TRAVEL GAZETTE – The United Bank of Switzerland (UBS) said in a study that investing in Arab Gulf states and Iran needs a “post-oil investment approach.”
The approach would be focused on future green energy, tourism and equity markets as the private sector continues to develop throughout the region, said the UBS report.
The report, “Prosperity beyond Oil — The Middle East at the Crossroads,” said the persistent oil slump could benefit sectors such as solar power, tourism, and financial services.
Economies such as Saudi Arabia and Iran, which are welcoming increased foreign investment, will also benefit, said UBS in an e-mailed statement.
The UBS report said the Middle East, with an average of more than 300 days of sunshine per year, should put in more efforts in tapping solar power.
“Solar project investments in the Middle East and North Africa region grew from 160 million U.S. dollars in 2010 to 3.5 billion dollars in 2015,” the report said.
“By 2020, solar energy will become a significant part of the region’s power generating capacity,” according to UBS, which called solar power the “new yellow gold.”
As for tourism, the lender said that while Dubai has been at the forefront for many years, other regional countries are following suit.
“Qatar is hosting the FIFA World Cup in 2022 while Saudi Arabia is targeting improvements in tourism and leisure in its Vision 2030 plan,” the report said. “Challenges include cultural differences between residents and visitors, as well as perceived security threats,” it added.
With regards to the financial sector, the plunge in oil and gas prices has left the Middle East with growing financing needs, which is likely to appeal to international investors.
Bond issuance is on the rise, while the privatization trend and greater foreign ownership of companies will help launch Middle Eastern equity markets, the report said.
Saudi Arabia launched its local stock market, Tadawul, the largest in the Middle East in terms of capitalisation, to foreign institutional investors in mid-2015.
It plans to list its state-owned Saudi Aramco flagship oil company soon.
UBS President and Wealth Manager Jurg Zeltner said the necessary reforms will not be easy, and the coming years will not be without difficulties.
The prices of oil, currently at around 46 dollars per barrel, recovered significantly from the January 2016 lows, but remains way lower than the 110 dollars per barrel which markets witnessed in June 2014.
The historical experience of countries which were successful in diversifying their economies shows that “the chances of implementing deep reforms are higher when oil prices are not too low,” said the UBS report.