REUTERS SUMMIT-Investment recovering in Arab Spring economies

Reuters Middle East

* Signs of increasing interest from foreign investors

* Minimum levels of political stability viewed as reached

* Growing confidence in Egyptian real estate market

* Cash-rich Gulf countries account for much of interest

By Andrew Torchia

DUBAI, Nov 15 (Reuters) - When two real estate developers

from the United Arab Emirates announced a big project in Egypt

last month, it was more than a boost to the country's property

market; it was a sign of a revival of cross-border investment in

the region.

Al-Futtaim Group and Emaar Properties said they

had reached a preliminary agreement to spend about 5 billion

Egyptian pounds ($820 million) on building the "Cairo Gate"

complex off the Cairo-Alexandria desert highway.

The 65-hectare complex would be built around a shopping mall

and include an office park, a luxury hotel, schools, medical

facilities and residential space.

A year and a half after Arab Spring uprisings erupted across

much of the Middle East and North Africa (MENA) region,

countries affected by the unrest are again starting to attract

foreign capital for securities portfolios and for direct

investment in factories and property.

The process is hesitant and incomplete, with economic

conditions still grim in many countries. Egypt, for example, is

wrestling with a balance of payments deficit that may cause a

depreciation of its currency and is forcing Cairo to seek a $4.8

billion loan from the International Monetary Fund (IMF).

But in some countries - Bahrain, Egypt, Libya, Morocco,

Tunisia and Yemen - there are signs that investors feel that

sufficient political stability has returned for them to begin

looking for business opportunities.

"There's a good amount of interest in investing in North

Africa," said Adnan Ahmed Yousif, chief executive of Bahrain's

Al Baraka Banking Group, adding that the interest is not only in

traditional sectors such as banking and real estate.

New areas of interest include infrastructure, consumer

industries and even entertainment, said Yousif, who also heads

regional banking body the Union of Arab Banks.

More than two dozen top executives and officials from around

the region will discuss business prospects and opportunities at

the Reuters Middle East Investment Summit, a series of

interviews taking place from Nov. 18-21 in more than half a

dozen Arab cities.

The Arab Spring took a heavy toll of investment in the

worst-hit countries. Egypt's stock market was down

about 50 percent last year and the country suffered a $483

million outflow of foreign direct investment. That compared with

a $6.39 billion inflow in 2010, according to the Arab Investment

& Export Credit Guarantee Corp.

The latest balance of payments figures show that the picture

is improving. Egypt's net portfolio investment outflows slowed

to $456 million in the second quarter of this year, from $1.58

billion a year earlier, central bank data shows.

That has permitted a 56 percent leap by Egypt's stock index

so far this year, making Cairo one of the world's

best-performing markets.

Sherif Salem, portfolio manager at Abu Dhabi's Invest AD,

said that Egypt's rally had stalled in the past few weeks as

investors realised the size of the country's economic

challenges, including the need to cut the state budget deficit

with politically difficult reductions in subsidies.

"We haven't reached that point where you can say if Egypt

has turned the corner or not - there's clearly a lot of

potential, but the potential is not yet reality," he said.

However, other Egyptian asset classes are also showing more

strength. Consultants Jones Lang LaSalle said that the election

in June of President Mohamed Mursi has provided a boost across a

number of sectors.

"With a return to a more politically stable environment,

under a business-friendly government, we are seeing increased

investor and consumer confidence," it said in an October report.


Foreign direct investment is recovering in many countries.

Tunisia attracted 1.48 billion dinars ($931 million) in the

first nine months of 2012, up 27 percent from a year ago, its

investment promotion agency said. The total was down only 1

percent from the same period of 2010, before the Arab Spring.

Masood Ahmed, Director of the IMF's Middle East and Central

Asia Department, said that some investors expect the Arab Spring

would strengthen economies in the longer term as new, democratic

governments worked harder to create jobs and reduce poverty.

"These investors are conscious of the fact that medium-term

prospects for the region remain very favourable," he said.

One of the biggest developments in the wake of the Arab

Spring is the emergence of Gulf Arab states as top investors in

North Africa, partially offsetting a drop in Western investment

because of economic woes in Europe and the United States.

High oil prices - lifted in part by political tensions in

the region - will help the Middle East's oil exporters to post a

combined current account surplus of about $400 billion this

year, close to a record high, the IMF estimates.

Some of that is now being recycled to the Arab Spring states

in the form of aid and investment.

Many big investments are by state-backed Gulf companies. But

Al Baraka's Yousif said there was also growing interest among

cash-rich private companies in the Gulf.

For example, Saudi food group Savola bought out

two Egyptian firms late last year and Saudi-based private equity

firm Amwal Alkhaleej has said it is eyeing investment in Egypt.

"The private sector in the Gulf has become quite big and

powerful. It is therefore looking overseas," Yousif said.

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