Squire Sanders expanded both its Middle East and South Korea operations in October, as Latham & Watkins reported a surge in investment activity between Asia, most notably China, and the Gulf states.
Cleary Gottlieb Steen & Hamilton also announced in October that it will open an office in Seoul, following approval from the Korean regulatory authorities. This follows the opening of the firm’s office in Abu Dhabi in September. Squire Sanders expanded its Middle East practice through the acquisition of El-Khoury & Partners’ Middle East and North Africa (MENA) business, which formerly operated in Saudi Arabia as EK Partners & Al-Enezee.
The deal has strengthened Squire Sanders’ presence in the region with a fully integrated office in Riyadh, operating as Al-Enezee in association with Squire Sanders. As only Saudi-qualified lawyers are permitted to have an office in the Kingdom, any international firm can only operate through an association. The office will be headed by Khulaif Al-Enezee, who will work with Kevin Connor, the co-ordinating partner for the MENA region.
The expansion in the Middle East came barely ten days after the firm announced the opening of a new office in Seoul, after being granted a licence to practise by the Korean Ministry of Justice. The firm also announced the launch of a new office in Sydney in October. A source at the firm said that they expect there to be a good amount of deal flow between the recently opened Seoul office and the Riyadh office, which reflects increasing reports from international firms that trade between Asia and the Middle East is proving to be a lucrative source of work.
Connor also confirmed that the firm’s Riyadh practice has some ‘very significant global Chinese companies’ as clients. Meanwhile Middle East stalwart Latham & Watkins has also reported an upsurge in Chinese investment activity in the Middle East, which is being dubbed the ‘New Silk Road’.
Nearly three quarters (70%) of Chinese investors regard trade and investment in the MENA region as ‘very important’ for China’s economic future, according to a report commissioned by Latham released last month. Over the next two years, Chinese trade and investment in the MENA region is expected to increase substantially; 80% of respondents predict big growth in trade, while 65% expect significant growth in investment activity.
‘The growth in China and North Asia is significantly greater than any other part of the world.’
Bryant Edwards, Latham & Watkins
Bilateral trade between China and the UAE has been increasing steadily over the last decade and is expected to exceed $100bn by 2015. ‘The market forces driving the growth and diversification of these two markets are unstoppable, further strengthening the alliance between the two regions. As trading and investment opportunities along the new Silk Road multiply, it has the potential to redraw the global economic map,’ said David Miles, chair of Latham’s Asia practice and a senior partner in the Hong Kong office.
Saudi Arabia and the UAE top the list of most attractive investment jurisdictions for Chinese investments. The survey cites sovereign risk and political instability as the primary barriers to more widespread investment in the MENA region. Difficult legal and regulatory regimes (60%) and lack of infrastructure (50%) are the other main reasons limiting investment in the region, according to the survey.
Statistics show that the trade of goods between China and the Middle East has risen by 36% over the year and the expected signing of a free trade agreement between China and Gulf Cooperation Council will increase this by an estimated five fold. It is thought that Chinese government policy is a driving force behind the growth opportunities in the Middle East.
The top five strategic sectors, according to the survey, are: oil and gas (90%), infrastructure (75%), mining (70%), financial services (50%) and construction (50%).
Aside from sectors readily associated with the Middle East, such as oil and gas, other sectors, including chemicals, telecoms and infrastructure, are also booming between the regions. In July Latham advised the Hong Kong-based private equity firm HPF on its acquisition of a 90% stake in Jordan Dubai Capital for $102m.
The Chinese expect investment to be done via M&A, playing to one of Latham’s key strengths. Bryant Edwards, corporate partner in Latham’s Hong Kong office, said: ‘We are extremely excited by the Chinese interest in the Middle East. There’s enormous interest in the UAE, the Gulf region and development in trade with China.’
He added that there was concern among the Gulf states that as the US develops more independence through the development of its own sources of energy, major US energy companies won’t have the same interest in having a large presence in the Middle East.
That said, Edwards believes that China and the Middle East are the places to be at the moment.
‘Whether there’s a slowdown or not the growth in China and North Asia is significantly greater than any other part of the world, including Europe and the US. So we’re in the right place. We as a law firm certainly want to be part of this,’ he said.
The Middle East markets were recently left disappointed when index provider MSCI didn’t upgrade the UAE and Qatar to ‘emerging market’ status. Both are still ranked as ‘frontier’ markets, which do not attract anywhere near as much institutional investment. Edwards admitted that this was a disappointment. ‘The lack of the MSCI upgrade is a concern. It is a barrier for a while,’ he said.
However, despite the lack of an upgrade, Edwards believes that the perception of financial hubs such as Dubai flies in the face of official classification. ‘If you look at the market, it’s treating Dubai as an emerging economy; it’s not seen as a frontier economy in the way it prices its bonds,’ he said.