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Driving Up Tourism in Abu Dhabi

21 December 2015 Comments (0) Business, Featured, Middle East

abu dhabi cruise

With ambitions to become a top winter sun destination, Abu Dhabi has launched a new cruise ship terminal and is developing its tourism infrastructure.

With ambitions to become a top winter sun destination, last Sunday, Sheikh Hazza bin Zayed Al Nahyan, National Security Advisor and Deputy Chairman of the Abu Dhabi Executive Council, officially opened Abu Dhabi’s first purpose-built cruise ship terminal. With capacity for three ships carrying 5,000 passengers at a time, this new terminal, located in the Zayed Port, marks a major landmark for cruise tourism in Abu Dhabi. 205,000 cruise visitors in 112 vessels are already scheduled for this season, 2015-2016, which is a fivefold increase compared to the first cruise season of 2006-2007. Officials expect this figure to increase by at least 15,000 next season to 220,000 cruise passengers in 117 vessels (2016-2017). Longer term growth projections anticipate that figure to reach 300,000 passengers in 130 vessels by 2019-20. Swiss-based cruise line MSC Cruises will be the first cruise line to use the new terminal as its home port for the 2015-16 season. The following season, it will be joined by Celebrity Cruises.

Abu Dhabi’s Economic Vision 2030

Development of the cruise tourism industry is part of a plan to significantly boost tourism in the emirate traditionally seen as second to Dubai as a tourist destination. In 2006, Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, mandated the development of a long-term economic plan to increase the non-oil share of the emirate’s GDP. Known as the Economic Vision 2030, the year by which predictions suggest Abu Dhabi’s baseline growth assumptions could achieve economic diversification, the plan focuses on finding tangible solutions to boost tourism and leisure. Sultan Ahmed Al Jaber, Minister of State, said: “By working closely with our strategic partners and building the necessary infrastructure we hope to expand Abu Dhabi’s tourism sector and reinforce its position as a major global destination.”

As part of the Economic Vision 2030 plan, in 2006 Abu Dhabi also formed the Tourism Development and Investment Company (TDIC), a body intended to drive development of the tourism industry. Capitalizing on blue seas, sand dunes, and UNESCO world heritage sites, the TDIC is currently working on more than 55 projects across the emirate which are all set for completion by 2020. Building projects include multi-use complexes, business and leisure resorts, and desert resorts. One of its flagship developments is Saadiyat Island, where branches of the Louvre and the Guggenheim are currently being built, and expected to open towards the end of next year. Two championship golf courses, environmentally-friendly resorts, new hotel developments, and luxury residential developments to house 160,000 residents are also underway.

The Abu Dhabi International Airport is also undergoing expansion in order to increase its capacity to 45 million. The new, high-tech 700,000 square meter Midfield Terminal Building, set to open in 2017, has been designed to process 19,000 bags per hour on a 22 kilometer baggage handling system and to utilize a new check-in system that can automatically verify mobile and printed boarding passes, improve security, and lower waiting times.

These projects will join the Yas Island development, Abu Dhabi’s $40 billion man-made destination island, which is home to the Ferrari World theme park and the $1 billion Yas Marina circuit, the most expensive F1 track ever built, which hosted the first Abu Dhabi Grand Prix in 2009.

Tourism up in Abu Dhabi

The strategy is already seeing some success. Abu Dhabi’s most recent summer season saw a 21% rise in the number of visitors compared with the previous year. The most significant growth came from Indian visitors, up by 29.8% year-on-year, and Saudi Arabian visitors, up 28% year-on-year. Visitors from the US also grew a significant 24.4%. And visitors from Europe grew 18.1%, with the United Kingdom and Germany contributing to the bulk of the increase. The figures mean that this year Abu Dhabi will exceed 4 million visitors for the first time. Sultan Al Mutawa Al Dhaheri, acting executive director of the Abu Dhabi Tourism and Culture Authority (TCA), said: “We are hugely encouraged by number of visitors who came to the emirate, not only from across the GCC but from around the world”.

The TCA will continue to focus on attracting tourists from India, a drive which this year saw a promotion office opened in India’s capital Delhi to increase passengers of Cruise Arabia, a voyage touring Dubai, Abu Dhabi, Bahrain, and Muscat. The TCA is also focused on attracting tourists from China. This year, more than 20 Abu Dhabi hotels, shopping centers, and tourist destinations enrolled in the China National Tourism Administration’s “Welcome Chinese” program to learn about providing services for Chinese travelers such as Mandarin-speaking staff and payment services for China’s UnionPay bank cards. The TCA has also led a delegation of Abu Dhabi travel suppliers, including representatives of Hyatt Hotels and Resorts and The Ritz-Carlton Abu Dhabi, to Korea and Japan. And looking toward the African market, the TCA will open an office in South Africa this coming year.

The Middle East looks to tourism

Abu Dhabi’s tourism aspirations are part of a burgeoning trend in the region. Dependent on oil for around 50% of GDP and suffering from high unemployment of the young, Saudi Arabia has begun investing in a number of programs to develop heritage sites, museums, tourist accommodation, and tourism infrastructure. A report by the Saudi Commission for Tourism and National Heritage (SCTNH) confirms: “Tourism represents the second most important economic sector in the Kingdom. Despite its low contribution to the gross domestic product (GDP) of only 2.7 percent, development plans in tourism show its ability to raise its contribution to higher levels, and makes it more capable to develop targeted areas especially the rural and remote areas that need comprehensive economic development to create jobs and investment opportunities.” The global Travel and Tourism Competitiveness Report currently ranks Saudi Arabia as 64th in the world. This in fact puts it ahead of many of the more traditionally tourist-focused countries in the Middle East: Tunisia is 79th, Egypt is 83rd, and Lebanon is 94th.

Qatar is also looking to boost tourism to diversify its economy; 2013 tourism figures were up 8.3%, but it still lags behind most of its neighbours. The Qatar Tourism Authority (QTA) has set a goal of attracting 7.4 million visitors by 2030, and has pledged to spend billions in developing new tourist attractions and training more hospitality workers. And Dubai’s Department of Tourism and Commerce Marketing (DTCM) is also busy implementing Dubai Vision 2020, a program designed to double the number of tourists from 10 million in 2012 to 20 million by 2020, and boost tourism’s share of GDP to $81.7 billion.

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Iran’s nuclear deal may not mean an oil boom

19 December 2015 Comments (0) Business, Featured, Middle East

iran oil

The prospect of western sanctions ending in Iran is an exciting prospect for international oil companies hoping to tap the fourth largest oil reserves in the world. According to Russia’s envoy to the U.N. nuclear watchdog, the historic Iran nuclear deal is expected to see sanctions lifted in Tehran in January 2016. The Joint Comprehensive Plan of Action (JCPOA), a deal brokered between Iran and the P5 + 1 nations (France, China, UK, Russia, US and Germany) in July 2015 after 20 months of negotiation, is ground breaking. In exchange for Iran reducing its nuclear program, including swapping non-enriched uranium to scale back its stockpile of low-enriched uranium, Europe and the US will lift international economic sanctions on Iran.

Despite concerns that the US Congress may block the deal, the prospect of oil markets opening up to international oil companies seems more likely come January 2016, with the IAEA (International Atomic Energy Association) expected to close a 12 year investigation into Iran’s nuclear program when the board meets in December 2015.

Hope for oil markets as sanctions lift

If the Iran nuclear agreement holds, western sanctions are due to begin winding back in early January 2016. Consequently, a Reuter’s poll comprising 25 oil analysts and economists predicted that as much as 750,000 barrels per day (bpd) of Iranian crude oil could enter the global market by mid-2016. International oil companies such as France’s Total, Italy’s Eni and Royal-Dutch Shell are understandably enthusiastic about the prospect of gaining traction in Iran’s emerging oil economy. With the promise of 50 new production projects in Iran’s extensive oil and gas reserves and flexible contracts on offer in 2016, the prospect of an oil boom seems tangible.

iran oilProgress on JCPOA nuclear deal

But how robust is this deal in reality? Will Iran deliver on its promise to scale back their nuclear program?

On the one hand there are promising signs that Iran is ratifying the agreement. As recently as November, 2015 the Iranian nuclear chief, Ali Akbar Salehi reported that work had begun to decommission centrifuges. This activity was additionally confirmed by complaints in Tehran from 20 MPs, claiming that dismantling work at Natanz and Fordow facilities was advancing too quickly.

Further progression of the JCPOA was evidenced by Iran granting permission for the head of the International Atomic Energy Agency to visit the sensitive military site Parchin in September, 2015. This was despite earlier parliamentary restrictions which declared the nuclear deal excluded such inspections.

However, in complete contrast to these acts of compliance, in October, 2015 Iran fired a long – range ballistic missile from a hidden military base in a seemingly confrontational act of defiance. Considering sanctions will only be lifted when Iran fulfils conditions within the nuclear agreement, this action sent confusing signals.

Political climate throws doubt on nuclear deal

There is also concern that the nuclear deal has not been ratified into local Iranian law. Rather the Iranian parliament has referred to the JCPOA as a “Plan of Action”, maintaining the agreement’s voluntary nature (according to the Iranian government). This avoids the Iranian parliament having to mandate the agreement as an international treaty or contract, which would require local governmental authorization into law.

Thus the nuclear deal, in reality, is an agreement accepted by the Rouhini agreement on the basis of good faith, but stands on shaky ground when considering the implications for future governments. Until the JCPOA deal is legislated into Iranian law it would arguably be unwise for international oil companies to leap into Iran’s oil and gas market without some serious caution.

Conditions too volatile to ensure oil market stability in Iran

Although some economists have predicted a significant global reduction in oil prices once the JCPOA “day of commencement” arrives, the shifting sands of Iran’s political and military conditions make this eventuality less likely. Even if Iran does comply with nuclear downsizing, discontinues weapons testing and demonstrates political willingness to conform to the agreement, there is still concern about the power of the military over commercial operations.

For instance the US insists sanctions will be maintained over the Iranian Revolutionary Guard Corps. Although this military corps was designed to respond to internal or external threats against Iran, it now has extensive influence in the Iranian oil and gas industry via control over hundreds of companies. Therefore, international oil companies may still find themselves hampered by sanctions if they partner with Iranian companies maintaining ties to the revolutionary guard.

When the long term political and military complexities are considered in Iran, it seems it may be some time before the Iran nuclear deal will make a significant impact on global oil markets.

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Tehran takes tough line with VAT tax

18 December 2015 Comments (0) Featured, Middle East, Politics

iran tax

Implementation of 2008 VAT  tax at a time of economic stagnancy is causing confusion and anger in Iran’s merchant class.

Across Iran there is a growing anger at VAT bills received by merchants, many of them covering the years since the tax was first implemented in 2008, and some of the bills reaching $100,000 or more.

As Iran faces economic stagnancy, businesses claim that these VAT bills could in many cases render their businesses unsustainable. Falling oil prices have greatly affected the Iranian economy over the last few years. And with the groundbreaking deal with the West on slowing development of nuclear weapon capability meaning that many sanctions will be lifted in mid-2016, many consumers have vastly reduced their spending in the hope that the deal will bring both lower prices and a greater range of available goods.

Relaxed Taxation

Historically Iran has had a laid back approach to taxation; authorities were often willing to negotiate and bargain, there was a high level of smuggled – and thus tax free – goods available on the market, and dual accounting was and is still common practice to avoid some taxes. But with the global oil market seeing reduced prices over the last decade, the Iranian government brought in a 3% VAT level in 2008 on all but everyday goods such as bread and some other food products.

But since President Hassan Rouhani took office in 2013, tax collection has been stepped up, a move that is now worrying business owners across Iran. With oil prices forecast to continue falling in the year ahead, the lifting of sanctions still several months away, and with a deficit that could reach 550 trillion Iranian rials next year (18.3 billion USD), the government is keen to maximize tax collection. Given that the vice-president of the Iran Chamber of Commerce, Pedram Soltani, estimates that 40% of all government income in the year ending March 2016 will come from taxation – with VAT constituting half that figure – it is understandable why the authorities in Tehran are keen to pursue this.

Power of the Merchants

But President Rouhani has to tread carefully on this issue. Despite there being a ban on free trade unions, the merchant class – or bazaaris to give them their traditional name in Iran – remains a powerful force with a past history of confronting the government on this same issue. They played a key part in the revolution of 1979, combining with the clergy to oppose the Shah’s oppressive policy and implementing strikes which crippled the economy. And, when they see it as necessary, they have again wielded that power to oppose policies by the new regime. A 2008 strike in response to the original implementation of VAT saw clashes with security forces as many businesses closed. This led to a temporary suspension of the tax and an announcement of annual rises with an agreement on figures of 6 to 15%.

iran tax 2Then in 2010 the government stated that VAT on many goods would rise by 70%. Once again the bazaaris went on strike and once again the government backed down, agreeing to reduce the VAT rise to 15% instead of 70%. The government also offered a concession that businesses who could show they operated at a loss in previous years could apply for an exemption from increases.

An interesting factor of both these strikes was that it was not confined to merchants who were affected by the higher rates but was instead supported by traders across a wide range of goods, illustrating that the bazaaris had strong solidarity across their “membership.”

A rock and a hard place

How this current dispute plays out will be interesting to observe and hard to predict. On one hand, there is a determined government led by Rouhani who is trying to steer the country through uncertain economic waters. Even with the lifting of sanctions due in mid-2016, it will take some time for that to have any positive effects. On the other hand there is a united and powerful merchant class who are adamant that many businesses cannot survive these new increases or backdated bills. Given the outcomes of the two previous strikes and the resulting government climb-downs, it may well be the case that Rouhani has to consider some form of compromise, as strike action of any length would further damage the economy and could also lead to more instances of public disorder.

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Who is Ayman Rafic Al-Hariri?

16 December 2015 Comments (0) Leaders, Middle East

ayman hariri

Ayman Hariri: a talented entrepreneur or a well-financed, well-connected, unprincipled businessman?

Ayman Hariri was born in 1978 in Saudi Arabia but at the age of two he moved to Lebanon, the birth place of his father. At the time his father Rafic Hariri, having become a successful and hugely wealthy businessman in Saudi Arabia, was increasing his philanthropic activities in Lebanon as well as starting to build a political career for himself. Ayman has joint Lebanese and Saudi Arabian nationality and currently lives in Riyadh, Saudi Arabia with his wife and child.

Ayman Hariri is the son of Rafic Hariri and Nazik Hariri (nee Audi). Nazik was Rafic’s second wife and as a result Ayman has three half-brothers (one deceased) through his father’s marriage to his first wife Nida Bustani. Ayman is the eldest of Rafic and Nazik’s four children. He has a younger brother called Fahd and two younger sisters, the youngest of which is called Hind.

A family of Prime Ministers

His father became the Prime Minister of Lebanon, serving two terms; 1992 – 1998 and 2000 – 2004. He was later assassinated on the 14th February, 2005 in Beirut. Ayman’s brother Saad followed his father into politics, becoming the Prime Minister of Lebanon on the 9th November, 2009. His term only lasted until the 12th January, 2011 when the cabinet collapsed due to disagreements with Hezbollah as a result of the investigations and resulting allegations surrounding his father’s assassination.

Ayman earned a bachelor’s degree from Georgetown University in Computer Science. Just like Ayman, his three half-brothers Bahaa, Saad and Houssam were all college educated in the US. In fact, it was whilst studying at MIT that Houssam died in a car accident; it is alleged that he and his brother Bahaa were drag racing identical Porsche 911’s at the time of the accident.

Ayman Rafic Al-Hariri: a member of the Executive Committee for Saudi Oger

Ayman began his career working as an engineer for a company called Intelsat – the first company to offer a commercial global satellite communications solution. He later started up a company called Epok which is an identity management software company, where he is still the Chairman.

In addition to his responsibilities at Epok, he is also a Director of 3C Telecommunications Ltd and Vice Chairman, Deputy Chief Executive Officer and a member of the Executive Committee for Saudi Oger Ltd, the company founded by his father Rafic in 1978.

Saudi Oger is a construction company based in Riyadh, and in conjunction with all its subsidiaries it offers a complete construction package including building design, project management, engineering, facilities management, telecommunications, waste management and IT services.

Strong leadership skills…

Ayman Rafic Al-Hariri

Ayman Rafic Al-Hariri

Whilst his elder brother Saad is the Chairman and Chief Executive Officer, Ayman is very much considered to be the driving force behind Saudi Oger.

His strong leadership skills, in conjunction with his experience and entrepreneurial vision, as well as the fact that he appears to have no political aspirations, make him the apparent heir to the Hariri family business.

…but many controversies

Rumors of corruption have plagued this family for years; whilst Prime Minister this father was often accused of stripping Lebanese finances whilst building his own personal wealth. His supporters however insist that he actually invested much more money into Lebanon than he ever removed.

Saudi Oger along with Saudi Bin Laden have for a long time been the two major businesses to benefit from the massive investments being made in Saudi Arabia, including Princess Noura University for Women and King Abdullah University of Science and Technology. This dominance is however starting to change so whilst there are planned investments totalling approximately $806 billion in the next 15 years, Saudi Oger can no longer be confident of benefitting as they would have done 10 years ago.

Whilst the financial stability of Saudi Oger is hard to fully ascertain, in 2012 three major Saudi banks stated that Saudi Oger and its subsidiaries were “financially vulnerable institutions.”

Embezzlement and corruption rumors

In 2011 Saudi Oger received a loan of $800m and a further $1bn in 2013, yet at the end of 2013 it was stated that they were $3bn in the red. The year of 2013 also saw further company restructuring with approximately 1,500 layoffs. These were largely Lebanese nationals however some Saudi nationals were included, which caused major controversy and widespread objections.

An audit of the business showed a complete lack of accountability, not to mention a lack of trust between senior employees. There were also embezzlement and corruption rumors and serious concerns raised about the lack of clarity within the political, business and personal financial records.

When asked about these issues in 2013, Saad blamed Ayman, apparently even threatening to sell his brother’s shares in the business to deal with the gap in the company finances.

 

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African Development Bank approves $1.5 billion loan to Egypt

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

CAIRO (Reuters) – The African Development Bank (AfDB) has approved a $1.5 billion loan to Egypt to be paid out over three years, International Cooperation Minister Sahar Nasr told Reuters on Tuesday.

The first $500 million of the loan will arrive within days, said Nasr, and will go toward the government’s economic development programme and national projects.

“We have a competitive economic reform programme that started more than a year back and based on that we are taking the first tranche,” Nasr, a former World Bank official, told Reuters by telephone.

Egypt expects to receive an additional $1 billion from the World Bank by the end of the year to support the budget and could discuss potential IMF financing once parliament convenes, Nasr told Reuters previously.

“The bank’s approval today is a strong message affirming that the Egyptian economy is moving at a steady pace towards achieving comprehensive development and confirms that the bank is confident in the government’s reform process,” said AfDB representative Leila Mokaddem.

A foreign currency shortage has crippled import activity this year and the country has scrambled to find new sources of dollars as shipments have piled up at ports and manufacturing has slowed.

Foreign currency reserves, which stood at about $36 billion before the 2011 uprising that toppled veteran ruler Hosni Mubarak, were $16.42 billion at the end of November despite billions of dollars in Gulf Arab aid that Egypt has received since mid-2013.

 

(Reporting by Lin Noueihed; Writing by Eric Knecht; Editing by Mark Trevelyan)

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Salma Elloumi Rekik, a glimmer of hope for Tunisian tourism revival

14 December 2015 Comments (0) Featured, Leaders, Middle East

salma elloumi

At a time when many would have shied away from such a hard-hit economic sector, Salma Elloumi Rekik, business woman and politician, boldly stepped into the role of Tunisia’s Minister of Tourism.

Time of action for the Tourism Minister

Little over a month after taking the reins from her predecessor Amel Karboul, on February 6th, 2015, the already fragile economy was knocked by Bardo terrorist attacks and again in the July Sousse beach massacre. Tourism has increasingly become the nation’s linchpin, generating 15 percent of the country’s GDP last year. It has been down to Rekik to provide solutions to get the vital tourism trade back on track.

On June 29th, 2015, Salma Elloumi announced the many government measures that were to be put in place to essentially give those in tourism a financial lift. Among them: loan repayments were postponed for the years 2015 and 2016, VAT reduced from 12 percent to 8 percent and overdue fines cancelled.

“The ministry has focused its actions on the change in the promotional policy, especially after the attacks of Bardo and Sousse,” said the Minister.

In an endeavor to broaden Tunisia’s appeal to holiday makers from African countries, Iran, China and Russia, Rekik worked hard to have security in the country strengthened and to increase air traffic, devoting a budget of 12.5 million of Tunisian dinars (over 6 million US dollars) for this purpose.

The lady behind the titles

Born in Tunis on June 5th, 1956, Rekik was influenced and immersed in business from an early age. Growing up surrounded by her family’s wiring company; she continued her education after leaving Omran High School at the Institute of Management in Tunis (ISG) until the age of 22. As well as possessing a business mind, the young Rekik became multi-lingual, speaking and reading in Arabic, French and English.

On leaving university she began working for the family business which her father, Taoufik Elloumi, created in 1985. Societé Cofat Med -SCM specializes in the design and manufacture of electrical wiring for motor vehicles and utilities and is still going strong.

“SCM started with less than 20 employees; now it is one of the most popular companies in Tunisia,” the 59 year old said of her father’s enterprise.

In the early 1990’s, Rekik expanded her professional outlook after the former president Zine el-Abidine Ben Ali launched a campaign to modernize agriculture. Taking this as a cue, she branched out into a new sector, industrial agriculture.

She began with Stifen, the food processing company her father founded in 1994. In time she was made CEO and the prosperous company became part of the expanding Elloumi group. Her appetite for responsibility led her to become the CEO of SCM and she went on to drive both companies to great success. Stifen now exports globally and lists Kellogg’s, Danone and Nestle amongst its clients.

Political life

The mother of three, not content with just one profession, she embarked on her political career after the 2011 Jasmine revolution in Tunisia. Spurred into action by the changes her country was experiencing, she co-founded the secularist political party Nidaa Tounes and became a member in the party’s executive bureau.

“Engaging in politics is a duty as a citizen,” she said, and she paid her duty well, following her party to victory against the Islamist Ennahda party in the October 26th, 2014 elections, only the second truly legitimate election to be held in Tunisia since 2011.

Their time in power was not smooth, including a coalition government with their Islamist rivals in February 2015. Further difficulties beset the party when Rekik, along with 30 other Nidaa Tounes deputies, resigned Sunday, November 8th, 2015. The mass resignation came in response to members becoming increasingly fractious about the conduct and intentions of some of the party’s fellows.

For the love of one’s country

For now, Rekik has a big enough task ahead in her work as Tourist Minister. Without doubt she has proven herself many times over in her varied chosen fields of work, and has shown and continues to display strong and prudent leadership skills, which have been sought after globally.

Versatile, intelligent and brave, Rekik’s work has been publically recognized and gained her two commendations by the Tunisian Republic for her service to the nation. She still found time to participate throughout her career in leadership, management, and crisis management training programs in the United States and Europe.

Her work as Minister of Tourism seeks to bring hope to the Tunisian people and highlight the rich array of positives her nation has to offer the rest of the world. Speaking on December 2nd, 2015, she announced the upcoming release of a film about the 2015 Nobel Peace Prize, which was awarded to the Tunisian National Dialogue Quartet, an encouraging sign and a pivotal moment for Salma Elloumi Rekik’s beloved country.

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Stef Wertheimer: Manufacturing Peaceful Coexistence in Israel

12 December 2015 Comments (0) Business, Featured, Middle East, Politics

Stef Wertheimer

Israeli industrialist Stef Wertheimer, founder of Iscar and Blades Technology, is investing millions in industrial parks to diffuse Arab-Jewish conflict.

Born in Germany in 1926 a decade before his family was forced to flee the Nazis to what was then British-Mandate Palestine, Stef Wertheimer is an Israeli industrialist who believes that his country’s problems and solutions lie in economics. Over the last 30 years, the billionaire has invested millions of his own personal wealth in building industrial parks and training programs for Arabs across Israel, in the hope of using job creation and lowered economic disparity to foster peaceful coexistence between Arabs and Jews.

The International Metalworking Companies Group and Blades Technology

Now aged 89, Wertheimer’s early academic career was short lived. He was expelled from school aged 14, and instead started working in a camera-repair shop. Later, in the lead-up to Israel’s War of Independence in 1948, he made weapons for the Jewish underground. And after the war, in which he served as a pilot and a member of the Palmach strike force, he set up a small metal tool-cutting factory in a garage in his garden in Nahariya. The city, Israel’s northernmost, is in an underdeveloped, largely agricultural and Arab region, about which Wertheimer says: “There were no jobs, this area was agricultural, and I decided that I had to do something on my own”.

He named his small operation Iscar, and within five years, the company was exporting precision carbide cutting tools to Europe and the US. Today, it is one of the world’s top two companies in the field, and its automotive, aerospace, and electronics industry customers include General Motors and Ford. It is also now the largest of 15 companies that make up Wertheimer’s International Metalworking Companies (IMC), a Group valued at $10 billion, with 140 subsidiaries in 61 countries around the world, employing over 10,000 people.

Wertheimer further expanded his manufacturing holdings in 1968, when the Israeli government asked him to make blades for the Israeli Air Force following a French weapons embargo. In the years following, Iscar Blades (now Blades Technology Ltd.) has similarly become one of the world’s largest in its field. With a valuation of $1 billion, its customers include Rolls-Royce and General Electric.

Wertheimer solidified his position as one of Israel’s most respected businessmen in 2006, when Warren Buffett’s conglomerate holding company, Berkshire Hathaway, bought an 80% stake in IMC for $4 billion. It was Buffet’s first purchase outside of the US, and he went on to buy the remaining 20% of the company in 2013 for $2.05 billion. The Wertheimer family (Wertheimer’s son Eitan started running day-to-day operations at Iscar in 2004) also sold its 51% stake in Blades Technology in 2014. And the deals have made Wertheimer the head of the wealthiest family in Israel and the country’s third wealthiest man, with an estimated net worth of $5.6 billion.

Tefen Industrial Park

Tefen Industrial Park

The Tefen Industrial Park

In the late 1970s, Wertheimer also served a term in the Knesset, Israel’s parliament. It was during this time that he decided that there may be a different route to achieving peace and stability in Israel: one centered on industry and job creation. Acting on his idea, in 1982 he established a residential community near Nahariya, Kfar Vradim, and later the same year moved the Iscar plant to the nearby industrial zone, Tefen. In 1984, the Tefen Industrial Park was officially inaugurated, marking Wertheimer’s first park dedicated to helping Arab and Jewish Israeli entrepreneurs set up export-focused industrial initiatives. “I started looking for a way to influence the Arab population in Israel, Jordan and the Palestinian areas by developing industry,” says Wertheimer. “The idea of industrial parks in the Middle East and on the borders between Israel and its neighbors is that the parks will bring industry and provide jobs, which will keep people busy working, instead of engaging in terrorism”.

The Tefen Industrial Park now hosts 20 companies, and also offers a post service, a shared dining hall, landscaped gardens, a collection of vintage cars, a tennis court, and a school that educates students in industry and innovation. Wertheimer, whose own main office is on the site, has also created art and German-Jewish history museums.

Expanding Israel’s Industrial Export Output

His unique philosophy stems from the country’s problem of economic disparity. Israel’s 1.7 million Arab citizens make on average 58% of the income of their Jewish counterparts. Arab men make 69% of the income of Jewish men. And there are three times less Arab women in the labor force than Jewish women. The Arab population is also largely excluded from Israel’s current tech boom, which this year has seen $9 billion in tech mergers and acquisitions.

Based on the five principles of export, education, coexistence, community, and culture, Wertheimer has now established six further parks in typically Arab dominated regions – five in Israel (in Tel Hai, Omer, Dalton, Lavon, and Nazareth) and one in Turkey. The industrial parks, which Wertheimer calls “capitalistic kibbutz”, also run training programs before placing the workers in jobs, and recruit Arab and Jewish entrepreneurs for industrial entrepreneurship courses to create Arab-Jewish partnerships. Firms also receive benefits encouraging the employment of professionally educated Arabs. The parks have so far generated and supported 260 companies, which have seen an average yield of $200,000 in sales per employee, higher than Israel’s average. And Wertheimer also has plans to add another park aimed at the Bedouin, one of the region’s poorest communities.

Yitzhak Rabin, former Israeli prime minister and 1994 winner of the Nobel Peace Prize, said: “With 20 more industrial parks like these, it would be possible to double the industrial export output of Israel. This would completely change the economic, social and security situation.” Wertheimer has also been honored for his work. He was awarded Israel’s highest honor, the Israel Prize, in 1991. In 2010, he received the Oslo Business for Peace Award. And Germany has bestowed both the Federal Cross of Merit and the Buber-Rosenzweig medal for his work in advancing peace through entrepreneurship.

Not everyone agrees that an economic solution will solve Israel’s problems, but Wertheimer is fully committed to a future trying to do just that.

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Rising food prices push up Egypt’s inflation

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

CAIRO (Reuters) – Egypt’s urban consumer inflation jumped to its highest level since June, data from the state statistics agency showed on Thursday, propelled by the rising cost of food even as the state takes new measures to keep prices in check.

The figure rose to 11.1 percent in November from 9.7 percent in October, CAPMAS said, compared with 11.4 percent in June.

Egypt said in November it would control the prices of ten essential commodities and use its state grain buying agency to import a broader array of goods in an effort to curb inflation.

However, November core inflation, which excludes volatile items such as fruits and vegetables, rose to 7.44 percent from 6.26 percent in October, the central bank said.

The higher inflation figures might influence the central bank’s decision on interest rates at a monetary policy committee meeting scheduled for next week, Capital Economics said in a research note on Thursday.

“For now, with the domestic economy struggling, we suspect that interest rates will be left on hold next week. But today’s figures … mean that there is a growing risk that the (central bank) will be spooked and decide to hike rates,” the note said.

 

(Reporting by Eric Knecht; Editing by Louise Ireland)

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OPEC Rejects Oil Production Limits Despite Falling Prices

8 December 2015 Comments (0) Business, Featured, Middle East

OPEC Meeting

In spite of growing climate concerns and plummeting oil prices, the world’s largest oil cartel has rejected limits on pumping crude oil in the coming year.

The move by the Organization of Oil Producing Countries (OPEC) virtually guarantees a continuing glut of oil along with low prices at the gas pump. Low prices could further undercut U.S. production shale oil production in 2016.

Meeting December 4, 2015 in Vienna, Austria, representatives of OPEC’s 13 member countries debated whether to cut crude production, currently about 31.5 million barrels a day, in an attempt to prop up prices.

Growth in demand is cited

In a statement following the meeting, OPEC acknowledged the oversupply but emphasized potential growth in demand next year.
“ The Conference observed that global economic growth is currently at 3.1% in 2015 and is forecast to expand by 3.4% next year. In terms of supply and demand, it was noted that non-OPEC supply is expected to contract in 2016, while global demand is anticipated to expand again by 1.3 mb/d (million barrels per day),” the OPEC statement said.

OPEC ministers divided

The failure to impose limits followed a fractious discussion within OPEC. The Vienna meeting, scheduled to last four hours, was extended to seven as members debated whether to continue a year-old policy of oversupply.

The prevailing faction, led by Saudi Arabia, the cartel’s largest producer, wants to pump at current levels despite the risk of even more price reductions. Other members, such as Venezuela and Algeria, want to cut production in an attempt to bolster prices.

OPEC member countries produce about 40 percent of the world’s crude oil and their exports represent about 60 percent of the total oil traded internationally, which has enabled the cartel to influence oil prices, according to the U.S. Energy Information Administration.

That was evident as the U.S. benchmark rate for oil declined 2.7 percent to $39.99 a barrel on the day of the OPEC meeting.

Action could undermine U.S. producers

Saudi Arabia says it wants to protect its market share. But some analysts say Saudi Arabia wants to pump more oil in order to slow down shale oil production in the United States, leaving OPEC producers to fill the vacuum as demand grows. Shale oil is significantly more expensive to produce so these producers are even harder hit by lower prices.

A U.S. slowdown is already happening. According to Baker Hughes North American Rig Count for the week of December 4, 2015, there were 737 active rigs in the United States compared to 1,920 rigs a year earlier.

Oil production may increase

Meanwhile, OPEC production is likely to increase beyond the current 31.5 billion barrels a day.

In Vienna, Iran said it would double production to 4 million barrels a day, the amount it was producing before international sanctions were imposed. Iran’s production dropped sharply in 2012 as a result of the sanctions, which are being lifted as a result of the Iran nuclear deal. Iraqi oil production also has increased to about 4 million barrels a day.

A new reality for OPEC

The decision to keep pumping underscored the cartel’s weakened ability to collectively sway prices.

“Effectively, it’s ceilingless,” Iranian Oil Minister Bijan Namdar Zangaeh said. “Everyone does whatever they want.”

Iraqi Oil Minister Adel Abdul Mahdi noted that other producers do not operate with production limits. “Americans don’t have any ceiling. Russians don’t have any ceiling. Why should OPEC have a ceiling?”

Historically, OPEC has been able to bolster prices by squeezing production. But in November 2014, Saudi Arabia blocked calls from poorer OPEC members to cut production in hopes of halting the slide in prices. At that time, the price of oil was slightly more than $71 per barrel.

“It is a new world for OPEC because they simply cannot manage the market anymore. It is now the market’s turn to dictate prices and they will certainly go lower,” Dr. Gary Ross, chief executive of PIRA Energy Group, said at the time.

Indonesia rejoins OPEC

OPEC also welcomed the re-entry of Indonesia into the cartel after a six-year absence. The country is the fourth smallest producer of OPEC’s 13 members.

A net importer of oil that also exports, Indonesia rejoined OPEC hoping to gain greater access to crude oil supplies.

Climate change concerns

While declining to set limits on crude production, the OPEC ministers did discuss the United Nations Climate Change Conference that was ongoing in Paris at the same time.

The discussions “stressed that climate change, environmental protection and sustainable development are a major concern for all of us,” the OPEC statement said.

Efforts to reduce carbon emissions could place large oil producers in even more of a bind if governments in the climate talks move to reduce dependence on oil in favor of sustainable energy sources.

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With new central bank leadership, Egypt repays foreign investors

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

CAIRO (Reuters) – Egypt’s central bank revised the way it allocates dollars at auctions, seeking on Tuesday to reassure markets by repaying foreign investors a backlog of more than $500 million built up during a long-running dollar shortage.

The economy has been in disarray since the 2011 uprising that ended Hosni Mubarak’s 30-year rule, spooking foreign investors and tourists who are the main sources of foreign currency.

Foreign currency reserves have dropped from $36 billion before the revolt to about $16.4 billion in October, leaving the central bank with little firepower to protect the value of the tightly-managed Egyptian pound.

In February, the central bank limited the amount of dollars companies could deposit in banks to squeeze a dollar black market.

Business people say that policy backfired, making it difficult for companies to finance imports and discouraging foreign investors who feared they would be unable to repatriate profits or cash in their investments.

In the first major move by Egypt’s new governor Tarek Amer, who took up his post on Friday, the central bank said it had repaid foreign portfolio investors $547.2 million, clearing the entire backlog.

“This is a very strong signal about the change in management ideology,” said Hany Farahat, senior economist at CI Capital.

“There has not been an indication of where such sources of funding have come from… It might just be more aggressive use of the reserves available at the bank.”

The central bank urged foreign investors to enter Egyptian capital markets through a pre-existing scheme set up to help them repatriate their hard currency.

Those who have used the scheme have not faced delays, the central bank said in a statement. But many foreigners have invested without using that mechanism and had struggled — until Tuesday — to obtain dollars and move them out of Egypt.

The measure is the latest in a series taken by the central bank since Amer’s appointment was announced in late October.

Within two weeks of the announcement, banks had supplied $1.8 billion to clear a backlog of imports that had caused an outcry among businesses.

The following week, state banks raised interest rates on certificates of deposit to 12.5 percent from about 10 percent aiming, economists said, to limit dollarisation ahead of a potential devaluation.

Amer’s next move came on Nov. 11, when the central bank supplied $1 billion to banks to cover 25 percent of dollar overdrafts they had opened for companies during the crisis.

Mohamed El Sewedy, the head of the Federation of Egyptian Industries, told Reuters in a recent interview Amer had promised to cover the entire $4 billion exposure.

At the same time, the central bank strengthened the pound by 20 piastres — a surprise move given the gap with the black market rate, now hovering about 8.5 pounds to the dollar.

Some economists criticised the revaluation but others said it was aimed at shaking out speculators making downward bets on the pound, with a view to eventually allowing a downward drift.

 

CURRENCY AUCTION

The central bank held the pound steady at 7.7301 to the dollar at its second official dollar auction under Amer, but caused confusion by supplying some banks with more of their forex needs than usual and others with nothing at all.

Egypt’s central bank holds three foreign exchange auctions a week, and the sales are the key mechanism through which it sets the official exchange rate of the pound.

Banks are accustomed to receiving a regular quota of foreign exchange at each foreign currency sale.

Bankers said some banks had bid late in the auction due to uncertainty over whether the central bank would move the exchange rate or hold it steady and had missed out. Others said some banks who bid early in the session were also refused.

The central bank said it had changed the “internal allocation process” but gave no details on the changes or whether they would apply to future forex auctions.

Amer, the well-regarded former head of commercial lender National Bank of Egypt (NBE), faces a delicate balancing act as he seeks to end the foreign exchange pressure without triggering inflation, which hurts the poor hardest, or dampening the growth needed to create jobs for its growing population.

 

(By Asma Alsharif. Additional reporting by Eric Knecht’ Writing by Lin Noueihed; Editing by Ruth Pitchford)

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