The UAE has firmly established itself as a major player on the global investment stage, with its investment arms undertaking a wide array of ventures across the world. Through this, we can be in no doubt that the UAE is leaving a significant mark on the international business landscape.
In this article, we will review the UAE’s investment endeavours, exploring the sectors the country is focusing on, discussing some notable acquisitions, and considering what the future holds.
We’ll also look at how these significant foreign investments can have a positive knock-on effect for smaller business owners back here in the UAE.
How does the UAE invest abroad?
The UAE generally invests through its sovereign wealth funds (SWFs). These are investment vehicles that are owned by the government and receive funding through state-affiliated sources. One of their functions is to diversify investments – and increasingly, many of those investments take place abroad.
A quick scan of the top SWFs in the GCC region shows that the UAE features strongly. Some of the most notable names are:
- Abu Dhabi Investment Authority (ADIA), founded in 1976 and worth USD 853bn
- Investment Corporation of Dubai (ICD), founded in 2006 and worth USD 320bn
- Mubadala Investment Company (Mubadala), founded in 2002 and worth USD 287bn
- Abu Dhabi Developmental Holding Company (ADQ), founded in 2018 and worth USD 159bn
Across the entire GCC, the Abu Dhabi Investment Authority (ADIA) comes out on top with a deployment of USD 25.9bn.
UAE foreign investment – the big headlines
The times when these investments make headlines are when an SWF acquires a sports team. By far the most successful example of this came in 2008 when Sheikh Mansour bin Zayed Al Nahyan’s Abu Dhabi United Group acquired Manchester City – a football club with a somewhat mixed history in terms of success.
In the years since the acquisition, the story has changed dramatically. Manchester City has won the Premier League seven times since the takeover, turning the club into a global brand in the process.
But why choose football when it’s a notoriously risky venture? In the case of Manchester City, the success has been so stellar that the team’s annual report from the 2021/22 season shows profits of GBP 41.7m. But beyond that, it’s about branding. While tech CEOs have become celebrities, most legacy companies have leaders who remain largely unknown to the general public. Not so in football, where the owners and their countries of origin are not only well known, but – if the club is successful – often celebrated.
It’s worth noting that the Abu Dhabi United Group has also added to its sports portfolio through acquisitions of lesser-known football teams in the United States, India and Australia.
UAE foreign investment – banking and future trends
A recent bold move in banking sent reverberations through the financial sector. While the Abu Dhabi Investment Authority (ADIA) already holds a 4.9% stake in Citigroup’s share capital (with Mubadala holding 7.5% of the global investment firm Carlyle Group), it was an attempted acquisition that really made the world take notice.
Earlier this year, it was reported that First Abu Dhabi Bank was attempting to acquire Standard Chartered. While the deal to purchase this British multinational bank did not get past regulators, it indicated the level of ambition on the part of UAE SWFs. And while the deal didn’t go through this time, many industry commentators believe it’s only a matter of time until these kinds of deals become more commonplace.
So banking and finance are very much in play. In May of this year, it was reported that SoftBank (a Japanese multinational investment holding company) was close to a deal to sell Fortress Investment Group (which it had acquired in 2017) to Mubadala.
Diversification of investments, access to international markets, global influence, wealth preservation, and strengthening financial infrastructure are all motivations for UAE SWFs to seek such deals.
The Abu Dhabi Investment Authority (ADIA) owns significant real estate assets in cities such as London and New York. In 2019 it was reported that ADIA acquired full ownership of a New York City property on Madison Avenue, close to Grand Central Station. The fund had previously held a 75% stake in the office block and then purchased the remaining 25% to gain full ownership of the Manhattan property.
This year, the Investment Corporation of Dubai (ICD) sold its 75% interest in the Mandarin Oriental New York Hotel, a luxury property located directly across from Central Park in Manhattan. The hotel was sold for a reported USD 98 million, a figure that highlights the desirability of this type of investment and underlines the level of UAE SWFs’ investment in luxury real estate and hospitality.
For the UAE, investing in an American semiconductor company enables strategic access to cutting-edge technology. These kinds of investments offer opportunities for long-term returns while fostering technological advancement back home. Additionally, the investment can strengthen economic ties between the two nations, supporting bilateral trade and, importantly, fostering innovation within the UAE’s growing technology sector.
Semiconductors play a pivotal role in various industries, including electronics, telecommunications and defence. And this year, Mubadala became a major shareholder of the US chipmaker GlobalFoundries, recently raising almost USD 2.6bn in an initial public offering. Mubadala believe the semiconductor industry will see high growth over the next 10 years – and it would be difficult to find an analyst who disagrees.
Back home in the UAE
The UAE’s SWFs play a crucial role in the nation’s economic development and global influence. The significance of these foreign investments cannot be overstated. UAE SWFs such as Mubadala and the Abu Dhabi Investment Authority (ADIA) have strategically diversified their portfolios by investing in various sectors worldwide.
These investments reduce the UAE’s reliance on oil revenues, providing a stable and sustainable income source. They also facilitate the transfer of advanced technologies, knowledge and best practices back to the UAE, contributing to its economic diversification and innovation.
The acquisition of major foreign companies by UAE SWFs can also indirectly impact small business owners in Dubai and the broader UAE. When SWFs invest in foreign companies, it can stimulate economic growth at home. In turn, a thriving economy can lead to increased consumer spending, benefiting local businesses, including small ones.
High-profile investments can also attract skilled professionals and entrepreneurs to the UAE, boosting the local talent pool and providing expertise and resources for small businesses. Overall, it can play a significant role in creating an even more favourable environment for small business owners in the UAE to thrive and expand their operations.