Economy

Euro woes call for pause in Gulf frx union

Gulf Arab countries planning a monetary union should take some time to draw lessons from the troubles in the euro zone and give fiscal policies equal importance in the process, Kuwait's foreign minister said. "There are a lot of lessons" to be drawn from the euro zone problems, the foreign minister, Mohammad Sabah al-Salem al-Sabah, said. "We should pause a little bit and try to learn from what happened with the European monetary union. It would be irresponsible to proceed 'business as usual' without minding or ... (learning) from the euro problem," he said. Sabah spoke to reporters in the Saudi Red Sea port city of Jeddah after a meeting of Gulf Cooperation Council (GCC) foreign ministers. In addition to Kuwait, which currently holds GCC's rotating presidency, the bloc includes Bahrain, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Oman and the United Arab Emirates have pulled out of the monetary union scheme, which has initially been planned to start before the end of 2010 with the launch of a single currency. "We want to do it at the right time and in the right format," Sabah said. "We have to first and foremost think seriously about not only monetary policy but also fiscal policy, and that requires the harmonization of our budgetary policies… The 'pause' doesn't mean delay".

India replaces China as largest trading partner for GCC

India has replaced China as the largest trading partner for the Gulf Cooperation Council (GCC) as trade between India and the GCC grew at a whopping rate of 50 per cent every year between 2004 and 2008, a recent report by the Dubai Chamber of Commerce and Industry said. Trade constituted the bedrock of ties between India and the GCC, as the total value of trade between the country and the GCC exceeded 91 billion dollars (AED334.1bn) in 2008 and grew at an average annual rate of 50 per cent between 2004 and 2008, according to a study conducted by the Chamber. 'The Indian economy is one of the fastest growing economies in the world along with China and it has already been two years since India became the number one trade partner, replacing China,'' Mohammad Al Asoomi, a UAE-based economic adviser, said. The UAE and Saudi Arabia were the two largest partners in terms of trade with India and the GCC was the leading origin of imports and second largest destination of exports for India. The GCC's share of India's trade increased from 8.6 per cent in 2004 to 18.7 per cent in 2008.

IMF: Mideast, N. Africa economies rebounding in 2010

Mideast and North African oil exporters will see a "strong recovery" in 2010, pulled ahead by increasing capital inflows and oil prices, the International Monetary Fund said even as it lowered its projection for the countries' growth amid a sharp drop in oil prices and worries about Europe's debt crisis. In a report on the region, the IMF also warned that concerns remained about the banking sector in these nations - mainly stemming from slow credit growth. The IMF said MENA oil exporters were projected to see a combined growth rate of 4.2 per cent - down slightly from the 4.5 per cent growth it had projected last month in its World Economic Outlook. Since that report's release, crude prices have plummeted over 20 per cent amid concerns that Europe's debt crisis could undercut the global economic recovery currently under way.

Saudi Arabia: Confidence rising

As finance departments across the Kingdom file their first-quarter figures, the Saudi economy appears to have had a positive start to the year. Confidence among local executives is improving, while the stock market posted strong gains that look set to lure back some of the investors that have been waiting on the sidelines. According to Banque Saudi Fransi's (BSF) business confidence survey, executives are more optimistic about the Saudi economy in 2010. The BSF Business Confidence Index rose to 100.7 in the second quarter of 2010 compared to 99.4 in the first quarter of the year. The decision-makers surveyed in the index expect a favorable operating environment over the next two quarters on the back of firm oil prices, strong economic growth and banks willing to extend credit. The changing sentiment towards the banking sector was one of the most significant and important findings in the report. Nearly 60 per cent of the 781 company managers participating in the survey said that the lending attitude of banks had returned to "normal" or "improved", a significant increase from the 41 per cent that felt that way in the Q1 survey. Nonetheless, 41.5 per cent of respondents still went on to describe the banks' lending attitude as "not good". Additionally, the report found that a majority of business leaders are looking to bolster their inventories and raise production capacity, assuming stronger revenues are on the horizon. Some caution still remains however, with almost half of respondents saying they are keeping production capacity at current levels. Business leaders are also regaining confidence in the stock market, with 41.1 per cent ranking equities above real estate, bonds or cash when asked which single asset class would provide the best returns during the remainder of the year, compared to 21 per cent and 12.7 per cent who gave the same answer in the Q1 2010 and Q4 2009 surveys, respectively. This growing confidence is based on the performance of the Tadawul, Saudi Arabia's stock exchange, in the first three months of the year. According to the Tadawul Q1 2010 Statistical Report, the Tadawul All Shares Index (TASI) rose by 679.25 points, or 11.1 per cent year-to-date, in the first three months of the year. Total equity market capitalization at the end of Q1 2010 reached SR1.34 trillion (US$360bn), an increase of 52.1 per cent over the same period of the previous year. (Source: OBG)

Egypt competes for investor money amid global crisis

Egypt is competing for foreign investors' stock listings at a time when risk tolerance is thin and turmoil in the global economy has reduced confidence that there will be a swift recovery. Despite investors' aversion to risk, Egypt's stock exchange plans to launch a new derivatives product during the second half of next year. Recently, the exchange launched Egyptian depositary receipts, or EDRs. "The Egyptian depositary receipts product allows foreign companies to list in our exchange, exactly like ADRs in the New York Stock Exchange," Maged Shawki said on the sidelines of investment bank Beltone Financial's sponsored conference on the Middle East. Egypt, an emerging market country, with a growth rate close to 5 per cent even at a time of global economic downturn, "has the second best stock market performance in the emerging world, according to MSCI," Shawki told investors in New York. Egypt is likely to attract US$7.5 billion in foreign direct investment in the fiscal year 2009/2010 and could reach US$10 billion in 2010/11, according to government data. Egypt's stock exchange, with a market capitalization of US$90 billion, has 213 companies trading a daily volume of 150 billion shares.

Dubai World in US$23.5bn debt deal with core banks

Dubai World, the state-owned conglomerate, has reached a deal in principle to restructure US$23.5 billion in debt with the core lenders holding 60 per cent of the exposure. The deal, which has no new financial aid from the government, must still be approved by banks outside the core-negotiating panel, Dubai World said. "We are not entirely happy but we are in a no-choice situation. Under the circumstances, this seems the best deal possible, even though it is not entirely satisfactory," said a banker at a Gulf-based lender outside the core group. Dubai, famed for extravagant property projects and a tax-free lifestyle, has struggled to bring its debt burden, estimated at US$101 billion, under control. The Gulf Arab emirate used massive amounts of leverage to transform itself into a trade and tourism hub, but the global financial crisis and a collapse in oil prices in 2008 brought an abrupt end to a six-year boom. The emirate stunned global markets last November when it said it would delay repayment of US$26 billion in debt linked to Dubai World and its property units, Nakheel and Limitless. Dubai unveiled a US$9.5 billion rescue plan in March.

Iran to boost non-oil exports to Iraq

Iran plans to raise its non-oil exports to Iraq up to US$7.5 billion annually from the current US$4.8 billion, the Iran-Iraq Economic Development Center’s Secretary-General said. “Iran mainly exports foodstuff and construction materials to Iraq," Hassan Danaeifar said. "Currently, over 8,000 tons of cement is being exported to Iraq daily," he added.

China, Qatar ink document on energy, financial cooperation

The governments of China and Qatar in May signed a memorandum of understanding (MoU) to strengthen cooperation in the energy and financial sectors. Chinese Premier Wen Jiabao and visiting Qatari Prime Minister and Minister of Foreign Affairs Sheikh Hamad bin Jasim bin Jabir al-Thani attended the signing ceremony after their meeting at the Great Hall of the People. Hailing China-Qatar relations, Wen said the two nations in recent years have increased mutual political trust and common interests and enjoy a solid foundation for expanding bilateral win-win cooperation. China will work with Qatar to seize the opportunity to cope with the international financial crisis and actively advance cooperation in energy, finance and infrastructure construction, Wen said. "This will help promote economic growth in the two nations and push forward the bilateral friendship," the premier said. The Qatari Prime Minister said his country attaches importance to building a friendly and cooperative relationship with China based on mutual trust. Qatar will work with China to deepen cooperation in the oil and gas business, expand mutual investment, and explore cooperation in other areas, he said.

Riyadh cuts reliance on foreigners

"The Kingdom has already taken several measures including a substantial reduction in the number of work visas," the Ministry of Labor said in a statement. "The Kingdom reduced the number of work visas by 15 per cent in 2009 compared to a year before," said the statement quoting Abdullah Al-Ajlan, an official at the Ministry of Labor. Al-Ajlan said that the government issued 1.54 million work visas in 2009 compared to 1.81 million visas in 2008. He said that the efforts to reduce dependence on foreign workers by replacing them with Saudis have been more successful in the public sector, where nationals make up more than 85 per cent of the work force. But, in the private sector the situation is far from satisfactory. Employers in private sector are said to prefer non-Saudis because they work for much lower salaries, can be easily fired and have a reputation for working harder than their Saudi counterparts at same positions. Al-Ajlan said that the total number of worked visas issued to private-sector employers dropped by 21 per cent last year. On the other hand, the number of visas for Saudi government agencies was reduced by 14 per cent during the same period. The Human Resource Development Fund (HRDF) of Saudi Arabia has meanwhile announced special incentives for companies that hire Saudis, including salary subsidies and job training, said an official of the HRDF.

Turkey: Steady growth predicted

Turkey's economy is well on the way to erasing memories of recession, posting solid growth from late 2009 onwards, though recent woes in neighboring Greece and beyond will have many in Ankara casting a wary sidelong glance towards the West. Having contracted by 4.7 per cent in 2009, Turkey's economy has been on the rebound since the final quarter of last year, growth being spurred by a strong surge in export sales and climbing consumer demand at home. The government of Prime Minister Recep Tayyip Erdogan is predicting a 3.5 per cent rise in GDP for 2010, yet some ministers are increasingly suggesting this will be at the lower end of the economy's possible performance. In early April, Deputy Prime Minister Ali Babacan, who also serves as state minister for the economy, told local media that the growth target set by the government was conservative and would probably be revised upwards in June, when the cabinet next meets to rejig its medium-term economic plan. This sense of optimism is shared by a number of international organisations and agencies. In late April, the IMF raised its projections for the Turkish economy, forecasting an increase of 5.2 per cent for the year. By the end of the month, Deloitte went further, predicting GDP to expand 5.7-6 per cent. While inflation is edging up, and could finish the year close to 10 per cent according to Central Bank estimates, this is in part a result of rising domestic demand and is seen as a sign the economy is gearing itself up for further expansion. The reserve bank has deliberately chosen not to target inflation at the moment, keeping interest rates at an historic low of 6.5 per cent for the past six months in an effort to stimulate lending to help reboot the economy. Though many of Turkey's domestic economic indicators are good, there are still suggestions of a possible cooling off, most likely due to external factors. The main factor in any possible change is the debt crisis in Europe, which could spread from Greece westward to Portugal and Spain, potentially destabilizing the eurozone. Ali Babacan has sought to play down reports the debt crisis will have a major impact on his country. (Source: OBG)

Syria, Kuwait ink six cooperation agreements

Syrian President Bashar al-Assad in May inked with visiting Emir of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah six cooperation deals to further bilateral relations. The top leaders of Syria and Kuwait inked six cooperation deals on tourism, cultural exchanges, mutual investment protection and infrastructure constructions, which aim to develop the bilateral ties between the two countries, according to the report. The two leaders called for bolstering bilateral cooperation, encouraging mutual investment and working for unified Arab stances on achieving peace in the region, the report said. Statistics of the Syrian Investment Commission showed that Kuwaiti investments in Syria between 1991-2009 amounted to 37 projects in industrial, agricultural and transportation domains, with a total volume of more than US$6 billion.

Gulf customs union 'still facing snags'

A disagreement over how the six-nation Gulf Cooperation Council (GCC) should distribute custom receipts is threatening the completion of the bloc's long-awaited customs union, officials said. The GCC's attempts over the past 29 years to emulate the European Union's economic integration model have been dogged by delays in a monetary union plan and regional rivalry and mistrust between its two biggest economies, Saudi Arabia and the UAE. Officials had hailed the introduction of a customs union in 2003 as a major achievement countering critics’ claims that the Gulf bloc would be unable to realize economic integration in the world's biggest oil exporting region. But differences remain and trucks transporting goods have been held up for days mainly at the border between Saudi Arabia and the UAE, an issue that has cast fresh doubts about the efficiency of the customs union plan. GCC officials say the UAE is unhappy with a quota of receipts proposed by the GCC secretariat but some stress that a bigger issue would be to scrap red tape at border crossings. GCC secretary general Abdulrahman al-Attiyah cautioned at a meeting of finance ministers of the bloc - which also includes Bahrain, Kuwait, Oman and Qatar - against stopping in the midst of 'transitional phase of the customs union.'