Economy

Egypt: Taking matters into its own hands

With its recently passed budget for the 2011-12 fiscal year, Egypt has established a revised set of ambitious targets for tackling its public expenditures. Having rebuffed aid offers from several international organizations and countries, the move is a sign that the country will steer clear of a rising budget deficit on its own accord. Passed on June 22, the budget set public spending at LE490.6billion ($82.2bn), down 4.65% from the LE514.5 billion ($86.2bn) forecast in its draft released earlier in the month. The final budget also cut the deficit for the year from LE170billion ($28.5bn) to LE134.3billion ($22.5bn). This is still 8.6% of GDP but is down from the 9.5% expected in the 2010-11 fiscal year and a significant drop from the 10.9% forecast in the draft budget. In response, Fitch Ratings approved of the country’s lowered budget deficit in early July, saying it sends a strong signal to the international community at a politically precarious time. The ratings agency affirmed Egypt’s “BB" long-term foreign currency Issuer Default Rating on June 28 and assigned it a Negative Outlook, removing it from Rating Watch Negative. Source: Oxford Business Group

Egypt becoming hub for foreign investments

Egypt's Prime Minister Essam Sharaf said Egypt has become a hub for foreign investments as more international investors are showing interest in tapping into the Egyptian market. Sharaf made his comments during a meeting with Sweden-based Electrolux Chief Executive Officer Keith McLaughlin. They discussed Electrolux's deal to buy a controlling stake in Egyptian appliance maker Olympic Group in exchange for $400 million. If approved, the deal will be the first after the January 25 Revolution in Egypt. A new package of industrial incentives offered by the Industrial Modernization Center (IMC) and the Industrial Development Authority will be announced by the end of the week, said Industry and Foreign Trade Minister Samir el-Sayyad. The package aims to ease measures and offer better services to the industrial community to attract more investments in the sector and consequently offer more job opportunities, Sayyad said during the opening of a new LCD televisions factory in the Quesna industrial zone in Minufiyah governorate. Source: Global Arab Network

Dubai: Steady pace

Dubai’s economy is maintaining a steady pace of recovery, with confidence returning to the marketplace, investor appetite again being whetted and some of the longer-term development schemes starting to repay the faith and capital placed in them, though the need for care in managing the emirate’s debt burden remains key. Having been hard hit by the global recession, and with some of the emirate’s leading state-backed corporations caught short with high debt exposure at a time when liquidity dried up, the economy is now back on a more even keel, though some sectors have yet to fully recover from the effects of the financial crisis. While other countries in the broader region have seen their economies stall amidst political and social unrest, Dubai and the rest of the UAE have seen their reputation as an investment safe haven reinforced. Though there may have been some movement of hot money into the Dubai economy, with investors seeking somewhere safe to temporarily park their funds, others are again eyeing Dubai as both a sanctuary and a solid base for regional operations. That improved sentiment is reflected in market assessments of Dubai’s debt risk and the costs of insuring against the increasingly remote prospect of default. Though the emirate’s debt remains high, Dubai’s five-year credit default swaps (CDS) dropped to below 325 basis points in early June, below the levels prior to November 2009. Having peaked at 655 basis points in February last year, Dubai has managed to slash its risk factor by half, which in turn will both make insuring against any debt risk less costly and the buying of Dubai bonds and debt more appealing to investors. Source: Oxford Business Group

Qatar: Assets aplenty

Having emerged as one of the most resilient financial markets in the region in the wake of the international economic downturn of 2008-09, Qatar is working to further boost its profile. The government has made a concerted effort to expand the country’s asset management industry, in particular, to meet steadily expanding global demand for local and regional funds. The Qatar Exchange (QE) has been enhanced by a number of regulatory changes and major new listings in recent years. In 2010 the bourse was the best-performing exchange in the GCC, posting growth of nearly 25% for the year. The QE is working to gain “emerging market” status with MSCI, the US-based index provider, which currently labels Qatar a “frontier market”. As foreign fund managers rely on MSCI rankings to determine their asset allocations, a change would likely result in increased long-term international investment, particularly from institutions, and a concomitant reduction in volatility. While increasing the foreign ownership allowance – currently set at 25% – has also been under discussion, the exchange’s chairman, Hussain Al Abdullah, said at the end of May that the limit would remain in place for the coming year. The 25% ceiling has been a concern for MSCI, and a move to raise it would likely have a positive effect in terms of increased overseas interest. Source: Oxford Business Group

Bahrain to study tax system

Delegates at Bahrain's National Dialogue agreed a study on a possible tax system for the kingdom. Abdulhameed Al Kooheji, who is representing the National Unity Assembly, said members attending the economic sessions had reached consensus on 50 topics so far, with 20 other subjects yet to be discussed. One of the issues that was debated was the introduction of a taxation system,"" he told the Gulf Daily News on the sidelines of the talks. ""Bahrain is a liberal, tax-free country and there should be a clear study carried out with neighboring Gulf countries on the feasibility of taxation."" However, he said that economic competitiveness was imperative, with Bahrain's tax-free status an attraction for foreign businesses. ""There is no doubt in the future taxation will be considered, but at the moment we have reached a consensus to carry out a study for proper research to align our decision with our neighbors."" Participants in the economic session also discussed cutting the budget deficit, identifying target groups, government revenues and social justice. Kooheji added it was important to improve the living standards of citizens through subsidisation of essential goods, as well as providing government support to companies affected during Bahrain's unrest. Source: TradeArabia News Service

Yemen crisis costs industry, trade $17bn

Months of political unrest in Yemen have cost its industrial and trade sectors at least $17 billion, the Saudi state news agency reported, quoting the deputy chairman of the Yemeni Chamber of Commerce as saying. Losses in the past six months reached at least $17 billion due to the political crisis in Yemen, SPA quoted deputy chairman of the chamber, Mohamed Mohamed Salah, as saying. Yemen's GDP totaled $28.3 billion in 2010. Salah also said that a large number of factories and plants had closed down, laying off tens of thousands of workers. He said the country was undergoing an economic disaster. More than five months of protests against President Ali Abdullah Saleh's 33-year rule has led to a shortage of fuel, food, water and electricity in the country. The International Monetary Fund (IMF) said in July that inflation in the country could surge to as high as 30% this year. The IMF last month also reversed its view on the economic outlook for Yemen, forecasting GDP will shrink this year but did not give a precise forecast, against a forecast in April for 3.4% growth. In 2010 the economy grew 8%. Source: TradeArabia News Service

Kuwait must increase spending says cbank

Kuwait needs to increase government spending and support the private sector to overcome imbalances in its economy, the central bank governor said in television remarks. The Opec member's dependence on oil and the government's control on all sector are causing the main imbalances in the economy, Sheikh Salem Abdul-Aziz al-Sabah told CNBC Arabia television in an interview. Earlier, Sheikh Salem was quoted by Kuna saying that the country's economy is undergoing imbalances which needed to be corrected, but did not give more details. Source: Reuters