Hikers descend from the Chouf mountains into the Beqaa Valley and Qaraoun Lake in Lebanon.
Hikers descend from the Chouf mountains into the Beqaa Valley and Qaraoun Lake in Lebanon.
Hikers descend from the Chouf mountains into the Beqaa Valley and Qaraoun Lake in Lebanon.
Hikers descend from the Chouf mountains into the Beqaa Valley and Qaraoun Lake in Lebanon.

Middle East in perfect position to be an eco-tourism hub


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The global travel industry offers huge potential for green investors, with the Middle East rapidly becoming a destination for eco-tourism.

There are an estimated 700 million travellers in the world annually generating about US$2.4 billion (Dh8.8bn) a day, according to Conservation International (CI). CI also reports that eco-tourism is a growing source of revenue for the long-term management and care of more than 33,000 protected areas worldwide.

When Malaysia's prime minister, Datuk Seri Najib Tun Razak, addressed Gulf investors in Abu Dhabi at the end of last month, he highlighted the investment opportunity offered by eco-tourism and green technology.

"We are targeting industries in which Malaysia has distinct advantages, such as eco-tourism, medical tourism, financial services, education, telecommunications and green technology, including renewable energy," he said at the time.

But Gulf investors who are keen to get in on the ground floor of the new global eco-tourism industry could do better to look for investment opportunities closer to home. The Middle East has the sunny climate needed to attract international tourists and has areas of outstanding natural beauty. At the start of the year, Morocco became the latest MENA country to announce plans to make "sustainable tourism" a key part of its national economic strategy. Although the plan, part of the government's Vision 2020 strategy, is designed to double the number of tourists visiting Morocco, strong emphasis is also placed on the sustainable growth of tourist locations and responsible custody of the environment.

The plan will initially focus on well-known destinations such as Marrakech and the Mediterranean coast. Eventually, it is hoped that activities such as desert and mountain trekking will be enhanced by new environmentally friendly developments such as desert eco-lodges.

The scale of the investment opportunity offered by eco-tourism is greatly increased by the difficulty of "greening" existing tourism facilities. Moroccan resorts such as Agadir, constructed using World Bank funding in the 1970s, are proving tough to tackle.

Morocco also raised a question mark over its green credentials with a controversial move to block a proposal made by Sweden in Qatar to monitor the trade of the 30 to 50 species of red coral. The supply of red coral is diminishing as a result of unsustainable extraction from the Mediterranean.

The ecologically sound proposal received the support of the UAE, but was blocked by countries such as Morocco and Tunisia on the grounds that a ban of extracting red coral from the sea could endanger the livelihoods of local fishermen.

And while governments may pay lip service to the greening of their tourism industries, it can prove prohibitively costly in real terms. For example, in November 2008 at the UN World Travel Conference, Zoheir Garrana, the Egyptian tourism minister, declared that the Red Sea resort of Sharm el-Sheikh was to become the country's first carbon-neutral holiday destination.

But although Egypt commissioned a thorough feasibility study, the task of greening the huge hotels and international chains has proven daunting. According to environment watchers, Egypt has so far achieved little more than token initiatives, such as volunteer clean-up days.

At the UN Climate Change Conference in Cancun, Mexico, in December, Mr Garrana promised that Egypt would be instigating a more thorough programme aimed at greening its massive tourist industry. According to official figures, 12.5m foreign travellers visited Egypt in 2009 and international tourism arrivals rose by almost 19 per cent in August compared with the same period the previous year.

Egypt's new green agenda for tourism is now on ice following the recent political upheaval, and foreign tourists are cancelling trips to Egyptian resorts.

However, the Middle East offers a wealth of environmentally friendly alternatives to large-scale resorts such as Sharm el-Sheikh. Lebanon, for instance, now offers a growing range of facilities for eco-tourists bent on taking trips to sustainable destinations. Lebanon is already well suited to the role in terms of branding, with its national flag featuring a picture of one of the country's cedar trees in the centre.

The nation offers facilities such as the Lebanon Mountain Trail, a 440-kilometre path that leads from the northern tip of the country to the south and passes through more than 75 towns and villages. It is the first long-distance hiking trail in Lebanon and promotes environmentally and socially responsible tourism. Other facilities include the Eco Village in Lebanon's Dmit Valley, where eco-tourists live in local camps or huts, eat organic food, help with farming and learn about the environment. The eco-friendly resort also offers classes in disciplines such as yoga and tai chi.

The relatively small scale of many of today's eco-tourism schemes should not deter investors. These types of projects can offer a long-term sustainability that would be impossible for large-scale tourist developments, such as Sharm el-Sheikh, to achieve.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Real estate tokenisation project

Dubai launched the pilot phase of its real estate tokenisation project last month.

The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.

Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.

Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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