Saudi Arabia Financially Strong Despite Problems

Saudi Arabia Financially Strong Despite Problems

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Saudi Arabia Financially Strong Despite Problems

Saudi Arabia’s fiscal position is weakening but is still relatively strong, with volatile oil prices will continue to weigh on the government’s balance sheet, says Moody’s Investors Service in a recently published report.

It expects that lower oil revenues will result in continued large budget deficits, a drawdown in reserves, and increased sovereign debt issuance. Although the government has begun to cut back on expenditures, further cuts are likely to reduce the fiscal deficits. Without such cuts and/or non-oil revenue increases, the Kingdom’s creditworthiness will be affected.

“Given Saudi Arabia’s dependence on the volatile hydrocarbon sector, we expect that low oil prices will continue to drive fiscal deficits for several years. While the kingdom’s large assets provide a cushion, we believe that further measures to address the deficit will be forthcoming,” says Steven Hess, a Moody’s Senior Vice President.

With Saudi Arabia’s 2015 budget estimating that 80% of revenues will be derived from the oil industry, Moody’s expects a 2015 fiscal deficit of SR411 billion (USD110 billion), or 17% of GDP. As a result, the rating agency projects that Saudi Arabia’s debt issuance will continue to increase, with the ratio of government debt to GDP rising to 6.4% at end-2015, from 1.6% at end-2014.

However, Moody’s also notes that the Saudi government’s financial reserves accumulated before the oil price decline provides a solid buffer, with a decade of considerable fiscal surpluses allowing it to finance large deficits without undermining its fiscal strength in the near term.

A slowdown in government capital spending will negatively impact wider economic growth, according to Moody’s. The rating agency estimates real GDP growth of 2.5%-3.0% over the next two years, down from the 5.5% decade average, as the government adapts to lower oil revenues and as some government-financed projects are wrapped up.

New Trustee for Trustee for US$100 Million Turkish Cat Bond

New Trustee for Trustee for US$100 Million Turkish Cat Bond

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New Trustee for Trustee for US$100 Million Turkish Cat Bond

BNY Mellon, a global leader in investment management and investment services, has been appointed trustee, paying agent, account bank and custodian for a US$100 million Turkish cat bond transaction designed to protect insurers against the risks of potential earthquakes.

The bonds were issued by Bosphorus Ltd., a Bermuda-based special purpose reinsurer created by the Turkish Catastrophe Insurance Pool (TCIP), the originator of the transaction. Eureko Sigorta A.S. (Eureko Sigorta) is the institution administrator of the bonds and acts on behalf of TCIP to provide day-to-day administrative services. Cat bonds are risk-linked securities that transfer a specified set of risks associated with hurricanes or earthquakes from an insurer or a nation state, to investors.

Can Ak?n Caglar, CEO of Eureko Sigorta and board member of TCIP, commented, “TCIP is pleased with how the capital markets received the Turkey earthquake cat bond issuance. We, as TCIP, are proud to be the sponsor of such a successful transaction.”

Suha Cele, Executive Board Member of Eureko Sigorta, added, “Our previous bond Bosphorus 1 Re was the first cat bond covering Turkish perils and a real success story. We are delighted to see that this second bond was also well received by the capital markets. In view of the constantly growing portfolio of TCIP, our cooperation with the capital markets will continue in the near future which will enable TCIP to diversify its reinsurance buying and utilise its multi-year capacity programme at stable prices.”

The global cat bond market continues to grow. Over the last 10 years the amount of cat bonds outstanding has increased from about $6 billion to $23 billion. BNY Mellon is a leading provider of corporate trust services to the insurance-linked securities market.

“TCIP’s innovative use of the capital markets illustrates the continuing growth of the insurance-linked securities market,” said Paul Traynor, head of insurance services for Europe, the Middle East and Africa at BNY Mellon. “The combination of insurers working with the capital markets, governments and technology experts can provide much-needed protection in vulnerable areas of the world.”

BNY Mellon opened an office in Istanbul in 1986 and has been servicing Turkish clients since the early 1900s. BNY Mellon offers a range of solutions to the Turkish market including treasury services, corporate trust, depository receipts, syndicated loans, global markets and trade finance; and closely follows emerging opportunities in investment servicing and investment management in the Turkish capital markets.

Qatar Investment Authority Form Invest in American Development

Qatar Investment Authority Form Invest in American Development

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Qatar Investment Authority Form Invest in American Development

Brookfield Property Partners L.P. has announced that one of its subsidiaries has entered into a joint venture with Qatar Investment Authority (QIA) on the mixed-use Manhattan West development project in New York City.

In the transaction, Brookfield sold a 44% interest in the development to QIA. The total value of the development upon completion and stabilization is estimated to be $8.6bn.

‘Brookfield has enjoyed a long-standing, successful relationship with QIA and we are thrilled that they share our vision for this transformative project,’ said Bruce Flatt, CEO of Brookfield Asset Management.’We are pleased to expand our relationship with Brookfield and invest in this world-class project. This joint venture is an example of our strategy to invest in high-quality real estate with strong partners. It is also a further demonstration of QIA’s long-term confidence in the US market,” said His Excellency Sheikh Abdulla Bin Mohammed Bin Saud Al-Thani, CEO of Qatar Investment Authority.

Manhattan West is a five-building, 7-million-square-foot development project on the west side of Manhattan, bounded by 31st and 33rd Streets and 9th and 10th Avenues. The project consists of the following phases:

  • One Manhattan West ‘ The 67-story, 2-million-square-foot office building currently under construction will be anchored by tenant Skadden, Arps, Slate, Meagher & Flom LLP and is scheduled for completion in 2019.
  • Two Manhattan West ‘ Will be the second 2-million-square-foot office tower constructed onsite following the lease-up of the first tower.
  • Three Manhattan West ‘ This 62-story luxury residential tower currently under construction will feature 844 apartment units, welcoming its first residents in 2017 with final completion slated for 2018.
  • Four Manhattan West ‘ Initial plans for this phase envision a hotel or further residential units.
  • Five Manhattan West ‘ This 1.8-million-square-foot office building ‘ formerly known as 450 West 33rd Street ‘ is currently undergoing a $350 million redevelopment program which will fully modernize and integrate the building into the Manhattan West campus. In the last 12 months, Brookfield has signed leases totaling more than 400,000 square feet at this property to technology- and media-sector tenants, bringing current occupancy to 90%.
  • Central Plaza / Retail ‘ The Manhattan West campus will be transected by a two-acre public park, essentially creating a new £32nd Street’ pedestrian thoroughfare, lined with abundant green space and approximately 200,000 square feet of retail, restaurants and amenities.

‘Manhattan West is on track to be the leading premier mixed-use development in the Hudson Yards district ‘ New York City’s next great neighborhood,’ said Ric Clark, CEO of Brookfield Property Group.

‘The sale of an interest in Manhattan West is consistent with our strategy of actively recycling capital by partnering with leading institutional capital providers.’

Boeing Forecasts Demand in the Middle East

Boeing Forecasts Demand in the Middle East

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Boeing Forecasts Demand in the Middle East

Boeing forecasts airlines in the Middle East will require 3,180 new airplanes over the next 20 years, valued at an estimated $730bn. 70% of the demand is expected to be driven by rapid fleet expansion in the region.

According to the Boeing Current Market Outlook (CMO), single-aisle airplanes such as the 737 MAX will command the largest share of new deliveries, with airlines in the region needing approximately 1,410 airplanes. These new airplanes will continue to stimulate growth for low-cost carriers and replace older, less-efficient airplanes.

“Traffic growth in the Middle East continues to grow at a healthy rate and is expected to grow 6.2% annually during the next 20 years,” said Randy Tinseth, Vice President, Marketing, Boeing Commercial Airplanes. “About 80% of the world’s population lives within an eight-hour flight of the Arabian Gulf. This geographic position, coupled with diverse business strategies and investment in infrastructure is allowing carriers in the Middle East to aggregate traffic at their hubs and offer one-stop service between many city pairs that would not otherwise enjoy such direct itineraries.”

Twin-aisle aircraft will account for a little under half of the region’s new airplane deliveries over the 20-year period, compared to 23% globally. This is demonstrated by the strong order book and deliveries for the 787 and 777, underlining how Boeing is meeting customer demand in the region by focusing on enhancing passenger experience and improving operating economics and capability.

Boeing’s presence and support for the Middle East also includes a growing aftermarket services business that continues to expand offerings to better support regional airlines.

Boeing’s Commercial Aviation Services is a leading provider of aftermarket services in the Middle East, supporting airlines throughout the lifecycle of their fleets from airplane introduction to retirement. Boeing’s Component Support Programs, a segment of Boeing’s GoldCare Services suite, are particularly successful with three new 787 operators in the region contracting Boeing to ensure reliable, timely, and cost effective component management.

“Over the course of our 70 year presence in the Middle East, Boeing has been working with customers to ensure we provide airplanes and services that support their aerospace ambitions,” said Tinseth. “Boeing is well-positioned to continue to address demand in the Middle East and provide airlines in the region with the capability to serve their expanding global networks.”

Boeing has forecasted long-term global demand for 38,050 new airplanes, valued at $5.6trn. These new airplanes will replace older, less efficient airplanes, benefiting airlines and passengers and stimulating growth in emerging markets and innovation in airline business models.

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Accelerating Mobile Broadband and Smartphone Adoption across Arab States

Accelerating Mobile Broadband and Smartphone Adoption across Arab States

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Accelerating Mobile Broadband and Smartphone Adoption across Arab States

Mobile operators investing in networks, jobs and innovation throughout the Arab States according to new study.

Mobile broadband networks will support more than two-thirds of all mobile connections across the Arab States of the Middle East and North Africa by 2020, according to a new GSMA study published at the GSMA Mobile 360 Series ‘ Middle East conference being held in Dubai this week. The new study, ‘The Mobile Economy ‘ Arab States 2015’, finds that there will be 350 million 3G/4G mobile broadband connections in the Arab States by 2020, accounting for 69% of the region’s total connections by 2020, up from just 34% at the end of 2014. This rapid migration to higher-speed mobile networks is being driven by operator investments in 3G and 4G networks and rising smartphone adoption. The number of smartphones connections in the region is forecast to almost triple between 2014 and 2020, reaching 327 million.

‘The mobile landscape in the Arab States varies considerably in terms of market maturity, ranging from the fast-developing North African markets to the highly advanced Gulf Cooperation Council (GCC) states, but the entire region is benefiting from the shift to mobile broadband networks and devices triggered by rising mobile operator investment,’ said Alex Sinclair, Acting Director General and Chief Technology Officer at the GSMA. ‘We encourage governments in the region to adopt policies that will further accelerate mobile broadband adoption, for example by releasing more internationally harmonised spectrum; introducing incentives that encourage the deployment of infrastructure in remote and economically challenging areas; and revising taxation and regulatory policies that can negatively impact uptake of innovative new mobile services.’Over the last four years, mobile operators across the Arab States have spent more than US$40 billion on capital investments, or approximately 18% of total revenue. Investments have focused on improving network coverage, increasing network capacity, and deploying 3G/4G mobile broadband networks. According to the report, 3G networks are now live in every country in the region except one, while there are 23 live 4G networks in ten countries in the region and 4G launches planned in a further eight markets.

A Diverse Mobile Landscape

The Arab States encompasses 18 markets across the Middle East and North Africa. The number of unique mobile subscribers in the Arab States as a whole reached 199 million at the end of 2014, equivalent to 54% of the region’s population. However, the levels of market maturity vary considerably across the region in line with economic development; the Arab States are home to three countries ‘ Bahrain, Kuwait and the UAE ‘ that have penetration rates above 75%, but also four (Palestine, Sudan, Syria and Yemen) where fewer than half the population has a mobile subscription.

It is forecast that the number of unique mobile subscribers in the Arab States will reach 233 million by 2020, representing 57% of the expected population by this point. However, subscriber growth will be slower than the global average over this period and subscriber penetration will fall behind the 59% global figure expected by 2020. This can be attributed to several factors: the declining growth potential in already highly penetrated markets; the challenge of growing penetration in the lower income and rural-based groups in less developed markets; and the unstable political and economic conditions that currently exist in several regional markets.

Mobile Industry Delivering Economic Growth, Employment and Public Funding

In 2014 the mobile industry in the Arab States made a total contribution of US$115 billion to the regional economy in value-added terms, equivalent to around 4 per cent of the region’s total GDP. It is forecast that this contribution will grow to U$160 billion by 2020, equivalent to 4.5 per cent of projected regional GDP by this point.

The mobile industry is also a key source of jobs and public funding in the region. It is calculated that the industry directly and indirectly supported 1.3 million jobs across the Arab States in 2014, a figure expected to surpass 1.5 million by 2020. The mobile ecosystem also made a total tax contribution to the public finances of the region’s governments of US$12.6 billion in 2014, excluding regulatory fees and spectrum auction payments. It is forecast that this contribution to public funding will rise to US$14.3 billion by 2020.

‘The mobile industry has a pivotal role to play in addressing social and developmental challenges in the Arab States, challenges that are becoming increasingly acute in those regional markets that are seeing high unemployment levels, a youthful population, and ongoing social and political instability,’ added Sinclair. ‘In many of the region’s emerging markets, mobile is connecting unconnected populations by providing essential access to the internet where there are no other alternatives and enabling mobile-powered solutions in essential areas such as banking, healthcare and education. Meanwhile, in developed markets, mobile operators are launching advanced services in sectors such as digital commerce, digital identity, digital security and the Internet of Things.’

Middle East Technology Markets Overview

Middle East Technology Markets Overview

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Middle East Technology Markets Overview

Middle East Already Embracing Five Technology Trends Affecting the Digital Transformation of Public and Private Sectors, Accenture Finds.

In its annual global technology outlook, Accenture (NYSE:ACN) has identified five technology trends that will re-shape markets by creating new digital ‘ecosystems’ and found that leading businesses and governments in the Middle East have new strategies and projects in place to capitalize on digital transformation opportunities.

The five trends identified in the Accenture Technology Vision 2015 report include the personalization of the internet ‘ Internet of Me; a shift in focus from selling things to selling results in an Outcome Economy; digital platforms that help build next-generation products and services in the Platform (R)evolution; intelligent software embedded across the enterprise, creating the Intelligent Enterprise; and intelligent machines and devices working alongside employees as a Workforce Reimagined.To supplement this report, Accenture interviewed more than 200 senior decision-makers in the public and private sectors of the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA). A majority of respondents ‘ 62 percent in UAE and 83 percent in KSA ‘ have seen the pace of technology adoption in their organization increase over the past two years. About half the organizations in the Middle East (48 percent in UAE and 53 percent in KSA) are actively investing in digital technologies, while another four in 10 are assessing them (41 percent in UAE and 43 percent in KSA).

‘Now that digital has become part of the fabric of many organizations’ operating DNA, they are stretching their boundaries to leverage a broader digital ecosystem as they shape the next generation of their products, services and business models to effect change on a much broader scale,’ said Paul Daugherty, Accenture’s chief technology officer. ‘Leading organizations in the Middle East are already planning and executing on their digital transformation goals in response to the fast-changing needs of this digitally-savvy population.’

All (100%) of the survey respondents from UAE and 97 percent from KSA are already using or experimenting with mobile technologies to engage with customers, employees or business partners, compared with an average of 94% in other countries.

Some additional findings from the survey of Middle East respondents, broken out by the five emerging technology trends, are:

The Internet of Me is changing the way people around the world interact through technology, placing the end user at the center of every digital experience.

More than three-quarters of Middle East survey respondents (87% in UAE and 82% in KSA) said that having a personalized customer experience fits within their top three business priorities, and almost half (46% in UAE and 49% in KSA) said they are already seeing positive returns on their investments in technologies that enable this personalization. With the exception of mobiles and tablets, respondents from KSA are more bullish than their UAE counterparts on adopting digital technologies within the next four years, including wearables, connected TVs, connected cars, interactive kiosks and smart objects. When asked to identify the leading barrier to adopting personalization technologies, respondents in UAE cited a lack of technology maturity, while those in KSA cited security concerns.

  • Digital devices on the edge are powering an Outcome Economy and enabling a new business model that shifts the focus from selling things to selling results.
  • More than nine in 10 Middle East respondents (96% in UAE and 91% in KSA) expect that with more intelligent hardware, sensors and devices, organizations will increasingly shift from selling products or services to selling outcomes. While respondents from both UAE and KSA said that mobile, tablet and smart technologies are three of the most influential technologies, they differ widely in their views on the impact of wearable technologies, with more than three-quarters (76%) of KSA respondents ‘ but less than half (45%) in UAE ‘ identifying wearables as highly influential.
  • The Platform (R)evolution reflects how digital platforms are becoming the tools of choice for building next-generation products and services, and entire ecosystems in the digital and physical worlds.

The vast majority of Middle East respondents ‘ 97% in UAE and 90% in KSA, higher than in any other country surveyed ‘ believe that industry boundaries will dramatically blur as technology platforms reshape industries into more interconnected ecosystems. It is not surprising, therefore, that Middle East respondents were more likely than their global counterparts to say they plan to engage with business partners from outside their own industry on digital initiatives like joint online or mobile solutions ‘ 49% in UAE, 50% in KSA, while only 40% in other countries, on average.
The Intelligent Enterprise is making its machines smarter ‘ embedding software intelligence into every aspect of its business to drive new levels of operational efficiency, evolution, and innovation.

More than two-thirds (69%) of the respondents in KSA ‘ and more than nine in 10 (95%) of those in UAE ‘ reported that managing the volume, variety and velocity of data being generated today is very or extremely challenging, compared with 55% in other countries, on average. At the same time, approximately 80 percent of all Middle East respondents said they believe that software will soon be able to learn and adapt to our changing world and make decisions based on learned experiences, with applications taking on human-like intelligence.

In a Workforce Reimagined, advances in more natural human interfaces, wearable devices, and smart machines are extending intelligent technology to interact as a ‘team member,’ working alongside employees.

The vast majority of Middle East respondents (93% in UAE and 86% in KSA) believe that we have reached a tipping point in the talent shortage for IT skills that will require companies to look at emerging technology solutions to augment their workforces. About two-thirds (60% in UAE and 66%in KSA) are considering using technologies that enable business users to complete tasks that previously required IT experts. However, about four in five (82% in UAE and 79% in KSA) believe that successful organizations will manage employees alongside intelligent machines, ensuring collaboration between the two. More than half the respondents (56% in UAE and 54% in KSA) said they are already using augmentation technologies, like wearables, to better train their workforce, and more than four in 10 (45% in UAE and 42% in KSA) said they are implementing training to improve human-robot collaboration.
‘The pace of innovation and technology adoption that is beginning to transform companies and governments across the Middle East is only going to increase,’ said Omar Boulos, regional managing director of Accenture in the Middle East and North Africa. ‘Pioneering organizations will focus on creating and becoming part of the broader digital ecosystems that now extend to customers, business partners, employees and other industries.’

Middle East Real Estate Market Outlook to 2019

Middle East Real Estate Market Outlook to 2019

Middle East Real Estate Market Outlook to 2019

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Research and Markets has announced the addition of the “Middle East Real Estate Market Outlook to 2019 – Demand for Destination Retail and Affordable Housing to Shape Future” report to their offering.

The market research report titled Middle East Real Estate Market Outlook to 2019 – Demand for Destination Retail and Affordable Housing to Shape Future provides an in-depth analysis of the Middle East real estate market. The report covers specific insights on the market size in terms of value, segmentation by geography & sector wise segmentation by major countries, drivers and restraints, recent trends and developments, government regulations and future outlook of the real estate market at the Middle East level and countries.

The Middle East real estate industry is one of the fastest growing sectors across the world. Foreign real estate developers have infused billions of dollars into places such as Oman, Qatar, Dubai, Saudi Arabia and other countries in Middle East region, which has pushed the growth of this market.

In the year 2014, UAE real estate market the surge in real estate investments from domestic as well as overseas investors have quadrupled the market. Northern Emirates has been the second largest segment of UAE real estate market. UAE real estate market is highly fragmented and competitive with about 2,206 brokers in Dubai alone currently listed by Real Estate Regulatory Authority (RERA). UAE real estate market is poised to grow at a noticeable CAGR of 6.4% during the period 2015-2019.

Residential segment of the market contributed the largest share in the year 2014.The region is estimated to be the domain for 15,000 registered and unregistered real estate offices of which approximately 37% are based in the Central region, 34% in the Western and 29% in the Eastern region.

The Qatar real Estate market has deteriorated at a CAGR of 2.2% during the period 2009-2014. The residential segment is the largest contributor of the real estate sector in Qatar. The real estate sector in Qatar is fragmented amongst many large-scale and small-scale developers. The future for the real estate market in Qatar is certainly promising on account of the booming domestic economy due to the inclining oil revenues and the bid win of the FIFA world Cup 2022.

Read full report here.

 

Falling Oil Prices: The Reaction of the GCC Countries

Falling Oil Prices: The Reaction of the GCC Countries

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Falling oil prices: the reaction of the GCC countries

Sharp decline in oil prices reveals the importance of economic diversification. Countries with fewer financial buffers, such as Bahrain and Oman, are witnessing problems related to low growth performance. Saudi Arabia and UAE are less impacted by declining oil prices with strategies underway to promote non-oil trade. Private consumption and the governments’ efforts to support sustainable economic growth are maintaining the outlook positive for GCC. GCC countries are projected to grow by 3.4% in 2015 and 3.7% in 2016.

The more resilient economies benefit from strong macroeconomic fundamentals, such as more diversification, solid financial buffers and greater integration with world trade. The developed manufacturing and service industries in these markets allow less dependence on oil revenues.

Oil dominance on economic performance
GCC countries are projected to grow by 3.4% in 2015 and 3.7% in 2016. While these rates are considered high compared to other emerging markets, they remain below the region’s average growth rate of 5.8% between 2000 and 2011. The reason for the slowdown is the decline in oil prices, which have fallen from approximately USD 110 per barrel in mid-2014, to around USD 50 in 2015. While rising government expenditure, coupled with falling oil prices have impacted the GCC region, not all markets have reacted in this same pattern. Despite similarities in economic structures, the countries differ in terms of economic size, population, levels of diversification and fiscal break-even prices.

UAE: resilient to lower oil prices
The UAE’s economy is one of the most diversified among the GCC countries, making it resilient to falling oil prices. Hydrocarbon revenues account for 25% of GDP and 20% of total export revenues. The non-oil private sector shows strong growth fueled by domestic demand and tourism, especially in Dubai. According to Dubai Airports, in the first quarter of 2015, passenger traffic at Dubai International Airport jumped by 7% to 19.6 million, with the influx of tourists expecting to grow further, in line with Dubai Expo 2020. 

Domestic demand is powered by strong retail sales and rising confidence. Dubai’s retail sales, which rose by 7% in 2014, are estimated to rise further, due to further increases in tourist numbers. Dubai’s real estate market is burgeoning through foreign investment as well as wealth from the neighboring Abu Dhabi.

Saudi Arabia: speeding up the diversification process
While 80% of its export revenues and around 85% of its budget revenues come from the oil sector, the Kingdom is speeding up its diversification process. The main driver of economic growth is strong government spending to fuel private consumption and the construction sector, which has posted a growth of 6.7% in 2014. The industry is projected to grow in 2015 as the government plans to invest in projects such as transportation infrastructure, energy, utilities and housing. In early 2015, the Saudi Arabian General Investment Authority announced the Kingdom’s Unified Investment Plan, which consists of four sector specific approaches, in order to boost investment. These include the integration of the energy sector, raising productivity in the construction, tourism, real estate and retail sectors, boosting mining and transport development and further investment in education to improve the Kingdom’s competitiveness. There are 40 promising investment opportunities in the healthcare sector worth USD 71 billion, including the manufacturing of medical hardware and equipment, medicines, vaccines as well as the establishment and management of hospitals. There are also 36 attractive transportation investment projects in the pipeline which include the manufacturing of buses, train carriages and spare parts as well as providing technical and technological support services for the creation and development of infrastructure. The government also seeks to support consumer spending by providing two months’ bonus salary to state employees and subsidies worth USD 5.3 billion for electricity, water and housing. This investment stimulates consumption, especially retail sales, and partly compensates for the negative impact of lower oil prices on incomes. 

Diversification and global integration
The GCC economies are still dependent on the hydrocarbon sector as the main export and source of revenues. However, the local governments are trying to replace this growth model through economic diversification policies aimed at reducing their dependence on the oil sector. Revenues from the hydrocarbon sector have been used to boost growth in the non-hydrocarbon industries in the form of subsidies and government spending. Saudi Arabia, UAE and Qatar have been more successful in diversifying their economies compared to their GCC neighbors.

Many GCC countries have implemented long-term economic plans – Saudi Arabia has implemented its strategy 2025, Oman – Vision 2020, the UAE – Vision 2021, Bahrain – Vision 2030 and Qatar National Vision 2030. As a result, the share of the non-oil sector in the total real GDP is rising – and increased by 12% to 70% in the GCC countries between 2000-2013. The local authorities have introduced measures to promote trade, and attract more foreign direct investment to facilitate economic growth. All GCC countries are open economies with close commercial relations with the rest of the world. According to the Institute of International Finance, the region’s total exports amounted to over 60% of its GDP in 2014. The main export partners in the region: Asia, the West, Middle East, North Africa and Turkey.

Economic resilience in the UAE and Saudi Arabia in specific sectors
Coface assesses that the food and beverage sector in UAE will benefit from the high-income domestic market, solid private consumption, a large population of expatriates with increasing demands, strong economic growth and the country’s position as a safe haven. The UAE has been investing in the food processing industry; a total of USD 1.4 billion since 1994, especially in the dairy industry. The halal food segment is also continuing its expansion, and is projected to grow to USD 1.6 trillion by 2018, boosted by strong consumer demand for varied natural food choices.

In Saudi Arabia, the most promising industry is the automotive sector. Several original equipment manufacturers have established local entities in the country. The Saudi Arabian Public Investment Fund (PIF) is investing in an automobile manufacturing plant worth USD 1 billion with a production capacity of 150,000 cars a year by 2018. The vehicle sector is expected to grow by 3.6% in 2015 due to rising disposable incomes, favorable demographics and higher urbanization rates.

“As oil continues to be a major contributor to economic performance in the GCC, economic diversification is a vital for Gulf countries to ensure continued healthy growth. This has been showcased in Saudi Arabia and the UAE, which are driving sustained GDP growth through significant government investment in non-oil sectors. In UAE, the food and beverage sector is forecasted to grow by 36% between 2014 and 2019, while KSA’s automotive industry is slated to rise by 5.2% in 2015.”

“In view of these growth figures, Saudi Arabia and UAE are setting a positive example of the importance of diversified economies as a means to offset the impact of lower oil prices, promote growth and avoid a fiscal deficit.” said Seltem Iyigun, MENA Region Economist, Coface

Middle Class in UEA Expect Greater Rewards

Middle Class in UEA Expect Greater Rewards

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Middle Class in UEA Expect Greater Rewards

In an increasingly competitive retail banking market, nearly three quarters (72%) of affluent middle class consumers in the United Arab Emirates do not see the value in bank reward programmes, don’t find the benefits interesting and don’t feel they can accumulate sufficient points to redeem rewards.

A large proportion (58%) only have a basic main bank account with no fees but also no added benefits and 60% have credit cards that lack benefits such as cashback or air miles. This highlights an opportunity for banks and card providers in the region to differentiate themselves and offer additional services such as insurance, assistance and travel benefits. 

The study of 4,400 affluent middle class consumers (within the top 10-15% income bracket), in the United Arab Emirates, Brazil, China, India, Italy, Singapore, the UK and USA, reveals the changing attitudes and expectations of this group towards banks. It has found that whilst customers in the UAE are more satisfied with their banks than the other countries surveyed, they don’t feel rewarded or recognised for their loyalty and look elsewhere for additional financial services. Nearly two thirds of customers in the UAE (63%) feel more loyal to brands that provide access to rewards and 63% feel more loyal to companies which offer more personalised offers and communications.

As a result, retail banks and credit card providers in the UAE are missing out on the opportunity to create powerful advocates and attract repeat business from loyal customers. Affluent middle class consumers in the UAE who feel loyal to a brand are prepared to recommend a bank or credit card provider to their friends and family (67%), 64% would be willing to purchase more products from them and 52% will pay a premium to use a service, even if it is more expensive.

Banks are losing their position as a ‘one-stop shop’ for financial services, with savvy consumers choosing a range of financial service providers. Customers are increasingly looking elsewhere for additional services. For example in the UK, the preference is to regularly compare the options for services such as insurance, find the best deal and then purchase direct. In contrast in the USA and Singapore, these services are sought via credit card. However when a customer does buy additional products through their bank, they are more loyal, with over half (54%) of these customers globally less willing to switch provider. This highlights a dual benefit of offering more premium services such as insurance and assistance which will increase revenue as well as enhance customer loyalty. 

Mark Roper, Commercial Director, Collinson Group says, “Whilst the majority of customers in the UAE are satisfied with their banks, the emergence of alternative providers of financial services and the number of customers on more basic bank and credit card services, highlights the opportunity to retain and grow a portfolio of services with those within the top 10-15% of income. Customers see their accounts as a necessity but don’t feel they offer additional value or reward.”

“Our research found that not being rewarded for loyalty is the biggest frustration for consumers, as cited by two thirds of respondents globally, ahead of poor interest rates and charging unnecessary fees,” says Roper. “Many banks offer standardised, transactional loyalty programmes which rely on traditional points-based rewards. Less than half of affluent middle class consumers are currently members of bank loyalty initiatives and this group are more likely to be members of supermarket, airline, credit card and hotel loyalty programmes ahead of banks, where these programmes offer greater value and appeal.” 

Roper continues, “With increased competition in the sector, encouraging the most valuable customers to become active members of loyalty programmes can be a powerful tool in improving satisfaction, retention and achieving repeat business.”

Personalised and consistent communications regardless of how customers choose to interact with a bank is also important for the affluent middle class. The study has found that customer engagement improves by a third amongst individuals who ‘feel known’ by their bank and a further third for those who say they receive a consistent multichannel service – whether in person, by phone or via digital channels.

Collinson Group research has previously highlighted how today’s affluent consumers place a higher priority on family, altruism and enriching experiences ahead of short-term satisfaction and this is reflected in their expectations of banks. Nearly two-thirds in the UAE (58%) expect their banks to be ethical.

“Banks need to act now to protect their current revenue. Middle class mass affluent consumers are increasingly mobile and expect more from their banks” says Roper. “Transparent, ethical behaviour is important and financial services organisations also need to demonstrate the value of their loyalty programmes to encourage active participation. Personalised, aspirational and more lifestyle orientated benefits and rewards, which are more accessible to earn and redeem will enable banking brands to differentiate themselves and attract and retain the most affluent consumers.”

Mark Roper, Commercial Director, Collinson Group delivered a keynote presentation at the Middle East Banking Innovation Summit in Dubai on the 14th September at 15:00. The presentation explored the themes outlined above and will cover:

Delivering the Future of Loyalty in Financial Services

‘ The challenges of changing market dynamics and consumer demands in delivering loyalty and commercial results

‘ Understanding the prized “mass affluent” consumer and their attitudes to loyalty

‘ Proven strategies for creating more engaged, loyal and profitable customers today and tomorrow

QBA Holds Tax Efficiency Seminar

QBA Holds Tax Efficiency Seminar

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Qatari Businessmen Association (QBA) in Cooperation with Aqua Trust Holds a Seminar on How to Achieve Tax Efficient Investment in UK Real Estate

Award-winning Aqua is first off-shore Trust Company to achieve License Status in the State of Qatar at the QFC.

The Qatari Businessmen Association (QBA) in cooperation with Al-Faisal International for Investment, AlSawari Group, and Aqua organized a private seminar entitled, ‘Achieving Value in the UK Real Estate Market’, led by Jersey and Qatar based offshore practitioners and tax planners, UK legal experts andestate agents. The seminar took place at the QBA headquarters at the Marriott Marquis Hotel.

The seminar was attended by private entities, local companies,and businessmen interested in the UK real estate market. The Qatari Businessmen Association opened the seminar by welcoming the attendees and noted that this seminar isin line with QBA’s vision to serve the business community by providing leading and unique services.The seminar was introduced by QBA as part of a series of specialized seminars to highlight the latest business trends in the markets that are of interest to the Qatari business community.

Joanne Luce, Managing Director of Aqua Group, based in Qatar, Jersey and Malta, and Peter Burnside, senior tax counsel at BDO UK led the first panel discussion revealing how tax planning can add value by interpreting the latest tax changes from a practical perspective.

Aqua’s presentation “Tax Efficient Investment into UK Real Estate’ compared the tax liabilities of basic investment structures in the UK withmore favorable investments via Jersey companies. The optimum solution presentedwas atax exempt real estate structure through Jersey private wealth trusts and UK unit trusts. The tax exempt structure was said to be relevant for both commercial and residential rental property as secure succession options. The presentation concluded by presenting the ideal private residential property solution for families usingprivate trusts in Jersey limited partnerships.

The following panel discussions wereled by Matthew Khalil of Kahlil & Kane on ‘How to achieve strong returns and value from residential and developmentopportunities’ and by Nick Clayson of Norton Rose on ‘The Legal view on what structures work and how to retain value’.

Joanne Luce, Managing Director of Aqua Group, said: “According to recent reports, confidence has returned to real estate markets in Europe and London is still a firm favorite with investors. This is why we felt this seminar was particularly relevant, offering advice on potential investments in this field. The sessionis aimed at Qatari audiences to ensure they are familiar with the latest tax implications associated with UK real estate investment and receive the best advice they need for secure succession. We believe such seminars are ofinterest to local families andfamily-led businesses who are investing abroadso they receivethe tax planning advice they may need.”

Aqua Group was created in Jersey to provide family-led businesses with a unique and very personal service offering families tax-efficient offshore solutions before it becamethe first off-shore Trust Company to achieve License Status in the State of Qatar. Aqua GCC was set up to help existing clients in the region and drive in value to the families Aqua serves either through improving their return on investment or by adding value to help family businesses grow and develop. Aqua’soffices in Malta and Jersey give it access to offshore and onshore structuring.

Joanne Luce continued: “Aqua offices offer Qatari investorswhat they need to achieve. Malta is a gateway into Europe and Africa allowing Aqua to structure commercial solutions that add value through structuring at the Family Trust level to protect against punitive Real Estate taxes. We are strong in this area and have very effective networks with other key and trusted advisers to build optimum commercial services. Jersey is more traditional with a fantastic jurisdiction for Estate planning, through investment in the UK and the bespoke creation of Fund platforms – so by having offices in both locations we can achieve what international families may need.”

Doha Bank Imports Gold to Meet Demand

Doha Bank Imports Gold to Meet Demand

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Doha Bank Imports Record Volumes of Gold to Meet Growing Consumer Demand

Sharp drop in price of gold has spurred strong buying interest from retail investors and jewelers in Qatar.

As falling gold prices continue to fuel strong buying interest in gold, Doha Bank is building up its gold supply to meet increased consumer appetite for the yellow metal.

The Bank imported a record 23,818 ounces of gold in the first seven months of 2015 to keep up with sustained demand from jewelry manufacturer, jewelers, retail and high net worth (HNI) investors.

Doha Bank is one of the few banks authorized to import gold in Qatar and offers gold bars and mint coins to its customers at an extremely competitive price.

Gold prices fell below USD 1,100 in July 2015, touching a five-year low, and continue to hover around the mark, triggering heavy buying interest.

Mr. Samuel K.V., Head of Treasury Trading & Product Management said, ‘Despite the short-term headwinds, gold remains a solid bet for the future. The continued strong consumer preference for the yellow metal reinforces why gold is considered attractive long-term investment option, and with prices having plunged to its lowest level in five years, now is as good a time to buy yellow metal and capitalize on its long-term strength.’

He added, ‘As the first authorized Qatari bank to import and sell gold in the country, Doha Bank enjoys a considerable first-mover advantage in the domestic market which, combined with the unmatched quality of our physical gold products and our highly competitive prices, has enabled the Bank to emerge as the most preferred and trusted Gold Mint and Cast Bar seller in Qatar.’

Doha Bank has signed a Memorandum of Understanding (MoU) with Switzerland based leading gold supplier and also established tie-ups with several major global suppliers in the physical gold market.

The Gold Mint and Cast Bars offered by Doha Bank are manufactured as per the highest international standards and are Assay certified. Available in standard bar sizes of 5 gm, 10 gm, 20 gm, 50 gm, 100 gm, TT Bar and Kilo Bar, they are packaged in a tamper-proof cover to ensure zero damages.

Gold bars can be bought over the counter at Doha Bank Main Branch on Grand Hamad Street, as well as at the Al Mirqab, City Centre, Mesaieed, and Abu Hamour branches.

Gold bulk purchase can be made at Doha Bank Corporate Service Center, located at Grand Hamad Street which offers extended working hours including Saturdays to provide more convenience to customers.

2016 Report to Explore Opportunities in Dubai

2016 Report to Explore Opportunities in Dubai

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2016 Report to Explore New Investment Opportunities in Dubai

Oxford Business Group appoints new team for its forthcoming economic publication.

Dubai – Positive outlook for the economy and investment opportunities in 2016 will be given wide-ranging analysis in a forthcoming report to be produced in Dubai.

The international publishing, research and consultancy firm, Oxford Business Group (OBG) has brought in a new team to start conducting a new important edition on the country’s latest economic developments.

Nihan Alan takes on the role of Country Director in Dubai, working alongside Marc-Andr’ de Blois who is the group’s new Editorial Manager in the emirate. They will lead the Group’s research operations for The Report: Dubai 2016 that will contain a detailed sector-by sector analysis with an emphasis on the most significant economic segments.

The Editorial Manager highlighted that “global trade is accelerating its move towards the East and Dubai successfully positioned itself at the heart of it, over the last few years”.

“By continuous efforts on the fronts of innovation, efficiency and sustainability, the emirate of Dubai is on the right track to secure its regional leadership and comparative advantages as a starting point to do business and to further integrate with other global hubs”, he said.

According to the Country Director, “in these very interesting and challenging times for the region, Dubai’s macro-economic environment is unfolding and responding quite positively to global changes.

With the implementation of the National Innovation Strategy (NIS) by the authorities this year, technology, innovation and sustainability are becoming a much greater force for growth and a comparative advantage for Dubai to always remain ahead of the game and ready to address the challenges of today’s global economy. Dubai can capitalise on strong relationships with organisations and multinationals from a wide range of sectors in order to remain competitive and continue to diversify its economy, with an increased focus on technology and human capital.”

Nihan Alan, Country Director, has been working for OBG in the GCC region for more than 5 years and is returning to Dubai this year, after spending two years working on annual our economic research in Qatar. Ms Alan was the Country Director in Dubai back in 2011-2012, with the re-opening of the Dubai economy, and she’s glad to take part to the new edition of The Report: Dubai.

Thorough knowledge of governing and trade structures in emerging countries, Marc-Andr’ de Blois, Editorial Manager, has been working with Oxford Business Group (OBG) for more than seven years across the Middle East and Africa and he is thrilled to return to the region and with the company after having worked for 3 years as the Press Secretary and Spokesman of the Minister of Culture and Communications and the Chief of the Official Opposition in Quebec, Canada.

The Report will feature key exclusives viewpoints and interviews from the local and international government officials and business leaders.

The new publication on Dubai’s economy will assess trends and developments across the economy including macroeconomics, infrastructure, financial sector, real estate & construction, tourism and other sectoral developments. The publication will be available in print or online.