Dead Sea, Jordan // Abraaj Capital has launched an investment in Jordan as part of its US$500 million (Dh1.83 billion) fund focused on small and medium enterprises (SMEs) across the region.
Additional investment initiatives are to be rolled out to Lebanon, the Palestinian Territories and Egypt before the end of the year.
The investment will help small businesses that struggle to access money from more traditional sources such as banks.
The UAE private-equity firm is investing $20m in the $50m Jordan initiative in partnership with the European Investment Bank (EIB) and the Jordan Enterprise Development Corporation, it announced yesterday on the sidelines of the World Economic Forum regional meeting in Jordan.
"We like Jordan as an investment destination. We think it's very entrepreneurial," said Tom Speechley, a senior partner at Abraaj Capital. "This will involve Jordanian investment managers investing in Jordanian entrepreneurs."
Access to liquidity is one of the biggest obstacles to business expansion and job creation, recent research from the World Bank and other institutions has shown.
The Jordan fund will invest in 10 to 12 SMEs in fast-growth sectors such as technology. Abraaj is targeting a tripling of its investment over four years, said Mr Speechley. It is partnering with international institutions such as the EIB and the Overseas Private Investment Corporation of the US on regional investment.
Abraaj has channelled a significant amount of investment into Jordan in the past. In early 2002, Abraaj bought into Aramex,a Jordanian logistics company. It also achieved a 75 per cent return from the sale in 2007 of its stake in Arabic-language portal Maktoob.com, which is now owned by Yahoo.
The latest deal comes at a time of a slowdown in buyouts in the Middle East private-equity industry this year as a result of political unrest and flagging Middle Eastern markets. No private-equity investments were publicly announced in the Middle East and North Africa in the third quarter of this year, according to a report from Bureau van Dijk, a Dutch research company.
But Mr Speechley sees opportunities amid the uncertainty.
"It's the best investment climate we've seen in our region in terms of pure investment opportunity, strong macroeconomic fundamentals and very little competing capital, meaning that asset prices are not in any way inflated," he said. "Despite the political turmoil, especially in the SME range, businesses continue to grow to serve the needs of the local market."
The EIB's involvement in the Jordan project is part of the bank's annual €2bn (Dh10.2bn) investment in the region. It plans to accelerate its investment in Jordan, Morocco, Tunisia and Egypt. Those countries committed to political reform under the Deauville Partnership. Agreed in May, the partnership, which includes G8 economies, Saudi Arabia, Qatar and Turkey along with international organisations, has so far pledged about $80bn in financing to Tunisia, Egypt, Morocco and Jordan over the next two years.
"With the Arab Spring, we have decided to speed up the process so we do support the democratic transition," said Philippe de Fontaine Vive Curtaz, the vice president of the EIB.
He said the Jordan fund would enable SMEs to access finance from a new source because banking finance remained tricky.
