Promoting Cayman in the Middle East

Given the political nature of any
government decision, many may not fully appreciate the need for having a Middle
East presence and being proactive to bring inward investment to our Islands.
Acting on behalf of the Cayman Islands, as an advisor to the government’s
Department of Commerce & Investment in the United Arab Emirates, I want to
underscore why Premier Bush and Executive Director of DCI, Dax Basdeo, are
visionaries, when a year ago they posted a representative in the commercial hub
of the Middle East, Dubai, as part of their global mandate to promote trade and
inward investment.
   

At the time
of writing, many recent events have destabilised the Middle East region. These
events, highlighted by intense media coverage, on top of the well known 2008
meteoric fall of the Dubai real estate market, have regrettably brought an even
greater misunderstanding of why DCI needs to have a presence here. In this
article, I will attempt to provide a better understanding of the investment
opportunities I see possible from this important region as well as my role
assisting DCI.

The Gulf
Cooperation Council

To
understand the importance of the Middle East for investment, first, let me
provide some general background on my geographical area of focus, the GCC
states. The GCC or Gulf Cooperation Council was created in 1981 and consists of
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. It is
a political and economic union involving the six Arab states of the Persian
Gulf with many economic and social objectives. These six countries present
tremendous investment potential for the Cayman Islands as they all have
benefited tremendously from high oil prices and in recent years have
experienced a broad-based economic boom.

According to
a recent McKinsey Global Institute study, even priced at a low of US$50 per
barrel, the GCC would still earn US$4.7 trillion in oil export revenues up
until 2020. Together, the GCC accounted for 18 per cent of global oil
production and 39 per cent of oil exports in 2006. Record oil export receipts
have been reflected in sound government revenues, current account surpluses,
large accumulations of foreign assets and a real estate boom. With surpluses in
hand, the GCC has embarked on investment and development plans which differ from
those of previous oil booms in the 1970s and 1980s.

Today, there
is more diversification. We are now witnessing a shift from the public to the
private sector as the main engine of growth, as well as a reduced dependency on
petroleum and natural gas as a source of revenue.

GCC
governments are increasing foreign investment in areas such as infrastructure,
tourism, manufacturing, energy, agriculture and real estate. To illustrate the
huge appetite for foreign investment one only needs to see the activities of
GCC “sovereign wealth funds”, the state-owned and managed funds, Aabar, Qatar
Investment Authority and Mubadala making big bets on Daimler, Canary Wharf and
Viceroy Hotel Group respectively. Additionally, most are unaware two of the top
three world’s largest sovereign wealth funds are located in the GCC – Abu Dhabi
Investment Authority and Saudi Arabia Monetary Agency Foreign Holdings-which
combined have greater than US$1 trillion in assets under management.

Role and
responsibility

My role is
to develop relationships with these investors flush with cash and to promote
Cayman trade and inward investment. I am not alone in Dubai; several other
Cayman-linked companies including Maples, Cayman National and Walkers are also
here with the same objective; travelling the GCC to bring investment back home
from the Middle East. Long gone are the days of the suitcase banker making
annual trips from somewhere else to the region to secure investment deals. Arab
investors are sophisticated and want constant attention from a local base of
professional service providers.

Already
having very strong and established relationships, with numerous institutional
investors, government and royal dignitaries, and high net worth investors due
to my activities as managing director with Pharos Financial Group, a Dubai
International Financial Centre based asset manager, I have been able to
leverage off my contacts to hit the ground running for the strategic benefit of
the Cayman Islands Department of Commerce & Investment.

Over the past
year, since I began my advisory role with DCI, I have attending numerous events
and meetings with institutional investors, private banks, family offices and
sovereign wealth funds in all six of the GCC countries. To date, the strongest
demand for Cayman opportunities is coming from the United Arab Emirates, Qatar
and Saudi Arabia.

Already
Cayman has pending deals with investors for infrastructure, tourism, logistics,
IT and banking investments as result of having a presence here. Moreover, I was
able to kick-start a dialogue between the Cayman Islands Monetary Authority and
the Dubai Financial Services Authority to try and reach a memorandum of
understanding between the two regulators to promote each respective financial
centre. This important MoU, which is still being negotiated, will obviously
strengthen ties between Cayman and the Middle East well into the future. 

Being
recognised as politically and economically stable, tax free and having a strong
judiciary based on English Common Law, the Cayman Islands are an attractive
place for many Arab investors. While Cayman enjoys a solid reputation, we must
continue to promote ourselves, given the increased and fierce competition from
other rival jurisdictions such as Luxembourg, Bermuda and the BVI or risk losing
our position as a leading financial hub.

As global
wealth swings from developed countries to emerging countries, many expatriates
representing major financial centres, multi-national corporations, investment
banks, asset managers and wealth advisors have established local offices in the
region to stay ahead of the curve.

Local
presence and culture

In Arab
culture, emphasis is placed on relationships and trust. The typical sales cycle
with a local investor takes no less than a year before a deal may materialise.
This happens over numerous meetings. The first several meetings may not even
involve discussion of the investment opportunity but focus on topics like work
experience, hobbies, sports, travel and politics. Finally, by the fifth or so
meeting, then it is time to talk business. These meetings are usually done in a
polite and relaxed manner in a comfortable environment while drinking green tea
with fresh mint.

In addition
to marketing inward investments, my duties for the Cayman Islands also include
promoting the financial services, tourism, real estate sectors along with a bit
of diplomacy with community leaders and investors. This is pleasurable since I
try to educate people on why the Cayman Islands are such a special place. Not
surprisingly, the most frequent questions I get from persons hailing from the
Middle East are “where are the Cayman Islands?”, “is the weather in Cayman as
hot as it is here in summer?” and “are the Cayman Islands part of the United
States?”. While these questions may sound simplistic, given they are coming
from some of the world’s most sophisticated investors, they act as great ice
breakers to develop and cultivate long lasting relationships. Furthermore,
these questions demonstrate the need for greater education and promotion of the
Cayman Islands to increase the odds for investment, whether FDI, establishment
of a Cayman office and/or a family holiday on Seven Mile Beach.

Conclusion

The
political decision to establish a presence in the Middle East has been a good
one. The benefits of promoting the Cayman Islands in the region add tremendous
value that may not be completely quantifiable or understood for many years. The
Dubai DCI effort continues to be increasingly active as current regional
instability has only highlighted the benefits of foreign investments in the
Cayman Islands. While Arab investors move at their own pace, time will show how
important they are to the global economy. Without a doubt, the Cayman Islands
are in a much better position to flourish economically as a result of the
initiatives DCI has made in the Middle East. Already contacts made in Dubai
have resulted in investments in the Cayman Islands.

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