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Abu Dhabi, UAESunday 21 October 2018

Middle East tech firms eager to attract investments from $15bn Chinese fund

Regional tech companies have potential to attract global funding but they need to improve transparency, analysts say

The Middle Eastern technology firms are looking to attract Chinese investments. Pawan Singh / The National
The Middle Eastern technology firms are looking to attract Chinese investments. Pawan Singh / The National

A new $15 billion (Dh55.10bn) joint venture between Chinese firms and a London investment company has launched a fund to invest in technology companies globally, and tech firms in the Middle East are hungry for the big-ticket Chinese investments.

The tech investment fund is a partnership between London’s Centricus and China Merchants Group and SPF Group. The fund will invest in and buy stakes in technology companies, predominantly in China but also globally, the companies said on Sunday.

Regional tech companies have the potential to attract capital from the investment vehicle, especially as the UAE, the second-biggest Arabian Gulf economy, has removed visa restrictions for Chinese visitors and has forged closer investment ties with Beijing, which boosts visibility of the UAE technology players in particular, and their regional counterparts in general, according to analysts.

The Middle East tech firms, however, need to improve transparency and create scalable businesses before they receive big cheques drawn out to them, they said.

“Since this Chinese fund’s mandate is global, then there’s no reason why they shouldn’t look at Middle East companies,” said Najam Kidwai, a partner at AlpView Capital.

“If I was a Chinese fund or company like Alibaba, there’s no reason why I wouldn’t look at a ride-hailing company like Careem in Dubai.”

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Ammar Al Malik, executive director of Dubai Internet City and Dubai Outsource City, said: “The announcement of this fund is very timely, as it comes at a period when UAE start-ups are already closing large investment deals, and generating considerable interest in the international tech and business community.

"Additionally, there has been an increased effort to strengthen relations between the UAE and China, with bilateral trade expected to cross USD 35 billion this year – and so an announcement such as this will be a great incentive for businesses in the region.

"Dubai Internet City is home to large, multinational companies, as well as rapidly growing start-ups and SMEs – and I am confident that a fund such as this will encourage greater investment from the Chinese market into our local businesses. As Dubai’s thriving start-up ecosystem continues to mature, we are certain that increased trade between the UAE and China will provide a valuable incentive for innovators to set up in the tech space.”

Mubadala Investment Company and China have committed $1bn towards about 10 investment opportunities as part of a $10bn joint investment plan between Abu Dhabi and Beijing across a variety of sectors. The UAE is also focused on developing its financial technology sector through various initiatives launched by its onshore financial hubs.

With a trade war heating up between China and US president Donald Trump’s administration, China will gradually reduce its investment in America and look to Europe and other parts of the world to deploy cash, Mr Kidwai said.

Tech companies such as Careem, which has already raised funding from Chinese ride-sharing firm Didi, and a Dubai online retailer like Noon or Awok could be attractive options for the fund.

“I wouldn’t be surprised if Alibaba or JD.com partner with Noon, who doesn’t need capital now but may look into strategic investments, or invest in companies like Dubai’s online retailer Awok,” Mr Kidwai said.

Smaller tech start-ups in the UAE and the Middle East are equally enthusiastic about attracting capital from the fund.

“It’s an extremely attractive opportunity, the Chinese have been taking the lead in FinTech innovation and have an eye for making investments in FinTech,” said Arushi Joshi, founder and chief executive of AtCash, a digital transformation start-up specialising in Islamic banking. “We hope a fund like that will make winning bets on early-stage companies.”

The global remit of the fund will be an advantage to Middle East tech companies, as most investment vehicles have a focus on Europe, Asia or the US, said Michael Lahyani, chief executive of Propertyfinder in Dubai.

“The region has the ability to attract these funds, we have large population of Arabic speakers and readers, that only local entrepreneurs can build good products for, he said. “It’s harder for others to tap into that market.”