As the Eurozone debt crisis rages on and the situation in Greece becomes more unstable, British businesses are looking eastward for investment opportunities. Investors in the UK, fearing contagion from peripheral European countries saddled with insurmountable debt, are increasingly hedging their bets on the Middle East and the Arab Gulf region.
To drum up investment for British companies in the Gulf, London’s Lord Mayor David Wootton is heading up a delegation of investment bankers, asset managers and lawyers on a five-nation whistle stop tour of the Gulf Cooperation Council (GCC) that begins today. The visit comes one day after ratings agency Moodys placed Britain’s prized AAA credit rating on ‘negative outlook’ saying the UK economy faced ‘credit pressures’ that would weaken its balance sheet and threaten the effectiveness of the government’s austerity drive.
As the ambassador for London’s business community and the link between private and public sector the Lord Mayor hopes to reassure foreign investors and trading partners that Britain is still open for business. This trip to the Arabian Gulf is only the latest in a series of high level visits to the region over the past year – including a visit by Prime Minister David Cameron to Saudi Arabia last month ─ all of which form part of the Conservative-led government’s outreach to the Middle East in what is known as ‘commercial diplomacy.’ Namely, the notion that Britain’s national security interests are best served through commercial cooperation with strategic political partners.
It is no surprise then that the tour includes visits to strategic allies Saudi Arabia, Qatar, and the UAE and that the main purpose of the visit – like most other visits - is about “developing relationships,” according to the Lord Mayor.
“The main purpose is to make sure [GCC countries] know how important those relationships are,” Lord Mayor Wootton told Al Arabiya in an interview ahead of the trip. He also wants to ensure British companies get a piece of the action in the region. “There’s a lot going on in the GCC and we’d like British businesses to have a full part of it.”
The delegation’s itinerary includes stops in Kuwait, Qatar, the UAE, and Bahrain as well as visits to three key cities in Saudi Arabia, the UK’s largest trading partner in the Middle East. According to Wootton, in Saudi Arabia, Britain is mainly interested in petrochemicals projects in Al Khobar in the oil-rich Eastern Province as well as airport and railway development projects in Jeddah and Riyadh.
Wootton said UK firms will be seeking contracts on large infrastructure projects in the transportation sector and that British companies are well placed to do so. “We have vast amounts of experience in these large infrastructure projects, from original design, to project management to support of specialists and subcontracting elements to the construction itself.”
The United Kingdom is already the second largest foreign investor in Saudi Arabia, after the United States, with around 200 joint ventures worth $17.5bn. But the trade balance between the two kingdoms is far from equal with UK exports to Saudi exceeding £3bn in 2010 while Saudi exports to Britain were valued at less than £1bn.
Saudi Arabia’s Finance Minister Ibrahim Al-Assaf highlighted this trade disparity during a visit to London in October 2011 saying that “trade is a two way street.” Saudi, along with its GCC neighbours, is seeking to diversity its economy away from oil and petrochemicals and the Lord Mayor says London stands ready to assist Gulf businesses in promoting what they have to offer. “Trade works best when both parties are getting as much out of it as each wants, imbalance does not work long term,” he said.
Britain also wants to attract Gulf cash to its own big budget infrastructure projects, which, according to the UK Chancellor, requires investments of £130 billion over the next five years. “We’re hoping most of that money will come from outside the government,” Wootton said. He also pointed out that Britain is seeking to diversity its sources of investment from the Gulf. “Qatar already invested a lot, we’re hoping others will follow.”
The Lord Mayor will meet with members of the royal families and senior government figures including the Emir of Mecca, the Mayor of Jeddah and the President of the Islamic Development Bank (IDB). London is vying to be a hub for Islamic financial services in the west and Wootton said he is hoping to convince the IDB to issue a sterling-denominated Sukuk or Islamic bond, something he said would further reinforce London’s leading position is Sharia (Islamic law) compliant financial services.
(Carina Kamel of Al Arabiya is based in London. She can be reached at: firstname.lastname@example.org Follow her onTwitter @carina_bn)