Economy

DP World to repay $3 billion loan with existing cash

DP World Limited today announces it will use existing cash resources to repay all $3 billion outstanding under its revolving credit facility due to mature in October 2012. The repayments will take place between 4 and 10 April 2012. As at 31 December 2011, DP World had $4.2 billion of cash balances including cash flow generated from its portfolio of global terminals and the proceeds of the monetization of the five terminals in Australia. Following this $3 billion repayment, DP World will have reduced total debt to approximately $4.7 billion and have cash balances of approximately $1.2 billion. In line with the cash repayments in early April, DP World will cancel $2 billion of the existing revolving credit facility retaining a $1 billion undrawn facility. This undrawn facility will be replaced by a new 5-year revolving credit facility of $1 billion. We are in the final stage of agreeing documentation with the banks that have committed to this new facility and expect it to replace the existing facility shortly. The new facility will be used to provide DP World with flexibility to manage cash flow and investment in our portfolio. We have no immediate need to draw down the new facility. DP World Chairman, Sultan Ahmed Bin Sulayem commented: “We are delighted to be in a position to repay all outstanding $3 billion of our revolving credit facility six months ahead of maturity. The repayment, using our existing cash balances will reduce our total debt to approximately $4.7 billion. “DP World has a very strong balance sheet not least because of the strong cash generative nature of our global operations. We have created a balance sheet that allows DP World to meet the long-term strategic requirements for investment into profitable growth opportunities, whilst maintaining a disciplined approach to capital allocation.” Group Chief Executive Officer Mohammed Sharaf commented: “We are very pleased to have put in place a new bank deal in the current market climate. Whilst we have no immediate plans to access the new facility, it allows us to draw down and pre-pay cash as needed, providing timely and flexible access to cash as we continue to invest in our global portfolio to deliver profitable growth.” Source: Albawaba

Saudi Arabia becomes biggest GCC magnet

Flow of foreign direct investments in the Kingdom continued and captured the highest rates of the FDIs in the Gulf region by 60-70 percent. The report, issued by Global Investment House says the rate of Saudi GDP, which stood at 3.3 percent during 2011-2010, hit 6.8 percent in 2011 compared to 3.8 percent in 2010. Non-oil sector GDP grew by 14.2 percent in 2011 compared to 9.1 percent in 2010 thus exceeding the growth rates registered during the last five years which stood at 7.7 percent. The Kingdom is following the right step aimed at diversifying its economy as it continues to receive flow of foreign direct investments and, reportedly, capturing between 60-70 percent of the GCC total FDIs. The rate of FDIs to Saudi GDP fell to 6.5 percent in 2010 compared to 9.5 percent in 2009, the report says. Based on the fact that the oil sector GDP growth was as high as 41 percent, contribution of nonoil sector to the GDP dropped from 49 percent and 47 percent in 2010 and last five years, respectively, to 44 percent in 2011, according to the report. The nominal GDP grew by 29 percent in 2011 due to the increased contribution of mining and quarrying sectors to the GDP which grew by 41 percent. On the other hand, increasing of oil production and its higher prices contributed notably to upward trend in GDP by 70 percent. Source: Albawaba

Bahrain probes US joint investment

Bahrain Chamber of Commerce and Industry (BCCI) officials held talks with senior US consultants on ways for the private sector to reap the dividends of the Free Trade Agreement signed between the US and the kingdom. The BCCI officials met representatives of the American McGuire Woods Consulting Company and discussed ways of boosting the presence of Bahrain businessmen in the US market, promoting opportunities for joint investments and establishing joint ventures in both countries. They also explored the possibility of holding an exhibition to showcase Bahraini-made products in the US and setting up marketing activities and exchange visits of trade delegations. They also exchanged ideas to improve economic and trade relations between the private sectors in both countries, as well as reviewed economic and investment opportunities in Bahrain and the US. They also reviewed the possibilities of economic and trade co-operation and ways to boost intra-regional trade. The BCCI stressed the importance of following up on Bahrain's trade delegation's visit to the US last year, especially with regard to joint ventures that have been discussed. Source: TradeArabia News Service

Experts discuss Mena tax landscape

More than 250 senior finance and tax professionals outlined the evolving tax landscape in the Mena region at a key summit hosted by the Ernst & Young in Dubai on Sunday. The 'E&Y Mena Tax Conference 2012' was aimed at promoting business and improving transparency. Over the past year, regional developments and economic pressures have impacted the taxation policies of almost all countries in the region, remarked Sherif El-Kilany, Mena tax leader, E&Y, who chaired the conference. 'On the one hand, countries have moved towards a more transparent and business friendly tax environment. On the other, we are seeing increased regulation and enforcement of tax compliance leading to increased administrative burden which, for foreign businesses, may translate to potentially higher tax cost,' he noted. Most countries have lowered tax rates to encourage investment whilst fiscal policy dictates increased tax collections to strengthen public finances and fund social development. Sherif said, “From a fiscal and tax perspective, the changes we are seeing are largely positive, with business and investment friendly tax laws and increased transparency of regulation and enforcement. The changes rightly factor in the impact of the Eurozone crisis which continues to cast a gloomy shadow. We see Mena countries proceeding with their resources investment, infrastructure development and economic growth plans with more realism than we have experienced in the past,' he added. Regional tax authorities often take a much broader, and at times more local, interpretation of tax concepts that may be different from other jurisdictions. For example, the interpretation and application of new tax laws relating to foreign oil and gas contractors also requires local expert understanding and experience in dealing with the authorities, said the experts. Tax laws in Egypt, Oman and Qatar, now provide the tax authority the right to review the pricing of the related parties’ transaction and compare it with fair market price, they stated. Many countries, including Egypt and Qatar, have issued executive regulations that include accepted pricing methods and require tax payers to declare specific information for related parties’ transactions. More complexity in tax laws relating to dependent agency, thin capitalization and transfer pricing is being introduced in countries like Egypt, Qatar, Kuwait and Oman. Sherif added: “In Egypt, for example, if the debt equity ratio of any company exceeds 4:1, excess interest is not tax deductible. In Kuwait, interest paid to financial institutions outside Kuwait could be challenged. It is important to keep abreast of tax practice in various countries in the region as these practices constantly change and evolve,' he added. Commenting on the factors defining the fiscal landscape during the years ahead, Sherif said: 'From a regional tax perspective, we are likely to see a continuance of low corporate tax rates to encourage local and regional investment. Countries will continue to face fiscal pressures to increase tax collections to fund social programs and subsidies. We will also see a move towards more complex tax laws and regulations to broaden the tax net and enforce compliance. These measures will create an increasingly challenging tax environment in many countries as the assessment process will become more involved with increasing level of scrutiny relating to cross border transactions and related party transactions. These trends will continue in almost all Mena countries,' he added. The conference featured panel discussions where tax executives from global companies and E&Y tax specialists exchanged experiences and views to highlight recent changes in tax regulations and practices in Egypt, Iraq, Kuwait, Libya, Oman, Qatar and Saudi Arabia. The impact of global economic crisis and political changes on the fiscal and tax policies in the region was also discussed as were major issues faced by taxpayers in Mena countries. The key presentations at the summit included updates on regional transfer pricing policies and tax treaties. Source: TradeArabia News Service