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Five Forecasts For The MENA Investment Landscape In 2017 Insights from Al Masah Capital's Sixth Annual Investor Forum at Dubai.

By Shailesh Dash

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Held in February at The Ritz-Carlton, DIFC in Dubai, this year's edition of Al Masah Capital's Annual Investor Forum saw banking and investment experts from around the world come together to discuss the overall economic climate in the Middle East and North Africa, as well as shed light on some of the most important issues faced by the region's real estate, healthcare and consumer-driven industries.

Here's a roundup of some of the noteworthy insights that were shared at this event:

1. The diversification of regional economies needs to pick up speed

The region's heavy reliance on the oil sector needs to change rapidly, and investments need to diversify into non-oil sectors in order to ensure consistent and sustainable positive growth. Non-oil GDP has been growing at a faster rate, but this still needs to accelerate, especially for countries that have a high break-even oil price. The UAE has done well with its strong commitment towards diversifying its investments and finding new revenue engines. Saudi Arabia has put in place an ambitious diversification plan, which bodes well for the future if implemented correctly. Qatar and Kuwait have lower oil breakeven points, and so are less anxious, but still cognizant of having a blueprint for more revenue streams. Egypt needs to focus on the right sectors and, due to the lack of oil revenue, has a more difficult job ahead in driving its GDP towards active growth. Recognizing problems, rectifying errors, reducing unnecessary cost, becoming more efficient and diversifying plans for the future will be important themes for the region. In such a dynamic environment, active portfolio management will be the key to finding positive investment returns, positioning portfolios in appropriate asset allocations that best utilize the prevailing opportunities.

2. Global, political, and economic risk remains high

The changing political landscape in Europe and the US -rising nationalism and trade protectionism- has the potential to cause a significant spillover effect on global capital markets including the MENA region. Brexit will have a lasting negative impact, but for the time being, confidence amongst British consumers has stayed surprisingly high. A weaker GBP continues to act as a buffer as foreign investments flow in. The US elections have been greeted by an upsurge in market confidence, predicated by President Donald Trump's promises of lower taxes, less regulation and more infrastructure spending, but how much of this will be implemented remains the big risk going forward. China's fresh credit expansion in February 2016 should not be underestimated, especially the significant effect it has had on the rest of the world markets– the question now will be how long this effect will last.

Shailesh Dash, Founder, Al Masah Capital at the Annual Investor Forum.Image credit: Al Masah Capital.

3. The GCC healthcare services sector remains an attractive investment opportunity

Each respective regional government in the GCC is actively encouraging greater private sector participation, which is enhancing the efficiencies of the industry and allowing for greater organic growth. At the same time, the governments' own active role as a progressive regulator is enhancing and complementing the healthcare services industry by allowing a more competitive landscape to develop. Despite strong years of growth, institutional investors still see immense opportunity in the region's healthcare industry's next evolution, especially the huge potential to deliver returns in specific sub-sectors. The healthcare sector is a consistent growth engine for the region with 2016 showing 90% of the sector portfolio registering growth between 16-17% in terms of revenue.

4. Key characteristics of K12 education industry that make it attractive to investors

This sector is witnessing a strong demand due to its burgeoning young population, with the long-term revenues being locked in, starting with a child's early education years. In addition, there is room for further increase in fees, based on the quality being provided and high barriers to entry. However, finding the right business partner remains a challenge in this industry and the cost of setting up a school is also rapidly rising. The increase in population and rising income levels keep fueling supply and demand for high quality schools, thereby allowing for significant scope for expansion for existing players in the market as long as economic efficiencies are met and the right sub-sectors are targeted. State-of-the-art facilities, progressive education curriculums, well-trained staff and the increasing use of technology in the educational field will be differentiating points for schools to help them stand out and flourish.

5. The importance of regional real estate management services

The GCC real estate sector is one of the fastest growing in the world. Within it, the sub-sector of asset management services is showing the fastest growth rates and clearest opportunities to tap an underserved, young market. Amongst the regional markets, Dubai, Abu Dhabi and Doha have emerged as the strongest due to their international projects, foreign investment flows and growing populations. In addition to this, the upcoming Expo 2020 in Dubai and FIFA 2022 in Doha will drive the demand for specifically designed amenities and world-class infrastructure spaces. Overall, the real estate sector's performance has been stable despite oil price fluctuations, providing a healthy hedge to multi-asset portfolios. This sector looks likely to be resilient going forward, and by continuing to register growth, it will create greater opportunities for real estate asset management service providers.

Related: Moving Mainstream: A VC's Perspective On The MENA Fintech Ecosystem

Shailesh Dash is an award-winning entrepreneur, ideator, mentor, and philanthropist. A veteran of the MENA alternative investments sector, Dash has over 20 years of alternative investment experience. In 2010, he started Al Masah Capital which has successfully raised over US$1 billion and established itself as one of the fastest growing alternative investment management and advisory firms focusing on the MENA and SE Asia region. Before Al Masah Capital, Dash had managed $4 billion of assets and executed 14 IPOs and five trade sales. In addition, he created the second largest PE business in the MENA region (extrapolated from rankings of PEI Asia) and served on the boards of 12 companies. 
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