Economy

Tough 2010 for banks in Dubai, Kuwait - Moody's, S&P

Banks in Dubai and Kuwait will endure a tougher 2010 than their Gulf peers as lenders in the region continue to take provisions against bad credit, which will curtail profits, ratings agencies said. "We believe that 2010 will be another difficult year for Gulf banks as they continue to clean up their loan books -- an effort that will weigh on their financial performance," ratings agency Standard & Poor's (S&P) said. The United Arab Emirates banks' specific provisions for non-performing loans (NPL) stood at AED33.4 billion (US$9.09bn) in January 2010, a 64 per cent surge from a year earlier, according to Central Bank data. "We see a growing disparity in credit quality among banks in the Gulf, between the stronger Saudi and Qatari banks on the one hand and the relatively weaker Dubai, Kuwaiti, and Bahraini investment banks on the other," said S&P credit analyst Mohamed Damak. Banks in Qatar and Saudi Arabia, both major oil exporters, are expected to outperform the sector, underpinned by bullish economic growth prospects. The UAE economy is likely to see growth of zero to 1 per cent this year, the International Monetary Fund recently said. Saudi Arabia and Qatar are seen growing by 3.8 per cent and 16.1 per cent, respectively.

Lebanon: Balancing the books

Lebanon's new national unity government is set to plunge into the bond market, looking to raise funds to pay off debts falling due this year while taking advantage of lower interest rates and tentative improvements in investor confidence. This year, Lebanon has US$2.15 billion worth of Eurobonds maturing, with two tranches falling due in March and November. Added to this, it has some US$8.3 billion worth of treasury bills maturing at various times throughout 2010. In mid-February, Finance Minister Raya Haffar El Hassan said in an interview with the Bloomberg news agency that the government intended to either sell up to US$2 billion worth of Eurobonds this year or conduct a debt swap, with two local banks and one international lender already chosen to manage the sale. While the government's bond plans were well advanced, El Hassan did not specify when the issue would take place as she said the terms of the sale were still subject to negotiations. (Source: OBG)

Dubai World debt tribunal opens

More than 100 creditors and lawyers have contacted the Dubai World special tribunal about making a claim on debts they believe they are owed as a part of the conglomerate’s US$26 billion (Dh95.49bn) restructuring. Mark Beer, the registrar of the tribunal and of the Dubai International Financial Centre (DIFC) Courts, said he was receiving “many inquires on a daily basis about the procedure in relation to filing with the tribunal”. “People are factoring the tribunal into their strategy,” Mr. Beer said. “They are preparing themselves.” The tribunal has made available a raft of forms and other resources to help those who believe they are owed money to make a claim. The tribunal is “fully operational” and has been ready to receive claims since it was created in a special decree by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, on December 13, he said. Despite the inquiries, no claims have been filed yet, he said. “The tribunal is fully operational,” Mr. Beer said. “It has its members. It has its funding. It has its case management system.”

Qatar: Banks looking ahead

Backed by strong government support and operating in an economy that recorded some of the fastest growth in the world last year and is expected to expand by up to 18 per cent in 2010, Qatar’s banking sector is poised to begin another period of accelerated growth. That is not to say local banks spent the past year idle. Overall, the country’s banking sector appears to have weathered the global financial crisis far better than most, posting combined profits of US$2.7 billion in 2009, just 0.1% down on the previous year’s result. Qatar National Bank was responsible for almost half of the US$2.7 billion, having made a record US$1.15 billion in net profits, 15 per cent up on 2008, with three other lenders, Doha Bank, Qatar International Islamic Bank and Al Khaliji all building on their profits from 2008. Of the country’s eight other domestic banks, only four recorded lower profits, one of which was Commercialbank, which posted a drop 10.4 per cent in 2009, down from US$466 million to US$417 million. According to Abdullah bin Khalifa Al Attiyah, the chairman of Commercialbank, 2009 was a challenging year, but thanks in part to state support the bank and the rest of the sector had risen to the challenge and would be looking toward stronger results in 2010. (Source: OBG)

US Chamber inaugurates AmCham Qatar

The US Chamber of Commerce's Executive Vice President and Chief Operating Officer David Chavern, along with Qatar’s Minister of Justice Al Ghanim, inaugurated the American Chamber of Commerce in Qatar (AmCham Qatar) in February. AmCham Qatar will seek to advance American commercial interests in the country, as well as the interests of international and local companies working in the region. The launch was scheduled on the margins of the U.S.-Islamic World Forum, where Chavern is scheduled to speak. The United States is Qatar's largest export market and is the country's single largest investor, with more than US$7 billion in financing in 2007. Bilateral trade increased by more than 340 per cent from 2003 to 2008, totaling more than US$3.2 billion per year. During this same period, US exports to Qatar grew by more than 580 per cent. "The rate of growth of the Qatari market for US exports surpasses other markets in the Middle East region," said Chavern. "American business interests are expanding here and AmCham Qatar will provide a platform for their interests to be voiced." AmCham Qatar is a non-profit, non-governmental and non-political organization dedicated to fostering mutual cooperation between the United States and the State of Qatar through trade, commerce, and investment.

Iran eyes doubling Iraq trade to US$8bn in 2010

Iran hopes to double trade with Iraq to US$8 billion this year, an Iranian diplomat said, shrugging off Western-backed sanctions aimed at curbing business with the Islamic Republic. Shi'ite Muslim Iran is the main trading partner of Shi'ite-led Iraq and has been one of the largest investors in Iraq since the fall of Sunni dictator Saddam Hussein. A series of agreements between Baghdad and Tehran could boost bilateral trade between the two countries to US$8 billion in 2010, up from US$4 billion last year, Iran's consul in the southern oil hub of Basra Mohammed Reza Baghban said. "We are sure that, if there are no obstacles in Iraqi-Iranian economic relations, bilateral trade between the two countries will be double what it was in 2009," he told reporters at an Iranian trade fair in Basra. The main areas of trade between the two countries are the construction, food and industrial sectors. The United States and its European allies have been trying to pressure Iran to suspend its disputed nuclear program, which the West suspects is aimed at making bombs. Tehran says the program is for peaceful purposes and will not be halted.

Saudi banker: US dollar still key reserve currency

The Saudi central bank chief said he believes the US dollar will remain the world's key foreign reserve currency, offering the endorsement at a meeting of business leaders taking stock of the global financial crisis. Participants at the Jeddah Economic Forum also discussed the growing role of emerging market economies in helping steer the world through its worst recession in over six decades. "The dollar is still pre-eminent in its role as a reserve currency," said Mohammed al-Jasser, governor of the Saudi Arabian Monetary Agency. Even so, as an official reserve currency, the "euro is gaining ground," he told the conference in the Saudi commercial hub of Jeddah. The remarks offer another indication that even with the wide fluctuations in the US currency over the course of the global meltdown, suggestions put forward last year by China for a new international reserve currency have yet to gain serious traction, at least in the Gulf region. Saudi Arabia, like most other Gulf Arab nations, pegs its currency to the dollar, and trade in its chief export - oil - is also in dollars.

Kuwait, Japan sign five-year taxation agreement

Kuwait and Japan have signed the final five-year agreement to avoid double taxation and prevent financial evasion, in relation to income taxes in the two countries. Kuwait's Finance Undersecretary Khalifa Hamada and Japan's Ambassador Masatoshi Muto signed the agreement. It noted that negotiations over the agreement began in 1993. The agreement aims to reduce tax burdens on Kuwaiti investors abroad, as well as on foreign investors in Kuwait, thereby encouraging the exchange of capital and investments. As stipulated by this agreement, the investor will be subjected to single taxation on activities and profits, such as to avoid being taxed twice for share profit and interests. It will also serve to remove financial obstacles that may limit the movement of capital and commercial exchange between Kuwait and Japan.

SMEs 'business confidence at new high'

The business confidence among the small and medium-sized enterprises (SMEs) in the Middle East region is at a new high with Qatar topping the list, according to a new survey by HSBC. Across the region, a growing proportion of small businesses are optimistic for their prospects in 2010 signaling increasing capital investment and recruitment, said the survey conducted by research agency TNS for HSBC bank. The semi-annual 'HSBC Small Business Confidence Monitor' gauges the six-month outlook of SMEs on local economic growth, capital investment plans and recruitment. This was the first time that Middle East countries were included in the list of 20 markets, capturing the views of more than 6,000 SMEs in Asia, the Middle East, Europe, North America and Latin America – the largest international survey of its kind. Qatar business confidence in the fourth quarter of 2009 was the highest at 159 points followed by Saudi Arabia at 125 points and Egypt at 110 points, it added. Globally, the SME indices tracked by HSBC in most countries and territories hold a positive outlook, with the Middle East at 125, Latin America at 118, the US and Canada at 107 and the UK at 101. France is just below neutral at 94. “Confidence levels appear to be back to pre-financial crisis levels. The Middle East outlook correlates strongly to the global emerging market outlook, and as a major international trading hub, the region is well-placed for future growth,” Nicholas Levitt, regional head of Business Banking HSBC said. About 47 per cent of the region’s SMEs expect local GDP growth to increase over the next six months, while 36 per cent expect the pace to remain the same, and only 17 per cent expect growth to slow, he noted.

Qatar issues new law on company ownership for expatsr

Qatar Emir Sheikh Hamad bin Khalifa Al Thani has issued a new law allowing non-Qatari investors to take full ownership of companies in certain sectors. The Gulf state leader enacted amendments to law 13 of 2000 regulating the investment of non-Qatari capital in the economy. The amendment, which was first announced last October, allows non-Qatari investors to go beyond the limit of 49 per cent ownership up to 100 per cent of the project's capital.