The Salik IPO shows a changing UAE investment economy

Infrastructure, key to making a country run smoothly, is something in which the UAE excels and takes a great interest. From major international aviation hubs to Etihad Rail, in a matter of decades the country has built networks that have taken most others far longer to establish. The indirect profit of good infrastructure is significant, allowing people, government and business to operate smoothly and predictably. Now, the potential for direct profit from these systems, particularly technologically advanced ones, is also on the government’s radar. On Tuesday, Dubai announced that it intends to raise Dh3 billion ($817 million) from the sale of a 20 per cent stake in the emirate’s road toll operator, Salik , setting the offering share price at Dh2. More than Dh600m has been raised in the initial public offering. Key investors include the UAE Strategic Investment Fund and Abu Dhabi Pension Fund. Many early contributors are from the Emirates, helping to build a sophisticated cycle of domestic-focused investment that can form a key part of the UAE’s plans to diversify its economy. Ibrahim Al Haddad, the toll company’s chief executive, said that he is “delighted by the strong interest we have received since announcing our intention to float", adding that “the growth of the city is in tandem with the growth of Salik, and this offering represents an exciting opportunity for investors to be a part of that journey.” There is plenty of evidence to support this assessment. Traffic passing through Salik’s network of eight tolls grew at a compound annual rate of 5.5 per cent between 2013 and 2018. As Dubai’s economy and population expand as a result of the Covid-19 recovery, the business outlook will only get stronger. Its population is expected to grow by 70 per cent in the next 20 years. There is also great flexibility in the model. Dynamic pricing offers a way to maximise profit, regulate air pollution levels, limit traffic at busy times and support those who deserve to pay less. Perhaps even more important, Salik might soon be overseeing new transport technologies. Dubai is, for example, investing a great deal in air taxis. In June, electric aircraft company Eve Holding and UAE-based charter flight operator Falcon Aviation Services signed a letter of intent for the delivery of 35 flying taxis starting from 2026. The city could take the international lead in designing tolls in the air. Back on the ground, consultancy Arthur D Little said this week that the Emirates ranks eighth in global readiness to accommodate electric travel. The adoption of green technologies such as electric cars could be sped up with incentivising toll reductions. Moreover, infrastructure stocks are simply proving to be more reliable, low-maintenance and predictable in a global investment market that is going through significant instability. Technological advances might be taking the world by storm, but people will still always need roads, rail and buildings.