How to attract the petro-dollar investor

We ask Clifford Chance lawyers working in Dubai about how to attract petro-dollar investments. One suggestion: You don't necessarily have to worry about Sharia-compliant, just make sure the investment opportunity is sound.
Say the expresion "petro-dollar" and immediately folks think big bucks. We talk to Clifford Chance's partner Robin Abraham and lawyer Qudeer Latif, both based in the firm's Dubai office, about how much money is floating around out there.

FinanceAsia: In general, there's a notion that there is a lot of petro-dollar money available on the market - roughly how much is out there?

Robin Abraham: In short - a lot! Forbes estimated in 2005 that the current-account surpluses of the 22 biggest oil-producing nations (both the Organization of Petroleum Exporting Countries and non-OPEC countries) exceeded the accumulated surpluses of all the economies of Asia, excluding Japan.

Based on International Monetary Fund and US Energy Information Agency data, Forbes put the net oil revenue of those 22 producers at $800 billion in 2005, up from $330 billion in 2002. Whilst some countries will keep the surpluses in their own economy, it is believed that there was approximately $400 billion for external investment in that year alone.

Many people think that petro-dollar investors often seek to target Muslim countries or Muslim funds; in your experience, is this true? Or are they just looking for good investments?

Qudeer Latif: Both are true. However, if you look at assets being acquired by Istithmar, Mubadala (the Abu Dhabi investment vehicle), Qatar Investment Authority, etc, there is no obvious strategy to invest in Muslim countries. They are looking at business risk first and foremost - see for example Istithmar's purchase of the V&A Waterfront in South Africa.

The situation is not as clear as regards high net worth individuals. Whilst there are no statistics clearly highlighting where the money goes, the rise in the number of Sharia-compliant funds suggests that there is increasing demand for such products.

In the case when petro-dollar investors are looking for Sharia-compliant investments, which Asian countries are doing the best job of attracting them?

RA: Countries such as Malaysia and Pakistan have been structuring Islamic instruments in a manner that will be acceptable to GCC [Cooperation Council for the Arab States of the Gulf] investors for many years now. Other Asian countries, such as Indonesia, are expected to start doing this soon.

What are they doing to attract the petro-dollar investors?

QL: There is an availability of Sharia-compliant investments in these countries that isn't seen elsewhere in Asia. Countries such as Malaysia in particular made a conscious decision to structure a product that will not only be acceptable in the domestic market but also in the GCC market. This increases the potential investor base and also appeals to GCC investors who are willing to invest in assets outside of the region to increase portfolio risk.

What can be done to make an investment more attractive to petro-dollar investors?

RA: It needs to be a sound business investment, first and foremost. Whilst Sharia-compliance is a bonus, it is not always a necessity.
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