Abu Dhabi, Korea partner on private equity initiative

ADIC, Korea Development Bank and the Korea Trade Promotion Agency aim to boost the private equity, real estate, and infrastructure investment flow between the MENA region and South Korea.

The Abu Dhabi Investment Company, Korea Development Bank (KDB) and Korea Trade Promotion Agency (KOTRA) have signed an agreement to increase the flow of investment between South Korea and the Middle East and North Africa (MENA).

The agreement, signed in Seoul today, encompasses private equity, cross-border M&A and infrastructure.

“This is an important step, which should lead to some exciting investment opportunities both in South Korea and the MENA region. The Middle East should not just be regarded as a source of capital but also as an investment destination,” said Nazem Fawwaz Al Kudsi, ADIC chief executive.

A statement released by ADIC said that although governments in the MENA region are diverting increasing amounts of oil and gas revenues towards infrastructure spending, there was a real need for foreign expertise and investment to supplement this. Research commissioned by the firm found a minimum of $410 billion-worth of infrastructure investment had been planned for the next 10 years, on sectors such as new roads, ports and power projects.

The firm also anticipated ample private equity investment opportunity for its Korean partners as family-run companies “reshuffle their assets”.

In South Korea, the government aims to increase foreign direct investment by 7 percent in 2009 to $2.5 billion in asset classes such as real estate, infrastructure and private equity, according to the ADIC statement. Central to the government’s strategy for attracting foreign capital is the promotion of its six Free Economic Zones and the current weakness of the won.

A report in The Korea Times stated the state-owned Korea Development Bank hoped to use funds from the Middle East to help rescue sprawling and “cash-strapped” conglomerates such as Hynix, GM Daewoo Auto Technology, Ssangyong Motors, and Daewoo Shipbuilding & Marine Engineering.

According to the article, KDB planned to seek MENA-based investors’ participation in a private equity fund set up specifically to purchase assets from Korea’s ailing mega-firms, which expanded aggressively during the boom years, helping them restructure to weather the economic downturn.

KDB CEO Min Euoo-sung is expected to travel to the Middle East next week to seek further funding.