< Previous10 Vol. 24/06, 15 May - 31 May 2023 From football to nance Revealing the secrets behind the Gulf’s big international purchases Soft power Investments in European football clubs enhances the pro le of the Gulf countries on the world stage For many years now, oil-based economies have been creating long-term visions as a way of securing their countries’ wealth and prosperity far in the future. While investments into green technology and infrastructure have played a key role, what often makes the most noise is when GCC countries start looking abroad for investment opportunities. COMMEN T | KARL HOUGAARD, FOUNDER AND MANAGING PARTNER OF TRADE LICENSE ZONEarabianbusiness.com 11 One of the world’s most popular Manchester United is always on the radar of Gulf SWFs Premier league Manchester City have close ties to Abu Dhabi. The team is owned by Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister of the UAE The most headline-worthy of these are European football clubs. From Manchester City to Paris Saint-Germain, many high-pro le teams have been taken over by GCC sovereign wealth funds in the past few decades. But has the recent attempted acquisition of Standard Chartered by Abu Dhabi Bank signalled a new direc- tion? Are Gulf countries increasingly looking to nance rather than foot- ball? And does this mean pro t and influence is replacing image and branding as a strategic goal? Here we look at some of the major moves by GCC sovereign wealth funds, starting with sport and then taking a glimpse into the future by asking: What is behind these massive investments? Sovereign wealth funds and who has the deepest pockets Sovereign wealth funds (SWFs) are owned by the state and fuelled by state-a liated sources. They are used for stabilisation, development, and future planning. The goal is to diver- sify these investments across sector and country. While the world’s largest SWF belongs to China, the GCC has an impressively strong showing in the global top ten. The Foundation for Strategic Research notes that ‘of the $5.5 trillion held by SWFs today, nearly 40 percent comes from the Gulf countries.’ The UAE ranks high- est in the GCC. Most signi cantly, of the 60 or so giant deals made last year, 25 were carried out by Gulf SWFs, with nearly 70 percent of them targeting compa- nies in the US or Europe, according to FDi Intelligence. They went on to report that the Abu Dhabi Investment Authority (ADIA) spent $25.9bn last year, while Saudi Arabia’s Public Investment Fund (PIF) wasn’t far behind with $20.3bn. Other notable names from around the Gulf include the Emirati funds Mubadala and Abu Dhabi Develop- mental Holding Company PJSC (ADQ), the Qatar Investment Authority (QIA), Mumtalakat in Bahrain, the State General Reserve Fund of Oman, and the Kuwait Investment Authority. Football and the question of ROI FDi Intelligence reports that last year, SWFs in the Middle East, more than doubled their investments in Western economies to $51.2bn. This move has been marked by the acquisition of football clubs, notably in Europe. The trend started in earnest in 2008 when an ailing English football club was taken over by Sheikh Mansour bin Zayed Al Nahyan’s Abu Dhabi United Group. Once the poor relation to the legendary Manchester United, over the years Manchester City has found its feet and turned around its performance to become one of the most well-known teams in the world. Abu Dhabi United Group also own several other less- $51.2BN The investment SWFs in the Middle East placed in Western economies last year From Manchester City to Paris Saint-Germain, many high-pro le teams have been taken over by GCC sovereign wealth funds in the past few decades | COMMEN T What often makes the most noise is when GCC countries start looking abroad for investment opportunities 12 Vol. 24/06, 15 May - 31 May 2023 er-known football teams in India, Australia and the US. Three years after the Manchester City takeover, the Emir of Qatar Sheikh Tamim bin Hamad Al Thani bought Paris Saint-Germain football club through Qatar Sports Investments (QSI). In , percent of She eld United went to Prince Abdullah of Saudi Arabia, while in , Saudi Arabia’s Public Investment Fund (PIF) bought an 8 percent stake in Newcastle United. This trend doesn’t look like it’s ending any time soon, with some owners looking to sell, others aiming to increase their stake. Two high-pro- le teams that are also rumoured to be attractive to Gulf SWFs include Manchester United and Tottenham Hotspur. But why the focus on football? In short, it’s a global game and by far the most popular sport in the world. And while ROI may be di cult to calculate early on, it’s the branding aspect of owning a football club that really pays dividends. When you own a football team, you essentially become a celeb- Global investor The Abu Dhabi Investment Authority (ADIA), was founded in 1976 and invests funds on behalf of the emirate’s government $708.75BN The asset value of Abu Dhabi Investment Authority (ADIA). It is the largest sovereign wealth fund in the Middle East COMMEN T | A major takeover of a strategically important Western bank would give an SWF an out-sized level of in uence arabianbusiness.com 13 rity, a household name. The team then becomes associated with you and your country. Fans chant your name. You are in the media regularly. This is a stark contrast to many owners of major companies who – to the wider public – remain relatively anonymous. This focus on image and branding doesn’t mean there isn’t money to be made in football. But rst and fore- most, football investment has always been about creating an image for a country and then promoting it around the world. You gain instant visibility to an enormous audience and the chance to shape how a coun- try is perceived. Sporting investments are not just about foreign teams and football. The recent establishment of the LIV golf tour by Saudi Arabia’s Public Invest- ment Fund (PIF) and Qatar hosting the 2022 football World Cup show that sport can also be a strong investment in public image when brought closer to home. But we are increasingly hearing more and more rumblings away from the football pitch in the boardrooms of major nancial institutions. Is this the beginning of a new trend? SWFs and Western nancial institutions Along with green energy, Disruption Banking reports that the other two pillars of the Gulf’s “life after oil” strategy are sport and banking. It notes that Abu Dhabi Invest- ment Authority (ADIA) holds 4.9 percent of Citigroup’s share capital, while Mubadala holds 7.5 percent of the global investment firm Carlyle Group. Meanwhile, Qatar has acquired more than a quarter of the capital of the London Stock Exchange and also has shares in Barclays – another major British bank. Around 25 percent of the stock of ailing global investment bank Credit Suisse is now owned by several investors, including those from Qatar and Saudi Arabia. But what about an outright acqui- sition of a major Western nancial institution? Disruption Banking notes that becoming a limited part- ner in funds and deals helps gener- ates returns; buying banks wields in uence. To that end, First Abu Dhabi Bank attempted to acquire Standard Char- tered – a British multinational bank. While the deal was blocked because of regulatory issues, this should not necessarily be seen as an end to this kind of ambition. There may be limits for GCC SWFs when it comes to Western nancial institutions, but this attempt by First Abu Dhabi Bank is likely not the last by a Gulf fund. Finance, football and the future So where do we go from here? The level of confidence and ambition demonstrated by First Abu Dhabi Bank is likely not a one-o . While we may well see more football teams being acquired in the future, the world’s gaze will be xed rmly on movements within nance. A major takeover of a strategically important Western bank would give an SWF an out-sized level of in uence. So why not keep trying? Football may be partly about image and branding, but perhaps it does sit comfortably in a portfolio along with nance. Like image, the in uence gained by owning a Western bank may be hard to measure, but no one is pretending it’s not of great value. And if run well, as Manchester City has demonstrated, the ROI from any kind of international investment can potentially over time include a healthy pro t on the balance sheet. 80% Public Investment Fund's (PIF) stake in English professional football club Newcastle United Petrodollars Qatar Investment Authority (QIA) was established to develop, invest and manage the country’s reserve funds and other assets Football may be partly about image and branding, but perhaps it does sit comfortably in a portfolio along with nance | COMMEN TECONOM Y | 14 Vol. 24/06, 15 May - 31 May 2023 How an IPO rush could accelerate UAE’s GDP growth Compliance obligations of public companies is a guarantor of economic stability ECONOM Y | In today’s volatile economy, there is one crucial area that our nation could capitalise on – Initial Public Offerings (IPOs). By enabling more companies to go public, the UAE can stimulate economic growth, create new jobs, and enhance its overall GDP. IPOs are an essential tool for companies looking to raise capital beyond private equity or venture capi- tal, and take their business to the next level. By going public, companies gain access to a much larger pool of inves- tors, which can translate into bigger expansion plans, more resources, better R&D and a wealth of opportu- nities. This in turn can lead to increased productivity and ultimately a boost to the nation’s GDP. IPO’s role in enhancing corporate governance Adherence to the compliance obliga- Funding growth IPOs are an essential tool for companies looking to raise capital beyond private equity or venture capital $7.3BN The proceeds raised by 20 IPOs in the MENA region during the fourth quarter of 2022 BY AWS YOUNIS, CHAIRMAN, AWS LEGAL GROUP The UAE has always been a land of visionaries and dreamers – a breeding ground for some of the most inno v ativ e and forward-thinking ideas. This has led to impressive economic growth over the past few decades. arabianbusiness.com 15 | ECONOM Y Legal eagle Younis says accountability is a key factor in maintaining public trust in business Bourse supremacy Dubai Financial Market (DFM) welcomed the listing of shares of Salik Company in September of last year, raising more than $1bn tions of an IPO is a guarantor of nan- cial stability among companies and economies. For instance, due diligence and a company’s prospectus required for an IPO ensure that nancials are in order, and that the company has a sound business plan enabling it to grow and prosper. This process provides investors with the con dence that they are investing in a robust business with growth potential. By meeting IPO requirements, companies demonstrate their commitment to transparency and accountability, which are crucial ingre- dients for any successful business. Accountability is a key factor in maintaining public trust in business, and public companies are required to be more transparent in their nancial statements as they are subject to higher scrutiny than private ones. Public companies must comply with laws and regulations that enhance transparency and e ciency, making them more trustworthy and creating a positive impact on the overall repu- tation of the national economy. In the past decade, accountability has become more elusive for LLC companies in the UAE. Prior to the 2008 nancial crisis, business owners upheld strong ethical standards. In the aftermath of the crisis, account- ability levels have declined. This trend highlights the need for renewed emphasis on ethical conduct and compliance. This is not the case with public companies, which know that they will be under greater scrutiny. A lack of accountability has a severe impact on the economy as a whole, resulting in an increase in non-performing loans and insolven- cies. In this context, going public represents an indirect remedy. IPO activity on the rise Over the years, the IPO readiness of UAE’s LLCs has improved thanks to the availability of more resources, professional assistance, regulatory guidance, and legal consultancies. The UAE government is taking a strong stance on encouraging companies to adhere to IPOs and listing regulations. Consequently, IPOs are bound to and aware of the potential gains from being listed, with more and more enti- ties considering an IPO as a viable option to raise capital and grow their business. A regional trend Elsewhere in the MENA region, we are witnessing a notable IPO activity. Egypt’s stock exchange has seen a signi cant increase in listings over the past few years, leading to a boost in the nation’s GDP. The Egyptian cabi- net has recently announced plans to privatise 32 state-owned businesses and nancial institutions. The sale of these assets will be carried out through IPOs to strategic investors. The process will take place from Q1 2023 to Q1 2024, with the aim of boost- ing the country’s economy and enhancing competitiveness. Considering an IPO is a strategic decision, and it’s not suitable for all companies. Those who choose to go public must be prepared to be more accountable, transparent, and follow legal requirements. By adhering to IPO regulations, businesses can bene- t from enhanced governance prac- tices, access to new liquidity, and the opportunity to participate in the over- all growth of the UAE’s economy. An increase in IPO activity would stimulate investment in the UAE, enhancing the country’s long-term nancial stability and prosperity. An increase in IPO activity would stimulate investment in the UAE, enhancing the country’s long-term nancial stability and prosperity become more common in the UAE, which will be a signi cant contributor to the country’s economy. Several public and private sector companies in the UAE have already gone public, including ADNOC, Salik, DEWA, and Al Ansari Exchange. Given the new taxation laws in the UAE, LLCs are becoming more educated ECONOM Y | 16 Vol. 24/06, 15 May - 31 May 2023 Unpacking the future of food Technology is helping secure the future of food in the UAE, writes Ghanim Al Falasi, Senior Vice President, Technology Ecosystem and Development O ce, Dubai Silicon Oasis ECONOM Y | As the UAE gears up to host the United Nations Climate Change Conference (COP 8), one crucial issue is sure to be included on the agenda: Transformation of the global food system. The current global food system accounts for around percent of all greenhouse gases and is a primary driver in biodiversity loss. Current ways of producing, distributing and consuming food are not sustainable. Unsustainable The current global food system accounts for around 30 percent of all greenhouse gases and is a primary driver in biodiversity lossarabianbusiness.com 17 | ECONOM Y Self-su ciency The UAE's National Food Security Strategy aims to increase home-grown food production by 30 - 40 percent in a decade Innovation Food Tech Valley is created to support the achievement of the objectives of the National Food Security 2051, says Al Falasi Global food security is reaching a crisis point. The main challenges are poor management of food supplies to feed an ever-growing world population, the impact of agriculture on climate change, and food loss and waste. At COP27, The Food4Climate pavilion highlighted the growing urgency to find solutions to the crisis and adopt a more sustainable food system – solutions that will act on climate change while ensuring food security. In a proactive response to food security issues, the UAE has set up a National Food Security Strategy. The aim is to increase home-grown food production by 30 percent – 40 percent in 10 years and become a world-lead- ing hub of innovation-driven food security by 2051. So, what exactly is the UAE doing to help achieve food self-su ciency and future food security? In the run-up to COP28, the UAE is setting a global example in food system transformation through initi- atives, programmes, and food and agritech innovations. Let’s look at these initiatives one by one. Food for Future Summit In 2022, the UAE Ministry of Climate Change and Environment, in asso- ciation with the UN Food and Agri- culture Organisation and the Committee on World Food Security, hosted the inaugural Food for Future Summit in Dubai. The landmark gathering in the MENA region united 100+ global leaders and innovation experts from more than 60 countries with the common aim of addressing global food security. The summit also provided a unique opportunity for foodtech and agritech startups to showcase their innovative ideas in the food and agri- culture value chain. In its own words, the Future for Food Summit is the ‘Ground Zero for the world’s most advanced technologies shaping the future of food security’. The UAE is fast becoming a leading example of how agritech innovations can shape the future of food. The forthcoming 2023 summit will be an occasion to show the country’s commitment and determination regarding technology and food secu- rity ahead of the COP28 conference later this year. Food Tech Valley Food Tech Valley is a first-of-its- kind, global food innovation centre created to support the achievement of the objectives of the National Food Security 2051. The underlying idea involves a holistic approach to food security, uniting the entire food and agriculture ecosystem. Food Tech Valley comprises four main zones: Food production, smart logistics, a business park, and an innovation and R&D centre. The ambitious government-led initiative aims to: • Become a global hub for foodtech startups and industry experts • Provide an integrated agri-busi- ness ecosystem to support startups and entrepreneurs • Host research and development facilities • Further develop vertical farming, water systems and agritech • Triple the UAE’s food production • Accelerate the UAE’s journey towards food self-su ciency The UAE is fast becoming a leading example of how agritech innovations can shape the future of food $40M Dubai’s investment in Emirates Crop One (ECO 1) facility – the world’s largest vertical hydroponic farmECONOM Y | 18 Vol. 24/06, 15 May - 31 May 2023 Food Tech Challenge The FoodTech Challenge is an annual government-led global food security competition that seeks agriculture technology solutions from innovative foodtech startups. The $2m competition o ers start- ups from across the world the oppor- tunity to develop food systems and transform traditional agricultural practices e ciently and sustainably. The two main exploration areas are food production and food loss and waste. Previous winning innovations include: • An online platform to streamline food imports into the UAE • An omega-3 and protein-rich algae-based superfood • A light-based solution to aid sustainable shing practices • A saltwater irrigation solution for greenhouses Vertical farming Vertical farming is a type of Controlled-Environment Agriculture (CEA) that could be the answer to UAE’s food security challenges. Vertical farming utilises soilless methods such as hydroponics and aqua- ponics that use 95 percent less water than traditional farming methods. Crops are grown in vertical stacks to maximise space and yields, so they can easily be housed in urban areas, helping reduce transportation emissions. The modular design of vertical farms means that producers can grow 100 times more produce per square foot than traditional farms. The Local produce Pure Harvest Smart Farms produces over 17 million fruits and vegetables a year in high-tech, climate-controlled greenhouses $5BN The MENA region’s projected agritech market size by 2029arabianbusiness.com 19 | ECONOM Y Food security The UAE is investing heavily in vertical farming technologies The way forward is smart! “Smart farming is the way forward to achieving food security,” said Mariam Al Mheiri, the UAE Minister of Climate Change and Environment and Minis- ter of State for Food Security. As well as hydroponics and vertical farms, the UAE is also exploring the potential of other agritech solutions, including: • Alternative crops – including sea asparagus, which is rich in nutrients and can be easily grown in the country. • Green deserts – Dubai-based startup Desert Control is creating a liquid natural clay technology that can transform deserts into fertile land. • Alternative proteins – research and investment are taking place in the development of plant-based alterna- tives to meat and other alternative proteins. By prioritising food security with a focus on food and agricultural tech- nologies, the UAE o ers incredible opportunities for businesses in the region. In 2021, UAE-based compa- nies received more than $50bn in investments – that’s around 1.1 percent of the global capital invested in agritech. With such an urgent need to address food security, investments in the food and agritech sectors are only set to grow. By prioritising food security with a focus on food and agricultural technologies, the UAE o ers incredible opportunities for businesses in the region bles. Based in the heart of Dubai, Uns Farms provides an urban farm-to- fork solution for hotels, restaurants, airlines, hospitals, schools, and super- markets in the city. • iFarm – this Finnish tech startup is a new arrival to the UAE vertical farm market. A provider of bespoke vertical farming systems enabled with software and automation, iFarm recently moved its international headquarters to the UAE. With tech- nologies already used in an industrial farm in Riyadh, Saudi Arabia, iFarm also plans to set up a Dubai facility in partnership with agritech company Spacefarm. • Right Farm – the UAE agritech startup uses predictive technology to source fresh produce for the food and retail sector, providing a seamless end-to-end supply chain process from farm to table. controlled indoor environment allows the production of pesticide-free, organic produce, resulting in safer, healthier, tastier food. Water scarcity and lack of useable arable land mean that 90 percent of the UAE’s food is currently imported. Vertical farming could help slash these imports, replacing them with home-grown produce that can be grown all year round. Food security is a top priority in the government’s development goals, as outlined in the National Food Secu- rity Strategy 2051 and the Water Secu- rity Strategy 2036. So, it’s no wonder the UAE is investing heavily in vertical farming technologies. The potential to grow anything, anywhere, without having to rely on seasons or global supply chains is a major driver of food independence and security for the UAE and the entire GCC region. As a result, the vertical farming market is steadily growing. The MENA region’s agritech market size is projected to be worth close to $5bn by 2029. Major players in UAE agritech include: • Emirates Crop One – the 300,000 sq ft facility set up by Dubai’s Emirates Flight Catering and US company Crop One is the world’s largest hydroponic farm. The $40m facility uses an AI-powered closed-loop water system to produce more than 900,000 kg of fresh produce annually for Emirates in-flight meals and selected stores under the Bustanica brand. • Pure Harvest Smart Farms – the Abu Dhabi-based agritech business produces over 17 million fruits and vegetables a year in high-tech, climate-controlled greenhouses. With UAE supermarket chain Spinney’s onboard as a major partner, Pure Harvest recently secured $180m in funding from global investors to expand into GCC and Asian markets. • Uns Farms – one of the biggest hydroponic vertical farms in the UAE, Dubai-based Uns Farms uses LED lighting technology and hydroponic irrigation techniques to produce farm-fresh quality fruit and vegeta-Next >