Weak infrastructure is probably the single biggest obstacle to emerging nations fulfilling their potential. Infrastructure shortcomings in Latin America and Asia are well documented but even in the Middle East, a region flush with petrodollars, more investment is required, especially from the private sector.
Over the next decade, the Gulf Cooperation Council countries alone will demand up to $545 billion of investment across the transport, power, water, energy, education and social infrastructure sectors.
It is against this background that Bahrain’s Gulf Finance House (GFH) and Ithmaar Bank, together with Abu Dhabi Investment House, have entered into a new and separate Shariah-compliant venture that will specialize in infrastructure financing across the Middle East, north Africa and south Asia. The three firms have also joined forces to create new entities to take advantage of opportunities in the agriculture and hospitality industries.
Their focus on infrastructure will revolve around a new bank, InfraCapital, which will invest in projects. The bank will have authorized capital of $6 billion and hopes to raise a further $1.5 billion through private placements. “These projects are big and require specialist institutions with large amounts of capital that can syndicate and can manage such complex transactions,” says Mehran Jamsheer, deputy chief executive at GFH.
The second initiative is an investment firm focused on the agriculture sector, AgriCapital. The company will focus on livestock, food production and biomedicine. A second investment firm, which will fall under the AgriCapital umbrella, will provide funding in agricultural technologies and biofuels.
AgriCapital will have starting capital of $3 billion and plans to raise another $1 billion from investors.
In the Middle East alone, domestic production of crops and livestock amounts to less than half of what the region consumes. Like other regions, the Middle East is feeling the pinch from rising food prices, up 60% over the past two years. Increased consumption, extreme weather conditions, rising energy prices and demand for biofuels are all to blame.
“The world’s population is projected to be greater than 8 billion by 2025,” says Jamsheer. “That will require a doubling in agricultural production.”
The third initiative is a Hospitality Development Fund, which will have two areas of focus. The first includes hotels, apartments and transport. The second will be on hospitality companies that have strong growth potential. The fund will close with an initial $300 million, although the aim is to grow it to $1 billion. All three backers have experience in the hospitality industry.
Commenting on all three ventures, Mohammed Hussain, co-chief executive of Ithmaar Bank, says: “Our approach is very simple. We listen closely to the highly individual needs of specific industries and tailor our services accordingly. The results will be products with a flexibility and foresight to inspire infrastructure, agriculture and hospitality ventures the world over.”
