Qatar is a master of punching above its weight in geopolitical and economic terms, using its natural resource wealth to advantage its influence and connections throughout the world.
The Arab Gulf peninsula state is bidding to bring itself closer to Egypt and Pakistan, which already have close relations with Saudi Arabia – a neighbor that Qatar has had a rocky relationship, until a recent rapprochement between Doha and Riyadh.
Both Egypt and Pakistan are facing financial constraints, which have required dialog with the IMF for financial support amid increasing threats to food and energy security, causing high inflation rates. Attracting foreign investment is regarded as crucial to providing a much-needed stimulus - and the bold sovereign funds of Arab Gulf states such as Qatar are leading the charge of investors.
Infrastructure Potential Overcomes Pakistan’s Drawbacks
Prime Minister Sharif has been courting Qatari support ahead of an IMF board meeting next week which is expected to release financial support totalling US$1.2 billion. Winning the IMF’s support is a condition of Arab nations’ commitment to supporting the country.
This week, the Qatar Investment Authority (QIA) announced plans to invest US$3 billion in strategic sectors of the Pakistani economy, including the country’s largest airports in Islamabad and Karachi, as well as in the renewable energy, power and hospitality sectors, according to Bloomberg’s sources. It reported that QIA’s investments could partly overlap with the US$2 billion in bilateral support Qatar has already announced for Pakistan
Qatar’s pledge of support comes after a subsidiary of the Kuwait Investment Authority (KIA) announced in May a US$750 million agreement to drive Pakistan’s economic development, with renewables at the heart of its strategy. Enertech Holding Company, an infrastructure developer fully owned by KIA via the National Technology Enterprises Company (NTEC), signed the deal with Pakistan Kuwait Investment Company (PKIC), a development finance institution owned by the Kuwaiti and Pakistani governments, to support renewables.
Established in 1979, PKIC aims to finance industrial activity through equity and debt investment in infrastructure and industrial activity. The joint venture’s assets totalled PKR42.1 billion (US$224 million) at the end of FY2022, making it the largest development financial institution in Pakistan. PKIC has been involved in the establishment of Meezan Bank Limited and Al Meezan Investments, in which it has a 30% stake.
Night Boat to Cairo
At the same time, QIA is making good on its promise, announced earlier this year, to invest US$5 billion in Egypt. Daily News Egypt reported that Sheikh Tamim bin Hamad – the Emir of Qatar – will visit Egypt in the upcoming weeks, when agreements for Qatari investments worth US$20 billion will be announced, including QIA’s commitment which will be directed at acquiring stakes in Egyptian companies. It is negotiating with The Sovereign Fund of Egypt (TSFE) to snap up stakes in three or four listed companies, including the Alexandria Container and Cargo Handling Company and companies in the fintech and food sectors. In June, President Abdel Fattah Al-Sisi and Sheikh Tamim held talks in Cairo during first visit in nearly seven years.
The announcement of QIA’s planned deals come days after Saudi Arabia’s Public Investment Fund (PIF) set up a company to invest in promising Egyptian sectors, called Saudi Egyptian Investment Co (SEIC). This month, SEIC bought minority stakes in four Egyptian companies for US$1.3 billion: Abou Kir Fertilizers & Chemical Industries, Misr Fertilizers Production Co., Alexandria Container & Cargo Handling Co, and payments firm E-Finance for Financial and Digital Investments, as Egypt struggles with the impact of the Ukraine crisis on food security and the value of the Egyptian pound. An interesting point to note - QIA’s targeted investment’s correspond closely with SEIC’s acquisitions, suggesting it is emulating the Saudi fund’s investment strategy.
The venture comes after Saudi Arabia announced in June during the visit to Cairo by Saudi Arabia’s Crown Prince Mohammed bin Salman – who also heads PIF – that it intended to lead US$30 billion worth of investments in Egypt. In March, Saudi Arabia deposited US$5 billion in Egypt’s central bank as to support the economy as it came under pressure due to consequences of Russia’s invasion of Ukraine, which led to outflows from government securities and a devaluation of the Egyptian pound.
Abu Dhabi is also among the Gulf states seeking to invest in Egypt. ADQ has established a new office in Egypt to bolster its investments in the country and support co-investments with 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. ADQ has an intense interest in Egypt. In March, it 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.
In September 2021, 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. 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 establishing an office in Cairo, ADQ indicates its relationship with Egypt will broaden and deepen.
The mode of establishing multi-billion-dollar investment platforms with strategic emerging markets is likely to remain a theme of Arab Gulf sovereign investors with Egypt and Pakistan joining larger economies like Turkey and India in the drive to find new opportunities at times of uncertainty and change.