New venture to spend millions on infrastructure

Morgan Stanley and Egypt's Orascom will form a joint venture to develop and invest in infrastructure projects across the MENA region.

Morgan Stanley and Egypt's Orascom Construction Industries will form a joint venture to develop and invest in infrastructure projects across the Middle East and Africa. The 50-50 partnership is expected to spend hundreds of millions of dollars across the region and may seek investments from third parties. In the current difficult economic climate, infrastructure ventures were more likely to seek outside investments, said an expert in the sector. "Liquidity is a problem for many of our clients. They often ask for deferred payment schemes or some sort of credit," said Ani Ray, the country director for Simplex Infrastructures, an international building firm based in Kolkata. "It makes sense for construction companies to tie up with a bank. It is important to have that kind of funding for high-level infrastructure projects."

The two firms hope to tap investment opportunities arising from multibillion-dollar infrastructure projects planned across the Middle East, including new bridges, airports, and desalination and power plants. The financial crisis has forced some governments, utilities and local authorities to undertake projects with public-private partnerships, opening up the construction sector to outside investment.

"The coming decade will require higher investment rates in infrastructure to sustain economic growth in the Middle East and Africa," said Sadek Wahba, the global head of Morgan Stanley Infrastructure. "Our proposed joint venture brings regional knowledge, operational expertise and global reach to capitalise on the region's economic expansion." Such spending is particularly pronounced in the Gulf, notably in Qatar, Saudi Arabia and Abu Dhabi, where petroleum sales fattened government revenue during the five-year oil boom from 2003 to 2008.

Rapid population growth across the Middle East has encouraged countries such as Saudi Arabia and Egypt to invest heavily in water and power projects. Given the decline in private sector residential building, such work is becoming increasingly important for construction companies and design firms. Gulf states including Qatar and the UAE are pouring billions of dollars into large-scale power, water and transport projects as they try to diversify their economies away from hydrocarbons. Such spending is also intended to reinvigorate local economies and spur domestic demand after the financial crisis.

Saudi Arabia plans to spend between US$400 billion (Dh1.46bn) and $500bn on infrastructure in the next five years. . Nassef Sawiris, the chief executive and chairman of Orascom Construction, said the joint venture would "capitalise on Morgan Stanley infrastructure's investing expertise".