July 08, 2008
Maghreb-ward, Ho! Gulf investment heads into the sunset
Rudely poaching on turf far better handled by other contributors, I call attention to this article in The National of Abu Dhabi(?) which relates risk/reward considerations of Gulf investment in North Africa, particularly in real estate. Do the observations jibe with reality? Too little fear, too little greed, or too much. Or just right. A good intro for the beginner or just a superficial story? Excerpts below the fold.
If the first act in the Middle East’s property market has played out in the Gulf, North Africa is where the spotlight is moving for Act Two.But, as the plot thickens, big questions remain: far from the Gulf, the countries of the Maghreb – that swathe of Africa north of the Sahara and west of Egypt – are a diverse collection of markets, each with its own complicated population and policy dynamics.
Quick country summaries:
Although regularly lumped together, the countries of the Maghreb are a mixed bag, especially when it comes to property development. Morocco, an increasingly popular tourist destination for Europeans, has a reasonably well developed infrastructure....Algeria has a population of about the same size, 34 million, but its economy is recovering from a long-running Islamist insurrection in the 1990s. Libya is just emerging from decades of isolation and getting its first taste of economic development. And Tunisia has a smaller population with a sizeable, educated middle class, 80 per cent of whom are property owners.
Big project players?:
It is far from clear how the Middle East’s new property giants – such as Emaar, Sorouh and Tameer Holdings, who have cut their teeth in friendly home markets – will fare as they launch some of their first and most ambitious overseas projects in the nations along the southern shore of the Mediterranean Sea.
[T]he UAE model – of obtaining land at minimal cost and selling properties off-plan to fund the building of projects – does not work there and some developers have found it difficult to kickstart their projects. In July 2006, when Emaar announced a number of other projects – including the redevelopment of Algiers Bay – the value it cited of up to $25bn caused quite a stir, as did the models of vast coastal developments that the developer displayed. . . However, little more has been heard of the Algiers Bay project. Two months ago, the Algerian minister of industry and investment, Hamid Temmar, confirmed that Emaar had invested in three other projects, with a total value of $5bn.
The property sector has attracted half of all GCC investments in Morocco, the country most open to property investment from foreigners. Development here is targeting tourism and upmarket housing for expatriates and the local elite, rather than meeting affordable housing needs.
The usual problem continues?
“Investing in Rabat’s economic development as a capital makes sense and the amount [or investment] is manageable,” said a European diplomat in the capital, expressing doubts about the viability of other parts of the country, particularly the overheated Marrakech market. . . Comparing Morocco with elsewhere in the Maghreb, he wondered if many of those projects would ever be built, raising North Africa’s age-old spectre of corruption. “In my opinion, investing $10bn or so in a new city in Tunisia doesn’t make any sense,” he said. “It seems that the only realistic figure is the percentage of the $10bn that certain people in the local government may expect in commission.”
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Speaking of Gulf wealth stories in that paper, I was amused by the UAE president denying that his country's sovereign wealth fund was as large as the common estimates of $800 billion.
I think the estimations you have mentioned are exaggerated and they do not reflect the truth and the size of Emirati investments abroad.Yes, yes, it's all very well to say that, but who's going to take any of it seriously in the absence of hard numbers open to outside scrutiny? And if the latter existed, SWFs would probably be less unwelcome in the West, and worries about their size would be diminished. The whole Gulf states are in with regard to where to invest is one they have at least partly dug themselves into.
Posted by: dubaiwalla at July 8, 2008 11:09 PM
“Investing in Rabat’s economic development as a capital makes sense and the amount [or investment] is manageable,” said a European diplomat in the capital, expressing doubts about the viability of other parts of the country, particularly the overheated Marrakech market
I disagree with this one. I believe in Morocco's potential (as long as its corruption remains manageable). Compared to the rather successful (though too Euro-dependent) Tunisian tourism sector for example, Morocco's is way underdeveloped, despite its much better potential.
“In my opinion, investing $10bn or so in a new city in Tunisia doesn’t make any sense,” he said. “It seems that the only realistic figure is the percentage of the $10bn that certain people in the local government may expect in commission.”
Sadly, this is so true. This is the biggest problem for Tunisia to reach its development potential, even more so than human rights (since the latter doesn't go without the former anyway). I wouldn't put even 1% of that amount if I don't have some very concrete way to grab them by the balls (e.g., by having at least some of their personal stakes in equivalent value elsewhere I could expropriate as a retaliation if needed - which I'm not sure is a realistic assumption since I'm not under the impression King Ubu family has diversified internationally anyway).
Funny, I am working on something along these lines. The description in this arty borders on the surreal for Rabat, but more later.
Posted by: The Lounsbury at July 9, 2008 07:25 AM
My one-word description of Rabat (based on only a couple days there) would be "sleepy". Not quite Belmopan, but not exactly a hot place to invest.
Posted by: Tom Scudder at July 9, 2008 10:25 AM
Rabat is developing, sleepy is outdated, but calling the development as being "set to be Morocco's largest business hub" utterly idiotic. It's a marina based tourism development primarily, and hardly a "business hub" although they did want to build some overpriced and idiotic towers a la Dubai.
Posted by: The Lounsbury at July 10, 2008 11:46 AM