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Magreb Bank launches to drive regional economic integration

19 January 2016 Comments (0) Featured, Middle East, Politics

Maghreb

The new Maghreb Bank for Investment and Foreign Trade is a significant step in efforts to create a regional economy.

The economic integration of five countries of the Maghreb region of Northern Africa took a step forward with the launch of the Maghreb Bank for Investment and Foreign Trade.

The bank will finance joint projects of the five member nations of the Arab Maghreb Union – Algeria, Libya, Mauritania, Morocco and Tunisia. It launched with $150 million in capital contributed by the member countries.

The bank will invest in projects including infrastructure, transportation, telecommunications and electrical power. It will also work to strengthen intra-Maghreb trade.

The bank, based in Tunis, was launched December 21. Nouerddine Zekri, former Tunisian Secretary of State for Development and International Cooperation, was named Senior General Manager of the bank.

A step towards integrating regional economies

The launch marks a significant step in the long-delayed effort to boost trade within the region by integrating the economies of the five countries, which together represent a market of about 100 million consumers.

Despite decades of regional political tensions, the economic appeal of the integration effort has remained strong.

Exports from and to countries within the region are extremely low and the integration promises to increase those. At the same time, most of the countries are highly dependent on trade with the European Union and more intra-region trade will reduce that vulnerability.

Integration promises to grow GDP

Economic integration would increase growth in GDP by an estimated 2-3 percent and increase job creation, according to one study, which called it a potential “game changer’’ for a region that is the least integrated in the world. On average, trade between the five countries represents only three percent of their global trade.

“The benefits would be significant. It could increase intra-regional commerce by 5-12% and stimulate job growth and help anchor stability,” the report from the Tunis Conference on Regional Economic Integration said.

Nouerddine Zekri

Nouerddine Zekri, the first General Manager of the new Maghreb Bank

Boosting trade within the region

The report said trade within the region could grow by 5 to 12 percent with integration.

“This growth could in turn translate to significant job creation particularly if enhanced trade encompasses both goods and services,” the report said, noting that a consumer market of about 100 million would attract greater foreign and local investment and offer smaller businesses opportunities to expand.

National economies struggle

The growth would help economies that have struggled.

Since 2011, growth of GDP in the region has averaged only 2 percent, compared to 5 percent during the six years prior to the financial crisis of 2008. Economic growth has failed to keep pace with population growth. Unemployment is high, averaging 12 percent in Algeria, Morocco and Tunisia, according to the European Commission.

At the same time, the Maghreb countries are highly dependent on trade with the European Union, which proved to be vulnerability during the euro crisis.

Algeria, Libya, Morocco and Tunisia export as much as 70 percent of their products to the EU and those exports represent 20 to 30 percent of their GDP. Morocco and Tunisia also depend heavily on European tourists, which make up about 40 percent of their arrivals.

While one goal is to reduce dependence on exports to Europe, an integrated regional economy might create a more effective bargaining bloc to negotiate in with the European Union.

Political tensions, unrest stall progress

The five countries first signed the Treaty of Marrakesh agreeing to integrate in 1989. The framework for forming a bank was signed in 1991 but the actual bank was not approved until 2006.

Political tensions stalled the economic integration effort for more than two decades. Initially, disagreements between Morocco and Algeria over territory in the Western Sahara contributed to delays. More recently, political disruption and war created uncertainty about economic stability in the region.

The differing economic structures of the countries have also posed a challenge to integration. Morocco and Tunisia have relatively liberal market economies while Algeria and Libya economies were more tightly controlled. Mauritania’s economy is largely based on subsistence agriculture.

Among the five countries, Algeria and Morocco have the largest economies with $552 billion and $250 billion GDP respectively. The GDP of Mauritania, totals an estimated $8 billion.

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Why Would Saudi Aramco Consider an IPO?

18 January 2016 Comments (0) Business, Featured, Middle East

Saudi Aramco

Saudi Arabia, the world’s biggest producer of crude oil, is considering a public offering of shares in its state-owned oil company Aramco

Saudi Arabia, the world’s biggest producer of crude oil, is considering a public offering of shares in its state-owned Saudi Arabian Oil Company (Saudi Aramco) and / or some of its downstream assets. The news was announced by the influential Saudi deputy crown prince and the country’s defense minister, 30-year-old Mohammed bin Salman, in an interview with The Economist. He framed it as a step toward transparent governance of state-owned oil and the Saudi market: “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco.”

His announcement was reaffirmed in an official statement released by Aramco: “Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the Company’s shares and / or the listing of a bundle of its downstream subsidiaries.”

Saudi Arabia facing significant political and economic challenges

Many are asking why the royal family would consider selling shares in its largest asset, especially when it’s at its lowest point since 2004. The complete control of Saudi Arabia’s oil is in large part the source of the government’s power and success. Some have suggested that Aramco has predicted the end of the age of oil, and that the Saudi’s are looking to cash out while they can. But, on the other hand, it could be more linked to the Kingdom’s politically and economically challenging time.

Oil income makes up about 90% of government revenue, but with crude oil prices at their lowest levels in over a decade, the Kingdom is losing billions of dollars in revenue. And while it is sitting on around $630 billion in reserves, Saudi Arabia’s 2015 budget deficit was 15% of GDP, and a record budget deficit of $98 billion is expected in 2016. Also, instead of slowing production to increase oil scarcity, as has so often been Saudi Arabia’s tactic, last year, Aramco pumped a record 10 million plus barrels a day to compete with the US and Russia. The strategy cost Saudi Arabia around $120 billion of its foreign currency reserves. And the Kingdom is starting to struggle to maintain its expensive military campaigns in Yemen and Syria, and to manage the resulting clashes with Iran.

The country is also facing high unemployment, currently at 12%, and a demographic bulge, which counts more than two thirds of the population under the age of 30. The bulge will require almost three times as many jobs in the coming decade than were created between 2003 and 2013 during the oil boom if the country is to avoid soaring unemployment and increasing the volatility of the political environment.

So as its most valuable asset shrinks, the Kingdom needs to find a way to diversify its economy in order to improve its long term economic capabilities. Working with McKinsey, Saudi Arabia has developed long term path that involves pushing $4 trillion into eight new sectors (finance, construction, healthcare, tourism and hospitality, retail and wholesale trade, petrochemicals, manufacturing, and mining and metals) to contribute 60% of growth. However, it seems likely that adding value across all of its oil related actions and managing its hydrocarbon resources, both conventional and unconventional, would also be part of the plan to prepare Saudi Arabia for financial and economic stability. It would also signal to Iran, the US, and Russia that Saudi Arabia is in the oil-game for the long-haul.

Saudi Aramco gas facility

Saudi Aramco gas facility

Saudi Aramco IPO

The details of the potential IPO are not yet clear. Aramco’s statement confirmed that: “Once the study of these various options is complete, the findings will be presented to the Company’s Board of Directors which will make its recommendations to the Saudi Aramco Supreme Council.” Aramco Chairman Khalid Al-Falih adds: “There is no plan that is concrete at this stage to do the listing. There are studies ongoing. Serious consideration. It will take time.” Falih also clarified that an IPO could be “shares in Aramco and/or some downstream assets. We are considering a listing at the top. So a listing of the main company, and obviously the main company will include upstream.”

But, it does seem more likely that Aramco will offer a small portion of downstream assets – a bundle of refineries or other assets such as petrochemical units – in order to allow the state to retain full control of its oil fields which produce more than 10 million barrels a day. Although significantly less valuable than a full IPO, downstream assets would still offer buyers a piece of a huge global business which processes more than 3.1 million barrels a day, with plants across the world in Saudi Arabia, the US, South Korea, Japan, and China.

$10 trillion valuation

Looking at a full IPO, the valuations are simply enormous. Based on claims that the company’s reserves are 265 billion barrels of crude oil and 50 billion barrels of natural gas, its market capitalization is estimated to be $10 trillion. This would make it significantly bigger than the world’s current most valuable company, Apple, worth $741.8 billion. It would also make Aramco significantly more valuable than ExxonMobil, the world’s current most valuable publicly traded energy company at $357.1 billion.

Even a listing that included just 5% of Saudi Aramco shares could raise around $500 billion, a figure far larger than Alibaba’s history topping $170 billion IPO of 2014. It would also make it too big to be included in Saudi Arabia’s stock market, the Tadawul.

The listing fees for the bank taking a company of this size public would also be huge, and there are already reports of strong competition for the role. HSBC, Citi, Barclays, Bank of America Merrill Lynch, and Deutsche Bank hold the biggest market share in the Middle East and Africa, making them likely contenders. Citi and Deutsche Bank have also already worked on deals with Saudi Aramco. But we’ll have to be patient until we can find out which bank is set to make a figure of around $17.5 billion working on the deal.

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Morocco trade deficit falls 18.7% in 2015

15 January 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

RABAT (Reuters) – Morocco’s trade deficit fell 18.7 percent to 152.27 billion dirhams ($15.43 billion) in 2015 compared with a year earlier, thanks to lower import costs and higher exports, the foreign exchange regulator said on Friday.

Energy imports fell by 28 percent from a year earlier to 66.84 billion dirhams, data showed. Wheat imports also fell 32.6 percent as the local harvest hit a record high last year.

Total imports fell 5.6 percent and total exports rose 6.7 percent from a year earlier to 214.27 billion dirhams, led by a 21 percent rise in auto exports and 16.3 percent hike in phosphate sales.

Exports covered 58.5 percent of imports for the first time in 10 years, the regulator said.

Tourism receipts dropped 1.4 percent to 58.51 billion dirhams, while remittances from the 4.5 million Moroccans living abroad rose 3 percent to 61.75 billion dirhams.

Foreign direct investment jumped 6.7 percent to 39 billion dirhams.

 

Figures are in billions of dirhams:

 

Jan-Dec Jan-Dec Jan-Nov

2015 2014 2015

EXPORTS 214.27 200.80 195.29

IMPORTS 366.53 388.08 335.32

BALANCE -152.27 -187.27 -140.02

MIGRANT

REMITTANCES 61.75 59.97 56.68

TOURISM

RECEIPTS 58.51 59.31 54.66

FOREIGN DIRECT

INVESTMENT 39.01 36.55 33.96

 

($1 = 9.8654 Moroccan dirham)

 

(Reporting by Aziz El Yaakoubi; Editing by Alison Williams)

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Report finds high business risk in 27 African and Mid-Eastern nations

15 January 2016 Comments (0) Africa, Business, Featured, Middle East

syrian war

Amidst unrest and war across Africa and the Middle East, a new report on risks to business in different nations paints a sobering picture.

Only 10 African and Middle Eastern countries are considered low risk for businesses, according to the report by Control Risks, a global risk management consultancy. Nearly three times as many countries – 27 – pose an extreme or high risk to companies operating within their borders.

Globally, insurgency is reshaping political and business affairs, according the report. In both business and politics, the established order is being disrupted by forces that appear suddenly, the report said.

Nowhere is that more clear than in Africa and the Middle East, according to Control Risks’ evaluation of political risk in 68 countries in the region. The rating is based on the likelihood that instability or interference or other factors such as corruption or infrastructure could negatively affect business operations.

Extreme risk in Burundi, CAR and Somalia

In sub-Saharan Africa, only three countries were given a rating of “extreme” risk: Burundi, Central African Republic, and Somalia.

Burundi has experienced widespread violence and the report predicts that the political and security environment will worsen in 2016, especially in Bujumbura, the capital. With the government unwilling the make concessions to its opposition, the report asserts that the risk of a coup will increase.

Meanwhile, Somalia and the Central African Republic are attempting to emerge from years of violence but remain unstable, the report said.

Violence in Burundi

Violence in Burundi

Piracy off East Africa coast declines sharply

It said a return to high levels of piracy off the coast of Somalia is unlikely in 2016.

The report said anti-piracy measures off the coast of Somalia have been effective, reducing the amount of activity to just one percent of its peak in 2011. But that might not last.

“Governments and shipping companies face the challenge of responding to the diminished threat without unraveling the work that helped to curtail the problem,” the report said, noting the paradox that the success of anti-piracy efforts could well lead to their being diminished.

However, the report cautioned about continuing offshore kidnappings and high jacking off the coast of Western Africa.

U.S. may increase anti-terror efforts in sub-Saharan Africa

On the terrorism front, the report predicts that U.S. president Barack Obama, in the final year of his term, will be more assertive internationally, including lending more support to counter-terrorism efforts in sub-Saharan Africa.

Boko Haram, the Nigerian militant group, is coming under more pressure from multiple governments and is likely to be forced to relinquish territory and instead rely on hit-and-run attacks, according to the report.

Nigeria was one of 16 countries that received a “high” risk rating. The report said the pending end of a program of amnesty for militants, and falling oil prices could worsen tensions.

Other countries with a high risk rating include: Chad, Comoros, Congo, Democratic Republic of Congo, Cote d’Ivoire, Equatorial Guinea, Eritrea, Gambia, Guinea, Guinea-Bissau, Lesotho, Niger, South Sudan, Sudan, and Zimbabwe.

Twenty-three nations pose medium risk

These 23 countries were given a medium risk rating: Angola, Benin, Burkina Faso, Cameroon, Djibouti, Ethiopia, Gabon, Ghana, Kenya, Liberia, Madagascar, Malawi, Mali, Mozambique, Rwanda, Sao Tome, Sierra Leone, South Africa, Swaziland, Tanzania, Togo, Uganda, and Zambia.

Only six countries – Botswana, Cape Verde, Mauritius, Namibia, Senegal, and Seychelles – received a low risk rating.

Middle East turmoil evident in ratings

The report also reflects political unrest and war in Northern Africa and the Middle East, where only four countries were rated low risk.

Three war-torn countries – Iraq, Syria, and Yemen – were rated extreme risk.

High-risk countries were Algeria, Egypt, Iran, Libya, and the Palestinian Territories.

Medium risk countries were Bahrain, Jordan, Kuwait, Lebanon, Mauritania, Oman, Saudi Arabia, and Tunisia.

Israel, Morocco, Qatar, and the United Arab Emirates were rated low risk.

By comparison, the United States is ranked low risk while China and Russia are ranked medium risk.

Globally, Control Risks said, the risk outlook is the worst it has been in the past decade. It cited, terrorism, instability in the Middle East, cyber-risk and Chinese economic problems as factors creating a “potentially more volatile world in 2016.”

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Crude oil falls as market braces for more Iranian oil

15 January 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

TOKYO (Reuters) – U.S. crude oil futures fell in Asian trade on Friday, heading lower after posting the first significant gains for 2016 in the previous session, as the prospect of additional Iranian supply looms over the market.

West Texas Intermediate (WTI) was down 48 cents at $30.72 a barrel at 0345 GMT. On Thursday the contract rose 72 cents, or 2.4 percent, to settle at $31.20. It hit a 12-year low of $29.93 earlier this week.

WTI is on track to post a third consecutive weekly loss, down more than 6 percent. The contract is down nearly 18 percent from a 2016 high on January 4.

Brent crude was down 20 cents at $30.68 a barrel. The global benchmark settled up 72 cents, or 2.4 percent, at $31.03 a barrel on Thursday, after falling to $29.73, its weakest since February 2004.

Over the previous eight sessions, Brent had lost about $7 a barrel, almost 20 percent.

Western sanctions on Iran are expected to be lifted within days, potentially paving the way for more crude oil exports from the country, under a landmark agreement on Tehran’s disputed nuclear programme.

“This is three or four months ahead of what the market was thinking last year, so it just adds fuel to the fire,” said Tony Nunan, Oil risk Manager, Mitsubishi Corp in Tokyo.

Iran has removed the sensitive core of its Arak nuclear reactor and U.N. inspectors will visit the site on Thursday to verify the move crucial to the implementation of the atomic agreement with major powers, state television said on Thursday.

Any additional oil from Iran would add to the glut that has pushed oil prices into a deep slump since the middle of 2014.

“It is the wrong time for Iran to be returning to the oil market, both for the market and likely also for Iran,” Phillip Futures said in a note on Friday.

“It would have been so much more ideal for Iran to return to the oil scene if prices were soaring at $100,” it said.

 

 

(By Aaron Sheldrick. Reporting by Aaron Sheldrick; Editing by Richard Pullin)

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Middle Eastern investment in global real estate surges

14 January 2016 Comments (0) Business, Featured, Middle East

London real estate

Investment in real estate can be a fickle mistress. The ebb and flow of the cyclical patterns of real estate values can be hard to read at times, and investments, particularly in residential real estate, can lead to decreases or stagnation of your original investment. But some sectors are relatively safe, especially for experienced players who look at the patterns established over many years. Foremost of these ‘safer investments’ are the areas of commercial and hospitality real estate which can both offer big returns when the correct choices of properties are made. And of course, the old adage of any investment in real estate is ‘location, location, location’ and that is especially true when you are looking at the higher end of the market, be it commercial or residential.

Record spending on commercial real estate

Recent research by CBRE, the world’s leading commercial real estate company, highlights rising levels of outward investment in commercial real estate from Middle Eastern countries, and showed that in the first half of 2015 around US$11.5 billion was spent on commercial property worldwide. This far surpasses the previous high of US$9.6 billion recorded in the first half of 2007. Much of this investment comes from sovereign wealth funds (SWFs), particularly those of the United Arab Emirates and Qatar. Of the US $11.5 billion coming out of the area, US$8.3 billion (or 72%) of that came from SWFs.

From a macroeconomic perspective this increase in real estate spending by Middle Eastern investors is not surprising. Oil prices sit at seven year lows and investment bank Goldman Sachs predicts that this situation will not improve any time soon, especially with increases in supply and reductions in demand an ongoing issue. So, with potential revenue decreasing at a steady rate, the fund managers of the Middle East are looking at the best options to invest and receive a high level of return.

The real estate industry will continue to grow

The real estate industry globally has generally managed to weather the recent recessions better than some other sectors. This is partly due to increased activity in Asia which has offset any declines in other areas. Higher disposable incomes and relatively low rates of unemployment in many economies has also been a factor that has protected the real estate industry. Forecasts of the 10 year period from 2010 to 2020 predict that industry value added may increase by 4.5% per annum – well ahead of predicted global GDP growth in the same period. With annual revenue of over US$3 trillion and a global workforce of over 11 million, this is a sector that will continue to grow and adapt to the cyclical patterns of individual markets and economies.

Location, location, location

New York real estateAs mentioned, location is a crucial factor, and it comes as no surprise that some of the world’s major conurbations are the primary beneficiaries of this surge in spending. London leads the field, with US$2.8 billion spent on commercial property in the first 6 months of 2015, with Hong Kong (2.4 billion) and New York (1.1 billion) following in its wake. It is worth noting however that if we examine total real estate investment rather than just that originating in the Middle East, New York is leagues ahead of its English rival with a staggering US$40.1 billion of investment in real estate over the first half of 2015 compared to London’s 19.4 billion and Los Angeles’ 19.3 billion.

Change in focus to hotel properties

As well as the dramatic increase in total investment from the region, there is another distinctive factor in Middle Eastern spending on real estate. In every year from 2007 to 2014, the bulk of investment has been aimed at the office market. As this has reached saturation point in many cities, characterized by empty units, falling rents and an increase in incentive packages to attract tenants, the fund managers and individual investors have shifted their focus to the hospitality sector and to hotels in particular, which offer attractive long-term revenue streams. Of the US$11.5 billion spent in the first six months of 2015, $6.8 billion was invested in the hotel industry, with $2.5 billion being spent on hotels in London and $2.4 billion in Hong Kong. Given that this sector only attracted $1.8 billion for the whole of 2014, this is a significant increase and emphasises the increasing diversity of investment strategies by Middle East based investors.

Middle Eastern money looks for new opportunities

This increase in real estate spending, and indeed the change in focus, does not look like it will abate in the near future. Investment in the Americas looks like it will continue to increase into 2016 as Middle Eastern money looks for new opportunities outside the energy industry and outside its traditional comfort zone of Europe. While Asia appears to be a market that has so far eluded investment from the Middle East – mainly due to the dominance of China in many of the developing economies – one cannot rule out astute investors continuing to cast their net over a wider geographical area.

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Islamic Finance Opens up Business and Trade Opportunities with Muslim Nations

13 January 2016 Comments (0) Business, Featured, Middle East

islamic-business

The $2 trillion Islamic finance market is growing rapidly and is becoming a crucial mechanism for the rest of the world to trade with Muslim nations

In recent years, Islamic finance has grown rapidly across the world, and Islamic banks and associated products now make up a $2 trillion market (World Bank). It is also becoming a crucial mechanism for the rest of the world to develop business and trade opportunities with Muslim nations.

Islamic Finance: An Overview

In brief, Islamic finance is an economic and commerce system which abides by the laws laid out in the Qur’an. Its primary motivation is the prohibition of riba, earning interest, which can be loosely translated as Usury or making money from money. It also responds to the fact that money itself is considered to have no intrinsic value, being simply a medium of exchange. There are a number of ways that Islamic finance is structured to comply with these factors.

A sukuk is a sharia-compliant bond. It removes the payment of interest, and instead sees the parties own the debt: “securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets”. A sukuk is also used in Islamic mortgages, whereby the bank buys a property and the customer then either buys it back at an agreed above market value paid in instalments (murabahah), makes monthly payments comprising both a portion of the purchase price and a rental fee until outright ownership (ijara), or shares the returns from the asset with the bank in proportions agreed in advance (musharaka).

In terms of investments, individuals can enter into a Wakala, which sees the bank act as an individual’s manager, using the individual’s money to invest in sharia-compliant trading activities in order to generate an agreed target profit for them. Financial trading of, and investments in things that are forbidden by the Qur’an are also forbidden (e.g. alcohol, tobacco, pornography, gambling, armaments companies, or non-halal products).

In regards to bank accounts, instead of being offered an interest rate, as with investments, target profit figures are agreed. The targets offered will be along the lines of those elsewhere in the savings market.

Finally, risk is also a central area of Islamic finance: speculation (maysir) and uncertainty (gharar) are considered haram (forbidden). This rules out derivatives, options, futures, and conventional insurance. Instead, Islamic insurance (takaful) works whereby the insured individual contributes to a fund which is overseen by a manager and the individual receives any profits made from the fund’s investments.

Islamic Finance Growing Around the World

The first experiments in Islamic finance took place in the early 1960s in Egypt, but it really took hold in the 1970s as oil wealth boomed. A demand-driven niche that is growing fast, over the past decade Islamic finance has grown between 10% and 12% annually. Between 2009 and 2013, Islamic finance assets of commercial banks rose 17% (according to Ernst and Young). By mid-2014, global Islamic finance assets reached $1.9 trillion, and these assets are estimated to have surpassed the $2 trillion mark at the end of that year.

About 75% of the industry is concentrated in the Middle East North America (MENA) region, although rather unequally distributed. Figures show that in 2015, Saudi Arabia held 31.7% of the world’s Islamic finance assets, followed by Malaysia (16.7%), UAE (14.6%), Kuwait (10.5%), and Qatar (7.7%).

But it is not restricted to Muslim nations. And in recent years it has started gaining significance worldwide. Islamic banks are in operation in countries including Denmark, France, Luxembourg, Nigeria, South Africa, Switzerland, and the UK. Luxembourg is considered the hub of Islamic finance in Europe: it has 111 Islamic funds, behind only Malaysia and Saudi Arabia; it was the first European country to join the International Islamic Liquidity Management; and Luxembourg’s Central Bank was the first European central bank to become a member of the Islamic Financial Services Board. Elsewhere, in 2014, Britain became the first non-Muslim country to issue an Islamic bond: its £200 million sale attracted orders of £2.3 billion. And last year, the Islamic Bank of Britain reported a 55% increase in applications for its savings accounts by non-Muslims.

Hong Kong has since raised $1 billion from its first sukuk; in 2015, Goldman Sachs became the first US bank to issue a sukuk, raising $500 million with its debut sale; and the Bank of Tokyo-Mitsubishi UFJ, France’s Société Générale, and a number of other European and American banks, including Citibank and HSBC, are expected to launch Islamic finance operations in the next year. The World Bank and the General Council for Islamic Banks and Financial Institutions (the global umbrella of Islamic financial institutions) are looking to continue driving the development of Islamic finance globally, signing a Memorandum of Understanding (MoU) in 2015.

Islamic banks must improve performance

Although in its early stages of development, one of the draws of Islamic finance is that it appears to be more resilient to shock. During the 2008 crash, Islamic banks remained stable. This could be because excessively risky strategies, speculation, and uncertainty are banned, and risk-sharing is promoted. And as worldwide interest in ethical finance increases, many think that Islamic finance may be more able to prevent financial bubbles.

However, if Islamic banking is to effectively compete with its conventional counterparts, performance must improve. 2006-2011 data shows that conventional banks averaged a ROE of 14.6% where Islamic banks averaged 7.1%. Similarly, conventional banks averaged a 5-year cost to income of 33%, where Islamic banks averaged 51%.

Increasing interest from conventional institutions signals that Islamic finance is set to become a highly competitive market. And if embryonic challenges can be overcome, it will present a new route for business between the Middle East and the rest of the world.

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UAE moves to quash talk of OPEC emergency meet as oil slumps

12 January 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

ABU DHABI (Reuters) – The United Arab Emirates moved to quash talk of a potential emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC) after Nigeria’s oil minister said on Tuesday a “couple” of members had requested a gathering.

Benchmark Brent crude futures slipped towards $30 a barrel to a near 12-year low before rising slightly. They have shed almost three-quarters of their value since mid-2014.

Such market conditions supported an emergency meeting to review whether OPEC should change strategy, Nigerian Minister of State for Petroleum Resources Emmanuel Ibe Kachikwu told reporters on the sidelines of an energy conference in Abu Dhabi.

However, UAE Energy Minister Suhail bin Mohammed al-Mazroui later told the same conference the current OPEC strategy was working, adding that time was needed to allow this to happen — perhaps between one and 1-1/2 years.

“I’m not convinced OPEC alone can change or can solely unilaterally change this strategy just because we have seen a low in the market,” Mazroui said.

Mazroui added that while the first half of 2016 would be “tough” for the oil market, there would be a gradual recovery later in the year, aided by an expected drop in non-OPEC production.

Indeed, OPEC has no plan to hold an emergency meeting to discuss the drop in oil prices before its next scheduled gathering in June, two OPEC delegates said on Tuesday.

OPEC’s strategy of maintaining production levels, instead of reducing supply to allow prices to recover, has been aimed at defending market share at the expense of higher-cost producers such as those in the U.S. shale sector.

The supply glut is likely to be exacerbated in 2016 by the return of Iranian supply to the market, once Western sanctions have been lifted.

“I think all the members including Iran have the right to increase their production. I don’t think we are going to restrict anyone,” Mazroui said.

Such prospects have led oil analysts to downgrade their forecasts in recent days, with Standard Chartered saying prices could drop to $10 a barrel.

The likelihood of a meeting taking place will hinge on the attitude of OPEC heavyweight Saudi Arabia, which has been at the vanguard of resistance to a production cut.

“Saudi Arabia‎ has never held the position that it does not want to talk,” Kachikwu said. “In fact, it was very supportive of a meeting before June, at the time when we held the December meeting, if (there was a) consensus call for it.”

 

(By Rania El Gamal and Maha El Dahan. Writing by David French; Editing by Jason Neely and Dale Hudson)

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Dubai’s Sheikh Mohammed connects on social media

4 January 2016 Comments (0) Featured, Middle East, Politics

sheikh mohammed twitter

The pioneering ruler of Dubai is conquering a new frontier – social media.

Sheikh Mohammed bin Rashid Al Maktoum has built a global social media following of millions of people and he is using social channels to connect with his citizenry and beyond.

He has 5.2 million Twitter followers and 3 million Facebook “likes” plus thousands of additional followers on LinkedIn, Instagram and other social media platforms. (By way of comparison, U.S. President Barak Obama has 5.5 million Twitter followers on his official POTUS account and 46 million “likes” on his Facebook page.)

Mohammed is @HHShkMohd on Twitter, HHSheikhMohammed on Facebook and HH Sheikh Mohammed Bin Rashid Al Maktoum on LinkedIn.

Known for being the force behind Dubai’s rapid development as a major global business and air transport hub as well as for his love of horse racing, Mohammed, 66, has been Emir of Dubai and Vice President and Prime Minister of the United Arab Emirates since 2006.

Connecting with young people

In recent years, the ruler has encouraged his countrymen to embrace social media as means to connect with young people and encourage innovation.

sheikh mohammed arab influencer summit“The significance of these (social media) channels lies in their ability to reach out easily to all members of the society through personal devices,” he said at a Social Media Influencer Summit, which he convened in 2015 to discuss legislation to insure the “best use of social media platforms.”

“It is our duty to help our young people and future generations by building a knowledge platform to protect them from any destructive and negative thoughts that affect their full potential and create constructive paths for Arab societies,” he said.

Discussing national and global issues

Mohammed has initiated a number of discussions on social media about issues facing the country and the world.

“We want every man, woman and child to join us in the biggest ever national brainstorming session to find new ideas for health and education,” he tweeted in 2013. “Education and health concern all of us, so I invite all of UAE society to think collectively of creative solutions.”

In 2015, during Ramadan, he used social media to launch a UAE Water Aid campaign to provide clean drinking water to people in poor countries. “Statistics show that 3.4 million people die every year because they lack clean drinking water,” Sheikh Mohammed said on Twitter. The campaign raised nearly $50 million in a month.

Emphasis on youth, Dubai development

Mohammed also posts frequent updates on both Twitter and Facebook describing his activities, which often focus on the need to develop the country and its young people.

One recent Tweet showed a photo of him meeting with students. “I had the pleasure today of meeting a group of students of the Mohammed bin Rashid school for communication. Positive and ambitious and persevering,” he tweeted.

“I told them constant communication with the people and listen to them … and the removal of barriers with them is the most important characteristic of a successful leader and media also successful,” he said in a follow up tweet.

Another has a photo of Mohammed in the cockpit of an airplane with the tweet: “UAE carriers have 530 aircraft worth $160 bn on their order books. UAE is a major growth driver for global aviation.”

Dubai transformation began in the 1970s

Air transport was a first major step in Dubai’s rapid development and transformation into a major global city starting in the 1970’s.

Mohammad as a young man oversaw expansion of the state-owned Dubai International Airport beginning in 1974. A decade later, he would oversee the launch of Emirates airline, which has become the largest airline in the Middle East and a strong competitor in the global airline industry.

Under Mohammed’s leadership, Dubai has become the air and financial hub of the Gulf. After he lifted a ban on foreign land ownership in 2002 and allowed the creation of special economic development zones, Dubai was able to attract significant development and multinational companies flocked to state.

Touting government efficiency

According to his LinkedIn profile, Mohammed’s “vision for the UAE has been proven successful through achieving unprecedented rankings on global indexes and has lately achieved number one worldwide for government efficiency, according to IMD data.”

More recently, it says, Dubai has developed as a humanitarian center.

“The UAE is not just a financial and economic nucleus, neither is it just a tourism hub: we are also a nerve centre of a global humanitarian work.” These words of Sheikh Mohammed physically manifest in the many charity and humanitarian foundations established by HH (Mohammed), which are major local and international players providing assistance and opportunities to the less fortunate around the globe.

Horse racing and poetry

Mohammed’s passion for horseracing is widely known. In 1992, he founded Godolphin, a family-owned enterprise that has become the largest thoroughbred racing stable in the world. The family-owned enterprise has farms in the United States, Ireland, England and Australia.

With an estimated net worth of $4 billion, he is also a well-regarded poet and has published books on leadership.

Social media for governance

On social media, however, his focus is on governance and using new technologies to improve Dubai and its people.

“The world is moving at a very fast pace and technology is evolving dramatically. We all remember how the traditional media emerged modestly but it quickly gained momentum driven by technology to become a force that impacted governments, changing the course of their work. It transformed the world into a small village.”

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Egypt’s central bank tightens import controls to boost local production

22 December 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s central bank will tighten import regulations from January in a bid to support local manufacturing and better preserve its dwindling foreign currency reserves.

Egypt, which depends on imports, has faced a currency crisis since a 2011 uprising drove foreign investors and tourists away. Hard currency reserves have more than halved $16.4 billion since then.

The decision excludes imports of medicine, foods, and other essential goods such as wheat.

The central bank said it aimed to “strengthen the national economy and promote local products, enhancing their competitiveness against foreign products,” in a statement on Tuesday.

Egyptian manufacturers have been pushing for stricter regulations to stop importers putting artificially low values on customs bills to avoid duties, a widespread practice that makes it difficult for local products to compete on price.

Egypt had imports worth $60.8 billion in 2014/15, compared with exports worth $22.1 billion, said Beltone Financial economist Ziad Waleed.

“They are just fine-tuning the present regulations amid the foreign currency shortage. This definitely could increase the pressure on importers,” he said.

The statement said that banks should obtain documents for imports directly from foreign banks, instead of obtaining them from the clients as is the practice currently. This is to stop any manipulation of receipts by importers, the Egyptian customs authority said on Tuesday.

Importers will also have to provide 100 percent of the cash deposit on letters of credit for imports instead of the current 50 percent.

“The central bank is trying to use all available measures to try to limit imports and this could limit the import of luxury goods, but it is not the key solution that would solve the foreign currency shortage,” Waleed said.

Egypt’s central bank has been rationing dollars and keeping the currency artificially strong at 7.7301 through weekly dollar auctions, giving priority to imports of essential goods.

 

 

(Reporting by Asma Alsharif and Ehab Farouk, editing by Louise Heavens)

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