The Arab world, a region of colossal potential and wealth, has had investors flee due to political unrest that has, in many cases, destroyed infrastructure and hurt economic confidence in several markets.
Despite that, several companies have withstood these changes and held their ground. Among these companies is PineBridge Investments, which is primarily focused on investments in Africa, the Middle East, and Turkey.
Wael Aburida, Chief Investment Officer of PineBridge Investments Middle East, told the Daily News Egypt that, while there has been an overall improvement in Egypt’s economic situation, more needs to be done to reassure international investors.
Can you tell us about PineBridge Investments Middle East and your recent regional activities?
PineBridge Investments is a global asset manager in emerging and developed markets, delivering innovative alpha-oriented strategies across asset allocation, equities, fixed income, and alternatives. PineBridge manages approximately $73.8bn, as of 30 June 2014.
PineBridge Investments Middle East B.S.C (c) (PBME) is a member of PineBridge Investments, headquartered in Bahrain and regulated by the Central Bank of Bahrain as a Category 1 Investment Firm. PBME offers world-class investment management services, with a global perspective and a regional focus across four core areas: real estate, private equity, investment management, and global funds.
PBME invests growth capital in companies across the Middle East, Africa, and Turkey, in sectors such as social infrastructure, demand-driven sectors, as well as industrial and manufacturing. In June 2014, PineBridge Investments raised close to $ 170m for a Shari’a compliant fund to provide its investors with stable returns from investing in income-producing real estate across the GCC [Gulf Cooperation Council]. The fund targets sale-leaseback deals with companies looking to unlock capital tied-up in property to use for growth. The fund focuses on property in healthcare, education, logistics, and warehousing, as well as community retail. Late last year, we successfully completed the fund’s first transaction – the sale and leaseback of a UAE-based school campus operated by GEMS Education Ltd, which is the seed asset for the fund.
In 2014, PineBridge acquired a 50% stake in Romatem, Turkey’s leading physical therapy and rehabilitation chain. PineBridge Investments Middle East continues to support Romatem in rapidly growing the company across Turkey to secure and maintain its leading position.
How have your investments in the region been affected by the years-long unrest?
We are focused on the long-term outlook and economic fundamentals of the region. In some countries, events like these may create issues in the short to medium term and in some situations create opportunities for investors, to fulfil demand. As a company with deep roots in the region, we see our investments as long-term commitments that address the needs of consumers and businesses in the region. Our approach for investment and country allocation will be adjusted from time to time to take into account the political stability and economic outlook of the countries in the region.
Is PineBridge an investor in Egypt? Which sectors are attractive?
PineBridge Investments Middle East looks to partner with visionary entrepreneurs and management teams by providing growth capital to their companies to expand and strengthen their existing operations and growth into new markets.
We are continuously seeking attractive investment opportunities in the region, including Egypt, with a focus on growing companies that have a strong competitive position in the market. We are interested in sectors such as manufacturing, oil and gas services, food and food processing, agribusiness, consumer goods, non-bank financial services, as well as social infrastructure—education and healthcare.
What do foreign investors need to see in Egypt?
Foreign investors will look for the same characteristics when evaluating investment in any country, mainly political stability and economic growth. This is demonstrated through investor-friendly government policies, and a balanced and consistent regulatory and business environment. With prospective portfolio companies, investors also look for clarity on company reporting, improved corporate governance and increased depth and liquidity in the stock markets.
Which markets will PineBridge tap next in the region? Should we expect any deals in the near future?
PineBridge Investments Middle East is primarily focusing on investment opportunities in the Middle East, North Africa, and Turkey. The region is attractive because of the relatively strong pace of economic growth. In Africa, we are looking at the kind of income convergence story that has played out in developing Asia over the last 30 years. Rising income and an emerging middle class is creating domestic demand in economies that until recently were dependent on exports of commodities. This is unleashing huge potential for corporate growth.
What is your assessment of Egypt’s economy at the moment?
Economic growth has recovered on the back of fast-rising government consumption and a pick-up in investment. The government is planning notable fiscal reforms in FY2014/15, including tax hikes and subsidy cuts, which are likely to increase inflation. However this will regain investors’ confidence. Overall, the Egyptian economy has shown signs of recovery in recent months but this has yet to feed through to the labour market. By 2015, foreign investors will be able to determine the full extent of the progress in support of investment reform and the growth path for the country.
What would you say are the biggest improvements brought about by the new administration?
The new administration has just started to implement its policy which will take time to assess. As the country transitions towards regaining political stability, there have been some positive movements in the economy, including partially lowering subsidies on fuel and electricity, consequently lowering the fiscal deficit forecast for FY2014/15, in addition to contractionary monetary policy to limit inflation expectations. Moreover, the new administration continues to prioritise investment, with a focus on improving infrastructure as well as job creation. On the back of this, deal activity and value of investments made are gradually expected to return to levels close to pre-2011. As a result of the political stability, the Egyptian pound has since stabilised, reflecting increased confidence in a business-friendly administration and further support from neighbouring Gulf states.
What are your biggest concerns regarding investing in Egypt as a foreign investor?
There are several challenges to undertaking investments, which bear similarities throughout the MENA region. Exit options via public markets remain a challenge, and deal activity remains lacklustre, although there are signs of improvement. Nevertheless, we should expect to see more and more companies sell shares to the public following the oversubscription of Arabian Cement Company on Cairo’s bourse. For example, the prolonged energy crisis resulting from fuel supply shortages and high temperatures poses a significant challenge to investors, as periodic blackouts can disrupt business activity, and be a deterrent to investors. The government is looking at long-term solutions to such critical business issues which would serve to regain foreign investor confidence.