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|By Arabian Post Staff|New solutions to meet future needs and diversify the options are being integrated into the the e-Dirham system, top officials involved in the development of a national alternative to cash payment for government services in the UAE indicated.
Government revenues from the e-Dirham system during the first nine months of this year stood at AED 5.8 billion. The number of e-Dirham transactions rose by 20 per cent year on year, to reach 15 million transactions during the first nine months of 2016 as compared to around 12.5 million transactions during the same period in 2015.

The number of electronic services carried out through the e-Dirham system during Q1 to Q3 grew by 5.8% year on year. The system saw 28.9 million electronic services in the first nine months of 2016, as compared to 27.3 million transactions during the same period in 2015.

The number of e-Dirham cards issued till the end of September 2016 grew by 41 per cent to reach 2.25 million cards, as compared to 1.6 million cards issued till September 2015.

The number of electronic services carried out through the e-Dirham system since the launch of the second generation of e-Dirham in 2011 by Ministry of Finance, in partnership with the National Bank of Abu Dhabi, has so far risen to 127 million, while the total value of the payment, settlement transactions and collection of revenues is around AED 27.5 billion.

Saeed Rashid Al Yateem, Assistant Undersecretary of Resources and Budget Sector, Ministry of Finance, said that the value and efficiency of the system would be increased by further digitisation of transactions and services, benefiting from the widespread usage of smartphones in the UAE. Better mobile payment options through smartphones were being made available to individuals as well as public and private sector companies in the UAE, he said.

“e-Dirham is one of the advanced systems that support cashless payment and collection means that include online and smartphone platforms, aligning to the smart government goals. The e-Dirham system provides comprehensive solutions that allow individuals and companies to carry out payment and collection transactions quickly, efficiently, precisely and safely”

Following the launch of its new services, the e-Dirham system has served more than 5,000 government service fee payment transactions at federal ministries and local departments. These fees can be paid by using the e-Dirham digital wallet or by direct debit from a bank account.

Within the framework of its innovative initiatives and in partnership with the National Bank of Abu Dhabi (NBAD), the Ministry of Finance (MoF) recently launched the eDebit and eDirect services at the Gitex Technology Week 2016. These services enable payment of service fees and purchases through direct debit from the customers’ bank accounts, in addition to allowing users to top up eD-wallets through Internet banking.

Saif Ali Al Shehhi, Senior Managing Director of UAE Government Group & VVIP Clients, National Bank of Abu Dhabi, said taht the favourable performance of e-Dirham during the first nine months of 2016 reflects the consistent improvements in the system which has obtained the certification of compliance in Payment Card Industry Data Security Standard (PCI DSS). The certification was conferred for e-Dirham’s 11 components and for the security compliance of its Triple Data Encryption Standard (3DES), making its components and structures in accordance with international standards.

Al Shehhi spoke of the system’s innovations to keep pace with the rapid changes in payment systems, given the importance of diversified payment options and the ease of carrying out transactions for promoting commercial activities.

“NBAD is working hand in hand with the Ministry of Finance to assess the potential of further developing the e-Dirham system to facilitate its use by clients of government departments, private companies and individuals. Our role at NBAD is to provide our extensive expertise in electronic payment and collection systems, creating solutions that ensure safe, easy and efficient transactions through relevant platforms and frameworks,” Al Shehhi added.

“This would further enhance user-experience and facilitate financial transactions through innovation as well as integrating new solutions with established systems while maintaining flexibility and developing capacity in order to serve future needs,” Al Shehhi said.

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|By Arabian Post Staff| The generations of Millennials, meaning people between the ages of 19 and 35, as well as Centennials, denoting young people aged up to 18, will most probably end up poorer than their parents and grand parents, a Bank of America-Merrill Lynch report titled Thematic Investing: The New Kids on the Block has predicted.

Gen Y (“Millennials”, 19-35Y) and Gen Z (“Centennials”, 0-18Y) are the world’s most important demographics, collectively accounting for 59% of the global population. There are 2 billion Millennials worldwide and they have overtaken Boomers to become the largest living generation in US history.

The report says the financial industry  has to prepare itself for the rise of the 2.4 billion Centennials – born at the turn of the century and set to live to over 100 years. They are embracing diversity, sustainability, globalisation, disruptive technology, “peak stuff”, new business models, and entrepreneurialism like no generation before them – and they are economically optimistic to boot. Together Gen Y and Gen Z will account for c60% of the global workforce by 2020E.

The report points out that technology is the defining characteristic of Gen Y and Z’s daily lives, with 90% smartphone and social network penetration. Young cohorts check their phones 150x per day, 50 billion IMs and 6 billion emojis are sent every day, and human attention spans are falling below those of goldfish. Gen Y and Z are mainstreaming disruptive technologies and both corporates and investors need to step up to the challenge, including via smartphones and apps, social media, instantaneous communication, “snackable content”, omnichannel strategies, and making things shareable.

For the first time in history, people aged 65Y+ will outnumber children below 5 years of age before 2020E. Total fertility rates have dropped to near or below replacement rates in all regions except Africa. The downside risk is that both generations may end up poorer than their parents and grandparents, with the demographics having profound long-term effects on the viability of economic growth, housing, pensions, health and long-term care, labour markets, education and public finances.

The report estimates that the total income of Millennials and Centennials at US$21 trillion in 2015 – 35% of global gross income. The US, China, India, Japan, and Germany are the largest markets. It further orecasts that this number could grow to US$62 trillion  by 2030E, US$32 trillion  for Millennials and US$30 trillion for Gen Z.

The article Be informed: Your kids may end up poorer than you or your dad appeared first on Arabian Post.

/by Arabian Post Staff/The global growth of asset management stalled as the industry in 2015 recorded its worst year since the 2008 financial crisis, according to a report by The Boston Consulting Group (BCG).

Growth in assets under management (AuM) stalled—or in the case of the Middle East declined 10%—and net new flows of assets, revenue growth, and revenue margins all dipped lower in 2015, according to Global Asset Management 2016: Doubling Down on Data. BCG’s fourteenth annual benchmark report on the industry.

Asset managers’ future prosperity and competitive advantage will require them to shift from outdated product strategies and develop disruptive investment capabilities using leading-edge data and analytics, the report emphasizes.

The lack of overall growth was due largely to the generally negative and turbulent performance of global financial markets, which failed to buoy the value of invested assets as in prior years. Net new asset flows remained tepid. At the same time, the rising value of the US dollar reduced values of non-US assets in dollar terms. In addition, institutional managers have divested assets to outbalance government deficits.

BCG reports that the global value of AuM rose just 1% in 2015, to $71.4 trillion from $70.5 trillion in 2014, after growing 8% that year, and at an average annualized rate of 5% from 2008 through 2014.

The industry’s regional growth, as measured by AuM, reflected in large part the performance of capital markets by region in 2015. AuM decreased in North America and the Middle East but rose elsewhere. Growth was modest in Europe and strong in Latin America and Asia, excluding Japan and Australia. The 10% growth of AuM in Asia, excluding Japan and Australia, was relatively robust, but once again, it trailed the rapid expansion of the region’s private wealth.

Net new flows of assets—the lifeblood of the industry’s growth—also varied widely by region. Flows were tepid in the U.S. but more robust in much of Europe and Asia-Pacific, where they reached almost 2.5% and 3% of 2014 AuM, respectively. This performance marked a recovery of net flows in France, the Benelux countries, and Eastern Europe and continued positive momentum in Germany, Spain, and Italy. In Asia-Pacific, China and India were among the markets where net flows exceeded 10% of prior-year AuM.

While asset management continues to be highly profitable, the 2015 results underscore the continuing dependence of many managers on rising financial markets to boost asset values rather than on long-term competitive advantage to generate strong net new flows, the report says.

Advanced and sometimes disruptive technologies—including machine learning, artificial intelligence, natural-language processing, and predictive reasoning—are on the verge of joining the mainstream asset managers, according to the report. Early-moving firms and financial-technology providers are beginning to model scenarios that push the boundaries of traditional analytics.

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JPMorgan Chase & Co. and Michael Klein, the former Citigroup Inc. investment banker who runs his own boutique, have been selected to advise on state-owned Saudi Arabian Oil Co.’s initial public offering, according to people familiar with the matter.

Klein is providing strategic advice to the government, while JPMorgan is working on preparations for the IPO and may be among the banks that underwrite the listing, the people said, asking not to be named as the details aren’t public. The deliberations are still at an early stage, and no final decisions about the IPO have been made, they said.

Saudi Arabia’s Prince Mohammed bin Salman is working on a plan to list shares in Aramco, as the business is known, on the country’s domestic stock exchange as early as 2017. A listing could turn the world’s biggest oil exporter into the largest publicly traded firm with a value in the trillions of dollars.

The prince, who heads Aramco’s supreme council, said Saudi Arabia plans to sell a less-than five percent stake in the business. Saudi Arabia’s sovereign wealth fund could receive $106 billion in cash from a sale of that size, according to the Sovereign Wealth Fund Institute.

Klein, 52, has become a prolific force in the M&A industry, landing roles advising on some of the biggest deals in the past few years. M Klein & Co. was listed first among advisers to Dow Chemical Co. on its merger with DuPont Co., the largest-ever chemicals deal. He also worked as a go-between for the chief executive officers on Glencore Plc’s 2012 merger with Xstrata Plc, people with knowledge of the deal said at the time.

He landed a spot as one of the top advisers to IHS Inc., where he had formerly served on the board, on its acquisition of financial data firm Markit Ltd. last month. When commodity trader Noble Group Ltd. faced criticism of its accounting and declining shares last year, Chief Executive Officer Yusuf Alireza hired Klein to review its financing and investment options, a person familiar with the matter said previously.

Saudi Arabia has announced 27 IPOs in the last five years with a total value of about $10.6 billion, according to data compiled by Bloomberg. The biggest by far is National Commercial Bank’s debut in 2014, which raised $6 billion and was the Middle East’s largest share sale.-Bloomberg

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The troubles of the joint venture named  Emaar MGF Land Limited included a failed stock market flotation and delays to many of its projects.

The demerger will “enable Emaar to implement focused strategy for its real estate business in India and will allow the business to undertake future expansion strategies,” as well as drive its ongoing projects, Emaar said in a statement to DFM.

It did not provide further details or a time frame for when the demerger would happen, except to say that it had “agreed to take steps for the reorganisation of Emaar MGF Land Limited”.

Emaar denied speculation in Indian media last July that it was planning a split, insisting that India was a key market for Emaar through Emaar MGF.

The Indian joint venture had planned to build homes, offices and shopping centres for India’s rapidly-growing middle class as their incomes were rising.

However, it has so far completed only a handful of projects, with many still under construction and suffering from long delays.

Emaar MGF Land Limited posted a net loss of 3.53 billion rupees ($53 million) in 2015, narrower than the 3.84 billion rupees it lost in the previous year, according to the ICRA ratings agency, which said in a January note that the firm was constructing 49 projects with total saleable value of 187.45 billion rupees.

According to Reuters, Emaar MGF also came under fire from the government in New Delhi for shoddy construction and months of delays after being contracted to deliver the $230 million athletes village for the 2010 Commonwealth Games held in the Indian capital.

During the peak of India’s property boom in 2007, Emaar MGF planned to raise $1.5 billion through an IPO but was forced to abandon the plan in February 2008 due to a stock market slump as the global financial crisis hit home.

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The sale process is at an early stage and may not result in a deal, Bloomberg quoted the sources as saying.  But the sources were not identified as the talks are private. Dubai Group holds a 48 percent stake in Shuaa worth about $100 million, according to data compiled by Bloomberg.

Trading volumes in Shuaa have been soaring in recent weeks amid signs that an investor may be seeking to gain a foothold in the company. The investment firm, whose shares have lost about two-thirds of their value in the past two years, had four chief executive officers in about five years and managed without one since the end of 2013. The stock has gained 68 percent so far this year.

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Diamonds are now cheaper than they were in 2006, says a Bloomberg report quoting data from PolishedPrices.com. Over the same period, the price of luxury items like cars, shoes and fine foods have risen at above-inflation rates, according to a Forbes index.

Demand for luxury jewelry rose just 1.9 percent a year from 2004 to 2013, trailing high-end beauty products, tobacco and watches, according to De Beers’s 2014 Insight Report on industry trends.

According to Bloomberg,  minie owners like De Beers — who helped dream up those successful marketing campaigns in years past — have been unable to prevent prices from dropping below where they were a decade ago, a sign the industry is failing to maintain the cachet of its brand.

Efforts by producers including De Beers and Alrosa PJSC to push prices higher in the past five years unraveled in 2015. Polishers who buy the raw gems and sell to wholesalers and retailers were unable to pass on the higher costs as consumers balked. A threat to boycott auctions of rough gems by buyers in India, where almost 90 percent of the stones are cut, ended with De Beers lowering prices 15 percent for the year and another 7 percent in January.

“Producers cannot simply just increase rough prices and expect consumers to pay more for diamond jewelry,” said Anish Aggarwal, a partner at industry consultant Gemdax in Antwerp. “Consumer demand cannot be taken for granted, even in mature markets and especially with millennials.”

Earlier generations were easier to influence.

De Beers’ monopoly on diamond supply in the 20th century meant money spent on persuading consumers to pay high-end prices for commodity minerals paid off in surging sales. The investment led in the 1940s to creation of the slogan “A diamond is forever,” and the industry heavily promoted the gems for engagement rings. Jewelers loaned pieces to celebrities like Monroe and 1944 best actress Oscar winner Jennifer Jones to create a buzz around the product as a luxury item.

Ready to jump and and learn if lab-grown is worth your time or not?

The new millennium brought the end of the monopoly, meaning other suppliers were able to sell their gems piggybacking on De Beers’ advertising. The company cut its marketing budget in half to about $100 million a year through the 2000s.

De Beers is getting the message. On top of its global advertising spending, the company plowed tens of millions of dollars into a push to spur jewelry sales in the key U.S. and Chinese markets in 2015.

Last year’s creation of the Diamond Producers Association, bringing De Beers and Alrosa together with Rio Tinto Group, Dominion Diamond Corp., Lucara Diamond Corp., Petra Diamonds Ltd. and Gem Diamonds Ltd., seeks to revive the kind of industrywide advertising seen during the monopoly years.

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Russia’s oil output set a post-Soviet high in March as the success of a proposed crude production freeze between OPEC members and other major producers appeared to be in doubt.

Russian production of crude and a light oil called condensate climbed 2.1 percent in March from a year earlier to 10.912 million barrels a day, according to the Energy Ministry’s CDU-TEK unit. That narrowly beat the previous high of 10.910 million barrels in January.

With most of the Organization of Petroleum Exporting Countries members, Russia and some others outside the group scheduled to meet in Doha this month to discuss an accord on capping output, Saudi Arabia’s Mohammed bin Salman signaled in an interview with Bloomberg that if any country raises output, the kingdom will also boost sales. Prices on Friday sank more than 4 percent after the comments. Iran previously said it plans to boost production after the lifting of sanctions following a deal to curb its nuclear program.

Russian oil exports rose 10 percent to 5.59 million barrels a day, according to the Energy Ministry data.-Bloomberg

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Al Shafar had made significant progress with its planned IPO last year, but the plan was put on hold in the wake of the market turning bad following the trouble in the global stock markets over problems with the Chinese economy.  The company had been working with Goldman Sachs, EFG Hermes and Emirates NBD for the IPO.

Azmy told Reuters the other day that the company had no immediate need to go public, but it was part of its long-term plan.

“There is nothing happening at the moment but when we think it’s the right time to restart the process then we will. Currently, I don’t see the markets being very receptive to a public offering on the DFM  especially in construction,” Azmy said.

There have been no new listings on the DFM since late-2014 as volatile market conditions and soured investor sentiment have put off companies from selling shares.

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According to a new study by The Boston Consulting Group (BCG), the banking industry in the GCC grew at a lower rate in 2015 than it did in 2014 with just a 7.2 percent increase, stemming almost exclusively from major customer segments such as retail and corporate banking.

The study is based on the banks’ 2015 annual results released in the first quarter of 2016 and covers the largest banks in Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and in the UAE. The 2015 BCG index includes 45 banks from across the GCC, capturing about 80 percent of the total regional banking sector.

In 2015, Oman banks led the pack in terms of growth numbers with 9.6 percent in revenues and 10.5 percent in profits. In parallel, UAE banks’ revenues grew by 8.1 percent and Kuwait banks recorded a 11.4 percent profit growth. The spread of revenue and profit growth rates between the GCC countries was significantly smaller than that of last year, ranging from four to 11 percent. There was no negative growth on a country level.

Instead, in 2015, the development of loan-loss provisions (LLPs) varied significantly between the countries, resulting in total, in a small increase of 0.6 percent. The two biggest countries, the UAE and Saudi Arabia, ended up with a small increase of two percent and 4.8 percent, respectively. Whereas Bahrain banks grew LLPs by 39 percent and Oman banks by 21 percent.

This is compensated across the GCC by a strong decline in Qatar and Kuwait. In 2014, we had observed a decline in LLP across almost all countries. Going forward, a slight increase can be expected due to current trends in economic development. A first sign of this is that the majority of banks in the UAE provisioned more in 2015 than they did the year before.

After a number of years with growth in operating expenses exceeding that of revenues, 2015 came out with a moderate aggregate cost growth of 6 percent, with Qatar and Kuwait banks managing almost zero and Bahrain recording a negative growth in cost of one percent. A number of banks preempted the consequences of a low oil price environment and restricted costs and investments. Some larger banks as well as those that had significantly increased costs in the past, managed to achieve low and, in several cases, even negative growth.

Revenues 

In 2015, retail banking revenues in the GCC experienced a further uptick of 8.1 percent, largely due to an increase in Qatar (16 percent), Oman (11 percent) and the UAE (10 percent).

GCC retail profits faced a decline in aggregate, largely because of a negative growth in the UAE. The growth rate in all the other countries was moderate; in fact, only banks in Qatar reached a double-digit growth rate with 13 percent.

In 2015, only Oman experienced double-digit growth rates in both corporate revenues and profits. In the UAE, however, there was a slight decline in revenues while profits grew by 22 percent due to a decline in provisions. All the other countries realized moderate revenue growth. Profit growth numbers, on the other hand, range from minus one percent in Saudi Arabia to 18 percent in Kuwait. 

Over the past decade, the leading banks have grown at double or triple the rate of the average ones. In almost all cases, such a development is based on a superior and consistently-executed strategy.

The article Oil price crash hits banks badly appeared first on Arabian Post.

The increase in debt is mainly due to the addition of the $650 million JAFZA Sukuk following the EZW acquisition and the additional $500 million borrowings from the GMTN programme and $500 million draw down of the term loan.

But overall, the company said balance sheet remains strong with ongoing strong cash generation and there is plenty of headroom and flexibility to add to the portfolio should favourable assets become available at attractive prices.

Total capital expenditure remained below the guidance as the second phase of Terminal 3 was delayed due to prevailing conditions. Capital expenditure in 2015 was $1,389 million, with maintenance capital expenditure of $186 million. The company expects 2016 capital expenditure to be in the range of $1.2 billion to 1.4 billion as it eyes adding further capacity at Jebel Ali, EZW and London Gateway (UK).

Group Chairman and CEO Sultan Ahmed  bin Sulayem pointed out how challenging market conditions in 2015 adversely impacted the performance. “Over the past twelve months, weaker currencies have made trade more expensive for importing countries, softer commodity prices have hurt economies reliant on natural resources, and geopolitical issues have contributed to uncertainty in domestic demand,” he said.

Despite the challenging market conditions , the company reported a revenue growth of 16 percent to $2.9 billion for the calendar year of 2015. The UAE region delivered another record throughput year with 15.6 million TEU handled, while Europe outperformed a difficult market. This resulted in revenue of $2,911 million, up 22.0% year-on-year aided by the acquisition of EZW.

The company invested $1,230 million in the region during the year. Investment was focused across the Middle East and Europe including Jebel Ali (UAE), EZW (UAE), DP World London Gateway Port (UK) and Yarimca (Turkey).

The Asia Pacific and Indian Subcontinent region delivered a strong financial performance due to continued growth from joint ventures and associates. Volume growth was broadly flat as growth in Asia was subdued while capacity constraints impacted our ability to grow in Mumbai (India) during the first half of 2015. Revenue grew by 4.4% to $414 million while our share of profit from equity-accounted investees rose 14.0% to $111 million mainly due to the strong performance in China, Hong Kong and Indonesia.

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The phase has even seen the revival of some of the grandiose schemes announced during the peak of the boom period, but got abandoned later as the crisis began to bite.

Analysts say that the frequency of new announcements betrays a certain sense of desperation on the part of some developers with heavily leveraged positions to try and retrieve their situation. As it happens in most such cases, this could lead to some of them going under and abandonment of projects under construction.  With credit cycles turning ever more tough and funding becomes impossible, the spectre of skeletal structures dotting the skyline, reminiscent of the 2008 crash, is becoming more real.

New tough regulatory initiatives and structural changes may have somewhat limited the impact of a repeat crash, but the continued slump in sales volumes and demand is not at all reassuring, particularly in view of the overall depressive market outlook throughout the region due to the fall in oil prices and supply glut.

According to Cluttons, residential prices have fallen 50 percent from the 2008 peak, suffering a second downturn beginning in early 2010. Although prices rebounded following the influx of money and people displaced by uprisings in several Arab countries, values started slipping again from 2014. CBRE has reported a 15-percent decline in prices and is predicting another 10 percent drop this year. On the other hand, there has been a consistent addition to the supply of new units, with the spectre of oversupply beginning to haunt the market.

Borrowing costs for developers have already doubled in recent times in view of the overall economic condition in the region. Analysts feel that it is a matter of time before banks cut credit lines to developers, especially those who do not have the clout of established players like Emaar Properties or Nakheel. Such a situation would imply a return to the post-2008 scenario, the memories of which all the stakeholders of the property market are still struggling to put behind.

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The exploration & production, oilfield services, building materials and steel industries continue to bear the immediate effects of low oil prices. The global oversupply, combined with additional exports coming from Iran and OPEC countries producing at capacity, has led to a fundamental shift in the energy industries.

Moody’s price estimates for oil reflect this shift and is in the process of concluding ratings reviews of issuers in these industries owing to the deterioration in credit conditions linked to persistently low oil prices.

Manufacturing, US surface transportation and unregulated European utilities and power producers are grappling with the effects of low oil prices, according to the report “Non-Financial Corporations — Global: Net Benefits of Prolonged Drop in Oil Prices Diminish or Turn Negative for Some Sectors.

” Electricity prices in Europe have declined in tandem with oil prices, pressuring unregulated European utilities and power producers. Cost cutting among exploration & production and oilfield services is flowing down to US transportation companies that move crude oil, frac sand and drilling supplies. In addition, oil and gas companies are renegotiating their contracts to reduce the prices they pay manufacturers that service or supply the industry.

“While low oil prices continue to have negative effects on the energy and commodities sectors, we are seeing broader shifts in impact on other sectors,” said Mark Gray, Managing Director of Global Corporate Finance at Moody’s. “The benefits of cheaper oil are diminishing for shipping, packaged food and chemicals companies and beginning to have a somewhat negative impact on the manufacturing and US surface transportation sectors.”

Low oil prices continue to provide a strong benefit only to the airline sector, where lower fuel prices have allowed airlines to reduce prices, boosting passenger demand and free cash flow for US airlines in particular.

The auto sector continues to moderately benefit from low fuel prices, with North American automakers selling larger vehicles the predominant beneficiaries. While higher consumer spending will benefit retailers who cater to the lower-income demographic, the impact will be moderate as wage growth remains anemic for this population and unemployment persists.

Mining companies are benefitting more than they did when Moody’s initially analyzed the benefits and risks of low oil prices in January 2015, with operating costs poised to improve 4%-5%. However, the rating agency notes that this improvement falls far short of offsetting low prices for base metals, iron ore and coal tied to the slowdown in Chinese consumption.

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UAE, along with other GCC governments are thinking seriously about broadening the corporate income tax bases and increasing rates. But Deloitte points out that the potential economic downsides associated with an increase in tax could very well outweigh the revenues earned as a result of the measures implemented to bring about that result.

In short, taxes on profits are more likely to adversely impact investment behavior and subsequent spill-over effects than taxes on consumption – a point that is not lost on policy makers, the report points out. The “easy” option of growing the corporate income tax base might be sub-optimal when compared to the “harder” option of implementing VAT, it says.

In the context of the UAE in particular, corporate tax also presents a more obvious challenge to the “tax-free” branding that the country has leveraged so well to date. Furthermore, the six individual Emirates that make up the UAE may very well find that a CIT does not sit well with either the long-term local tax exemptions that have been promised to businesses established in increasingly prosperous free-zones or the finely-tuned tax-free economic planning strategies that have been developed over many years.

Deloitte observes that corporate tax reform is an attractive proposition to governments operating within a trading bloc simply due to the relatively simple means by which profits can be unilaterally on-shored and taxed. When one considers that multinationals in the GCC are, most likely, paying taxes on profits generated in the region to their home jurisdiction to one extent or another, there is also a potentially neutral impact associated with the local capture of those revenues.

Compared to a VAT, corporate income tax is more likely to act as a disincentive to businesses considering investment in the region and more negatively impact GDP growth as a result, it says.

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Pakistanis invested AED 8 billion in Dubai properties in 2015, out of the total investment from non-Arab expats surpassing AED 74 billion. Compared to 2014, their investment in the Dubai property market increased 6.7 per cent in 2015.

With an investment of AED 30.64 billion in the last five years, Pakistanis are considered among the top three investors in the Dubai property market. Significant groups of Pakistani investors in the property market are expats living in the UAE and wider Gulf region.

The Pakistani investments in the realty sector in the UAE come at a time when the dirham’s peg to the US dollar makes less Pakistanis willing to convert their domestic currency into dirhams to acquire property in Dubai as they favor purchasing investments in their home country instead. Despite this economic fact, Pakistani investors in the realty market in the UAE have been one of the top three for a couple of years.

Dubai is still a very attractive investment market for Pakistani investors due to the high rental yields that range between 8 percent and  10 percent, while the investment in the UAE realty market secure huge financial transfers to Pakistan generated from profits coming from the sales or income of rental properties owned by Pakistanis. According to the Financial Year 2015 – 2016, the total Pakistani expatriates’ remittances from Dubai to Pakistan amounted to $1.67 billion with a growth by 39.7 percentof total Pakistani remittance transfers to Dubai.

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Abu Dhabi’s (Aa2 stable) economic growth could come under pressure this year amid government spending cutbacks in response to lower oil prices,  Moody’s Investors Service said in a report.

Moody’s estimates that the emirate’s real GDP growth will slow to 3.1% in 2016 compared to 3.4% in 2015. The non-oil economy and expanding oil sector have so far allowed Abu Dhabi to avoid a recession, but lower government spending on infrastructure projects is likely to dampen non-oil growth.

Higher oil production and refining volumes will only partially offset the likely slowdown in non-oil sectors of the economy.

“A prolonged period of low oil prices could gradually erode the emirate’s fiscal buffers if it does not maintain its prudent budgeting. In 2016, the emirate’s deficit will likely widen to 14% of GDP,” says Steven A. Hess, a Moody’s Senior Vice President.

“However, even if global prices fall further the government will be able to finance fiscal deficits for 5 to 10 years by liquidating assets. Overall, the country’s considerable foreign assets should mitigate the negative consequences of oil price volatility on Abu Dhabi’s fiscal and external accounts.”

Abu Dhabi’s liquidity risks are limited, with a very low debt burden relative to other investment grade countries. Public sector debt falling due in 2016 accounts for 4.8% of GDP, with direct government obligations representing only 0.2% of GDP.

Moody’s assesses the country’s susceptibility to event risk as medium, given volatile regional geo-political tensions. The rating agency notes the periodic rise of these tension as a rating constraint.

Moody’s Investors Service announced actions via separate releases on the ratings and outlooks of 18 oil-exporting sovereigns to reflect the impact of the continued large fall in oil prices, which Moody’s expects to remain low for several years.

For 12 sovereigns, the rating agency has initiated reviews for downgrade to assess the full impact of the oil price shock in a systematic and consistent manner. In four cases, Moody’s has downgraded the ratings and placed them on review for further downgrade to reflect the minimum impact that it believes the fall in prices will have on those sovereigns’ credit profiles.

Moody’s said it aims to conclude all rating reviews within two months. Moody’s has also affirmed the ratings of two further sovereigns but assigned a negative outlook to one of them. The full list of affected sovereigns and the corresponding rating action is provided below.

Moody’s also published a report to provide further insight into its views and the analytical considerations that drove the rating actions.

The report, entitled “Oil-Exporting Sovereigns — Global: Key Drivers of Rating Actions on 18 Issuers to Assess Impact of Sharp Fall in Oil Prices”, explains that the continuing fall in oil prices has material, and in some cases quite profound, implications for the economic growth and the balance sheets of sovereigns that rely to a large extent on oil and gas to drive their growth and finance their expenditures. Given the importance of economic and fiscal strength in Moody’s sovereign risk analysis, the rating agency believes that the credit risk profiles of these oil-exporting sovereigns are therefore under increasing pressure.

In January, Moody’s latest oil price forecasts announced a further downward revision of its oil price forecasts for Brent to US$33 per barrel in 2016 and US$38 per barrel in 2017, rising only slowly thereafter to US$48 by 2019.

The article Moody’s places Abu Dhabi in downgrade review appeared first on Arabian Post.

The new authority or department is expected to be entrusted with the task of implementing and collecting various taxes, including the proposed corporate taxes.

In June last year, the Ministry of Finance (MOF) had outlined in a report the move for the establishment of a tax system in the UAE.

The corporate tax policy has already been approved by the Cabinet along with the draft on the common value added tax (VAT) law framework for Gulf Cooperation Council (GCC) countries. The draft law on the establishment of a Federal Tax Authority is now before the Ministry of Justice’s technical committee for legislation. This will now go to the Cabinet, the Federal National Council and the Supreme Council, before it is presented to the President for signature.

According to Younis Haji Al Khouri, Undersecretary of the MOF, the draft of the corporate tax law and the value added tax law has been discussed with the local and federal governments. Several steps have already been initiated in this regard, although the specific timeline for implementation of the corporate tax policy has not yet been announced.

One of the complicated issues relates to the implementation of the tax laws at the individual Emirate’s level as it has to be in conjunction with various laws applicable to each emirate. Since the country does not have any significant taxation policy in place, the infrastructure for the tax administration has to be built from the scratch, which will present its own challenges.

The article Now watch out for federal tax authority appeared first on Arabian Post.

Some $94 billion in foreign currency denominated bonds and syndicated loans by GCC countries are maturing this year or the next year, which means these must either be repaid or rolled over, HSBC said in. The Gulf countries account for a total $610 billion in bonds and loans.

“The refinancing sum includes outstanding financial and corporate paper as well as debt issued by the sovereign, which is largely focused in UAE, Bahrain and Qatar,” Simon Williams, HSBC Chief Economist for the Middle East, said.

“With the Gulf acting as a single credit market, the refinancing challenge will likely be much more broadly felt” and “compounded by tightening regional liquidity, rising rates and recent downgrades,” he said.

Meeting the maturities without dipping into sovereign wealth fund capital is likely to be more difficult in the current regional financial environment. The slump in oil prices is set to leave regional energy exporters with fiscal and current account shortfalls of $260 billion and $135 billion over in 2016 and 2017, equal to 8.7 per cent and 4.5 per debt of regional GDP, impacting policymakers’ room for financial manoeuvre, HSBC estimated.

“With the Gulf acting as a single credit market, however, the refinancing challenge will likely be much more broadly felt, with its impact compounded by tightening regional liquidity, rising rates and recent downgrades by international rating agencies. Close to half of the maturities over 2016-17 centre on the banking sector, suggesting any increase in costs at refinancing could quickly feed through into a broader monetary tightening,” the HSBC report said.

The article GCC faces serious refinance challenge appeared first on Arabian Post.

The projects are said to include a new Atlantis resort Palm Jumeirah island and a new tower at the DIFC. According to reports, ICD, which acquired the Atlantis from Dubai World two years ago, and Kerzner International Holdings Ltd., an Atlantis partner, will spend $1.4 billion on the proposed Royal Atlantis Resort and Residences. The development will comprise nearly 800 guest rooms and 250 luxury residences

Similarly, ICD, along with its joint venture partner Brookfield, will build a commercial tower in the DIFC at a cost of about 1 billion dollars, which will be shared between the two partners.

The article ICD seeking $1billion-plus loan for real estate appeared first on Arabian Post.

Minister of State for Financial Affairs Obaid Humaid Al Tayer announced the other day after a joint press conference with IMF Managing Director Christine Lagarde that the UAE will implement VAT at the rate of five per cent from January 1, 2018. The revenue yield in the first year is expected to be AED12 billion.

VAT essentially being a consumption tax, most of this revenue will come from the retail and services sectors. To that extent, it would mean retail prices would go up and by implication there would be a proportionate or even larger drop in retail spending, apart from job losses.

It is not known whether any study has been undertaken about the impact of VAT with specific reference to the UAE or even the GCC because the issue has so far been approached only from the perspective of additional revenue generation in the wake of the slump in oil prices.

But a study by Ernst & Young on VAT in connection with the introduction of such tax in the US showed that the burden would shift forward to consumers through higher consumer prices and a consequent fall in consumption. By increasing consumer prices, the VAT also reduces real or inflation-adjusted wages, which would affect labour supply.

The Ernst & Young study estimated that the introduction of VAT in the US would reduce retail spending by $2.5 trillion over the next decade. Retail spending would decline by almost $260 billion or 5.0 percent in the first year after enactment of the VAT, it said.

The report was particularly harsh on impact of the VAT move, saying it would pose serious risks to the US economy itself. The drop in retail spending, jobs, and GDP under an add-on VAT has the potential to further weaken the economy in the near term, rather than strengthen it. Many countries have reduced their VATs in the face of the recent economic downturn, it noted.

The report went to the extent of suggesting that it would rather be more prudent to cut government spending to reduce budget deficit than cause a depressing effect on retail spending through the introduction of VAT.

“Reducing the deficit through lower government spending would have such more favourable economic effects – more jobs, higher GDP, a better standard of living for Americans, and a less depressing effect on retail spending – in both the near term and in the longer term,” Ernst & Young said.

According to the management consultancy, perhaps the most troubling aspect of a deficit-reducing VAT is that its negative effects on GDP, consumer spending, and employment would occur in the face of the current economic climate of weak economic growth, high unemployment, and low consumer confidence. These would raise additional economic worries, rather than shoring up the weak economy, it said.

The introduction of VAT will also pose serious challenges about its administration as the UAE or the GCC countries do not have any infrastructure in place for administering such a tax structure. Also, there are issues about collection, exemptions, procedures etc both at a central administrative level, manufacturing and distribution levels as well as at the retail outlet level, apart from the realignment of existing taxes such as the municipality tax for hotels and special taxes on goods like tobacco. A major challenge would be to equip the retail trade to handle the complex operation.

The article VAT to further distress retail industry appeared first on Arabian Post.

The Dubai Financial Services Authority (DFSA) has now upgraded to Category 4 whereby, LTCML, DIFC Branch will be regulated by DFSA to offer Wealth Management Solutions. The company will now arrange deals in credit and investments, provide advice on financial products and services, including equities, debt, structured products, investments in alternate asset classes etc., to the High Net worth Individuals (HNI) based in the UAE and the neighbouring countries.

Manoj Shenoy, Chief Executive Officer, LTCML, said Indians settled in the UAE account for US$15 billion in annual remittances, own more than 40,000 UAE companies and hold investments in the country worth an estimated US$55 billion.

Bhavnesh Thakkar, Senior Executive Officer for DIFC branch, who has been instrumental in setting up the office at DIFC, would continue to head the Dubai operations.

The article L&T Financial upgrades DIFC services appeared first on Arabian Post.

Total energy debt in default has now reached $18 billion, suggesting the credit cycle will mark a floor on oil prices. At present, the largest 25 US oil producers, comprising 4.1 million b/d, face an implied risk of default of 27%. Meanwhile, global energy output-weighted CDS risk is now well above 2009 levels.

To sum up, energy credit is upside down, risk capital has been scarred, trillions of dollars of equity wealth have vanished, and deflation fears have risen, the report said. The Saudi shift may have almost triggered a global recession. But not quite. Losses are highly concentrated and non-OPEC supply will likely now drop.

Also, the OPEC accord to freeze output is an important step to stabilize oil prices or even global markets. With Saudi domestic demand surging 450 thousand b/d from winter to summer, exports may drop by a similar amount by July. Coupled with a $3tn a year wealth transfer from oil producers to consumers, we still see a strong summer driving season ahead and $47 oil by the end of June.

The report points out that the radical Saudi oil supply policy shift starting in 2014 has exacerbated the fundamental dislocation created by the advent of shale technology. In recent months, the oil price drop may have even contributed to push down inflation expectations, indirectly affecting global interest rates.

This joint meltdown in oil and rates has in turn fed into energy and financials and can explain about 62% of the $4.6tn drop in global equity market values since July 2014. Similarly, US energy corporate bond values have dropped by $170 billion, mostly via a big jump in yields. The scale of the damage also extends to sovereign debt, with Venezuela sitting at the top of the list, followed by Brazil, Colombia, and Russia.

The article Turbulence in oil sector ‘far from over’ appeared first on Arabian Post.

The growth plans include the construction of 54 more stations in Dubai. The expansion will meet ENOC’s long-term strategic objectives which are aligned with the Dubai Plan 2021 of creating a ‘Smart & Sustainable City’ for ‘Happy, Creative & Empowered People’.

The renovated service stations will ensure safety, easier entry and reduced queuing at pumps. In addition to more dispensers, these stations will also have fully-fledged automotive services and retail stores, including ZOOM and Autopro.

The stations will feature new energy saving technologies, such as the use of a photo voltage (PV) solar panels system which will be installed onto the main canopy of the service stations to generate power with the DEWA grid system.

ENOC Retail is currently operating a network of over 112 service stations in Dubai and the Northern Emirates Regionally; ENOC currently has three service stations in Saudi Arabia with plans to build 11 more in 2016.

The article Enoc to expand retail business by 40% appeared first on Arabian Post.

Piling Tech, one of the group companies specializing in foundation engineering, design engineering and boring and driven piling systems, has acquired a new set of Soilmec SR-60 Evolution piling rigs.

Group CEO Shiraz Hasan said the company would spend AED 370 million to upgrade the facility area, machinery and transportation fleet, leading to a significant increase in the company’s production capacity.

Commenting on the economic outlook, Hasan said, “The medium to long-term economic outlook for the construction industry seems quite positive. 2015 was a very good year for us as we recorded 30%+ YoY growth. There is a host of opportunities available for the construction sector in the region as new projects are being announced throughout UAE.”

“We have created a high demand of our products and services in the region by continuously striving to be the best in the business. Committed to our growth strategy, we opened our third concrete block manufacturing plant last year that has increased the production capacity by almost 1 million units per month. AED 35 million has already been invested on expanding the current fleet for the Group and now these new piling rigs are added to the already growing fleet,” Hasan added.

Tech Group includes ten business units, spread across aluminium and glass; ready mix and concrete blocks; petroleum trading; electrical, mechanical and plumbing services; construction and piling works; steel cut and bend, and fabrication services; sweet water supply, and wood joinery works.

The article UAE construction group to invest $100m in expansion appeared first on Arabian Post.

The Win Eurasia Metal Working Fair in Istanbul held during 11-14 February provided clear insights into the evolving trends in this area and the rapid strides Turkish machinery manufacturing industry is making in this regard.

Turkey is the sixth largest manufacturer of machinery in Europe and exports to more than 200 destinations. Machinery manufacturing is consistently increasing its contribution to the Turkish economy in recent years and was worth over $26 billion in 2014, according to official sources. Machinery and accessories constitute the second largest sector after vehicles in Turkish exports. Machinery automation is currently a key focus of the industry in Turkey.

The highlight of the fairs’ opening ceremony itself was the thrust on industrial automation. Officials of fair organizer Deutsche Messe and government representatives all harped on the theme that the ultimate objective behind any machinery is the enhancement of human life and experience. Self-working machines would be a key milestone in the quest for this initiative. Industrial production without human intervention is the fourth phase of industrial revolution, which is currently under way, it was noted.

Exhibitors at the fair explained how Turkey enjoyed a unique advantage in terms of engineering technology due to its affinity with German technology, which traditionally has had Turkey as a destination for outsourcing its manufacturing requirements. At the same time, Turkish engineering technology comes at a much lower cost than Germany although in terms of quality it is almost at par. China may be offering technology still cheaper, but it is nowhere near Turkey in terms of quality and this makes Turkey an ideal player as technology source.

Win Eurasia Metalworking reinforced its innovative status in the industry not only with the products displayed, but also with its special sections and activities.  In addition to the Robotics and Safe@Work special sections organized last year for the first time, two new special areas were organized this year. The fair brought together the sheet processing and surface treatment industry with the automotive industry in the special section named Automotive Supply Chain. The event also focused on the innovations made in the surface treatment technology through various forums.

According to Alexander Kuhnel, General Manager of Hannover Messe Bileşim Fuarcılık, organizers of the fair, the show sought to bring together the manufacturing industry with innovative products on one hand, and address matters which will shape the future of the industry by bringing together the stakeholders on the other.

The increasing significance of robotic technologies in the manufacturing processes was the highlight of the Robotics section, organized in collaboration with the Industrial Automation Industrialists Association (Enosad). The show brought together 14 companies, which showcased their robotic solutions and saw over 20 presentations being made on Robot Technologies in the Manufacturing industry, Advanced Robotic Applications, Smart Factories and Industry 4. The companies included Halıcı, E3 Tam, EMF Motor, Entek Otomasyon, Festo, Gunmak, HKTM-Hidropar, Kuka Roboter Cee, Mitsubishi Elektrik Turkey, Nachi Europe, Schunk Intec, Staubli, Yaskawa Turkey and Fanuk Turkey.

Making yet another innovation, Win Eurasia Metalworking demonstrarted the role of the metal and surface treatment industry in automotive production live on the production line to be created with the Automotive Supply Chain section, organized for the first time. The event saw several presentations being made on cutting, processing, shaping, welding and connection, marking, painting and surface treatment.

Under the Trade Mission Program of the Ministry of Economy, the event hosted buyers delegation group and editors group from Cameroon, Iran, Jordan, Morocco, Tunisia and the UAE, Bulgaria, Kosovo and Slovenia. The editor’s group from the UAE was represented by the Arabian Post, while the Iranian buyers group was headed by A Parvin, representing the Iran Industrial Manufacturing Assocaition(SATSA).

The article Turkey’s industry muscle on show at Win Eurasia appeared first on Arabian Post.

HSBC Holdings cut its price estimates for Dubai developer Emaar Properties and peers including Damac Properties Dubai Co., predicting falling revenue and declining property prices in the United Arab Emirates.

Emaar’s price estimate was slashed 26 percent to 8.5 dirhams, while Damac’s is 8 percent lower at 3.4 dirhams, HSBC said in a note on Thursday. The bank also lowered its target for Aldar Properties to 3.5 dirhams from 3.9 dirhams.

“U.A.E. developers have performed poorly, reflecting concerns over the macro environment in the country,” analyst Patrick Gaffney said in the note. “Residential property is likely to remain weak this year. We assume a 20 percent decline in the overall value of sales at both Damac and Emaar.”

Emaar Malls Group PJSC, which owns stake in the world’s largest mall, was downgraded to hold from buy on weak earnings in the fourth quarter that reflected significantly lower sales growth than expected, HSBC said. The price target was lowered to 2.9 dirhams from 3.5 dirhams.

Even after the reduction, HSBC’s target for Emaar is well above the stock’s Wednesday closing price of 5.51 dirhams. Abu Dhabi’s Aldar closed 39 percent below the HSBC estimate.

“Current share prices unjustifiably imply significant value destruction from development businesses,” HSBC’s Gaffney wrote. “Even in a bear-case scenario where there are large cancellations of previous off-plan sales, the cash needed to complete construction is minimal” and affordable for both Emaar and Aldar, he wrote.

The article HSBC cuts Emaar price on property slump appeared first on Arabian Post.

Emirates Telecommunications Group Co is suing Nigeria competitor MTN Group Ltd. over plans by Africa’s biggest wireless company to buy local Internet provider Visafone Communications Ltd.

The lawsuit centers on MTN’s potential use of Visafone’s 800 megahertz of spectrum, Abu Dhabi-based Etisalat’s Nigeria unit said in an e-mailed statement on Monday. “Not to challenge will entrench the dominance of MTN in the data services market,” the company said.

MTN Nigeria has been served with court papers and the phone company was in court last week about the matter, spokesman Funso Aina said by text message. Tony Ojobo, a spokesman for the Nigerian Communications Commission, the regulator that approved the Visafone deal, said the NCC hasn’t received any official correspondence from Etisalat questioning the approval of the MTN acquisition.

MTN had 62.5 million Nigerian subscribers as of the end of September, according to the NCC’s website. Globacom and Airtel Nigeria had about 31 million each, while Etisalat was the country’s fourth-biggest operator with 23 million customers.-Bloomberg

The article Etisalat sues Nigerian rival appeared first on Arabian Post.

Analysts are projecting prices will climb more than $15 by the end of 2016. New York crude will reach $46 a barrel during the fourth quarter, while Brent in London will trade at $48 in the same period, the median of 17 estimates compiled by Bloomberg this year show. A global surplus that fueled oil’s decline to a 12-year low will shift to deficit as U.S. shale output falls, according to Goldman Sachs Group Inc.

U.S. production will drop by 620,000 barrels a day, or about 7 percent, from the first quarter to the fourth, according to the Energy Information Administration. Meanwhile, the International Energy Agency forecasts total non-OPEC supply will fall by 600,000 barrels a day this year. That may pave the way for a rebound as lower prices have stimulated global demand. Oil is the “trade of the year,” according Citigroup Inc., which is among banks from UBS Group AG to Societe Generale SA that predict a gain in the second half.

West Texas Intermediate and Brent both closed at the lowest level since 2003 on Jan. 20. New York futures for March delivery closed at $29.88 a barrel on Tuesday and would need to gain 54 percent to reach the median estimate of $46 a barrel. The London contract for April delivery closed at $32.72 and needs a 47 percent boost to hit $48. The median price outlook was taken from estimates provided this year by 17 analysts who gave forecasts for both oil grades.

Shrinking Output

The oil price rout will shut sufficient production to erode the global glut and crude will turn into a new bull market before the year is out, analysts including Goldman Sachs’ Jeff Currie said in a Jan. 15 report. U.S. production hit a record high of 9.61 million barrels a day in June, according to weekly data from the EIA, and is forecast to average 9.11 million barrels a day in the first three months of the year. It may fall to average 8.49 million barrels a day during the fourth quarter, according to the agency.

“We’ll see higher oil prices” with “supply and demand tightening in the second half of the year,” Bob Dudley, chief executive officer of BP Plc, said in a Bloomberg Television interview Tuesday. The market will remain “tough and choppy” in the first half as it contends with a surplus of 1 million barrels a day, he said.

A worldwide oversupply contributed to a 30 percent slump in WTI and 35 percent decline in Brent last year. U.S. crude supplies have swelled to a record and the Organization of Petroleum Exporting Countries have effectively abandoned output targets as they seek to defend market share.

“We need to see supply giving up and I think that all falls to the U.S.,” Dominic Schnider, the head of commodities and Asia-Pacific foreign exchange at UBS’s wealth-management unit in Hong Kong, said Friday in a Bloomberg Television interview. Schnider at the beginning of this year correctly predicted Brent would drop near $30 a barrel. “We’re still oversupplied.”

Natixis SA lowered its forecasts for 2016 and 2017 over concerns that Iran will boost exports after sanctions were lifted and on the possibility a more stable Libyan government will increase production. The Paris-based bank projects WTI will average $38 a barrel in the fourth-quarter, the lowest of 17 estimates compiled by Bloomberg. And while the IEA sees supply outside OPEC sliding, it warned last month that “the oil market could drown in oversupply.”

Into Balance

There are signs supply and demand will start to come back into balance this year, OPEC Secretary-General Abdalla El-Badri said Jan. 25 at a conference in London. Global demand is forecast to increase by about 1.3 million barrels a day while supply from outside the producer group is expected to contract by about 660,000 a day, he said.

Iraq, the second-biggest producer in OPEC, and Pierre Andurand, the founder of the $615 million Andurand Capital Management, predict oil may rise to $50 a barrel, while the United Arab Emirates sees the glut shrinking, even after Iran boosts exports.

While prices continue to fluctuate, buy the December 2016 WTI contract below $40 a barrel because prices are forecast to average $48 by the end of the year, according to Mark Keenan, the head of commodities research for Asia at Societe Generale in Singapore. There may be “meaningful signs” of shale production balancing in the second half, Keenan predicts.

“The combination of continued demand growth and falling U.S. production will eventually help create a floor in the market from where it will be able to rally back towards the $40 to $50 range by year-end,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by e-mail.-Bloomberg

The article Oil bulls see 50% rebound by 16-end appeared first on Arabian Post.

“We still think that normalized external financing flows and macro reforms in Iran will be required to support sustainably higher import demand from Iran as its external accounts come under pressure of low oil prices,” BoA-ML analysts Jean-Michel Saliba and Turker Hamzaoglu said.

In terms of energy markets, unyielding Saudi energy policy is likely to potentially exacerbate market share competition within OPEC, they pointed out.

The report believes that Dubai’s announced budget may be optimistic on the fiscal revenue side in the context of slower economic activity that is likely to drive slower growth in government fee income receipts. But it feels Dubai Inc. will manage to roll over debt in 2016, although this will likely become increasingly challenging. Nakheel is likely to be supported, if needed. Abu Dhabi support is likely to remain the ultimate sovereign backstop on systemic issues. However, further eventual Dubai Inc. restructurings may take place over a longer horizon, and differentiation should be made between credits with explicit guarantees and those lacking it.

The report sees Dubai external debt at tight spreads given still high leverage and refinancing challenges while Abu Dhabi and Qatar’s savings cushion sovereign creditworthiness.

For GCC in general, despite the fiscal consolidation plans for this year, oil price weakness threatens to undo all the spending restraint given the macro sensitivity to oil prices. As a result, the report forecasts increased sovereign issuance as oil prices move below the levels budgeted for and worsen the fiscal gaps.

The article Low oil dampens Dubai’s Iran advantage appeared first on Arabian Post.

The slump in the price of gold has brought investors all over the world closer to their much-loved asset. As gold, a known haven asset, became comparatively cheap in 2015, central banks showed a keen interest.

Increased volatility in the world markets has caused the central banks to invest their money in haven assets. Central banks as a whole have added 175 tons of gold to their official reserves.

The Chinese and Russian central banks have been stashing gold in the past year. According to reports by the World Gold Council, Russia added 144 tons in total to its official reserves, whereas China added almost 50 tons in the third quarter alone. Kazakhstan, Jordan, and the Ukraine also added 7.8 tons, 7.5 tons, and 3.1 tons, respectively, to their official reserves. Above is a chart that shows gold holding patterns in the second quarter of 2015.

The recent commodity market rout has forced emerging countries to secure their funds in assets that may not lose value as fast as their home currencies. Like gold, the US dollar seems to be a haven asset amid the current market rout. Another haven currency is the Japanese yen, which has also gained value alongside gold and the US dollar.-Bloomberg

The article Central banks boost gold holdings appeared first on Arabian Post.

The global oversupply of crude will decline this year even after Iran adds an expected 500,000 barrels a day in oil output, United Arab Emirates Energy Minister Suhail Al Mazrouei said.

Oil prices are fluctuating on speculation about the potential impact of more Iranian crude entering the market this year after the lifting of economic sanctions, Al Mazrouei said on his Twitter account. Iran has pledged to boost output by 500,000 barrels a day immediately after the sanctions are removed and by up to 1 million a day within a year.

“Iran’s possible production increase of 500,000 barrels a day this year won’t be enough to meet the expected demand,” Al Mazrouei said. “It’s difficult to see where the new oil supply is coming from this year to fill the expected annual demand increase of at least 1.3 million barrels a day.”

Benchmark Brent crude fell for a third year in 2015 and a further 13 percent this year amid the global glut. Brent for March settlement fell as much as 54 cents, or 1.6 percent, on Thursday and was was trading at $32.63 a barrel at 7:06 a.m. in London.

“Amid current prices, we should not ignore the possibility of a larger decrease in production from countries outside OPEC that are currently incurring losses,” he said. “The fluctuations in prices in the market are not linked to supply and demand, but are driven by speculators and their concern about the impact of a production increase by Iran.”-Bloomberg

The article UAE sees oil glut easing appeared first on Arabian Post.

Drivers in the U.S. oil hub of Houston can fill their tanks for less than the cost in Abu Dhabi and Dubai for the first time since 2008 as falling crude prices push Middle East exporters to cut government fuel subsidies.

The price of the cheapest grade in the United Arab Emirates, of which Abu Dhabi is the capital, is 1.51 dirhams per liter ($1.55 a gallon) for January, according to the country’s Ministry of Energy. That compares with $1.32 a gallon for the lowest regular fuel in Houston, data compiled by GasBuddy.com show. Houston drivers haven’t paid less on average than Abu Dhabi pump prices since 2008, according to the data. Dubai is the second-largest emirate in the U.A.E. which has the same fuel prices nationwide.

Benchmark Brent crude prices have dropped 16 percent this year after declining in each of the past three years. That’s cutting pump prices for drivers across the U.S., while having the opposite effect in Persian Gulf countries, which supply about a fifth of the world’s oil. Saudi Arabia, the U.A.E., Qatar, Oman and Bahrain have reduced or eliminated fuel subsidies over the past six months.

The article Fuel costs less in US than Dubai, Abu Dhabi appeared first on Arabian Post.

Saudi Arabia may further ease restrictions on foreign ownership in the economy and overhaul one of the world’s most restrictive visa systems as the kingdom seeks to draw investors to help reduce its reliance on oil exports.

The world’s biggest oil exporter is considering allowing foreigners to own 100 percent of a company in at least four more industries, Mohanud Helal, secretary general of the Economic Cities Authority, said in an interview in Riyadh. Retail and wholesale will be opened fully, from a 75 percent limit now, once rules are approved, Abdullatif Al-0thman, governor of the Saudi Arabian General Investment Authority, said on Monday.

The role of foreign investors in the economy has always been a controversial issue in Saudi Arabia, which follows an austere version of Sunni Islam. Yet as oil prices plummet to around $30 a barrel, authorities are racing to find alternatives to revenue from crude exports to finance a budget deficit about 15 percent of economic output.

Four Sectors

“The decision had already been made on some of the industries,” Helal said. The Saudi Arabian General Investment Authority, known as SAGIA, has identified about four sectors in which full foreign ownership may be permitted, he added without elaborating. Calls made to SAGIA after office hours weren’t immediately returned.

“SAGIA welcomes feedback from any investor on any regulation that will enable them to expand and grow their investment in Saudi Arabia,” said Al-0thman, the SAGIA governor. “We would love anyone to say look, if you change this law or regulation, I am coming here with these investments. Any regulation.”

The slump in oil prices has already pushed Saudi authorities to cut spending, issue more debt and draw down the kingdom’s foreign-currency reserves. Officials are also weighing plans to sell stakes in state-owned entities from hospitals to airports and even Saudi Arabian Oil Co., the kingdom’s biggest oil company, known as Aramco.

The country is also reviewing its restrictive visa system by looking for ways to accelerate the process of issuing work and visit permits, according to Helal, who heads the regulatory body governing four economic cities, including King Abdullah Economic City.

“It is a very important and much needed step,” said Mohammed Alsuwayed, the Riyadh-based head of capital and money markets at Adeem Capital. “We need foreign investors to contribute to the expansion of the Saudi economy, specifically the private sector and for them to better understand what or where they are putting their money in, they need to be allowed better access into the kingdom.”

The kingdom last year started allowing direct foreign investments in its stock market, the Arab world’s biggest. The benchmark Tadawul All Share Index has dropped 36 percent over the past year, compared with a 27 percent-decline in the MSCI Emerging Markets Index.

Authorities are looking at allowing visitors, including pilgrims, to visit landmarks in various parts of the country through tourist visas. Enabling workers to bring family in easily is another area which is being considered, Helal said.

“These are all things that are being looked at as we speak today and very quickly we will hear how some things are quickly changing to further the invitation of the international community,” he said.-Bloomberg

The article Saudi to further ease investment appeared first on Arabian Post.

DP World’s long-serving chief executive Mohammed Sharaf has retired with immediate effect, the Dubai-based port operator said on Wednesday.

Sharaf had been CEO for 11 years and worked for the company for 23 years, a statement to the Nasdaq Dubai bourse said.

DP World’s chairman Sultan bin Sulayem will carry out the CEO’s duties on interim basis, it said.

The company has a portfolio of more than 65 marine terminals across six continents, according to its website.

DP World’s market capitalisation is $14.3 billion, making it Dubai’s largest listed company by market value.-Reuters

The article DP World CEO ‘retired’ appeared first on Arabian Post.

Pressured by plunging oil prices and costly wars in the Middle East, Saudi Arabia moved to stamp out speculation that it might be forced to break the link between its currency and the dollar.

Authorities this week ordered banks to limit traders’ ability to bet against against the riyal, whose peg to the dollar has been a bulwark of the kingdom’s economic and financial stability since its introduction three decades ago.

Officials aimed “to kill this speculative activity over the sustainability of the riyal peg,” Apostolos Bantis, a credit analyst at Commerzbank AG, said by phone from Dubai. “Over time, this measure will lead to an easing of the forwards because it will make it far more risky for investors to do this trade.”

While few economists predict a devaluation is at hand, the move nonetheless underscores the financial crisis confronting the kingdom. The ruling al Saud family has taken unprecedented measures to reduce its reliance on oil. The government last month raised fuel prices and trimmed spending to narrow a deficit that may have been the widest since 1991 last year. It floated the possible sale of a stake in the state-owned oil company, Saudi Aramco.

Countries with currencies pegged to the dollar, such as Saudi Arabia and Hong Kong, are coming under increasing pressure from traders speculating that it’s become too expensive for policy makers to continue defending exchange rates as the U.S. currency soars. Bets for a devaluation of the riyal reached their highest in about two decades in January, even after the Saudi Arabian Monetary Agency said for a second time in four months it will stick with its currency peg.

With speculation mounting that the strain from the lowest oil prices in 12 years would be too much for the peg to bear, the monetary agency told lenders to halt the sale of options contracts on riyal forwards, according to five people with knowledge of the matter. The directive, issued at a Jan. 18 meeting in Riyadh, applies to local banks and the Saudi branches of international banks, the people said.

The central bank declined to comment when contacted by telephone Wednesday.

The crude drop comes as tension between the Sunni-led state and Shiite-majority Iran escalated after the execution of a prominent Shiite cleric and the dropping of most international sanctions against the regime in Tehran.

Saudi riyal forwards for the next 12 months rose to 967.5 points as of 6:29 p.m. in Riyadh. The nation’s benchmark stock gauge, the Tadawul All Share Index, dropped 5 percent, bringing its loss to 21 percent so far in 2016.

While Saudi Arabia has been burning through more than $100 billion of its foreign reserves the past year, the stockpile, at about $628 billion at the end of November, is still the third largest in the world after China and Japan. The Arab state may sell shares in Aramco in an initial public offering as part of a broader package of economic reforms. About 70 percent of the nation’s revenue comes from oil.

“They would cut oil output first and increase prices before moving on the peg,” John Peta, head of emerging market debt at Old Mutual Global Investors in London, said by e-mail.

Volatility in the forwards market has been based on “misperception about Saudi Arabia’s overall economic backdrop,” Governor Fahad Al-Mubarak said in a statement on Jan. 11. The kingdom will “uphold its mandate” of maintaining the three-decade old peg at 3.7500 per dollar.

The policy has “has served Saudi Arabia well,” Masood Ahmed, director of the Middle East and Central Asia department at the International Monetary Fund, said in an interview. “It remains appropriate given the structure of the economy. Also Saudi Arabia has adequate buffers to maintain this peg.”

The Washington-based fund on Tuesday lowered its 2016 forecast for economic growth in Saudi Arabia to 1.2 percent, its slowest pace since 2002.-Bloomberg

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Gulf Arabs could pull billions in investment money from the United States if Donald Trump wins the presidency later this year, billionaire UAE businessman Khalaf Al Habtoor told Reuters.

Trump, front-runner to be the Republican presidential candidate, triggered outrage around the world when he advocated a temporary ban on Muslims entering the United States.

The United States “will lose their businesses, people will cancel any plans of investment there, I am sure of that,” said Habtoor, the head of United Arab Emirates-based conglomerate Al Habtoor Group (AHG), who once supported Trump’s candidacy.

“Because if you don’t want me in your country, how can I invest and put my money there. Therefore people will divest, and this will result in unemployment in the United States.”

Habtoor is Chairman of AHG, one of the biggest family businesses in the UAE, with a range of interests including automotives, hospitality and construction. It plans 2 billion dirhams ($544.6 million) of acquisitions in the hospitality sector in the United States and Europe this year.

If other Gulf investors take a similar view, billions of dollars of Gulf Arab money slated for investment in the United States could be at risk.

The UAE was the United States’ largest trading partner in the Middle East in 2014, with $25 billion in bilateral trade, according to data from the U.S.-UAE Business Council’s website.

That includes multi-billion-dollar aircraft orders for Boeing from Emirates and Etihad Airways as well as defence contracts.

Qatar’s sovereign wealth fund set up an office in New York in April last year and plans to invest $35 billion in the country over the next five years.

Habtoor is not the first Gulf businessman to express anger at statements by Trump, who has also suggested refugees fleeing violence in Syria are affiliated with Islamic State militants.

Saudi billionaire Prince Alwaleed bin Talal called Trump a disgrace in a Twitter spat on Dec. 12, although he not threaten to pull out his U.S. investments. His company Kingdom Holding has a substantial portfolio of U.S. holdings including Citigroup, Twitter, and Newscorp.

Habtoor says Trump should not have stereotypically identified Muslims as terrorists.

“ISIS are not Muslims, Al Qaeda are not Muslims, Hezbollah are not Muslims, they are criminals, they are terrorists,” said Habtoor, who said he had written a letter to Trump asking him to reconsider his views and public statements.

Habtoor had initially backed Trump for the presidency, writing an op-ed in the UAE daily newspaper The National on Aug. 9 in which he said he was “convinced that he was the right man for the job”.

“I was supporting Mr. Trump because he is a very successful businessman, he is very shrewd, and I thought the United States now needs a successful businessman rather than a politician,” Habtoor said, adding he had been surprised by Trump’s comments.

The article ‘Trump win will see Arab money pullout’ appeared first on Arabian Post.

Real estate consultancy JLL predicted that average housing rents in the city would continue to fall by as much as 10 per cent over the coming 12 months. Asteco estimates that 12,000 apartments and 2,000 villas will be completed this year.

According to Hafeez Abdullah, Chairman of The H Holding Enterprise, the decline in rent prices could raise the emirate’s competitiveness over other regional and global markets, and might encourage more people to benefit from this most significant drop since 2011.

Earlier in 2015, Moody’s Investors Service stated that the slowdown in Dubai’s real estate market is positive in the long run, as it gives the market time to absorb the existing supply pipeline.

“Estimates show that in 2014, over 140 nationalities invested AED 218 billion in the emirate’s real estate market. We saw new investments methods facilitated to encourage more investors to come. For example, Dubai has allocated over 100 hectares of land for affordable housing, mostly to meet the demand for dwellings for people earning between AED 3,000 and AED 10,000 per month. These efforts will pay off gradually,” said Abdullah.

The market in Dubai is also influenced by the purchasing power of foreign investors and expatriates, economic slowdown of oil-exporting nations and the strengthening of the dollar-pegged UAE dirham against the euro and rouble.

The article ‘Faster’ correction in Dubai real estate forecast appeared first on Arabian Post.

The gaining strength of the dollar, which is making UAE real estate more expensive for overseas investors, also contributed to the problem.

In Dubai, data from the Land Department reveals falls of 33% and 28% in the volume and value of transactions respectively in the YT November 2015, compared with same period in 2014. This comes as rents and sales prices dropped 2% and 11% respectively in the YT November according to the REIDIN General Index.

Rents have performed better than sale prices in all sectors of the residential market in 2015, increasing rental yields and the future attractiveness of the sector. With average rentals declining in the Dubai market, 2015 has seen a widening of the gap between residential rents in Abu Dhabi and Dubai.

The report noted that real estate performance during 2015 remained largely stable as developers adjusted to lower oil prices, reduced government spending and a significantly slower rate of economic growth than in recent years by reducing levels of new supply.

Across the two cities of Dubai and Abu Dhabi, just 8,000 residential units were completed in 2015, less than half the number completed in 2014, as developers responded to more subdued market conditions and tightened liquidity, a trend likely to continue into 2016.

Craig Plumb, Head of Research at JLL MENA, said: “Following a rapid increase of residential rents and prices between 2012 and 2014, the market has now clearly stabilised, with sales prices falling in Dubai and remaining stable in Abu Dhabi during 2015 – but with a significant decline in transaction volumes in both markets. Prices softened by around 11% in 2015 according to RERA in the Dubai residential market and are expected to decline further over the next 6 months.”

A slowdown in the pace of economic growth has also affected the rental market – although with supply also generally subdued, there has been a lesser impact on residential rents compared to sales prices – with residential rentals in Dubai falling marginally (by around 3%) and rents in Abu Dhabi increasing marginally over the year.

Average commercial rents have remained largely unchanged in both Dubai and Abu Dhabi.  While there has been rental growth recorded in a number of the best quality schemes in both markets (those with low levels of availability) this is not an accurate reflection of the overall market where rents have generally remained unchanged in the face of significant levels of vacant space.

Retail rents have remained largely unchanged in both Dubai and Abu Dhabi – although the retail market is generally likely to move more in the tenants favour in both markets in the short term as the rate of growth in retail sales slows down at a time of increasing new supply.

The UAE hotel market saw mixed performance throughout 2015. While ADR’s remained flat in Abu Dhabi, room rates in Dubai saw a 9% decline during the year to October. Occupancy levels remained healthy in both markets, at 74% and 77% in Abu Dhabi and Dubai respectively. The hotel market is now at more competitive levels than in 2014, partly attributable to a decrease in the number of tourists from Russia, South Asia, Far East Asia and Africa visiting Dubai (due to a slowdown in their domestic markets and the strengthening dollar) as well as the addition of new hotel rooms.

The article Oil crash, dollar gains hit UAE real estate appeared first on Arabian Post.

It is the second time in the past four months that Saudi Arabia is pledging allegiance to the dollar after bets for a devaluation seemed to have hit the highest level in almost two decades.

The Saudi Arabian Monetary Agency will “uphold its mandate” of maintaining the riyal at 3.7500 per dollar, backed up by a range of monetary-policy instruments including its foreign-exchange reserves, central bank Governor Fahad Al-Mubarak said in statement.

According to Bloomberg, twelve-month forward contracts for the riyal climbed to the highest since at least December 1996 on Friday, reflecting growing speculation the country could adjust its exchange rate.

Bloomberg also quoted Monica Malik, the chief economist at Abu Dhabi Commercial Bank, as pointing out that speculation about the riyal has continued to gather pace with oil prices moving down. The central bank governor’s statement is to provide a consistent message in support of the peg, she said.

Saudi Arabia’s budget has been under pressure after crude, the nation’s main source of income, plunged to the lowest level in 12 years. The kingdom has announced plans to cut expenditure and subsidies to cope with the decline and may tap local and international debt markets this year to fund a deficit.

The currency peg is no longer sustainable, Peter Kinsella, an analyst at Commerzbank AG in London, said in a report last week. Pressure on the forwards will probably increase over the “coming weeks and months,” he said.

The kingdom’s net foreign assets dropped for 10 straight months through November, the longest streak since at least 2006, to $627 billion. Al-Mubarak said in September the nation will stick with its dollar peg as long as oil underpins the economy.

“Of late we have observed volatility in the dollar versus riyal forward market due to the mispricing linked to market operators’ misperception about Saudi Arabia’s overall economic backdrop,” Al-Mubarak said in the statement on Monday.

Twelve-month forward contracts rose to 975 points on Friday, the highest since Bloomberg started collecting the data. They were at 875 points at 11:51 a.m. in Riyadh Monday.

The article Saudis say dollar peg to stay appeared first on Arabian Post.

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A key factor weighing on the sector as a whole was relatively muted growth of new work – the pace of expansion was the weakest since August 2011. Output, employment and input buying also rose more slowly, while charges decreased as firms competed to secure new clients.

The survey contains original data collected from a monthly survey of business conditions in the UAE non-oil private sector.

After adjusting for seasonality, the index pointed to a loss of growth momentum in December. Falling from 54.5 in November to 53.3, the latest reading was the lowest since August 2012. Despite still signalling a solid improvement in business conditions, it meant that the fourth quarter was the weakest on average (53.9) since Q3 2012.

Underpinning the overall slowdown was a subdued expansion in new orders placed with UAE non-oil private sector companies. The latest rise was the least marked in nearly four-and-a-half years, albeit robust overall. New business from abroad followed a similar trend, with growth softening but remaining solid. Some panelists linked higher new work to improving market conditions both domestically and abroad, while others made reference to gains generated from marketing efforts.

Growth of new work was sufficient to motivate firms to raise their output further in December. The rate of expansion moderated in line with the headline index, though it remained slightly faster than the long-run average.

Another factor behind the overall easing was slower job creation at the end of 2015. Employment rose only modestly, as signalled by the respective index dropping below the 2015 average. Meanwhile, the level of unfinished work was unchanged in December, following a 19-month period of expansion. Data suggested that the absence of capacity pressures was at least partly due to the relative weakness of order books.

Input buying continued to rise in December, stretching the current upward trend to 65 months. The rate of growth eased, however, to the weakest since April 2013. Subsequently, stocks of purchases expanded at a slower pace.

On the price front, cost pressures remained modest in December.  Both salaries and purchasing costs rose more slowly, thereby restricting the overall rate of input price inflation.

Data for charges pointed to something of a squeeze on UAE non-oil private sector businesses. Tariffs fell for the second month running, with some panelists commenting on the need to offer discounts in order to capture new business.

The article 2015 ended on a low note for UAE appeared first on Arabian Post.

The daily EY101 flight from Abu Dhabi to New York’s JFK airport and the return EY100 service will also see leased Jet Airways Boeing 777-300ER aircraft replaced by Etihad Airways Boeing 777-300ERs from June 1, 2016.

The second daily Etihad Airways service to and from New York JFK, EY103 and EY102, will continue to be operated with the airline’s flagship A380 aircraft in 2016.

Kevin Knight, Etihad Airways’ Chief Strategy and Planning Officer, said, “With the growth of the Etihad fleet, we will be pleased to soon fly these important US services in our own colours, continuing to provide the very finest service in the sky to our guests.”

The Etihad Airways Boeing 777-200LR to be deployed on the San Francisco route will be configured to carry 239 guests in three cabins, with eight First Class seats, 40 Business Class seats and 191 Economy Class seats.

The Boeing 777-300ER to be deployed by Etihad Airways on the New York route will be configured to carry 328 guests also in three cabins, with eight First Class seats, 40 Business Class seats, and 280 Economy Class seats.

All Etihad Airways guests flying to the United States pass through US Preclearance at Abu Dhabi Airport meaning they clear US immigration and customs before boarding their flight and arriving in America as domestic passengers.

Etihad Airways offers a new premium lounge for First and Business Class guests to enjoy once they have passed through US Preclearance in Abu Dhabi.

Etihad Airways currently operates double daily to New York JFK, a daily service to Chicago, daily to Washington DC, daily to Los Angeles LAX, daily to San Francisco, and three flights a week to Dallas-Fort Worth. The airline opened a new flagship premium lounge in New York last year

The article Etihad replaces Jet Airways on two key US routes appeared first on Arabian Post.

Saudi Arabia’s currency peg is no longer sustainable amid a slump in oil prices that threatens to further crimp government financing, according to Commerzbank AG.

The cost of buying 12-month dollar-riyal forwards has risen almost 1 percent since early December to about 3.83 per dollar, Commerzbank said in a report on Tuesday. Upward pressure on the forwards will probably increase over the “coming weeks and months,” it said. Saudi Arabia has pegged its currency to the dollar at 3.75 since 1986.

“Markets clearly no longer believe that the USD-SAR peg is durable,” said Peter Kinsella, an analyst at Commerzbank in London, who recommended investors take “long” dollar-riyal positions. “If they did, then forwards would not diverge from spot prices to any large extent.”

The government last month released a more tight-fisted budget for 2016, reflecting scaled-back revenue expectations and lower spending on subsidies because of sinking oil prices and its involvement in the war in neighboring Yemen. The budget envisions cutting expenditures to 840 billion riyals ($224 billion) this year after spending reached 975 billion riyals in 2015, 13 percent above target.

“The Saudis could put off the day of reckoning by engaging in severe budget cuts which reduce the deficit,” Kinsella said. “However, this policy is not without domestic political risks and does not seem to be favored by the authorities.”-Bloomberg

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At almost any other time, an escalating diplomatic conflict between OPEC members Iran and Saudi Arabia would mean a spike in oil prices.

That the rally this time couldn’t be sustained shows just how abnormal things are in the oil market. Brent crude has fallen 0.5 percent this week as a global supply glut and the slowest Chinese growth in a generation trumped mounting strife between the nations on either side of the world’s busiest waterway for oil tankers.

“When oil supplies were tight, we’ve seen bigger reactions to geopolitical tensions,” Tushar Tarun Bansal, a senior oil analyst in Singapore at industry consultant FGE, said by phone Monday. “Now the price rise has actually been quite muted because the world is in a surplus situation.”

Awash in Oil

Saudi Arabia gave Iran’s ambassador 48 hours to leave after protesters set its embassy in Tehran on fire following the execution of Saudi cleric Nimr al-Nimr, a critic of the kingdom’s treatment of its Shiite minority. It was the worst clash between the nations since the 1980s, adding to proxy wars they were already fighting from Syria to Yemen in a quest to gain influence in the Middle East.

The impact of the tensions is limited because the oil market remains oversupplied, Macquarie Group Ltd. analysts including Vikas Dwivedi said in a note. The events “may severely limit the possibility of peace in surrounding countries, but do not directly threaten crude oil production,” the bank said.

The world is awash in oil after OPEC members led by Saudi Arabia committed to a strategy of increasing market share by pressuring high-cost producers, rather than cutting output to support prices. This policy has resulted in record oil inventory levels that will probably keep growing for most of the year, the International Energy Agency said last month. This provides a cushion against any unexpected turmoil.

Should violence break out in the Eastern province of Saudi Arabia, home to most of its Shiite community and its richest oil fields, the impact on prices could be more significant, according to Alexandre Andlauer, an oil analyst at AlphaValue SAS in Paris.

“The Saudis will move quickly to quash any violence, but the question will be whether they can keep any protests from flaring out of control,” Andlauer said Monday.

The dispute entrenches the biggest bearish factor in the oil market in the past year — OPEC’s decision to keep pumping amid falling prices.

Saudi Arabia and Iran are the largest and fifth-biggest producers in OPEC, respectively. Their worsening relations make it even less likely the group could overcome internal differences and agree to an oil-output cut to boost prices, Macquarie said.

Last month, OPEC effectively abandoned any limits on output and boosted production, according to a Bloomberg survey. The group would need to reach a consensus before making any change of policy that could reduce the glut.

While Iran is set to boost to oil production as sanctions on its nuclear program are lifted this year, it has called on other OPEC members to cut output. This is opposed by Saudi Arabia and its Gulf allies.

The U.A.E. reduced its representation to Iran, while Kuwait said it backed “all measures adopted by Saudi Arabia to maintain its security and stability,” according to an unnamed Foreign Ministry official cited by the KUNA news agency.

“When you see an escalation of this sort — which is sectarian in nature and involves the broader OPEC group — it just makes things even more difficult,” Virendra Chauhan, a Singapore-based oil analyst at consultant Energy Aspects Ltd., said by phone. The organization is now “less likely to come to some kind of broader output cut,” he said.-Bloomberg

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Last week, the Administrative Court of Braunschweig decided that the German Ministry of Transport was entitled to reject the 29 Etihad Airways – airberlin codeshares, which had been approved only until 15 January 2016.

As the notice of appeal was filed in the higher administrative court in Lüneburg today, Etihad Airways President and Chief Executive Officer, James Hogan, reiterated the airline’s unwavering support for airberlin, saying it remained committed to the German carrier, to competition and to consumer choice for German travellers.

“With airberlin, we are working to ensure that no traveller suffers as a result of this dispute, and all bookings will be honoured.

“We will fight all the way to protect our investment, to protect our partnership with airberlin and to protect competitive choice in German air travel.”

Mr Hogan said Etihad Airways’ commitment to airberlin was in stark contrast to the lack of support demonstrated by the German Ministry of Transport for a proud German airline.

Etihad Airways took a 29.2 percent stake in airberlin in 2011, following encouragement from German regional and national Government representatives. The airlines had approval for codeshare services on a total of 63 air routes, providing German travellers with new choices to destinations around the world. In the summer of 2014, the German Ministry of Transport raised concerns about 29 of the codeshares, based on lobbying by Lufthansa, and in November 2015 only approved the 29 codeshares until 15 January 2016. The remaining codeshares remain unaffected.

Mr Hogan said: “Together, airberlin and Etihad Airways have created new competitive choice for German travellers, based on codeshare services to international destinations that have operated for years without any concerns being raised as they are pro-competitive and increase consumer choice.  That was entirely correct, given that they meet the terms of the air services agreement between Germany and the UAE – a fact confirmed not just by our own legal team and expert advisors but by a former Director-General of Civil Aviation for Germany.

“Now, after four years of investing in Germany, supporting airberlin jobs as well as creating our own new employment in Germany, we find the rules have changed.

“As a global business, we focus our investments in markets which will deliver long-term returns. We were encouraged to invest in airberlin. However, since that initial investment, we have faced a series of significant challenges, including the introduction of airport taxes, which have directly eroded airberlin’s profitability.

“In other markets, such as Australia, India, Italy, Serbia and the Seychelles, our investments have been welcomed and supported. Yet in Germany, our commitment continues to be undermined by the lobbying efforts and protectionist tactics of Lufthansa, the national airline.

“Unless the German government can show its commitment to support all German companies and German jobs, its reputation as a safe country in which to invest is at stake. Investors need every reassurance that the integrity of their investments in Germany will be respected and protected.

“Etihad Airways is but one investor in one industry.  But our experience will serve as a warning to others when it comes to making international investment decisions.

“Make no mistake. Protectionism will undoubtedly harm the investment landscape in Germany.”

The article Etihad bid to overturn German verdict appeared first on Arabian Post.

Oil gained for a second day as Saudi Arabia cut ties with Iran a day after its embassy in Tehran was attacked to protest the Saudis’ execution of a prominent Shiite cleric.

Futures rose as much as 3.5 percent in New York, extending Thursday’s 1.2 percent advance. Iran’s Supreme Leader Ayatollah Ali Khamenei warned of repercussions and protesters armed with rocks and firebombs attacked the Saudi embassy in Tehran on Saturday and set parts of the building on fire. The Middle East accounted for about 30 percent of global oil output in 2014, according to the Energy Information Administration.

Saudi Arabia and Iran, respectively OPEC’s first- and fifth-ranked producers, are on opposite sides of Middle East conflicts from Syria to Yemen. Prices last week capped the biggest two-year loss on record amid speculation a global glut will be prolonged as U.S. crude stockpiles expanded and the Organization of Petroleum Exporting Countries abandoned output limits.

Diplomats Expelled

West Texas Intermediate for February delivery climbed as much as $1.28 to $38.32 a barrel on the New York Mercantile Exchange and was at $37.65 at 2:58 p.m. Hong Kong time. The contract rose 44 cents to $37.04 on Thursday. The volume of all futures traded was about 88 percent above the 100-day average. Prices lost 11 percent in December for a second monthly decline.

Brent for February settlement increased as much as $1.22, or 3.3 percent, to $38.50 a barrel on the London-based ICE Futures Europe exchange. Prices slid 35 percent last year for a third annual drop. The European benchmark crude was at a premium of 32 cents to WTI.

Iran’s ambassador in the kingdom has 48 hours to leave, Saudi Foreign Minister Adel al-Jubeir said late Sunday in Riyadh. The crisis is the worst between the two regional powers since the late 1980s, when the Sunni-led kingdom suspended ties with Shiite-ruled Iran after its embassy was attacked following the death of Iranian pilgrims during Hajj in Mecca.

Saudi Arabia produced 10.25 million barrels a day in December, helping to keep daily OPEC output above 32 million barrels for a seventh month, according to data compiled by Bloomberg. Iran pumped 2.7 million barrels a day and is seeking to boost exports once international sanctions are lifted.

Iran will raise exports by 500,000 barrels a day within a week of sanctions being removed, said Oil Minister Bijan Namdar Zanganeh, according to the official Islamic Republic News Agency. The country will add another 500,000 barrels a day in a second phase within six months after the curbs end, he said.

“Geopolitical concerns keep ratcheting up, especially with the latest flare up between Saudi Arabia and Iran,” Robin Mills, an analyst at Manaar Energy Consulting in Dubai, said by phone from the U.K. on Sunday. “All the supply indicators are very bearish for oil prices. Iran looks to be nearing a return to the market, Russia is producing at a high and most of the OPEC members are producing as much as they can.”

Russia’s crude output set another post-Soviet record in December, according to Energy Ministry data. The country’s crude and gas condensate production rose to 10.825 million barrels a day last month, beating the previous record set in November by 0.4 percent, Bloomberg calculations based on the data show.-Bloomberg

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A blaze that engulfed a Dubai skyscraper on New Year’s Eve – the emirate’s third high-rise fire in three years – has raised fresh questions about the safety of materials used on the exteriors of tall buildings across the wealthy region.

Hundreds of gleaming towers rose up in Gulf Arab states, especially the United Arab Emirates and Qatar, during the past decade’s economic boom. Ultra-modern, flamboyant designs often involved heavy use of cladding – layers fixed to the outside of buildings for decoration, insulation or protection.

After Dubai’s latest blaze, which security officials said spread up the outside of the 63-storey Address Downtown luxury hotel and residential tower, experts are asking if the layers may in some cases make buildings more vulnerable to fire.

“The fires that have erupted in Dubai landmarks have raised concerns about the quality of material used to clad the emirate’s buildings,” The National, a leading UAE newspaper, reported on Saturday.

Experts say most of Dubai’s approximately 250 high-rise buildings use cladding panels with thermoplastic cores, the newspaper said. Panels can consist of plastic or polyurethane fillings sandwiched between aluminium sheets.

Such cladding is not necessarily hazardous, but it can be flammable under certain circumstances and, depending on a skyscraper’s design, may channel fires through windows into the interiors of buildings, said Phil Barry, founder of Britain’s CWB Fire Safety Consultants Ltd.

Barry told Reuters that, working as a consultant in the Gulf in 2012, he had identified “a general trend of fires in high-rises”, which in some places indicated a need for stronger regulation and tougher building codes.

PREVIOUS FIRES

On Saturday, authorities were still investigating the cause of the fire at the Address Downtown. Dubai police said 14 people were lightly injured as the building was evacuated; a medic at the scene said over 60 people were treated for mild smoke inhalation and other complaints.

Mohamed Alabbar, chairman of Emaar Properties, which owns the hotel, said it had been built to the highest quality standards and following international best practice.

“We are determined to restore it to all its glory, and even surpass the splendid architectural standards,” Alabbar said in a statement. He did not discuss the reason for the blaze or the financial impact on Emaar, or say when the hotel might reopen.

In February last year, hundreds of people were evacuated from one of the world’s tallest residential buildings when fire broke out at the Torch, a 79-storey skyscraper in Dubai. An investigation by the building’s management found most of the damage was to the exterior cladding.

In November 2012, a 34-storey residential building was partially gutted by a fire. An investigation blamed a discarded cigarette butt that fell on a pile of waste; the blaze swept through cladding panels on the tower.

The UAE revised its building safety code in 2013 to require that cladding on all new buildings over 15 metres (50 feet) tall be fire-resistant.

But the new rules do not apply to buildings erected before that year, and Barry noted that the vast majority of the country’s skyscrapers fell outside the regulations; the Address Downtown was completed in 2008.

In an article published soon after last year’s Torch fire, Barry Greenberg and Michael Kortbawi at UAE law firm Bin Shabib & Associates said the cost of replacing cladding on skyscrapers with safer materials would be “prohibitive”.

But they added that the cost of not acting could prove even larger. “Total loss of a supertall building – requiring demolition and replacement – is a distinct possibility in the event of a fire,” they wrote.-Reuters

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But overall the Dubai Establishment has won admiration from all around for the manner in which such a major fire and its potential dangers were handled. The less than two dozen injuries reported amount to virtually nothing considering the gravity of the situation, with a huge crowd milling around the property in expectation of the New Year spectacle that Downtown Dubai and Burj Khalifa have by now become famous for.

The takeaway from the whole episode is that Dubai has once again demonstrated its inherent strength and positivity with the swift, professional, calm and caring response, as Emaar Chairman Mohammed Alabbar pointed out in a statement issued a day after the incident. The immediate priority was to ensure the safety of guests and the hundreds of thousands of visitors to Downtown Dubai, who were evacuated in record time in a most orderly fashion.

Within minutes of the incident, Dubai Civil Defence, Dubai Police, Dubai Ambulance Services, the RTA, Dubai Heath Authority and the all governmental authorities concerned, coordinated and responded with maximum efficiency—a true testament to how Dubai operates as one team.

Various hotels in Dubai contributed their part in relocating the guests who were staying at the Address. The authorities and staff at the General Directorate of Residency and Foreign Affairs, Dubai International Airport, Emirates Airline and other airline companies quickly extended support in ensuring the wellbeing of the guests.

“The teams across Dubai government entities are the true heroes. Their noble work gives Dubai’s people and the business community the sense of security, comfort and confidence,” Alabbar said in his statement.

“We are extremely thankful to the leadership and guidance of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, for keeping our morale high, and for his prompt directives that enabled us to deal with a challenging situation with utmost professionalism,” he said.

The Emaar Chairman also thanked Dubai Police, Dubai Civil Defence and all the Dubai government entities who demonstrated their superb commitment and dedication. He specially thanked the Dubai Civil Defence officials for their exceptional bravery and hard work.

Alabbar also praised the people of Dubai for their response to the challenging situation. “We extend our heartfelt appreciation and debt of gratitude to the people of Dubai, especially the visitors to Downtown Dubai, for their patience and trust in us. Their orderly conduct demonstrated their confidence in Dubai’s officials to meeting any challenge calmly,” he said.

The article Dubai shows its true spirit appeared first on Arabian Post.

Emirates Global Aluminium (Emal) a joint venture between Abu Dhabi and Dubai, is said to be paying almost 40 percent more for a loan compared with last year as liquidity in the Gulf tightens after the plunge in oil prices.

The state-controlled company will pay 200 basis points, or 2 percentage points, above the London Interbank Offered Rate on a $4.9 billion, seven-year conventional loan and an Islamic facility, according to three people with knowledge of the plan, who asked not to be identified because the information isn’t public. That compares with a spread of 145 basis points that subsidiary Dubai Aluminium paid on a similar maturity facility it raised in December 2014, according to data compiled by Bloomberg.

A spokeswoman for Emirates Global Aluminium didn’t respond to phone calls and an e-mail seeking comment.

Companies in the six-nation Gulf Cooperation Council, home to about 30 percent of the world’s proven crude reserves, are beginning to face higher borrowing costs after oil’s 65 percent plunge since June last year led to a slowdown in bank deposit growth. The Emirates Interbank Offered Rate, a local benchmark used to price some loans, climbed the most this year since at least 2006 to 1.04729 percent, the highest since April 2013.

Emirates Global Aluminium said Nov. 23 it started marketing the loan after appointing seven lenders including BNP Paribas SA, Citigroup Inc. and Natixis SA as bookrunners. The money will be used to replace existing loans raised by its subsidiary Emirates Aluminium in 2007 and 2012, and will be the “first of a series of transactions being implemented to optimize EGA’s capital structure,” Samer Jumean, the head of financing and capital markets, said in a statement that day.

Emirates Global Aluminium is owned equally by Abu Dhabi’s Mubadala Development Company PJSC and Investment Corporation of Dubai, and is among the world’s five largest primary aluminum producers, according to its website. The sheikhdoms started the joint venture in 2013.

Aluminum has declined 17 percent this year on the London Metal Exchange, heading for the biggest annual decline since 2011.-Bloomberg

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“Gold import is estimated at around 1,000 tonnes in 2015 calendar year, compared to around 900 tonnes last year. Imports are likely to increase because of low global prices,” All India Gems and Jewellery Trade Federation Chairman GV Sreedhar said at an event here. He said imports through smuggling were estimated to be around 100 tonnes this year.

According to the federation, India has already imported 850 tonnes of gold from January to September 2015 as against 650 tonnes in the first nine months of last year. Gold imports are expected to be 150-200 tonnes in the last quarter, as against 300 tonnes in the year-ago period.

The World Gold Council has said in its latest report that India’s gold demand in the October-December quarter will be more muted.

“Lingering concerns over the health of the rural Indian economy and local gold prices remaining in close proximity to Rs 27,000 per 10 grams level in recent weeks also give reasons to adopt a prudent outlook for the usual fourth quarter uplift in Indian demand,” it said in the report.

Although the upsurge in demand during the July-September period partially compensated for the second quarter’s poor turnout, it also ate into the ‘normal’ seasonal demand between September and November, the report said.

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The survey, conducted in conjunction with Sanabel, the Microfinance Network of Arab Countries, said tackling those problems will be key to spurring the development of the industry. Microfinance, long considered an important tool in the fight against poverty, has grown at a much slower rate in MENA over the last six to seven years, than it has in other parts of the developing world.

“Microfinance can be powerful catalyst for boosting economic growth and improving the lives of people in developing countries,” says Sahar Tieby, Sanabel’s Executive Director. “This study documents the key risks facing the sector as perceived by stakeholders in the hopes that they can work together to address them.”

The study, Voices: An assessment of the perceived risks facing the microfinance sector in the Arab World, surveyed industry players, including financial service providers, donors, and regulators, in 10 Arab countries. External risks, such as security challenges and macroeconomic downturns, were cited as the most serious issues facing the industry. There were also concerns about the over-indebtedness of borrowers, staffing, widespread competition, and political interference.

“By identifying and addressing the barriers to the growth of the microfinance sector, we can increase access to finance for micro-entrepreneurs and low income households across the region, enable them to increase incomes, build assets, and reduce their vulnerability to external shocks, helping to tackle poverty and boost shared prosperity.” says Mohammed Khaled, IFC Senior Microfinance Operations Officer in MENA,

The report marks the first in a series of studies on the microfinance sector to be developed by IFC and Sanabel. The initiative is part of IFC’s wider efforts in MENA to expand access to finance, support to micro, small, and medium enterprises, and create jobs. Globally, IFC invested $987 million in microfinance projects in fiscal year 2015, and launched 59 advisory projects with microfinance institutions.

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Oil declined to the lowest level since 2008 in London amid estimates that OPEC’s decision to scrap production limits will keep the market oversupplied.

Brent futures capped the biggest weekly decline in more than a year. The global surplus will persist at least until late 2016 as demand growth slows and the Organization of Petroleum Exporting Countries shows “renewed determination” to maximize production, the International Energy Agency said Friday. The group chose not to curb output at its Dec. 4 meeting.

Oil prices have slumped to levels not seen since the global financial crisis as a result of OPEC’s strategy to defend market share against higher-cost producers. The group’s production rose to a three-year high in November, it said in a report Thursday, as surging Iraqi volumes more than offset a slight pullback by Saudi Arabia.

Brent for January settlement declined $1.80, or 4.5 percent, to $37.93 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since Dec. 24, 2008. The contract decreased 12 percent this week. The volume of all futures traded was 36 percent above the 100-day average at 3:05 p.m. in New York.

West Texas Intermediate for January delivery slipped $1.14, or 3.1 percent, to close at $35.62 a barrel on the New York Mercantile Exchange. The contract dropped 11 percent this week, the biggest weekly decline in a year. It was the lowest settlement since Feb. 18, 2009. The U.S. benchmark crude closed at a $2.31 discount to Brent.

Energy companies led declines on the Standard & Poor’s 500 Index. Southwestern Energy Co., an oil and natural gas producer, dropped as much as 17 percent, making it the worst performer on the S&P 500 Friday.

“The level of output out of OPEC is spectacular,” Kilduff said. “There’s no end in sight for the global glut.”

ConocoPhillips will reduce capital spending by 25 percent next year to protect the highest dividend yield among major U.S. producers, the Houston-based company said Thursday. Its plan to cut spending to $7.7 billion comes a day after Chevron Corp. disclosed a 2016 budget 24 percent smaller than this year’s. Together, the reductions by the two companies totaled $10.9 billion.

Russia is preparing for the possibility that low crude prices are here to stay as competition between oil and other fuels such as natural gas intensifies. The nation sees no reason for crude to rise above $50 a barrel anytime soon and predicts it will remain in a $40 to $60 range over the next seven years, Deputy Finance Minister Maxim Oreshkin said at a Moscow conference organized by Vedomosti.

Fuel prices followed crude lower, with diesel having the biggest drop in the energy sector. Warm weather in most of the U.S. has weighed on demand for distillate fuels, a category that includes diesel and heating oil, accelerating declines.

January diesel futures fell 7.95 cents, or 6.5 percent, to $1.1456 a gallon, the lowest close since March 2009. Gasoline futures for January delivery rose 0.13 cent to $1.2815.

Seventeen of 30 analysts and traders, or 57 percent, were bearish on WTI in a Bloomberg survey Thursday. Five respondents were bullish while eight were neutral.-Bloomberg

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The Dubai Gold & Commodities Exchange is introducing a spot gold contract next week before trading begins in 2016.

The contract will cover 1 kilogram and be traded in U.S. dollars, DGCX Chief Executive Officer Gaurang Desai said by phone. The exchange, the Dubai Commodities Clearing Corp. and Dubai Multi Commodities Centre will showcase the product on Sunday in the emirate, according to an e-mailed invitation.

“‘It will be a soft launch to DGCX’s internal stakeholders ahead of the official launch taking place next year,” the exchange said through an outside public relations agency.-Bloomberg

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The UAE’s non-oil private sector expansion strengthened in November, having eased to a two-and-a-half year low during October. Business conditions improved solidly, with the highlight being a marked and sharper rise in output.

At 54.5, the headline Emirates NBD UAE Purchasing Managers’ Index™ – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – showed that the health of the economy strengthened midway through the fourth quarter. Up from October’s recent low (54.0), the latest figure pointed to a solid improvement in business conditions. That said, the rate of growth remained much slower than that seen earlier this year and throughout 2014.

Underlying data indicated that higher output was a key driver of the overall expansion. Activity rose more quickly in November, having previously increased at the slowest rate in two years during October. New business gains were behind rises in output, according to panellists.

Though remaining marked, growth of new work failed to accelerate in November. In fact, the respective index dropped slightly to a 43-month low. Anecdotal evidence nevertheless pointed to new client wins resulting from better marketing, while data highlighted a second consecutive expansion in new export work. However, some firms suggested that new orders had been undermined by increased competition.

Non-oil private sector employment in the UAE continued to rise in November, thereby extending the current sequence of hiring to 47 months. The rate of job creation was the quickest since July, with firms reportedly taking on extra staff in preparation for the start-up of new projects. Backlogs of work also increased, albeit only marginally.

Growth of buying activity picked up in line with output requirements during November. The expansion was the most marked in three months, and it contributed to another increase in stocks of purchases. A number of panellists mentioned that they had raised inventories in response to further inflows of new business.

Meanwhile, a weaker rise in purchasing costs led to an easing in the overall rate of input price inflation. Total cost pressures were at a five-month low, although they remained broadly similar to the average seen over 2015 as a whole.

Firms decided to cut charges in spite of higher input costs during November. Tariffs were driven lower by greater competition, but the rate of decline was only slight overall.

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