ARTICLE #17 – 5 NOVEMBER, 2017
WHY IS THE MIDDLE EAST INVESTING HEAVILY IN SPAIN?
For some years now Europe has been seeing significant interest amongst investors from the Middle East, wanting to invest in the Spanish market. There are myriad of reasons why Spain is receiving a lot of recognition amongst them. Not only is Spain the fifth largest economy in the Eurozone and twelfth in the world, but its multinational companies have solid ties with Latin America. What it means is that by investing in Spain, investors from the Middle East gain direct access to the Latin America where they would like to concentrate their next investments.
The Spanish Economy
The investors very well remember the years between 1998 and 2007 when the Spanish economy grew faster than any other large European country (except Ireland). Its average GDP growth was 3.9%, which doubled the rate of Germany and France during that period. During that decade, Spain was capable of constructing more residential real estate than Germany, France and Italy combined. Of course, the growth wasn’t distributed evenly and when the crash in the US began in 2007, the extremely dependant on the housing sector Spanish economy suffered a trickle-down effect. However, the statistics once again show that the Spanish economy is growing faster than the euro block. The annual pace in 2014 and 2015 were 1.2% and 3.2% respectively.
According to the National Statistics from 2016, there are four economic pillars that support Spain’s growth: food and beverage (13%), real estate (12%), construction (12%), and tourism (11%). High life expectancy, world-class infrastructure and high quality management schools are what Spain is also well known for.
Spain and the Latin America
What makes Spain so attractive amongst the Middle Eastern investors is not only the improved economic environment, but also the solid ties that Spain has established with the Latin America. Spain is the second largest investor in the region right after the United States.
What makes Spain so attractive amongst the Middle Eastern investors is not only the improved economic environment, but also the solid ties that Spain has established with the Latin America. Spain is the second largest investor in the region right after the United States. The connections between the Spanish multinational corporations and the Latin America began in the 90s when Spain invested in the oil, banking sector, infrastructure, engineering and telecommunications. As a result, Spain has become an attractive market for the investors who are looking into investing in the emerging economies of Colombia, Mexico and Peru. Between January 2014 and June 2015, 4,6 billion Euros were invested in the Spanish market through foreign Sovereign Wealth Funds, mainly from the Middle East. Moreover, when Spain was in an economic hardship and the domestic demand contracted substantially, the Latin American countries supported Spain through increased import of the Spanish produced goods.
The Middle East Investing in Spain
There have been various SWF investing in Spain: From Norwegian GPFG, to the Middle Eastern tycoons such as Qatar Investment Authority (QIA), Kuwait Investment Authority (KIA),and the Oman’s State General Reserve Fund (SGRF).
During the worst part of the financial crisis, Spain became the main investment destination of SWFs within the European Union, ahead of the United Kingdom, Germany and France.
It has been estimated that in 2006 foreign investors controlled 33% of the Spanish stock market, which figure by 2014 had grown to 43%. The total of foreign investments equals to 113 billion Euros, which have been invested in the IBEX35 companies (the index representing the largest 35 Spanish stocks).
Sheikh Hamad is the richest man in one of the world’s wealthiest countries and a former head of the Qatar Investment Authority (QIA). He is well known for his high-profile deals and for boosting Spain’s economic recovery through an investment of 1 billion Euros in El Corte Ingles, which is Spain’s biggest retailer and chain of department stores.
Another investment was made by the Qatari armed forces, which invested 129 million Euros in a five-star Renaissance hotel in central Barcelona. A member of Qatari royal family invested another 36 million Euros in the Malaga football club. The investments from the Middle East will keep flowing in, as Spain has a strategic position between the Latin America and the Arabs.
This time around Spain’s wealth is equally distributed amongst various commercial enterprises. It is not only the housing and construction industries that are invested in, but also department stores, supermarkets, travel agencies, opticians and mobile phone stores.