Capital Thinking Magazine

GLOBAL: INVESTMENT OPPORTUNITIES

Investment Op: Middle East

Now would seem a questionable time to invest in the Middle East, with political unrest in Tunisia, Egypt, Libya and Iran. But the GDP of the Middle East and North Africa is expected to grow 5.1 percent in 2011, according to the International Monetary Fund. That's nowhere near China's 9.6 percent, but it certainly beats the United States' 2.3 percent and Europe's 1.5 percent.

The key is to target the right markets, says John Vogel, a partner in Patton Boggs' Washington, D.C., office who specializes in Islamic finance. His picks and tips:

Target Countries: "Qatar, Oman, and the United Arab Emirates represent the best opportunities. Given their locations and human capital, Jordan and Iraq will be good countries to invest in for the long term."

Target Sectors: "There are opportunities in a number of sectors, including green energy, telecom, health care, education and infrastructure."

Areas of Development: "Health care, education and infrastructure need a lot of development. Western universities have established a presence and will continue to invest there."

Key Initiatives: "The UAE is investing huge amounts in solar and biofuels. Persian Gulf countries are investing in clean energy because they are preparing for a day when oil production begins to decrease."

Shariah Finance: "In Saudi Arabia, everything is done Islamically. In the UAE, sovereign-wealth funds are happy to invest conventionally. In Qatar, Jordan and Oman, it's a combination."

Mode of Entry: "You can't just go in and hang up a shingle." Most countries have strict rules about how foreign countries can invest. You need a partner who can offer some kind of entrée and support on the ground."

Public-Private Partnerships: "Many companies are controlled directly or indirectly by government entities. If you're responding to an RFP, for example, there's almost always a government presence."

Investment Op: Africa

The breadbasket of the world? That's the future of Sub-Saharan Africa, says Jude Kearney, a partner in Patton Boggs' Washington, D.C., office who specializes in African business developments. His take on the best opportunities:

Target sectors: "The growth of oil and gas in Africa will drive other industries such as telecommunications and hospitality. There's also great need for investment in electricity and water resources. And there's tremendous opportunity for agribusiness development."

Areas of development: "Many African countries currently lack a transportation infrastructure. There will be opportunities to invest in fee-based transportation systems."

Who's investing: "Companies from the U.S., Europe, Asia, the Middle East and other parts of the world are all investing in oil and gas in Africa. In addition, there are increasing bilateral investment relationships, such as China's. Likewise, Brazil is becoming a substantial investor in Africa."

Business ethics: In some African countries, corruption is a factor. In many countries, what we encounter is as much local culture as it is willful wrongdoing. In all events, it's simply not true that foreigners can only advance their interests by 'going along.' In that regard, there is no gray area: you need to comply fully with the [U.S.] Foreign Corrupt Practices Act."

Kearney concludes: "There is no question that Africa could become a net exporter of food. There is much more land than is being used that is arable and ripe for expansive agricultural operations. The golden years of investment in Africa are just starting. There is tremendous opportunity to outrival other parts of the world."

Passage From India

Businesses worldwide have been knocking on India's door, eager to take advantage of an emerging middle class of 300 million consumers. But increasingly, it's Indian companies that are spending money overseas.

"There are several sectors booming in India, including oil and gas, IT services, pharmaceuticals, automotive, and mining. And all of them are investing outside India," says Anurag Varma, of counsel for Patton Boggs. In particular, Indian oil and gas companies are looking to the Middle East, Africa and Central Asia. Indian auto parts and heavy-equipment makers are investing in the United States. And Indian pharmaceuticals are active around the world.

One such enterprise is Ranbaxy Laboratories Ltd., among India's largest pharmas. The company entered the U.S. market in the late 1980s as a bulk supplier of pharmaceutical chemicals. Today it manufactures, distributes, and sells generic, branded and OTC drugs in the U.S. and Canada. Over the past 18 months it has invested $42 million expanding U.S. manufacturing capabilities, creating jobs for more than 700 Americans.

"It used to be that pharmas were described as French or Indian or Canadian," says Chuck Caprariello, vice president of corporate communications for Ranbaxy's U.S. subsidiary. "But today you don't refer to their country of origin. They're all multinational." In fact, since 2008 Ranbaxy has been majority-owned by Daiichi Sankyo, a Japan-based global company.

What are the implications for the U.S.? "Indian companies are purchasing operations, such as mines and steel mills, that were on the wrong side of the economy," Varma points out. "And they're creating revenues and jobs in the U.S.

For U.S. companies, it means new competitors. But just as Indian companies are coming to the U.S., so U.S. companies are going to India. "Today it's a true global economy," says Varma. "All companies are investing everywhere."