Countries and companies have at least one thing in common when it comes to devising ways to improve upon both. The answer is reinvestment; for example investing in the country’s infrastructure makes transportation and other necessary services more reliable and faster. This helps businesses and citizens alike making everything more efficient and productive. For businesses reinvestment means keeping all of your workers ‘ skills and the company’s systems up-to-date. It also means funding research in various sectors that could yield improvements and benefits down the road. Countries and companies which do this successfully will see economic improvement and long lasting benefits.
One place in the world where this fundamental fact of investment is catching on is Abu Dhabi in the UAE. Hussain Al Nowais, the chairman of Waha Capital an investment company, recently announced that the company intends to invest over US$1 billion in energy and other important assets in the UAE and the Gulf region. Hussain Al Nowais said they are evaluating a number of deals however he didn’t offer any clues to how many deals Waha would confirm this year.
Waha Capital recently posted amazing record net profits in the fourth quarter of 2014 at Dh142 million from 2013’s 4th quarter Dh75.6 million. A majority of this 88 percent increase came from the company’s dividends in the NY-listed airline leasing company AerCap. In May of 2014 Waha Capital created a new branch which would develop and oversee its future investments in the energy sector for North Africa and the Middle East. The company has already invested Dh274 million in the Dubai-based oil and gas company – National Petroleum Services. That gave Waha Capital a 20% stake in the company and they also have a 25% in Dunia Finance.
These investments being made by Hussain Al Nowais and Waha Capital demonstrate the understanding required for helping transform the Middle East. The region is continuing to face many tumultuous conflicts and one of the underlying reasons behind all of this is economic instability. The UAE is one of the few places that has found stability and success and this is partly due to their economic stability. The country has also come to the realization that it must diversify away from oil in order to protect its economy from the ups and downs in the cost of this natural resource. This has helped to strengthen the country over the last year despite the drop in the price of oil per barrel. Hopefully this investment and action will spur others in the region to follow this role model.
Egypt recently held their “Egypt the Future” conference in the middle of March. The conference was held in Sharm el Sheikh at the Red Sea Resort. The aim of this conference was very straight forward, Abdel Fattah El Sisi, president of Egypt, needed to convince foreign investors that Egypt is a good place to invest now. His aim was to attract at least $60 billion in foreign investment. This meant he needed to convince attendees that Egypt is now stable economically, politically and currency wise. If these factors still feel too weak and investors fear another Arab Spring then Egypt won’t be able to attract the investment it needs to restore its infrastructure and lift people out of debt.
The country is currently suffering from inflation in the double digits, rampant youth unemployment and a power grid that is unstable and lacking enough electricity during peak energy use times such as the summer. The conference saw numerous high profile delegations from corporations such as Siemens, BP and GE. There were also contingents from countries such as Saudi Arabia and the UAE. The UAE has been one of Egypt’s biggest supporters and has been very avid about its support for Egypt.
The Senaat’s chairman Hussain Al Nowais has already pledged support for Egypt in numerous manners. The Senaat will provide $200 million loan that will support small businesses and micro industries. Hussain Al Nowais’ Khalifa Fund is also assisting with the construction of clean coal fired power plants to help re-stabilize the country’s power demands. The UAE sees the importance of returning Egypt to a stable economic power in the region capable of contributing to the region in a positive manner. The IMF is also attending the conference in order to discuss with other attendees and provide information.
Having attracted enough aid, it appears as though the country may be successful in turning its economy around and reducing poverty. The government has gone to great lengths to attract investment as well. Normally a great deal of red tape blocks investment, but recent laws have slashed away great swaths of that red tape in order to make foreign investments quicker and easier. These efforts will hopefully provide the country with a fertile setting that creates an economic recovery. Raising millions out of poverty will reduce the welfare demand on the state and make the country more independent.
Egypt’s recovery since the overthrow of Hosni Mubarak in 2011 has been dogged and filled with instability. They’ve experienced rolling power blackouts and have not been able to secure aid to help lift the country’s poor out of poverty in a meaningful way. However, over the last six months or so all of this has begun to change. The Abu Dhabi based Khalifa Fund has pledged to support Egypt with a $200 million loan. This loan will provide major job opportunity and will help raise people in Egypt out of poverty and off of state welfare.
In November of last year the Khalifa Fund agreed to the loan which will be focused on development of the microfinance sector and aims to promote women entrepreneurship, thereby reducing poverty. Hussain Al Nowais and many others have been saying for a long time now that promoting women in the economy is critical to reducing poverty and achieving the desired results as quickly as possible.
The loan is planned to benefit over 200,000 enterprises and eventually create more than 200,000 jobs for Egyptian citizens. As it stands currently, roughly 60% of youth and women are below the poverty line in Egypt. Raising them out of poverty and providing them with opportunity can reignite the Egyptian economy and give it the boost to return to the region as a central player, economically. Other groups are stepping up to aid Egypt as well such as the KBBO group, UAE firm Dana Gas and Islamic Trade Finance Corporation.
These investments in Egypt will provide the necessary funding required to help establish new factories and infrastructure which can then hire workers and provide them with real living wages. A number of investments are also happening for the construction of clean coal fired power plants in order to restore the nation’s energy grid to a more stable and reliable level. Recent black out waves have plagued the country, particularly in the summer, making it difficult for business and companies to work reliably. As these deals are implemented and funding begins to flow, Egypt will begin to find normalcy again and be able to positively contribute to the region.