Global Capital Management Limited comments on the impact of the US led economic crisis on the GCC economies

Mr. Shailesh Dash, Managing Partner of Global Capital Management Limited, said:

"The GCC investment theme is still in-tact. Growth levels in the GCC economies are still forecasted to match emerging market growth rates and are backed by stronger credit ratings when compared to that of emerging markets."

Growth forecast for Middle East for 2009 is 5.9%, stronger than the 0.1% growth forecast for the G7 Countries group and matching the 6% growth forecast for emerging markets (IMF-WEO, October 2008).

Mr. Dash, added: "The GCC Governments' large fiscal surplus (forecasted at around $300bn in total for 2008) provides fiscal flexibility to manage any risks." The recent drop in crude oil price will impact the fiscal surplus; however, even in a lower price scenario, the surplus will remain 'large enough' to follow expansionary fiscal policies.

The break-even price for crude oil to balance Government budgets ranges between $25 and $35 per barrel for individual GCC Countries (based on Government expenditure net of non-oil revenue and net of investment income). Global PE analyzed: the oil price required for a marginal cost player to return its cost of capital is $65-75 per barrel, significantly higher than the break-even price for crude oil to balance budgeted expenditure.

The current economic crisis is caused by lending standards in the USA and Europe. Mr. Dash, commented: "Leverage levels in GCC are lower compared to those in advanced economies." Public Debt securities and Bank Assets was 3 times Gross Domestic Product (GDP) in USA in 2007 and 4.5 times GDP in European Union as compared to only 0.8 times GDP in Middle East (Source: IMF-GFSR). Housing mortgage as a % of GDP is less than 10% in the GCC Countries as compared to over 60% in USA and United Kingdom.

GCC banks are well capitalized with 'Bank capital to assets %' between 10% and 13% at individual Country level, and 'Bank regulatory capital to risk weighted assets %' at over 14% and in some GCC Countries even as high as 20% (Source: IMF-GFSR). Mr. Dash, informed: "Global's Private Equity funds do not carry leverage."

Mr. Dash, added: "Demand drivers in GCC are broadly in-tact and only marginally impacted after the economic crisis. The commodity price correction as well as the strengthening US Dollar will benefit the GCC corporate sector." The drop in commodity prices from metals to agri-commodities, much of which is imported by the region, and where the drop has been up to 50% from the peak levels, will lower inflation in the region.

Mr. Dash, commented: "GCC corporate sector's profitability does not depend upon abnormally high crude oil price levels." Global PE analyzed the performance of 183 listed corporates (excluding financials) in GCC and the aggregate results displayed healthy 'return on equity' levels between 16% and 18% in each of the years between 2004 and 2007, when the average crude oil price ranged between $38 and $72 per barrel, lower than the current oil prices.

The analysis displayed that GCC corporates maintained revenue growth in excess of 25% each year since 2003, and net profit growth in excess of 20% each year since 2003 (except for 2006, when the net profit growth was 11%).

The Global economic crisis has created volatility even in currency markets, especially in the emerging markets, where currencies have depreciated up to 20%. This has impacted US Dollar returns for investors. Investments in GCC do not experience this scenario since the currencies are pegged to US Dollar.

Mr. Dash, commented: "Downturns are the best times to invest in private equity products as investment opportunities are available at attractive valuations." For instance, USA based private equity funds launched during the downturn caused by 'Savings and loan crisis' in 1990-91 and the downturn led by 'Technology bubble' in 2001-02, are the best performing private equity funds in terms of internal rate of return (IRR) as of June 2008 (data based on reports of Cambridge Associates). Recognizing the opportunity, Mr. Dash, commented: "Global PE is looking to close six private equity deals before the end of the year."

About Global Capital Management Limited
Global Capital Management Limited, is the private equity group of Global Investment House, which manages close to $10bn in assets, of which private equity assets comprise over $3bn.

The private equity team is one of the largest in MENA with over 40 qualified professionals from 11 nationalities. The team has cumulative work experience of over 300 years and has invested $1.88bn in 46 transactions across 11 sectors during past 2.5 years, with realized IRR of 62% (as of June 2008).