The Qatar Investment Authority (QIA) is in competition with its Abu Dhabi peers in headline-grabbing multi-billion bilateral memoranda of understanding. Global SWF assesses whether these agreements worth more than the paper they are written on – and if they are simply part of Middle Eastern states’ exertion of soft power.
Forgotten Agreements and Missed Targets
Recent days have seen QIA promise GBP10 billion (US$12.5 billion) in investment in the UK over the next five years, emulating the GBP10 billion five-year investment framework pledged by Abu Dhabi sovereign wealth fund Mubadala last year. Another copy-cat deal is last week’s US$5 billion pledge to invest in Spain via a pact with Spain’s state-owned investor Compañía Española de Financiación del Desarrollo (Cofides). The two pledges in Europe come hot on the heels of QIA’s plans announced in March for US$5 billion of investments in Egypt, which eclipsed Mubadala’s pledge of US$2 billion revealed just days before.
Investment rarely, if ever, reaches the headline-grabbing targets – and often falls far short. In 2011, Qatar announced it would invest EUR300 million in Spanish banks via QIA. The deal was seen as a “shot in the arm” for the cajas – unlisted savings banks, which were heavily exposed to the real estate collapse. Yet, nothing materialized in the Qatari deal.
Similarly, Qatar pledged GBP5 billion of investment in British infrastructure in 2016, “over the next three to five years”. Sheikh Abdullah bin Mohammed bin Saud al-Thani was quoted as saying "I am still looking, even after Brexit there will be opportunities QIA can really hunt for. Our aim now in the future is really to focus on infrastructure, and we will be focusing also on healthcare and IT.”
Yet, the Qatari sovereign wealth fund had little to show for these recent promises. While Global SWF has identified more than US$30 billion of QIA investments in the UK, from 2016 it has invested less than US$3 billion in the country, the largest part of which was dedicated to gas distribution operator Cadent. QIA and its Chinese counterpart the China Investment Corporation (CIC) were part of a consortium that acquired a 61% stake in the National Grid’s spun-off gas pipeline network, now known as Cadent, in December 2016 for a whopping GBP13.8 billion (US$17.5 billion).
Seen in this context, the announcements by QIA so far this year, amounting to US$20 billion in Egypt, Spain and the UK, should be met with a degree of caution. Indeed, QIA is following in the footprints of funds run by rival Gulf governments, namely Abu Dhabi and Saudi Arabia, in what appears to be a bidding war for influence. As a small state that has often found itself isolated by its neighbours over geopolitical controversies, Qatar has tended to resort to more asymmetric methods, capitalizing on its economic power, energy resources and investment in the media.
QIA is not alone in failing to reach its targets for hazy investment plans. A US$16 billion Egyptian investment fund backed by Saudi Arabia’s Public Investment Fund (PIF) was announced in a high profile visit to Egypt by Saudi King Salman in 2016, but the deal was quietly forgotten. PIF appeared to have another push for a massive investment package worth US$10 billion in March in an agreement signed with The Sovereign Fund of Egypt (TSFE) – again, the details are sketchy.
The British government is, nevertheless, seeking to secure a similar sized package of investment by PIF. Talks were held in Riyadh spearheaded by investment minister Lord Grimstone, who accompanied Prime Minister Boris Johnson on his trip to the Middle East in March. A deal has yet to be firmed up, but if there is no framework or strategic plan, the chunky numbers touted by political leaders are unlikely to materialize outside press conferences.
Abu Dhabi: Delivering the Capital
Mubadala has proven to be more active in pursuing its Country Direct Investment Programs and working towards its targets, and puts its money where its mouth is. Last year saw Mubadala pledge huge resources to tech and natural resources in the UK, with a commitment of GBP10 billion (US$14 billion) over 2021-26. Since the UK program was launched, there has been a steady stream of investments by Mubadala, amounting to around US$4 billion – 29% of the pledged amount over the five-year program.
Deals include the acquisition of Informa's Pharma Intelligence division for GBP1.9 billion, in partnership with Warburg Pincus’ Global Growth XIV fund. In March, Mubadala invested GBP300 million into CityFibre, Britain's biggest independent provider of full-fibre broadband infrastructure, following an initial commitment of GBP500 million last September. Last July, it teamed up with investment firm Carlyle to take up minority stakes in the UK-based financial services provider Apex Group.
Mubadala’s local peer ADQ is following its example with billions of dollars promised to Turkey. In November, ADQ announced that the UAE has created a US$10 billion fund to support strategic investments in Turkey, including in the energy and health sectors. It also signed a partnership pacts with the Turkey Investment Office to explore opportunities in energy and utilities, healthcare and pharma, agriculture, transportation and logistics. With CCN Holding, it also plans joint investments in hospitals and clinics.
The planned investment in Turkey is similar in size to ADQ’s commitment of US$10 billion to high growth investments overseen by the Indonesia Investment Authority (INA). ADQ is deploying its venture capital arm, the Abu Dhabi Growth Fund, to invest in the Southeast Asian country’s rapidly developing digital economy.
Like other Middle Eastern SWFs, ADQ has set its eyes on Egypt, with a new office established in Cairo in December to ramp up its investments in the country and support co-investments with The Sovereign Fund of Egypt (TSFE). The Abu Dhabi state holding company created a US$20 billion strategic investment platform with TSFE in 2019, targeting pharmaceuticals, healthcare, financial services, utilities, agriculture, and real estate, but to date less than a quarter of this amount has been invested
The situation appears to be changing with an acceleration in investments. In March, ADQ acquired about 18% of the Commercial International Bank (CIB) for around US$1 billion, as well as shares in Fawry for Banking & Payment Technology Services. The fund also acquired Egypt state-held stakes in Abou Kir Fertilizers & Chemical Industries, Misr Fertilizers Production Co. and Alexandria Container & Cargo Handling Co. Last September, it formed a consortium with Aldar Properties – a Mubadala portfolio company – to buy a 90% stake in Egypt’s Sixth of October for Development and Investment Company (SODIC), a real estate developer listed on the ADX. The state-owned investor acquired Egypt’s Amoun Pharmaceutical Company alongside TSFE in March 2021. In October 2020, ADQ signed a non-binding agreement with the Middle Eastern Lulu International Holdings (LIHL) supermarket chain, which could invest up to US$1 billion in expansion of operations in Egypt.
By delivering promised investments, Abu Dhabi sovereign investors can gain the confidence of bilateral partners, while the failure of others to fully deliver casts doubt on the significance of their grand announcements.
