The private equity industry in the Gulf Co-operation Council (GCC) countries needs more support at government level to help it reach its full potential, say experts.
“Government initiatives in liberalising the economy and privatising the public sector would stimulate private equity investment across the region,” says Imad Ghandour, investment team principal at Gulf Capital. “Even though there are genuine efforts to revamp company and capital market laws, the process could be expedited.”
The region’s private equity houses manage $13.3 billion in more than 70 funds. Rami Bazzi, private equity principal at Injazat Capital, said governments could take other steps to boost the industry. “The role of the governments is instrumental to the development of the industry and extends beyond setting up favourable business environments with efficient legal and regulatory frameworks,” he says.
“Making it easier to do business and introducing quicker registration and administrative procedures certainly would provide a direct boost to the companies’ operational efficiencies and, therefore, impact positively on the progress of the industry. But the main contribution by governments is creating a stable macro-economic environment and a solid, up-to-date legal system. The GCC governments have been proactive over the former and the macro-economic environment is one of the most attractive in the world.”
The Gulf states are co-operating with private players to diversify their economies. In such a scenario private equity has a major role to play and, given the right impetus, it can contribute to economies in a major way.
“Today governments are partnering with the private sector to drive economic prosperity and diversification away of oil dependency,” says Bazzi.
“The private equity sector can support this goal. We are seeing a great deal of involvement from governments across the region. For example, the creation of specialised free zones is a very positive development.
“The setting up of a number of funds to support venture capital businesses and encourage research and development in addition to the creation of business innovation is another positive factor. An interesting example is the ICT Fund in the UAE to which mobile operators contribute 1% of their total revenues. This is the type of partnership that could successfully emerge between the private and public sectors.” Though the region’s private equity industry is at a nascent stage it is going global with government support. Industry players are looking to Western markets to expand their businesses. “Investment exposure to wider geographic concentrations brings many opportunities to the private equity market in the Middle East and North Africa (Mena),” says Bazzi.