Cenk Alican JTW Columnist Letters from Germany printable version send your friend message to author add comment ()

Monday, 17 August 2009

It must have been a sunshine moment for Hans Michel Piech and Wolfgang Porsche, both members of the supervisory board of the recently created joint Volkswagen-Porsche company, when Qatari prime minister SheikhHamad bin Jassim bin Jaber Al Thani, just having landed in Stuttgart, made long-awaited decisions. The companysold a ten percent stake of its shares to the little, but oil-rich, sheikdom in the Arab Gulf. Hence, Qatar has become the third-biggest stakeholder of Volkswagen, following the State of Lower Saxony (21 percent) and the Porsche and Piech families, which controlled Porsche Holding for many years. It is the first time in the company’s history that stakes have been transferred to an external investor. 
 

The deal, resulting in more than one billion Euros of fresh funds for Porsche and a take-over of a 17-percentportion of the company’s VW options, was signed last Friday. Qatar also approved the increase ofPorsche’spending credit of EUR 10.75 billion, to be granted by a consortium of diverse banks, by 265 million.In the run-up to the deal, Volkswagen’s (VW) supervisory board had approved absorbing Porsche into VW by the end of 2011. The business here is not about VW-Porsche-relations, but about the fact that the forthcoming takeover will make the Wolfsburg-based company, employing more than 20.000 workers,the world’s biggest carmaker, pushing aside the current number one, Toyota, and that Qatarwill sit on the board and influence the future course of VW.

The Qatar Investment Authority (QIA), headed by Sheikh Jaber Al Thani, has a portfolio of US$62 billion available to go on a shopping spree through Europe. QIA has not been reluctant to do so in the past and will not be in the future. In the UK, it bought stakes of J. Sainsbury, the London Stock Exchange and Barclays. Well, let us leave behind QIA. What about the Kuwait Investment Authority (KIA) with a portfolio of about US$203 billion? In early 2009,KIA announced that it had agreed to a US$3 billion participation in the Citi Group Convertible Preferred Securities and a US$2 billion participation in Merrill Lynch Convertible Preferred Stock. KIA has already invested in Germany’s oldest engine maker, Daimler, and in Victoria Jungfrau Collection, a companywith luxury five star hotels in Switzerland‘s most attractive destinations.

Theabove-mentioned examples show what Gulf investors are heading for. With a future perspective, they want to stabilize their economic strengths in non-oil sectors, especially in the fields of financial services and industries. They are most-welcomecustomers throughout Europe, especially in the countries that are leading powersin Europe’s economic markets. Since Gulfleaders miscalculated in the past and lost essential parts of their assets in the Anglo-Saxon markets during the financial downturn and before, theirperspectives have now turned to traditional industry regions like export-dependant Germany. German exports have swung back to a solid ground of growth, surging by 7 percent in June. According to figures released by the Arab-German Chamber of Commerce and Industry in June, exports to the Arab World (including 22 states of the Arab League) increased by 2.9 percent to EUR 6.3 billion in the first quarter of the year. In 2008, the total volume of trade with this region had reached a new record of EUR 32.2 billion. In a time frame of eight years, between 2000 and 2008, the direct investment volume of the sheikhs in Europe was at US$37 billion, just five billion less than in US markets. Germany’s share is estimatedat US$7 billion. 

It was Gerhard Schroeder, the country’s charismatic chancellor, leading a social-green coalition from 1998 to 2005, who paved the way for this accelerating wave of Arab investments in Germany. During his chancellorship, he visited the Gulf region many times with senior CEO delegations hunting for a piece of cake in the competitive jungle of business opportunities. In return, his Arab hosts asked for German know-how in order to develop their oil refinery sitestechnologically and to activate local industries.Now, he is honorary president of the Berlin-based German Near and Middle East Association (NUMOV) and still good friends with Abu Dhabi’s sheikh clan.

In early May 2009, Federal Minister of Economy, Karl Theodor zu Guttenberg (Christian Social Union), together with his UAE-counterpart Mohammed Bin Saeed al-Mansouri, opened another platform of investment and networking: the German-Emirate Chamber of Commerce. The business that started with the era of Schroder continues now under his successor, Angela Merkel, chancellor of the grand coalition. Since she took over officein 2005,numerous Gulf countries have invested in German companies: Mauser (a Dubai Investment Company), MAN Ferrostaal AG (IPIC, Abu Dhabi), and HWA AG (NBK-Holding, Qatar), just to mention a few. And this trend will not stop in a foreseeable future; that is for sure. During the German presidency of the EU Council in 2007, efforts were made to establish a free trade zone between the EU and the Gulf Cooperation Council. The basis of this project was laid in 1990, but never ended successfully. But the Merkel administration is keen on involving Gulf States into the way out of the financial crisis.Federal Foreign Minister Frank Walter Steinmeier (Social Democratic Party) said during a recent visit to Abu Dhabi that “A new regulation of the financial markets will not work without important financial areas around the Gulf”.

By Cenk Alican – Letters from Germany