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Arab Financial Newsletter: 17 June 2008 AFF Newsletter 17 June 2008
BankingBank of Bahrain and Kuwait tries to lure NRI customers
Bahrain-based Bank of Bahrain and Kuwait has taken a step forward to make the process of remittance smooth and swift for its non-resident-Indian clientele. BBK signed an agreement with Bahrain Indian International Exchange Company (BIIECO), one of the leading exchange houses in Bahrain, to provide all its NRI banking customers the opportunity of seamless remittance. Customers will now be able to remit funds from their BBK account in Bahrain to that account or any other in India.
Saudi Arabia witnesses boost in banking sector
The banking sector in Saudi Arabia is in the midst of a structural upturn and among the most profitable and efficient in the region, a report released yesterday said. EFG-Hermes, the leading investment bank in the Middle East and North Africa (Mena) region, released a comprehensive research report on the Saudi banking sector. The report, entitled "Best of Both Worlds," provides an in-depth analysis of Saudi Arabia’s banking sector, which is the second largest in the GCC region by asset size, currently estimated at $290 billion.
Sound future for Bahrain banking sector
Bahrain looks to be on track to consolidate its position as a leading banking location in the region. The sector is primed for a period of strong growth, with employment on the rise and record high assets being recorded. The Kingdom’s banking sector is already strong - there were 149 local and international institutions operating out of Bahrain, with combined assets of $245.8bn as of the end of last year. However, according to a report issued in late May by local financial advisory and management firm Securities and Investment Company (SICO), the country’s banking industry is about to shift up a gear.
Commodities
Cement prices set to ease on capacity boost in UAE
A meltdown in the "excessively exaggerated" cement prices in the UAE is predicted with additional capacities coming on stream through 2009. According to analysts’ projections, over the next two years, as existing cement producers add capacity and new players set up green-field plants, UAE’s total capacity is expected to touch almost 41 million tonnes to far exceed demand and resulting in oversupply. GCC Monetary Union
GCC Central Bankers Resist Pressure to Drop Pegs as They Discuss Monetary Union
Gulf Arab central bankers meet for the second time in less than three months to pick up the pace of Monetary Union (MU) as they resist pressure to drop their dollar pegs amid soaring inflation. The six-member Gulf Cooperation Council (GCC) will try to flesh out technical issues in their extraordinary general meeting to come up with a final document on monetary union to be presented to the region’s leaders by year-end. Please note: This story is cross-listed with the Inflation section. Gulf common currency to help reduce prices of essential commodities in GCC
The Gulf common currency, which is expected in 2010, will help reduce prices of essential commodities in the Gulf Cooperation Council (GCC) states, according to Fitch, the international rating agency. Fitch said in a report that the use of a common GCC currency will reduce the member states’ cost of global trade transactions to a great extent, and added that companies and consumers would benefit as a result of fall in prices. Please note: This story is cross-listed with the Inflation section.KSA Central Bank: Clear roadmap for currency union by September
Central Bank Governor Sultan Nasser Al Suweidi said the draft agreement by GCC central bank governors on the creation of a monetary authority by 2009 and an eventual currency union is almost final except for some minor errors, but a clear picture about the roadmap would emerge by September this year at a crucial meeting in Jeddah. Speaking to the media on the sidelines of a meeting of the national anti-money laundering committee in Dubai, Suweidi said the draft agreement would be presented to GCC finance ministers at the Jeddah meeting.
Oman will not be part of monetary union Oman yesterday reiterated it would not join its partners in the six-nation Gulf Co-operation Council in the establishment of a landmark monetary union following its last year’s decision to pull out. The Central Bank of Oman said it did not attend last week’s meeting of the GCC central bank governors in Doha where they announced the completion of the draft for the long-awaited monetary union to be presented by the governors and the GCC finance ministers at an annual summit in September. Growth
Syria reaping results of economic reforms
The Syrian economy saw notable growth for the second year in a row as the state is reaping results of its reforms through increased confidence and higher growth rate and GDP. Changes that improved the investment environment and bolstered the partnership principle helped move the market towards competence, just distribution of wealth, reduction of poverty rate, reducing unemployment, and more sustainability of resources. More room for private sector activity also helped. Average Gross Domestic Product growth between 2005-2007 was 5.8 percent, with GDP going up from 1135 billion to 1193 billion Syrian pounds (SYP).
Bahraini Industrial sector grows 250% in three years
The Kingdom’s industrial sector grew by a robust 250 per cent over the past three years. Such was the pace that it grew by an impressive 87 per cent in 2007 alone and the number of registered companies in Bahrain rose to 75,303 by the last yearend. The value of accumulated local and foreign direct capital reaching the Kingdom touched $32 billion in 2007, the Industry and Commerce Minister, Dr Hasan Fakhro said yesterday, showcasing the rapid rise of the Kingdom on the global investment map.
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Morocco forecasts 6.2% economic growth in 08
The Moroccan Finance Minister said that the country’s economy is expected to grow by 6.2 percent in the current year, Kuwait Times reported. He further pointed out that Morocco’s economy expanded by 2.2 percent in the previous year. It was also forecasted that the Kingdom’s yearly inflation, which imports all its petroleum will reach between 2.7 and 2.9 percent in 2008. GCC economy set to exceed $1tr mark
The Gulf Cooperation Council (GCC) economy is enjoying a spectacular boom and is set to break the $1 trillion barrier in nominal terms this year, marking a three-fold increase in only five years. This will also push the GCC economy past that of South Korea and put it on a par with India. According to a monthly report of Samba Financial Group, real GDP growth, which is expected to reach 8.2 percent in 2008, has tended to fluctuate in line with oil output. The contribution of the non-oil sector has been more vigorous and more stable, and has been the engine of the current boom.
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Health Care
KSA- Health coverage for 4 million domestic helpers
The Saudi Ministry of Health announced more details regarding a new compulsory health insurance scheme that will be implemented shortly for the estimated four million domestic workers in the Kingdom. "We have already appointed 986 government-owned medical clinics, hospitals, primary health care centers and pharmacies throughout the Kingdom to treat patients who will be insured under this scheme, which is in the final stages for implementation," Health Minister Dr. Hamad Al-Manie said.
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Shortage of nurses hits health sector in UAE
Shortage of nurses is beginning to tell on the UAE health sector and government hospitals are pushing for more benefits and for the upgrading of the recruitment system to retain the experienced nursing workforce currently available. The seriousness of the issue can be gauged from hospital statistics. Internationally, the ratio of nurses to patients is set at 1:5, in general, and one nurse to one or two patients at the most for the Intensive Care Unit (ICU) of each hospital. But, this is not the case in the UAE. One hospital in the Al Baraha area of Dubai has a ratio of one nurse to 10 patients, and in the ICU, one nurse to four patients.
Dubai Health Authority to Centralize Hospital Monitoring
Dubai-based private and government hospitals and clinics will have to specify their patient-handling capacity before Dubai’s Health Funding System comes into effect, according to a Dubai Health Authority official. Hospitals and clinics cannot register a number of patients, which they may be unable to handle later and risk losing their licence, explained the official.
Inflation
Kuwait’s inflation surges to 10% in Feb
According to a report released by Kuwait’s central bank, inflation surged for a third month in February to a yearly 10.14 percent attributed to higher food costs and rents, Gulf Daily News reported. The report further added that inflation is rising across the region, reaching 10.5 percent last month in Saudi Arabia, the highest since the oil boom of the 1970s.
Dubai Customs: 3% VAT will not stoke inflation
A three per cent Value Added Tax (VAT), which is expected to replace customs duties by early next year, will not have any major impact on UAE’s runaway inflation currently skirting an all-time high of 12 per cent. Allaying widespread concern that VAT would aggravate inflationary pressures, Dubai Customs Director-General Ahmad Butti Ahmad said revenues from the new VAT system would match that from customs duties which are to be phased out when the new taxation is implemented. Please Note: This story is cross-listed with the Taxation section.GCC Central Bankers Resist Pressure to Drop Pegs as They Discuss Monetary Union
Gulf Arab central bankers meet for the second time in less than three months to pick up the pace of Monetary Union (MU) as they resist pressure to drop their dollar pegs amid soaring inflation. The six-member Gulf Cooperation Council (GCC) will try to flesh out technical issues in their extraordinary general meeting to come up with a final document on monetary union to be presented to the region’s leaders by year-end. Please note: This story is cross-listed with the GCC Monetary Union section.
Food Price Inflation in the KSA: A sectoral analysis
Rice is an essential foodstuff for about half of the world and remains highly protected and regulated. For Saudi Arabia, it is one the most important food items, consumed by 85 percent of all Saudis on a daily basis and by nearly 80% of the Kingdom’s expatriate population. Rice consumption in Saudi Arabia, at 45 kilos per capita per annum, is among the highest in the world, and all of the Kingdom’s rice is imported. Rice imports to Saudi Arabia over the past decade have been growing by more than three times the annual population growth rate. If we assume even a conservative scenario, then imports will rise by 58 percent between 2008 and 2014. Gulf common currency to help reduce prices of essential commodities in GCC
The Gulf common currency, which is expected in 2010, will help reduce prices of essential commodities in the Gulf Cooperation Council (GCC) states, according to Fitch, the international rating agency. Fitch said in a report that the use of a common GCC currency will reduce the member states’ cost of global trade transactions to a great extent, and added that companies and consumers would benefit as a result of fall in prices. Please note: This story is cross-listed with the GCC Monetary Union section.
Abu Dhabi rents set to rise by 25%
The Abu Dhabi real estate market is set to experience immense growth over the next two years, spurred on by the recent wave of investments and developments set to redefine Abu Dhabi’s image and appeal, an EFG-Hermes report announced yesterday. According to the research from the regional investment bank, this growth will be accompanied by a 20-25 per cent increase in residential rents by the end of 2008 and by a further 15-20 per cent increase in 2009. The market outlook for residential, commercial, retail and leisure segments uniformly indicates phenomenal growth.
Rising rents main cause of inflation in UAE
Ever-escalating rents is the main cause of rising inflation in the country, especially in the emirate of Abu Dhabi, according to a report released here yesterday. The UAE witnessed during the past year consecutive increases in housing rents, cost of production and prices of goods and services, pushing the overall inflation rate in Abu Dhabi to 10.9 at the end of 2007 and to 11.5 in the first quarter of 2008, said the report by the Abu Dhabi Department of Planning and Economy. Al-Assaf, Paulson Agree on Saudis Keeping Dollar Peg U.S. Treasury Secretary Henry Paulson and Saudi Arabian Finance Minister Ibrahim Al-Assaf agreed that the Gulf kingdom benefits from keeping its currency pegged to the dollar. The riyal’s peg “has served this country and the region well,” Paulson said today at a joint press conference in Jeddah. “I totally agree with Secretary Paulson,” al-Assaf said. “As we have said many times, we have no intention of de- pegging or of revaluation.” Infrastructure Oman plans to build a railway
Oman is studying a plan to establish a railway in all areas of the country to connect them "economically and commercially," according to an official. The Director General of the Supreme Committee for Town Planning, Salim Bin Mohammad Al-Affani, said in remarks published by the daily press on Monday that this study envisaged setting up a railway to connect all regions of the country, including key residential towns, industrial towns, and under-construction towns like Al-Duqm industrial area.
Read more...Saudi Arabia signs deals for highway developments
The Saudi Transport Minister recently inked agreements with 12 private sector companies for construction of highways in eight regions of the Kingdom, Arab News reported. Highways leading to Makkah, Madinah, Riyadh, Al-Qassim, Jouf, Jizan, Tabuk and Asir from all corners will be developed because of the growing need for more transportation facilities. The project will cover a stretch of 866 kilometers under the contracts and each contractor has been given a set target to complete his project within the given time. Moreover, the ministry has appointed a special committee to supervise the progress of the work undertaken by the contractors.
Dubai Investor: Call for unified Shariah board A unified Shariah board at national and international levels is necessary to encourage development of Islamic finance instruments, as it will give wider acceptance and diversity to investors, an expert on Islamic banking said. UAE share in Islamic banking assets by market value is around 33 per cent while Saudi Arabia contributes 24 per cent, revealed Alpen Capital Managing Director Sanjay Vig during a recent banking summit in Dubai. “It is expected that Saudi Arabia to lead region by 2010 with 52 per cent share and the UAE with 24 per cent. Islamic banking assets grew three-time faster than conventional banking assets over the last five years,” informed Vig. Legal
J.P. Morgan Official Is Held In an Inquiry of Dubai Bank A senior Mideast executive at U.S. investment bank J.P. Morgan Chase & Co., is being detained in Dubai as part of a widening fraud investigation at Dubai Islamic Bank, a police official said Sunday. Omair Mooraj, who joined J.P. Morgan in September as managing director and head of Islamic banking for the region, is one of several people being held by Dubai police in the inquiry, the official told Zawya Dow Jones. A representative for J.P. Morgan in London declined to comment on the matter when called, as did J.P. Morgan officials in Dubai. Oil & Energy
Saudis consider boost in oil outputOil prices reacted with caution on Monday to Saudi Arabia’s plans to boost its oil production to its highest level in more than 25 years in order to bring down record prices and ease political pressure from the US and other developed countries, increasing its output capacity by up to 500,000 barrels a day. However, the Saudis have already hinted they would not bring all that amount to market. By acting unilaterally Saudi Arabia could cause division within the Opec oil cartel, many of whose members are unable to boost production. Gulf states urged to open oil markets for investment
US Treasury Secretary Henry Paulson has urged oil-producing countries to open their oil markets to foreign investment, which would support faster and more efficient growth in the region. Addressing an open investment forum organised by the US-UAE Business Council in Abu Dhabi yesterday, he said opening up the Gulf economies to foreign investment and trade will make them more prosperous and stable.
Please note: This story is cross-listed with the Sovereign Wealth Funds & Other Investments section. KSA’s cabinet says current oil prices are unjustifiable
Saudi Arabia called for an urgent meeting of oil producing and consuming countries to discuss what it called the "unjustifiable rise in oil prices." It also offered to coordinate with the Organization of Petroleum Exporting Countries (OPEC) and other major producers to ensure adequate supply in order to curb prices. "Current oil prices are unjustifiable in terms of petroleum facts and market fundamentals," the Cabinet said. However, the Kingdom pointed out that the market has sufficient supply and an increasing commercial inventory. Oil prices surged by nearly $11 on Friday 6 June to a new record above $139 a barrel, partly on the weakness of the dollar and also because of increasing tension between Israel and Iran, the world’s fourth largest oil exporter.
UAE’s crude production jumps 0.38% in May
A report issued by the International Energy Agency (IEA) showed that the UAE’s crude output rose 0.38 percent on the month to 2.66 million barrels per day (bpd) in May 2008, Gulf News reported. The report further showed that the UAE pumped an average 2.65 million bpd in April and 2.54 million bpd of crude oil in March of the current year.
Regulation
Bahrain’s TRA releases final package of measures
The Telecommunications Regulatory Authority (TRA) yesterday released its final statement detailling a comprehensive package of pro-competitive and pro-consumer regulatory measures along with a determination on Bahrain Telecommunications Company’s significant market power in certain relevant retail markets and a report on responses received as a result of TRA consultation last February. The final statement issued yesterday outlines nine main regulatory measures to be implemented.
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