Economy

Qatar: Year in review 2010

While many countries in the Gulf region slipped into recession this year, Qatar has not only avoided the financial crisis but also moved straight past it at speed, gaining momentum. Some eyebrows may have been raised when, at the beginning of the year, the government confidently predicted GDP would rise by around 9per cent in 2009. However, it appears the predictions were correct, with solid growth across much of the country's economy being underpinned by a strong performance in the energy sector. The accuracy of this year's forecast gives additional credence, if any were needed, to the projection that GDP will expand even faster in 2010, with HH The Emir, Sheikh Hamad bin Khalifa Al Thani, saying in November that the economy would grow by 16per cent in the coming year, having achieved its target for 2009. This year's figures make Qatar the fastest-growing economy in the region and indeed the world's. Its projected rate of expansion for 2010 looks set to ensure this pole position is maintained. Though GDP is still growing strongly, there is one bugbear for the Qatari economy - inflation. However, this has become less of a problem this year. Having peaked at 15per cent in 2008, falls in rental costs and of some commodities have seen consumer price rises ease, with year-end projections putting inflation at around 11 per cent. Meanwhile, Qatar's financial markets underwent a facelift in June, with the launch of the Qatar Exchange (QE), the successor to the Doha Securities Market. The two shareholders in the new exchange, Qatar Holding and the New York Stock Exchange's overseas arm Euronext, foresee the QE becoming a leading bourse not only in the Gulf region but internationally. (OBG)

Dubai's US$10bn cash came through bond sale

Abu Dhabi's US$10 billion financial aid to fellow United Arab Emirates member Dubai to meet debt obligations was in the form of bonds, on similar terms to a US$10 billion bond issue to the UAE central bank in February. The February bond issue is for a five years and pays a coupon of four per cent per annum. "The loan is based on the same terms as the first tranche of the US$20 billion bond," a source said. Abu Dhabi gave Dubai the surprise lifeline earlier this month -- the same day a US$4.1 billion Islamic bond issued by Dubai property developer Nakheel came due -- helping it stave off a default and cheering markets. Dubai at the time said it was a government-to-government arrangement without giving details.

Fitch: Abu Dhabi support for Dubai World Tactical; Dubai corporate ratings remain on watch

Fitch Ratings says this month’s direct support of Dubai by emirate Abu Dhabi, while constructive in avoiding a near-term default by a high-profile entity with state linkage, is nonetheless tactical in nature as opposed to a reversal of recent rhetoric regarding state support. While this move will help to avoid a default at the Dubai World subsidiary Nakheel, Fitch interprets the move as a tactical step to permit an orderly restructuring of obligations within Dubai to continue. A US$10 billion injection by the government of Abu Dhabi into the Dubai Financial Support Fund (DFSF), an existing mechanism, which facilitates funding to state-owned entities, will be used to repay a Nakheel sukuk obligation, which Dubai World had previously indicated, would be restructured rather than repaid. The balance of the remainder will be utilized by the DFSF to "provide for interest expense and company working capital through April 30, 2010" specifically for Dubai World. In addition, the unspecified remainder of the funds will be used to support "obligations to existing trade creditors and contractors" of Dubai World within the Emirate of Dubai. Additionally, and importantly in Fitch's view, the Government of Dubai has announced the introduction of a "comprehensive reorganization law", which is expected to be based on the code currently employed by the Dubai International Finance Centre (DIFC).

Gulf states agree on time frame for single currency

Foreign ministers of the Gulf Cooperation Council (GCC) states have reached agreement on a time frame for the planned Gulf single currency, a Kuwaiti official said in December. "An agreement has been reached on a time frame for the Gulf single currency," by the ministers, said Kuwaiti foreign ministry undersecretary Khaled al-Jarallah. He provided no details. The six-nation bloc has been vying to issue the single currency in 2010 but is way behind schedule, having failed to hammer out essential technical convergence preconditions. In June, four of the six countries -- Saudi Arabia, Kuwait, Bahrain and Qatar -- signed the Gulf monetary union pact, which stipulates the establishment of a monetary council early in 2010. The council will eventually develop into a central bank, which will take all necessary procedures to issue the single currency. Oman withdrew from the monetary union saying it cannot meet convergence prerequisites, while the United Arab Emirates pulled out after the GCC picked the Saudi capital Riyadh as the base for the future central bank. UAE central bank says to back local banks The United Arab Emirates' central bank moved to ease concerns about stresses in the financial sector, saying it would back local banks who have exposure to debt-laden holding company Dubai World. "(The) central bank of the UAE reaffirmed its position that it stands behind UAE banks, including those with exposure to Dubai World and Nakheel," the central bank said in an emailed statement. Nakheel, builder of palm-shaped islands off Dubai's coast, is the property arm of Dubai World. Dubai said it had received US$10 billion from fellow UAE member Abu Dhabi, US$4.1 billion of which was allocated to Nakheel to repay its Islamic bond. The UAE central bank said the financial sector was more sound and liquid than a year ago. Interbank deposits in the banking system constitute 10.3 per cent of liabilities, with foreign interbank deposits constituting 5 per cent, it said.

Lebanon: New government, old problems

Nearly six months after its general election, Lebanon has a government in place, with Prime Minister Saad Hariri's national unity cabinet gaining approval in early November, though unity by no means guarantees stability. While there had been agreement for months over forming a broad-based government including representatives from the main opposition parties, with a general understanding of how many ministers each bloc would have, the forming of the cabinet was delayed by intense wrangling over which portfolios would be allocated to members of the various disparate groupings. As it stands, the cabinet contains 15 ministers of the March 14 bloc or its supporters under Hariri, with 10 more from the March 8 group made up of Hizbullah and its allies, and a further five nominated by President Michel Suleiman. The effectiveness of the cabinet on crucial issues is questionable because Hizbullah's strength will effectively veto legislation it does not like. Already there are some signs the cabinet may need the attention of a skilled fitter and joiner, such is the extent of the early cracks appearing in the woodwork. (OBG)

10 per cent of GCC professionals lost jobs in 2009

Almost two-thirds of professionals working in the Gulf region have not received any pay increase and one in 10 have lost their jobs this year, according to new research. The study by GulfTalent.com showed average salary increases across the six Gulf countries over the 12-month period to August 2009 fell sharply to 6.2 per cent compared with 11.4 per cent over the same period last year. The drop was most severe in the UAE, which fell from 13.6 per cent to just 5.5 per cent this year, largely due to its heavy exposure to the real estate sector, the survey added. Kuwait also saw a significant drop in pay rises from 10.1 per cent to 4.8 per cent, after the value of its financial investments collapsed. Pay rises in Saudi Arabia stood at 6.5 per cent, compared with 9.8 per cent last year, the smallest fall among GCC countries. Massive spending by the Saudi government on infrastructure projects this year has helped maintain economic activity.

Foreign firms to get tax relief in Oman

A new dependent agent clause has been introduced in the new tax law within the permanent establishment (PE) rules that would be of special importance to foreign companies to determine the liability to tax in Oman, a senior tax consultant said. 'Under the old law a PE was classified as a fixed place of activity through which any foreign person carries on an activity wholly or partly in Oman. However, the definition under the new law has been extended to such activity carried out either directly or through a dependent agent,' Mohamed Faycal Charfeddine, tax manager with KPMG Oman, said. Whilst there is no definition given for 'dependent agent' in the new law, the tax authorities are likely to follow the principles they currently practice. In this regard, he pointed out that even under the old law, dependent agents created a PE for foreign companies.

US looks forward to Qatari investment, says LeBaron

The US government was looking forward to investment in various sectors, including the real estate, by individuals as well as organizations from Qatar and other Middle East countries, said the US Ambassador to Qatar His Excellency Joseph LeBaron. He was delivering the keynote address at a seminar "Business Investment Seminar: Entering the US Market" at Marriott Hotel in December The US Embassy in Qatar in coordination with the National US-Arab Chamber of Commerce organized the one-day seminar to provide a 360-degree CEO panel of legal, taxation, banking, and government executives to inform Qatari entrepreneurs and executives about investment and business opportunities in the United States. Answering questions by Qatar Tribune, the US Ambassador said that there were many organizations keen to invest in the USA. "The organizations that are interested in investing in the USA include Barwa and Qatari Diar and we look forward to other such organizations to make use of this opportunity. America provides a safe and stable investment environment for investors to make profits, but foreign direct investment is also an important contributor to US job creation, innovation and competitiveness. It's a great deal for investors as well as for the America."

Bahrain GFH takes US$300m Dubai project provision

Bahrain's Gulf Finance House said it had taken a provision of US$300 million over its exposure to a Dubai development project. "Gulf Finance House ... will take a US$300 million (non-cash) charge against its proprietary Dubailand position and correspondingly reduce the liabilities on its balance sheet by US$290 million," the company said in a statement. "GFH has no remaining material exposure to Dubai." Like a number of Bahrain-based investment houses, GFH has faced losses since the end of a regional property boom late last year swept away its business model of raising financing for large infrastructure and real estate projects.

Qatari companies want to invest in Karbala

Qatari companies have presented proposals for several projects and expressed desire to implement them in Karbala. First deputy governor of Karbala said in December. "A group of Qatari companies expressed desire to implement a number of projects in Karbala in several fields," Engineer Nassif Jassem al-Khatabi told reporters. "The projects include tourism, hotel, agriculture and security fields," he noted.

Egyptian banks to accept real estate for debt

National Bank of Egypt (NBE) and Banque Misr, the country's first and second biggest banks by assets, said they had agreed to accept real estate in exchange for hundreds of millions of dollars in public sector debt. Egypt has reduced the debts the firms owed to state banks, accrued since nationalization in the 1960s, to 8 billion Egyptian pounds (US$1.5 billion) from 32 million only a few years earlier. "There has been an agreement... with the public sector companies that we would take assets as settlement for the public sector debt," Banque Misr's Vice-Chairman Mohamed Ozalp said. National Bank of Egypt's Chairman Tarek Amer confirmed in an e-mail that his bank had also agreed to the real estate for debt exchange. The two banks had formed a company to take receipt of the assets for later sale, Ozalp told Reuters. Both banks are owned by the government but are being run by bankers hired from private sector banks.