Investment opportunities in the Gulf

EU countries are Spain's main trading partners. In recent years, and perhaps as a result of the effects of the crisis, Spain has tried to diversify the destinations of its exports so as not to concentrate risks in a single region. One of the areas where the government has placed most emphasis is the Gulf area, aware that its countries have the capacity to finance the economic needs of some of the main developed economies but are deficient in infrastructures.

For this reason Banco Sabadell has set itself the main objective of accompanying Spanish companies with a presence abroad and operating in the international sphere. For this reason, they have organised a series of International Business Conferences focused on the main markets of interest to Spanish companies, with the aim of obtaining expert advice so that companies can successfully advance their activity abroad.

In the current context, it is more relevant than ever for businessmen and professionals to think strategically, contrast ideas and acquire new knowledge. This is why Banco Sabadell today presented an online seminar based on business and investment opportunities for Spaniards in the Gulf area, under the title United Arab Emirates: macroeconomic vision and practical information for operating in the country.

The United Arab Emirates is the business hub of the Middle East and a country of great opportunities for Spanish companies. This is why Banco Sabadell, with its experience of more than 10 years established in Dubai, has influence throughout the Gulf. Today it has provided the keys for companies interested in doing business in this area.

Banco Sabadell was the first Spanish bank to establish itself in the Gulf area, opening a representative office in 2009 in Dubai, the main financial and service city in the United Arab Emirates. The office offers extensive knowledge and coverage of the rest of the countries in the region: Saudi Arabia, Kuwait, Qatar, Oman, Bahrain, Lebanon and Jordan. In addition, it maintains correspondent relations with most of the local financial entities as its presence has been continuous for more than two decades. It also maintains extensive commercial lines with local banks to facilitate Spanish companies' foreign trade operations.

The session was led by Carlos Dalmau, director of international solutions at Banco Sabadell and Víctor Argüello, director of the representation office in Dubai of Banco Sabadell, who offered a macroeconomic overview of the Middle East, providing practical information on the services offered to companies interested in establishing or doing business in each of the hubs that represent great opportunities for Spanish companies.

This session, part of the International Business Conference Cycle, focused on the main markets of interest for Spanish companies, dedicated to the United Arab Emirates market, allowed attendees to get an idea of the risks, opportunities, necessary regulations and the path to follow in order to successfully internationalise a Spanish SME in the countries of this region.

The region has a population of 48.7 million inhabitants, an annual GDP growth rate of around 1.6 percent, a per capita income of $33,734 a year (31,382 euros), an unemployment rate of 4.7 percent and an economy in need of diversification owing to its dependence on oil. 

According to Víctor Argüello, director of Banco Sabadell's representative office in Dubai at sector level, there are many fields in which to invest "The Gulf countries still need to invest heavily in infrastructures, whether in construction, education, health, energy, water, purification issues, desalination plants 

The world's largest reserves of gas and oil have for years brought large flows of money, making the countries in the area the ones with the greatest investment capacity, as they have the largest sovereign funds in the world.

 However, the fall in oil prices, together with the wars in Syria and Yemen, has led to profound changes in the economies of these regions. The Gulf countries have ceased to have surpluses and major construction projects have come to a standstill.

"The Gulf has grown significantly in recent decades owing to the economic boom, although there are still significant differences, such as in Oman and Bahrain, whose per capita income is below that of Spain", according to Víctor Argüello. 

Regions such as Kuwait and Saudi Arabia have a very low weight in terms of Spanish imports and exports. With a high dependence on oil and little job creation and with risk factors related to the rate of inclusion of a growing population. 

Given its high per capita income, the UAE is not eligible as a borrower from the World Bank or Bilateral Development Agencies, with a very favourable tax regime. It represents the world's largest re-exporter behind Hong Kong and Singapore. 

Its financial system is fully integrated into the international financial system. Large projects often have the syndicated support of several financial groups, and sometimes of the Islamic financial system. It represents a relatively favourable business environment, with a credibility of the dollar peg. 

Small and medium sized Spanish companies usually turn to the sources of financing they have in Spain to undertake their projects. Local banks are generally less competitive and sophisticated than the Spanish ones and lack the tools to measure the credit risk of a project adequately. 

As the size of the sector is very small, the Gulf countries have to resort to imports to satisfy their domestic demand. This demand is constantly growing owing to the increase in population and income. This makes the region a viable investment opportunity.