3 future-forward ways to invest in the UAE’s growth story
As the UAE begins the 50th year of its federation, the next half-century offers tremendous scope for investors
Fifty years ago, the United Arab Emirates as we know it simply didn’t exist. On 2 December 1971, six emirates – or princely states –united into a federation (Ras Al Khaimah joined in 1972). Within the space of two generations, the new country grew from a collection of pearling villages and trading towns into a regional powerhouse, leading the Middle East on several fronts, from banking and finance to health, education and technology.
The past 50 years have shown that the UAE can achieve its goals, whether launching a probe to Mars or operating the Arab world’s first nuclear plant. The takeaway for investors? Don’t bet against the UAE. Cynics will have missed the first property boom and the expansion of the education, healthcare, tourism and retail sectors.
However, over the coming half century, there are several ways investors may reap the benefits of the UAE’s can-do attitude – with initial results likely to be visible over the short term. Despite a contraction in 2020, thanks largely to the coronavirus pandemic, the International Monetary Fund predicts gross domestic product will bounce back next year, with growth of 1.3% in 2021, and then averaging 2.5% in 2023-2025. With forward-thinking strategies already rolled out in many key sectors, that momentum looks set to continue over the longer term.
Below are three noteworthy ways to access this success story.
- Real estate: Following a significant drop in capital values and a re-evaluation of investor sentiment in the wake of the pandemic, pent-up demand has been unleashed across the real estate sector. Demand has started to pick up, particularly in established communities, while fewer new units are coming onto the market. The outlook appears strong on the back of a number of key fundamentals: the country announced a range of new visas (including retirement visas for people buying property over Dh2 million), while a slew of personal freedoms announced in November is expected to attract new expat residents, raising the demand on homes.
How to invest: Besides direct purchases, stocks and real estate investment trusts traded on the UAE bourses are a great entry point into the property market.
- Fourth Industrial Revolution: Technologies such as artificial intelligence, cloud computing, robotics, blockchain and 3D printing are expected to unleash the next wave of development, referred to as the Fourth Industrial Revolution. The UAE was the first country to enact a strategy to harness the benefits of these developments, with a specialized center to develop and trial research in each of these areas. The country is already a hotbed of start-up activity, accounting for 26 per cent of all venture capital deals. E-commerce, edtech, healthtech and fintech are among the most promising sectors.
How to invest: With the sectors in their infancy, long-horizon private equity remains the best route for now. However, with marquee brands embracing new developments, shares in the major healthcare, pharma and logistics players could be a smart play.
- Food security: With the UAE importing 80-90% of food consumed within the country, food security has become a major economic pillar. The National Food Security Strategy 2051 prioritizes the sector, and aims to facilitate the global food trade, diversify food import sources and identify alternative supply schemes. An early win has been the creation of a $7-billion food corridor with India, with Emaar Group building food parks across the subcontinent. Within the UAE, sustainable farming has taken off, and new ways of agriculture are drawing major government investment.
How to invest: Direct investment into new food and farm businesses is the bigger play, while shares of UAE companies with an overseas portfolio offer opportunities for more modest appetites.
The UAE’s growth story will extend across the economy, sparking growth in a wide range of sectors beyond those identified here. Speak to your bank wealth manager for more information.