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17th – 18th NOVEMBER 2016

FLI NET FALL CONFERENCE

SINGAPORE, ASIA

INVESTING IN GCC

DR. SHABEER NELLIKODE (MD, UNIVERSAL)

&

P.V SHEHEEN(PARTNER, GOODWINS LAW CORPORATION)

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The Gulf Cooperation Council (GCC) Member Countries

The Gulf Cooperation Council (GCC) Member Countries

The Gulf Cooperation Council (GCC) Member

Countries

Sharjah

Ajman

Dubai

Umm Al Quwain

AbuDhabi

Ras Al Khamaih

Fujairah

UAE

QATARSAUDIA ARABIA

BAHRAIN

KUWAIT

OMAN

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The association forms a trade bloc and provides a common market, including coordinationof customs regulations and various trade-related laws

The unified economic agreement between the countries of GCC was signed on 11 November1981 in Abu Dhabi.

A regional intergovernmental political and economic union.

The GCC Customs Union was launched in 2003, eliminating internal tariffs, enabling thefree movement of labor and capital internally and creating a unified 5% external tariffon most imported products.

The GCC Convention for the Execution of Judgments, Delegations and JudicialNotifications, 1996 – established coordination and cooperation among the GCCCountries in judicial fields taking into consideration the principles of Islamic Sharia.

GCC countries have signed free-trade agreements with Singapore and the European FreeTrade Association.

The EU established bilateral relations with the GCC countries through the 1988Cooperation Agreement, aimed at strengthening stability in a region of strategicimportance.

The Gulf Cooperation Council (GCC) Features & Objectives

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Despite the drop in oil prices and the political unrest in neighbouring countries which have caused slightly subdued GDP growth in the short term, GCC economies are expected to recover on the back of supportive fiscal policies and continued growth in sectors such as, travel, tourism, healthcare, education and infrastructure

Robust growth is expected over the next decade both in terms of population and GDP.

GCC population is forecast to reach 53.5m, a 30% increase over the level in 2000 by 2020

GCC real GDP is expected to grow by 56% by 2020

GCC nominal GDP, which was US$ 341.6bn in 2000, is forecast to soar to over US$ 1trn in 2010 and US$ 2trn in 2020.

The GCC is the EU's fifth largest export market (€111.6 bn of exports in 2015, +15% year on year), and the EU is the grouping's biggest trading partner, with trade flows totaling €155.5 billion, or 14.7% of the GCC's global trade.

GCC’s Economic outlook

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GCC Economic Growth Forecast by Country (World Bank Report 2016)

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Upcoming world class events will provide a major

boost to the region’s tourism &

retail industry

Dubai world Expo 2020

FIFA World Cup 2022, Qatar

World Vision 2030 Saudi Arabia

Heavily investing in transportation,

logistics & infrastructure

Health Care spending is

expected to grow to US$71 bn in 2020

Developing a more stable health eco-

system

Demand is driven by the changing demographic

and epidemiological trends

Real Estate Sector is first choice for more

than half of investors in the

region

Education Sector shows upward

trend

GCC governments are supporting greater

private sector participation

Required to address the growing school

population that is expected to reach 15m by

2020.

9,301 schools in the private education

market by 2020

41,678 schools will be established throughout

the public education sector by 2020

A recent study revealed this is the preferred

investment, followed by stocks & precious metals

63% of GCC (HNWI) plan to invest in their preferred

real estate locations during 2016.

One of the fastest growing sectors across the

world and is likely to remain resilient

The GCC Rail Network – Already in

Construction

Increasing congestion, high traffic density & large events drive the

need for improved road transport

GCC Government spend on transport

infrastructure to reach $288 bn by 2020

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Why investors are attracted to the GCC?

Sizable and stable economy growth

Sector liberalization and privatization

Population growth

Economic diversification

Comparative industrial advantage

Infrastructure investment

Regulatory and economic restructuring

Macroeconomic conditions

Availability of capital

Greater exit opportunities

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Foreign investment rules in all GCC countries are intended to protect nationalentrepreneurs and to limit the circumstances in which foreigners are able to take fullownership of companies. Foreign investors usually have two options:

Joint venture – the investor identifies a local company which will contribute to thebusiness, share any financial risk and facilitate business development and operationson the ground; or

Arrangements with a local businessman (or company) – A partner in name only;even where such a local partner owns majority of the company, the foreign investorwill put in place side agreements which allow the foreign partner to retain almost allthe profit, carry all the risk and exercise full control over the business.

Foreign Investment

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Key GDP contributor Alba (aluminum producer)

increased net income to $79m in the second quarter of 2015

from $40.2m in the second quarter of 2014

Ranked the 18th most open economy worldwide by the

Heritage Foundation and Wall Street Journal’s 2016 Index of

Economic Freedom

Committed to maintaining the region’s most liberal business

environment, with zero taxation for private

companies, few indirect taxes for private enterprises &

individuals and free repatriation of capital

Low costs is a huge advantage. Office rents & industrial land are

the lowest in the region. The combination of subsidies &

privatisation in the utilities sectors, electricity, gas & water costs are

highly competitive. With low living costs, wages are also highly

competitive

Workforce is the most Educated and skilled in the Gulf means

minimised spending on expatriate packages & a long-

term, sustainable local workforce (Bahrainis comprise 2/3 (65%) of the financial services workforce, according to the Central Bank of

Bahrain

The only country in the region offering 100% foreign

ownership of business assets and real estate in most sectors.

Foreign investment is the key to ‘Bahrain’s Economic Vision 2030’ - the long-term plan for

improving the competitiveness of the

economy, creating skilled jobs & enhancing living standards.

Supportive visa policies are an important development, placing Bahrain among the

countries with the most flexible visa policies in the region, providing easier &

quicker access for businesses with operations in Bahrain

Financial services sector has been thriving for 40 years

and was recently judged the Gulf’s most sophisticated

financial market

Our position at the heart of the Gulf makes access to

every market in the Middle East quick and efficient –

by road, air and sea

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The GCC’s only parliamentary democracy remains relatively

stable and prosperous. It retains significant oil reserves.

Local infrastructure -Significant progress has

already been made to enhance its infrastructure through the

first public-private partnership projects (PPP) / independent water & power

project (IWPP)

About 40% of its 2.5 million population, enjoy some of

the highest disposable incomes.

Foreigners can apply for a license to own up to 100% of a

Kuwait onshore legal entity under new Direct Foreign

Investment Law, in a plan to diversify the economy

The local population is young and a great consumer. They

are very fond of foreign products, western brands and

high technology.

The country's authorities intend to attract investment to

develop infrastructure through the 2015-2020

National Development Plan

New finance & security techniques can be used e.g. allowing investors to assign

government proceeds & assets to lenders and the pledging of

shares prior to the two-year lock-out period in order to provide

security to lenders.

Endowed with a good financial management and a solid banking system & a stable legal framework for

business laws

The government has vast foreign assets and one of

the richest project environments in the GCC.

Ranks 100th out of 189 economies in the ’Doing

Business’ report established by the World Bank (2016)

The country's infrastructures are of high quality, the labor force is

inexpensive, cost of energy is very low and the absence

of taxes are some of the undeniable advantages to

foreign investors.

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M&A and general commercial activity in Oman remains

buoyant despite the low oil price environment.

The seafloor mining sector will be boosted following discovery of gold, iron & zinc as well as additional reserves of copper. While

copper, limestone and gypsum have been mined in Oman for many years, companies are now being granted exploration licenses

for other metals & minerals

Over the next few years, multinational companies can expect solid growth.

Hospitality, it is estimated that by 2020 the number of hotel rooms in the country will be

more than 20,000, giving a major boost to the country’s ambitious

tourism growth strategy that hopes to attract 5 million visitors

a year by 2040.

An expressway project set for completion in 2017 and the game-changing Oman rail network will only increase

interconnectivity between the Sultanate's ports and local and

regional markets.

Tourism is set to be one of the key pillars for economic

growth in Oman in the coming decades.

Independent studies have shown that the new port, Port of Duqm has the trappings of

a world-class, multi-purpose commercial gateway and will propel Oman to be one of

the top 10 logistics hubs in the world, doubling the contribution made by the logistics sector to Oman’s GDP by 2020.

Real GDP rose by 3.6% in 2015 and inflation remained

at comfortably low levels.

Large-scale projects in the maritime sector, such as Port

Sultan Qaboos Waterfront, could open the market for foreign

investors to gain a foothold in a highly attractive market that has a

good track record.

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Qatar, an oil rich peninsula, the wealthiest country in the GCC per capita and enjoys

vast gas reserves.

Development of the new Doha satellite city of Lusail is

underway with some government tenants already beginning to occupy the first

completed office blocks

After half a decade of strong growth, the banking sector is

well positioned to weather regional economic volatility.

In 2015 the country was home to the third-largest banking

industry in the GCC, boasting total assets of $293bn.

“Vision 2030”, a program with four pillars of development; economic, social, human and

environmental, Qatar wants to reach new peaks of prosperity

The Msheireb “Downtown Doha” regeneration project

that will revive the old commercial district and blend traditional Qatari heritage &

aesthetics with modern technology while focusing on

sustainability.

The Qatar railway project has seen significant progress and Doha metro project, with an estimated cost of USD 15.2

billion is expected to be completed by 2019.

The Ministry of Economy & Commerce through the vehicle of the new Commercial Companies

Law has set itself the goal of creating a one-stop shop

registration process & embedded in that law, a provision setting

down a requirement for efficient processing

The non-hydrocarbon sector, in particular

infrastructure related capital expenditure, is now

the main contributor to growth and is expected to represent in excess of 55% of GDP at the end of 2017.

Despite lower oil and gas prices the major stimulus to activity in Qatar remain the major infrastructure which must be built to permit the staging of the 2022 World

Cup

Tourism is now one of the main drivers of the

economy going forward.

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The largest economy and market in the GCC, 19th

largest economy in the world, with a population of 30.7

million

State-of-the-art communications, boasts a wide transport network with a particular strength in road

& airport transportation. Has a well-developed sea transport

network developed to support the transport of petrochemicals &

has 4 principal airports

Investors are offered tax incentives for training and

recruitment of Saudi labour

Receives 38% of the total Arab GDP, with the world's largest oil reserves and a wealth of

metal deposits providing competitively priced energy

and easy access to certain raw materials

The private sector is playing an increasingly larger role in the economy, it now accounts

for 39.5% of GDP and is expected to continue to grow,

especially as it opens its doors further to foreign investment

Vision 2030 – to reduce the country’s dependence on oil &to rely on alternatives diverse economy & the development

of service sectors such as health, education,

infrastructure constructive, recreation & tourism

The Kingdom is one of the fastest-growing countries

worldwide, with per capita income forecast to rise from $25,000 in 2012 to $33,500 by

2020

Signed bilateral trade and

investment agreements

with Singapore

8th largest investor in education and increasing its

commitment in this strategic area, hosting 24

public universities, 20 private colleges and 24

vocational colleges with a further 80 to be built

Ranks 49th out of 189 countries for the overall

‘Ease of Doing Business’, according to the

International Finance Corporation/World Bank’s ‘Doing Business’ report in

2015

G20 member with the 3rd biggest current account

surplus in the world (World Bank Data 2014)

16th largest exporter and the world’s

29th largest importer in the world

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A diverse, growing economy with investment incentives

such as 0% corporate tax, 0% income tax and up to 100% foreign ownership in free

zones are some of the advantage’s that attract

investors to the UAE

Crime rate at a all-time low within all the emirates

compared to most parts of the world, considered one of the

safest places within the Middle East, Asia and Africa.

Politically and economically stable within

the Middle East region located strategically

between Europe, Africa and Asia with over 1000 flights weekly to most countries

worldwide

First class modern infrastructure which includes metros, trams, strong private

local and international healthcare facilities

Education at one of the highest levels in primary, secondary and collegiate

education catering to various ethnic and linguistic groups

that are internationally accredited

Available sectors for a safe and secure investments would

include the precious metal industry, general trading,

hospitality sector, Tourism industry, Oil and gas and

obviously the biggest sector of all real estate

Tourism is playing a very important, luxury services,

amazing weather all year round with unlimited activities and will

be boosted again upon completion of world class

cultural attractions such as the Abu Dhabi Louvre Museum

Leading financial centre in the region as a result of its

superior lifestyle and infrastructure.

Major beneficiary of the difficulties elsewhere in

the Middle East

With lifting sanctions against Iran on the horizon,

there is a further upsurge predicted & expected to add

USD 13 billion to the economy between now &

2018 according to IMF.

Agreed to set up a infrastructure investment fund with India to boost

two-way trade between the two countries by 60% over

the next 5 years

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Kuwait awards $4bn contract for airport terminal & a $1bn contract with a joint venture for its planned South Al Mutlaa City project with Italy's Salini Impregilo and Turkey's Limak Construction.

Emas AMC and L&T nab $1bn-plus Saudi Aramco deal with India's Larsen & Toubro (L&T) and Singapore-based Emas AMC for the expansion of the offshore Hasbah sour gas field.

BK Gulf has landed a contract to undertake MEP activities on the construction of a new $1.6bn container terminal at Jebel Ali Port in Dubai.

Armada inks $626m Royal Estates construction deal with Dubai-based developer Texture to build the townhouses. Teaming up with Texture is Pacific Ventures and PAL Developments, with the companies aiming to complete the 350 townhouses in the third quarter 2017 and over 2,500 apartments a year later.

Mitsui-led consortium $2.3bn Oman power deal

Current Investment Projects

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Dubai Municipality hands $490m Jaddaf contract for the Dubai Conference Centre (Arena) project, worth $490.1m (AED1.8bn). The project will be carried out by the department implemented to host Dubai Expo 2020.

Egypt's Orascom bags $308m Cairo metro deal for work on Cairo's third metro line's third phase.

Dubai's RTA awards $91m Business Bay roads deal - Dubai's Roads and Transport Authority (RTA) has awarded a $91.3m (AED335m) contract for a Business Bay project - Upgrading Parallel Roads at Business Bay project is scheduled for completion in the first quarter of 2018.

Dubai-based developer Union Properties has awarded China State Construction Engineering Corporation Middle East (CSCEC ME) the contract to build its $119m (AED440m) Oia Residences project in Dubai’s Motor City. The project, designed by AK Design, will include 269 residential units including duplex

apartments with private gardens, terraces, and direct access to the swimming pools.

Dubai-based developer Azizi Developments awarded a contract worth $54.4m (AED200m) to KeilaniConstruction Company to construct two new serviced residences in Al Furjan.

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What the experts say...

“Q1 2016 has clearly been a busy period for GCC's construction industry, as dwindling oil prices led construction firms to recons ider their planned pipeline of projects and activities for the year. The GCC construction contractor awards across the building, i nfrastructure and energy markets are forecast to decrease from US$ 168,254 million in 2016 to US$ 165,710 million in 2017” (Cityscape Global Report).

“UAE’s real estate outlook in the long-term remains positive due to government’s commitment to infrastructure spending and development projects, stronger growth forecasts (IMF), and the UAE’s safe haven status making it a favourable real estate destination” (Knight Frank)

“Saudi Vision 2030 aims to boost the kingdom’s hospitality industry by more than half and attract 1.5 million tourists by 2020”, according to industry analysts. Religious tourism will remain a key demand driver and will get a further boost if the number of foreign pilgrims increases.

“The size of the Qatar’s retail sector is expected to triple by 2016, with another 14 malls due to enter the market, bringing the total to 1.7 sqm of shops” (Oxford Business Group estimates).

According to NBK, “real estate market sales in Kuwait totaled US$ 233.6 million by the end of Q1 2016’.

“In the hospitality real estate market, it is estimated that by 2020 the number of hotel rooms in Oman will be more than 20,000, giving a major boost to the country’s ambitious tourism growth strategy that hopes to attract five million visitors a year by 2040. To urism is set to be one of the key pillars for economic growth in Oman in the coming decades .” (Cityscape Global Report)

The low transactions costs in Bahrain position its real estate market in a privileged position offering high investment yields an d capital growth. Added to all this is the ease of doing business for property investors and the kingdom's relatively low cost of living for both citizens and expats. Bahrain is considered one of the most convenient locations worldwide for expats due to its low rental an d living prices. (Cityscape Global Report)

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