14
Wo
rkin
g
Po
pu
lati
on
43% W
orkin
g
Po
pu
lation
47%
45%
6%
12%9%
28%
16%
22%
9%
MENASA North America Europe South America
Oil Reserves Oil Production
Hydrocarbon-based liquidity will support growth (1/4)
Source: McKinsey, BP Statistical Review of World Energy 2008
Highest reserves to production ratio in the world…
Reserves / Production Ratio
1.6x 0.3x 0.5x 1.1x
Reserves and production as a % of global total
17
0
20
40
60
80
Qatar United ArabEmirates
Saudi Arabia Oman Bahrain Kuwait
B/E Oil Price Budgeted Oil Price
Hydrocarbon-based liquidity will support growth (2/4)
…with budgets balancing at US$60 per barrel or less…
GCC breakeven budget* oil price
*based on official 2009 budget targetsSource: Merrill Lynch (April 2008) 18
51.0
61.4
83.0
90.0
2009 2010 2011 2012
Hydrocarbon-based liquidity will support growth (3/4)
…and consensus oil price forecasts above US$ 60 per barrel…
Consensus Oil (Brent) Price Forecast (US$ per barrel)
Source: Bloomberg consensus of analysts (May 2009) 19
0.61.1 1.5 1.9
2.4 2.8 3.2
0.90.9
1.31.5
0.8
1.0
1.3
1.5
1.5
2.1
2.2
2.6
0.61.1
2.4
3.8
5.1
6.4
7.6
8.8
2007 2008 2010 2012 2014 2016 2018 2020
Oil Price US$100
Oil Price US$70
Oil Price US$50
Oil Price US$30
Cumulative GCC Oil Revenues (US$ trillions)
Hydrocarbon-based liquidity will support growth (4/4)
Source: McKinsey
…resulting in continuing hydrocarbon driven liquidity at several price points
20
Significant governmental investment and reform efforts
High levels of infrastructure investment and government spending in attempt to diversify economies and facilitate job creation
– More than US$ 2.6 trillion worth of projects planned in the GCC alone
– King Abdullah Economic City in Saudi Arabia to create 800,000 jobs with seaport, light industries, tourism and financial services
Move to knowledge-based economies Monetary and structural support for knowledge economy sectors (healthcare, information technology, media,
telecommunications etc.)
– Set up of specialized infrastructure: Dubai’s Knowledge City, Jordan’s Education initiative, and over 400 SEZs in India primarily catering to IT and related sectors
– High level of investment in primary and secondary education (e.g. 25% of UAE budget allocated to education spending)
Reform agenda has spurred continued regional growth
A generational change in the leadership of GCC countries has set the stage for the modernization of local economies
– Significant liberalization and privatization efforts in the banking, telecom and real-estate sectors have taken place
– Independent capital market regulators have been established and formal partnerships with leading global exchanges have been developed
The Jordanian government plans to implement the ‘National Investment Strategy’ to ease bureaucratic restrictions and overhaul the tax system
The Egyptian government has launched a series of reforms including a new taxation law lowering corporate taxes and the establishment of numerous economic free-zones, causing FDI flows to grow 20x between 2002 and 2007
Government action has played an important role in supporting regional growth
Government reform & diversification
Source: McKinsey, MEED Projects 21
29%
45%
15%
28%
MENASA Oil Production
MENASA Oil Reserves
MENASA Gas Production
MENASAGas Reserves
Oil & Gas (Global Production % vs. Global Reserve %)
Gap16%
Gap13%
5.4%
7.4%
10.0%
17.0%
1996 2001 2005 2010F
26%24%
9%
4%
USA Europe Asia-Pacific MENA
158
4475
142
50
60
India / Pakistan North Africa GCC
Installed Gigawatt Capacity Required
Low Cost Carrier Market Share of Short-haul Market
Power Generation Capacity (Gigawatts) Petrochemicals (MENA % of world Ethylene Capacity)
Source: McKinsey, Economist Intelligence Unit, Citi Research, Abraaj Capital Analysis
Gap22%
(by 2017)
(by 2030)
(by 2015)
Investment requirement
US$ 50bn
Investment requirement
US$ 90bn
2005-2010 CAGR – 14%
MENASA has experienced historic under-development in key sectors creating pent up demand and high growth potential
Structural demand-driven opportunities – Infrastructure
22
1.31.1
0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0
4.6 4.4
Leba
non
Mor
occo
Bahra
in
Egypt
Jord
anUAE
Oman
Tunisi
aIra
n
Kuwait
Saudi
Arabia
Qatar
Syria
Yemen
Algeria
Libya
Asia
World
9.4%
7.4%
4.8%
2.5%1.8%
1.3%0.8% 0.7% 0.6%
G7 World India Jordan UAE Turkey Egypt Pakistan SaudiArabia
Insurance Penetration: Total Premiums % of GDP (2007)
Gap5.7%
13,827 15,834
37,374
MENASA 2007 MENASA 2017
At OECD Levels of Beds / 1,000 of Population
MENASA Level of Beds / 1,000 of Population
3
6
16
22
Egypt Saudi Arabia Europe US
Structural demand-driven opportunities – Healthcare & Insurance
Medical Labs (Lab Tests per Capita)
MENA Life Insurance Penetration 2007 (% of Population)
Source: World Bank, World Health Organization, McKinsey, Swiss Re Sigma Note: Hospital calculation based on 1.2 & 4.1 beds / 1000 population in MENASA and OECD, respectively, as well as current MENASA beds / hospital ratio
The healthcare and insurance industries in the region have suffered from similar underinvestment, lagging behind western counterparts
Healthcare (Total Hospitals Required)
Gap39,000
Hospitals
Gap1.5 BTests
Gap400 MTests
23
Gap3.7%
26%
22%
18%
12%
6%
6%
4%4% 2%
Finance, Insurance & Real Estate
Manufacturing
Transport, Storage & Comm.
Trade, Hotels & Restaurants
Community & Social Services
Construction
Mining
Agrigulture
Electricity & Water
24
Outlook on Jordan
Macro Economic Data Outlook
% GDP Contribution*
Despite a recent slowdown due to decreased tourism and trade, Jordan’s long-term growth prospects remain strong
Source: Economist Intelligence Unit, Department of Statistics *2007 data
2006 2007 2008 2009F
GDP (US$ billion) $14.8 $16.5 $20.0 $21.3
Real GDP Growth (% pa) 6.3% 6.0% 5.6% 2.6%
GDP / Capita (US$) $2,590 $2,793 $3,291 $3,430
Population (m) 5.7 5.9 6.1 6.2
Population Growth (% pa) 3.4% 3.3% 2.9% 2.1%
Foreign Direct Investment (US$ billion) $3.2 $1.8 $1.9 $1.3
Inflation (% pa) 6.2% 5.4% 14.9% 3.8%
Economy has recently achieved strong real GDP growth rates hovering around 6%
According to EIU, 2009 real GDP is forecast to grow at 2.6% as the prospects for the services sector, including tourism, continue to worsen
5 year growth however projected at 3.7%, well above western countries, driven partly by successful reform agenda
Foreign direct investment is also expected to decline in the short term given the lack of oil wealth being generated in the Gulf states
The sharp falls in commodity prices as well as the country’s expansionary fiscal policy should support consumer demand
Recent strengthening of the dollar, coupled with fall in commodity prices will also lessen inflation, with 2009 inflation expected to be 4% compared to 15% in 2008
The Central Bank is committed to maintaining the Dinar / USD peg as it has instilled monetary confidence and has not harmed competitiveness (mostly due to US’ role as largest export partner)
Current account deficit expected to decrease sharply as commodity prices decrease and re-export trade in Iraq grows
Expected to decrease from US$9 billion in 2008 to ~US$2.5 billion in 2009/10
Long term recovery depends heavily on recovery in the US given that it is Jordan’s largest export partner
4
11
26
32
7
18
37
36
Egypt Population Breakdown by Age (millions)
0-19
45-64
65+
20252005 % of Total
38%
18%
8%
36%
15%
5%
20-44
44% 36%
Outlook on Egypt
Macro Economic Data Outlook
Egypt has witnessed significant growth in the past and is expected to continue growing at an accelerated pace given favorable demographics and increased government reform
Source: Economist Intelligence Unit (May 2009), EFG Hermes (Jan 2009), United Nations
GDP/capita of US$ 2,093 grown at 18% pa over past 3 years
The banking sector remains strong in the face of the global credit crisis
- The economy is underleveraged, with private sector credit at 41% of GDP
Egypt has built up significant net foreign assets since 2003 that will be drawn down as the current account deteriorates
Recent reform initiatives have allowed government policy to be much more liberal than in the past
Egypt is a consumer led economy, stimulated by investments, with its long term prospects assured by demographics and strategic location
- c.75% of economic growth driven by local demand
- The domestic consumer is largely un-levered with low penetration rates of consumer finance products, credit cards and mortgages (1% of GDP)
- Declining inflation will enhance purchasing power and drive up domestic demand
- Favorable factors of production will allow Egypt to attract FDI in the long-term
Revised GDP growth of ’08-’13 CAGR 6% still well above global and regional average
Demographics as a key growth driver
2006 2007 2008 2009F
GDP (US$ billion) $107.9 $129.8 $161.4 $177.1
Real GDP Growth (% pa) 6.8% 7.1% 7.2% 3.6%
GDP / Capita (US$) $1,454 $1,719 $2,093 $2,253
Population (m) 74.2 75.5 77.1 78.6
Population Growth (% pa) 1.8% 1.8% 2.1% 2.0%
Foreign Direct Investment (US$ billion) $10.0 $11.6 $9.8 $5.0
Inflation (% pa) 7.6% 9.5% 18.3% 9.1%
25
26
Outlook on Algeria & Morocco
Algeria Macro Economic Data
Algeria Outlook
Outlook dependent on global recovery although natural resources will provide a strong buffer, particularly for Algeria
Source: Economist Intelligence Unit (May 2009)
Morocco Macro Economic Data
Morocco Outlook
2006 2007 2008 2009F
GDP (US$ billion) $117.3 $134.3 $155.6 $139.7
Real GDP Growth (% pa) 2.2% 3.2% 3.2% 2.3%
GDP / Capita (US$) $3,559 $4,026 $4,609 $4,089
Population (m) 33.0 33.4 33.8 34.2
Population Growth (% pa) 1.2% 1.2% 1.2% 1.2%
Foreign Direct Investment (US$ billion) $1.8 $1.6 $1.9 $2.1
Inflation (% pa) 2.6% 3.5% 4.5% 3.9%
2006 2007 2008 2009F
GDP (US$ billion) $65.6 $75.1 $86.6 $82.2
Real GDP Growth (% pa) 7.8% 3.2% 4.9% 2.0%
GDP / Capita (US$) $2,128 $2,406 $2,743 $2,574
Population (m) 30.9 31.2 31.6 31.9
Population Growth (% pa) 1.1% 1.2% 1.1% 1.1%
Foreign Direct Investment (US$ billion) $2.4 $2.8 $2.3 $1.6
Inflation (% pa) 3.4% 2.0% 3.8% 2.1%
Morocco will record 2% growth this year officially, with risks on the downside given its dependence on the global economy.
The poor outlook for European growth poses significant risks to Morocco’s economy, since the euro zone is its main export market and employs some 2.5m Moroccan expatriates.
A number of factors are pushing the market down including: lower FDI, lower remittances (9% of GDP), lower tourism inflows and lower exports.
Further to this the economy will continue to face risks associated with its dependence on rain-fed agriculture, which typically accounts for some 14% of GDP but employs 42% of the workforce
Over the longer term the non-agricultural sector's role will gradually increase as manufacturing develops and construction expands on the back of government housing and infrastructure projects, partly offsetting contraction in private-sector tourism developments.
Algeria’s growth will slow down to just over 2% in 2009
Fundamentals however remain strong with close to $140bn in reserves, keeping domestic demand afloat even as hydrocarbon income shrinks due to OPEC cuts and lower prices.
Expect continued expansion of public works and construction.
The business environment has deteriorated further on both investment and sales fronts. New restrictions are making a protectionist market even more complicated to manage.
Economic growth is expected to accelerate in 2010, to 4.5%, on the back of a modest recovery in export markets and stronger hydrocarbons output as many large-scale projects begin to come on stream, including a gas pipeline to Spain
26.6%
17.3%
10.7%9.7%
8.2%
7.2%
6.1%
4.8%
3.8%
2.7%
2.8%
Crude Oil & Natural Gas
Government Services' Producers
Finance, Insurance, Real Estate andBusiness servicesOther minning and manufacturing
Wholesale & Retail Trade & Restaurants& HotelsConstruction
Transport & Storage & Communication
Agriculture Forestry & Fishing
Community & Social & Personal services
Oil Refining
Other
Outlook on Saudi Arabia
Macro Economic Data Outlook
% GDP Contribution
Reform led growth continues to drive the largest GCC economy
Saudi is the largest economy in the GCC, both in terms of GDP and population
- Rapidly growing population of c. 25 million, growing at 2.5% pa (median age 22)
- GDP base of US$ 469 billion with real GDP growth of 4% in 2008
Saudi is well positioned to weather the current financial crisis
- Has saved 76% of the oil windfall between 2002 and 2008
- Low public debt at 13.5% of GDP
- Strong and growing domestic market accounting for a large portion of GDP
Saudi has initiated a significant reform campaign to attract foreign investment and increase the country’s global competitiveness
- 2008 “World Investment Report” highlighted Saudi as the region’s most attractive destination for investment
- Increase in net FDI inflows from US$ 2 billion in 2004 to estimated at US$ 16 billion in 2008
Despite potential slowdown, Saudi still seen as attractive market
- Revised GDP growth of ’08-’13 CAGR 2.8% still well above global average
Source: Economist Intelligence Unit (May 2009), CIA Factbook, Saudi Arabian Monetary Agency, Merrill Lynch (Feb 2009)
2006 2007 2008 2009F
GDP (US$ billion) $356.6 $381.7 $468.9 $346.9
Real GDP Growth (% pa) 3.2% 3.4% 4.2% (1.0%)
GDP / Capita (US$) $15,061 $15,746 $18,796 $13,581
Population (m) 23.7 24.2 24.9 25.5
Population Growth (% pa) 2.4% 2.4% 2.9% 2.4%
Foreign Direct Investment (US$ billion) $18.3 $24.3 $16.4 $10.1
Inflation (% pa) 2.3% 4.1% 9.9% 2.7%
27
2.5%
22.9%
0.3%
15.5%
2.2%9.9%
46.6%
Agriculture
Crude Oil Production
Mining & Quarrying
Manufacturing
Electricity & Water
Construction
Services
Outlook on the UAE
Macro Economic Data Outlook
% GDP Contribution
A push towards diversification has resulted in the UAE’s growth increasingly being driven by the services sector with the non-oil sector accounting for over 65% of GDP
The UAE has emerged as the 2nd largest economy in the GCC and one of the most important in the region- Diversified economic base with non-oil sector contributing
greater than 75% of total GDP, with growth driven by services sector
- The UAE has become a regional hub for finance, tourism and logistics
The UAE is positioned to weather the current crisis, however the main risk continues to be weakness in oil price- Current account surplus of 5% of GDP is projected if oil
averages $50 / bbl, while a deficit of 14% projected if oil averages $35 / bbl
- However, the UAE sovereign wealth funds had accumulated c. US$ 600-900 billion in assets before the credit crisis
Banking sector vulnerable in the short term given lack of liquidity, real estate exposure and capital markets decline- Rebound is possible given continued government intervention,
correction in real estate market and rebound in capital markets
Historically, high inflation was driven by increases in the prices of food and commodities and most importantly sharp rises in real estate prices. It is estimated that in 2007 housing expenditures contributed to 65% of inflation
Impact of correction in real-estate prices and strengthening US$ expected to ease inflationary pressure- Inflation expected to decrease from 20% in 2008 to 5% in
2009 Revised GDP growth of ’08-’13 CAGR 4% still well above global
averageSource: Economist Intelligence Unit (May 2009), HSBC, Merrill Lynch (Feb 2009), Global Research (November 2008), HC Brokerage (March 2009)
2006 2007 2008 2009F
GDP (US$ billion) $170.1 $198.7 $244.6 $211.8
Real GDP Growth (% pa) 9.4% 7.7% 7.4% (1.7%)
GDP / Capita (US$) $34,548 $37,690 $43,446 $38,387
Population (m) 4.9 5.3 5.6 5.5
Population Growth (% pa) 6.8% 7.1% 6.8% (2.0%)
Foreign Direct Investment (US$ billion) $12.8 $13.3 $11.3 $5.9
Inflation (% pa) 13.5% 13.3% 20.0% 4.5%
28
11%
25%
13%5%
46%
Real Estate Hotels Construction Oil Other
Primary Growth Drivers
Source: TRI Consulting1 Latest available data
Dubai is considered the region’s commercial, financial services and tourism hub as it continues to build landmark developments such as the Burj Dubai and Dubai Metro
Dubai Overview & Highlights
Infrastructure development Dubai International Airport – 10th busiest in the world Light Rail Line - Phase 1 to begin operation in 2009
Special Economic Zones Allows foreign companies to establish operations in
Dubai, less regulations and reduced bureaucracy The most important being Jebel Ali Free Zone, one of
the largest container ports in the world Hydrocarbon Revenues
Indirect beneficiary of increased oil prices as GCC investors continue to bring oil revenues to the city
Real-Estate Free-hold concept allowing foreign equity ownership
in Dubai, drives increased liquidity
GDP Breakdown by Sector (20061)
Jebel Ali Port
Downtown Burj Dubai 29
Turkey expected to emerge as the ninth-largest economy in the world by 2050
Underlying fundamentals ensure a strong long term outlook for Turkey, which is on track to become the 9th largest economy in the world by 2050
Outlook on Turkey
GDP In 2050 (US$ trillions at 2007 prices)
Short Term Outlook: Turkey’s high current account deficit gives it a high beta to global economic downturns. Accordingly, the currency has substantially depreciated since September of last year but somewhat recovered in the past 2 months
However, relative to 2001 the fundamentals are stronger with a healthy banking system and manageable public debt position
Demographics: Turkey benefits from one of the youngest populations of any emerging market
Productivity: 25% of Turkey’s labor force is still employed in the agricultural sector; however, a period of increasing urbanization (from 25% in mid-1900s to 70% today) will lead to further increases in productivity and employment
Reform: Turkey’s economy is well positioned long-term due to a range of successful economic policies enacted after the 2001 crisis and political reforms executed in pursuit of EU membership
Source: Goldman Sachs (October 2008), Economist Intelligence Unit (May 2009)
OutlookMacro Economic Data
01020304050607080
Chi
na US
Indi
a
Bra
zil
Rus
sia
Indo
nesi
a
Mex
ico
UK
Tur
key
Japa
n
Fra
nce
Ger
man
y
Nig
eria
Phi
lippi
nes
Can
ada
Ital
y
Kor
ea Iran
Sau
di
S.
Afr
ica
Vie
tnam
Tha
iland
Ven
ezue
la
Egy
pt
Spa
in
2006 2007 2008 2009F
GDP (US$ billion) $530.9 $647.1 $730.0 $571.5
Real GDP Growth (% pa) 6.9% 4.7% 1.1% (4.5%)
Current Account / GDP (6.0%) (5.8%) (5.7%) (1.3%)
GDP / Capita (US$) $7,540 $9,094 $10,155 $7,870
Population (m) 70.4 71.2 71.9 72.6
Population Growth (% pa) 1.1% 1.1% 1.0% 1.0%
Foreign Direct Investment (US$ billion) $20.0 $22.0 $18.3 $8.6
Inflation (% pa) 9.6% 8.8% 10.4% 6.8%
30
Concluding Thoughts
0%
20%
40%
60%
80%
100%
0 1000 1500 1600 1700 1820 1870 1913 1950 1973 1998 2025 2050
Europe Western* L. Am/Africa Asia
Paradigm shifts continue to alter the global economic landscape and have resulted in Asia regaining its position as the world’s dominant growth engine
Part of a pattern?
Distribution of Global GDP
*Includes: USA, Canada, Australia and New ZealandSource: Sir Paul Judge
Agricultural Productivity
Industrial Productivity
Information Age
Human Resources
32
2.0%
0.6%0.2%
-0.1%
2.1%
7.7%
3.4%
4.8%
China MENA[SA] LATAM EM* NorthAmerica
OECD EU-15
33
The outlook
MENASA will be the 2nd fastest growing region in the world over the next 5 years
Source: Economist Intelligence Unit (May 2009) *Excluding MENASA countries & China
2008-2013 Real GDP CAGR
MENA
MENASA
0
20
40
60
80
China MENASA* US EU 15 LatinAmerica*
SoutheastAsia
Japan
0
3
6
9
12
15
18
EU 15 US Japan China LatinAmerica*
MENASA* SoutheastAsia
The MENASA region is projected to overtake the US as the world’s 2nd largest economy by 2050…
Source: Goldman Sachs (November 2008)* MENASA excludes Jordan, Lebanon, Libya, Algeria & Tunisia. Latin America includes Argentina, Brazil, Chile, Colombia, Mexico, Peru, Paraguay, Uruguay & Venezuela
MENASA in the long term
The world in 2050
The world in 2007
GDP (US$ trillions)
GDP (US$ trillions at 2007 prices)
…however, challenges lie ahead
Demographics – a double edged sword
Continuing reform – balance between political, economic & social
Conflict and geo-political instability
Oil dependence / economic diversification
Climate change
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The information contained in this presentation is given without any liability whatsoever to Abraaj Capital Limited, any of its affiliates or related entities or their respective members, directors, officers or employees (collectively "Abraaj") for any loss whatsoever arising from any use of this presentation or its contents or otherwise.
No representation or warranty, express or implied, is made or given by Abraaj as to the accuracy, completeness or fairness of the information or opinions contained in this presentation. In particular, no representation or warranty is made that any projection, forecast, calculation, forward-looking statement, assumption or estimate contained in this presentation should or will be achieved. There is a substantial likelihood that at least some, if not all, of the forward-looking statements included in this presentation will prove to be inaccurate, possibly to a significant degree.
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Disclaimer
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