Emerging markets key to future Dubai growth

The company, part of government-owned Dubai Holding, plans to reach its goal by increasing its investments overseas, particularly in emerging markets. Today, much of its money is tied up in European and US investments, but by the time it hits $25bn, it aims for that to be closer to a 50:50 split, as it invests more money in local markets.

Speaking at the China-Middle East Investment Forum in Dubai, Anand Krishnan, chief operating officer at Dubai International Capital (DIC), said a significant portion of that 'local' split would be in China.

While DIC began life in October 2004 as a Private Equity company that focused largely on mature markets mainly in Europe and the US - because that was where its expertise lay - now it has expanded into public equity and emerging markets as well. 'There's a need to start investing in overseas markets other than western. One that springs to mind is China.'

Increasingly, as markets in Asia and the Middle East look to reduce their dependence on the west - although with the buying spree Dubai is on that seems hard to believe - it will create opportunities in these regions.

Krishnan argued that this creates the need for cross boarder relationships, which will benefit both regions. With its growing middle class and swathe of industrial projects, China has a huge need for oil. In the Middle East, there's a need for China's low-cost of manufacturing and cheap labour.

While delegates at the conference believed it was important to foster close relations between China and the Middle East, still much of the riches generated certainly in the Middle East flows straight to Europe and the US (On the day of the conference Dubai government owned Istithmar said it was considering a bid for two US companies suffering in the sub-prime mortgage crisis).

But some believed the route to market in China was via existing assets. DIC said it is exploring how it can take some of the companies it already owns such as Travelodge into China. Krishnan pointed to its budget UK hotel chain business as a way entering markets such as China via existing companies and looking at what value it can add to a given sector. It also avoids having to build a business from scratch, and means companies can build relationships before plunging into areas such as leveraged buy outs, a sector that is still comparably immature in China.

'China provides us with opportunities to add value to our assets and diversify in future,' said Krishnan.

Other Middle East companies are exploring similar routes to market in China. Felix Herlihy, chief investment officer at investment holding company Istithmar, which recently had its bid to buy luxury clothing chain Barneys New York for $942.3m approved by US anti-trust authorities, pointed to the growing consumerism in China and its new-found hunger for high-end goods.

While the company looks for ways it can differentiate in the region, that also means it uses 'tried and tested banking models' to attract the affluent middle classes.

See also:
China ripe for Middle East investment