MENA RESEARCH PARTNERS

Saudi Arabia seen opting for debt to fill fiscal gap (Gulf News)

KSA is likely to bridge its widening fiscal gap by resorting to domestic borrowing, according to economists and IMF. The country is expected to face larger than estimated budget deficit due to decline in oil prices and rising public spending on account of increased welfare spending, government handouts to its employees and a jump in defense expenditure.

UAE sees strong economic growth (The Saudi Gazette)

UAE expects a strong growth of 4.6% in ‘14 and through ‘15, as per Prime Minister Sheikh Mohammed. Non-oil sector grew by 8.1% in ‘14, with ongoing rise in public spending & in government & private capital. UAE would adhere to its long-term strategy to diversify, with non-oil contribution to the economy to rise from 68.6% to 80% of GDP in 2021.

Kingdom attracted FDIs worth $8bn in the year 2014 (Arab News)

FDIs in KSA dropped by 6.9% in ‘14 from $9.3 bn in ‘13, as per data from a UNCTAD. The country is ranked 3rd in Western Asia, behind Turkey $12.1 bn & UAE $10.1 bn. Oman comes 4th with $1.2 bn, Qatar $1.0 bn, Bahrain $957 mn, & Kuwait $486 mn. GCC FDIs remained stagnant during recent years compared to falls in the wider western Asia region.

Oil slump to cost GCC states $240b in assets (Gulf News)

GCC stands to lose $240 bn in hard-earned assets in 2015 if oil prices remain at low levels, avg $55. Governments are urged to find sources of revenue, cut subsidies & budgets, & curtail excessive spending, to avoid job losses, project cancellations, low bank liquidity & other economic challenges. The biggest loss will be incurred by KSA c. $160 bn, while UAE around $55 bn.

Kuwait parliament approves budget with $27 billion deficit (Reuters)

The budget deficit is nearly half of total spending of KD 19 bn, with revenues at KD 12 bn for a computed avg. oil price of $45. The deficit may not turn so large as oil is currently trading above $60 which can bring deficit at c. KD 4.5 bn, said Finance Minister Anas al-Saleh. No decision has been taken on how to fund this year's deficit.

Contribution of small, medium firms to GDP on the rise (Times of Oman)

The SME sector, currently 20% of GDP & 40% of the workforce, is a potential driving force in the country's non-oil growth, according to Central Bank. Governments made many initiatives and measures to boost their role. The Central Bank made efforts by mandating banks to allocate minimum 5% of credits to SMEs by the end-2014. The Al Raffd Fund of OMR70 million was established as a result of a Royal Decree promulgated in 2013 to further assist the development of this sector.

Free Zones (FZ) seize 25% of Egypt's Exports (Reuters)

The amended draft cut the deficit from a previous 9.9% GDP. Expenditures were cut to EP864 bn, while revenues raised to EP 622 bn. This is the 2nd revision of the draft which also cut spending on social programs & trimmed a subsidy on bread & food commodities. Tax revenue was little revised upwards. A finance ministry spoke said the draft was approved by presidency.

Morocco's growth to slow to 2.6% in 2016 (Reuters)

This is compared to 4.3% est. in 2015, said planning agency, as agricultural output which is >15% of GDP falls from an exceptional year where cereal harvest hit a record 11mn tons. Other activities will rise by 3.1% in ‘16, after 2.5% in ‘15. Forex reserves to rise to 6.1 months of imports. Public debt would reach 64.9% of GDP in ‘16, against 63.8% in ’15.

Lebanese economy forecast to fall 1.5% in 2015 (The Saudi Gazette)

The economy is barely growing, with heightened levels of pessimism in recent months, Economena Analytics said. None of surveyed economists expect real estate transactions or prices to rise while many project declines in both. Instead, growth will be driven by public spending, banking, ICT, and restaurants. The political outlook has also become more uncertain.

Saudi Retail Industry on Booster Shots (Frost & Sullivan)

Major factors fueling growth are the rising consumers' disposable income, high marginal propensity to consume, increasing GDP growth, and Government spending. Favorable demographics make it one of the youngest, fastest growing consumer groups in the world. The industry is predominantly run by family-owned businesses, which occupy exclusive franchising rights.

Qatari healthcare sector to see more private players (Gulf Times)

A total of 5 private healthcare operators will start functioning in Qatar very soon, Minister of Public Health said. In addition to finding new operators, the ministry will also outsource some of the government facilities to the private sector. Health centers under the Primary Health Care Corp. will be outsourced to competent private operators.

Industrial sector represents 25% of Jordan's economy (Petra)

Director General of the Jordan Chamber of Industry (ACI) Maher Mahrouq showed Jordanian industrial sector accounts for 25% of GDP and attracts >70% of the foreign investment. The industrial sector includes 18,000 industrial facilities spread across the Kingdom. It has provided 250,000 jobs and was responsible for 95% of exports to Arab and foreign markets.

Issue 02 | July 2015

Abu Dhabi financial free zone gears up to open with draft rules (Reuters)

The free zone, which aims to be a top regional banking center, issued draft laws covering fund management, market operations, information disclosure and enforcement of its rules. Because of Abu Dhabi's vast oil wealth, bankers think the ADGM could become a major player in MENA & compete in some areas with the fast-growing DIFC.

Dubai leads ME hotel construction with >100,000 rooms for 2020 (Gulf News)

Dubai is the regions’ leading city for hotel openings for the past 3 years, with new rooms to be added to the existing 65,000 set to bring the total to >100,000 by 2020. Other hot spots are Morocco with 46 projects, Riyadh 43 & Doha 38. Of c. 700 total hotel projects in the pipeline for the region, 528 are listed as in pre-planning, planning & construction stages.

Dubai auto parts and accessories trade at $12 bn in 2014 (Dubai Customs)

Dubai's trade for auto parts and accessories grew by 10% in 2104, as per Dubai Customs data. Imports of the Emirate's booming automotive after- market trade were valued at $7bn, while the value of exports & re-exports were $5bn. Dubai Customs has been enhancing automotive spare parts trade through an array of first-rate Customs facilitations and services.

Qatar $200bn capex to lift infrastructure upgrade, Samba (Gulf News)

Spending explicitly linked to world cup is about $15.4bn, only 7.5% of capex, Samba said. Aided by large reserves, with QIA holdings est. at $256bn, authorities will spend as set out in the National Development Strategy when oil prices were >$100. The prospect of declining fiscal & external balances will prompt a slower project approval & execution.

Tunisia’s tourism industry: $515 mn in losses after beach attack (Reuters)

These are the preliminary estimates after the attack on a beach hotel that killed 39 people, tourism minister Salma Loumi said. "The attack had a great impact on the economy, the losses will be large". The country earned $1.95 bn in revenues from tourism last year. The sector makes up 7% of GDP and is a major source of forex and employment for Tunisia.

World Bank calls for infrastructure investments in Lebanon (Daily Star)

The World Bank said more investments in Lebanon’s infrastructure, such as ICT, electricity, water supply and transport, are needed to create more jobs, reduce poverty and improve the quality of life. Fo example, the electricity sector reform is paramount and would result in cost recovery, improved fiscal and external balances and reduced CO2 emissions.

UAE's Al Jaber seeks new terms for $4.5 bln restructured debt (Reuters)

Talks with banks aim to refinance debt it restructured last year to improve terms & ease conditions imposed by creditors. Among goals are reducing the interest rate on debt & extending the maturity of loans, said sources. Creditors pushed back on any new deal, some claiming the company has not fulfilled terms of original agreement signed in June 2014.

ENOC presses on DragonOil takeover amid shareholder protest (Zawya)

Emirates National Oil Company is progressing with its 1.7 bn pound purchase of Dragon Oil shares it does not already own, despite a major investor saying the takeover undervalued the company. Dragon Oil's second-largest shareholder, asset management company Baillie Gifford, said two weeks ago the offer was not high enough.

Oman Oil Co to restructure, privatize some units (Reuters)

The move is designed to divest multiple non-core platforms and reduce debt by $105mn. Under the agreements’ terms, Qalaa will simultaneously sell to FHI, one of its major co-investors, its holdings in several non-core business units. The stakes Qalaa is acquiring are in firms with leading positions in energy, cement, transportation sectors, among others.

Abu Dhabi considers state-backed merger for troubled TAQA (Reuters)

The Saudi National Automobile Manufacturing Co & the Saudi Arabian Public Investment Fund are working closely with Daewoo Intl, to establish an automobile manufacturing plant in KSA with an annual production capacity of 150,000 cars by 2018. The plant aims to meet domestic demand & also cater for the increasing export market in GCC.

Abu Dhabi buys into Trafigura's Spanish mines (Reuters)

Trading house Trafigura sold half its stake in 3 Spanish copper and zinc mines to Mubadala as part of a JV they are setting up to invest in base metals mining, the companies said on Monday. Sources close to the deal said it valued the mines business at around $1.4 bn, meaning Mubadala would be paying around $700 mn for its stake.

Saudi's Riyad Bank prices $1.07 bn capital-boosting sukuk (Reuters)

The Gulf's largest dairy firm said the 2016-2020 program would cover expansion in the areas of farming, manufacturing, distribution and logistics. The objectives include increasing its presence in all segments & geographies where it operates, targeting to double consolidated sales, while improving the financial performance.

Limitless to pay $564 mn to creditors, nears debt plan approval (Reuters)

The real estate company took a step closer to securing a second restructuring on debt outstanding. It said it would repay $564 mn to creditors and won the approval of almost 90% of banks to extend its remaining debt to Dec-18. It seeks to follow the footsteps of Dubai World, which in March was given approval to end court proceedings relating to its $14.6 bn debt restructuring deal.

Miami Dolphins owner and Qatar to bid for Formula One (Reuters)

The bid aims to buy a controlling stake in Formula One in a deal that could be worth up to $8 bn and inject new leadership into a sport facing falling TV audiences and ticket sales. Formula One impresario Bernie Ecclestone, who has ruled over the sport for 4 decades, would stay on to lead the racing side of the business, the source said.

French group to invest at least $150 mln in Saudi's Kingdom Holding (Reuters)

Aeroports de Paris , insurer AXA and construction group Eiffage are among the companies in the consortium led by France's Caisse des Depots. The move will enable them to increase their economic presence in KSA. The deal follows signs of strengthening economic ties between KSA and France. The pricing of the share sale has yet to be decided, Kingdom said.

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NEWSLETTERM E N A M O N T H L Y

Country name

Index name

Market cap.

(in bn)

Index performance

Value 1-month 3-month 1-year

GCC (sum) $1,048 - 1.0% 1.0% -6% KSA TDW MAIN IDX/d $535 9,104.27 0.5% 4.8% 0% Abu Dhabi ADX MAIN INDEX $119 4,697.11 -3.4% -3.6% - 9% Dubai DFM MAIN INDEX $82 4,092.30 -4.3% 3.5% -17% Qatar QE MAIN 20 IDX/d $176 12,049.10 -2.5% -4.4% -11% Kuwait KW MAIN INDEX $89 6,187.55 -0.7% -4.3% -13% Oman MSM MAIN 30 ID/d $24 6,429.05 1.1% -2.6% - 5% Bahrain BB ALL SHARE IDX $22 1,363.83 -1.7% -7.4% - 6%

U.S. S&P 500 INDEX/d - 2,077.42 0.0% 0.1% 10% U.S. NASDAQ COMPOSI/d - 5,013.12 0.9% 2.1% 19% U.S. DJ INDU AVERAG/d - 17,757.91 - 0.1% - 0.7% 8%

Europe STXE 600 PR/d - 387.07 0.6% 2.0% 16% France CAC 40 INDEX/d - 4,883.19 -0.6% 1.1% 11% Germany XETRA DAX PF/d - 11,180.50 -0.2% 0.1% 15% Spain IBEX 35 INDEX/d - 10,911.50 -1.4% 0.4% 4% Holland AEX-Index/d - 482.83 0.9% 2.0% 21% Italy FTSE MIB/d - 22,956.74 2.2% 5.2% 9% Russia RTS INDEX - 930.66 -6.1% 8.1% - 26% Belgium BEL20/d - 3,641.09 0.1% - 0.2% 17% Greece AT COM SHR PR /d - 797.52 3.4% -6.3% -32% Portugal PSI 20 INDEX/d - 5,633.20 -2.9% 2.6% -17%

Asia Japan NIKKEI 225 INDEX - 20,494.12 2.5% 9.4% 40% China SSE COMPOSITE/d - 3,953.61 3.0% 39.3% 126% Kong Kong HANG SENG INDE/d - 26,383.31 -3.4% 10.5% 19% Australia ALL ORDINARIES - 5,585.30 -0.7% - 2.1% 5% Korea KOSPI - 2,108.09 - 1.3% 6.5% 5% India S&P SENSEX/d - 28,080.06 2.2% - 5.2% 15% Singapore SET Index - 1,496.75 - 1.7% - 5.7% 6%

Latin America Brazil BVSP BOVESPA I/d - 52,757.53 - 4.6% 2.3% 1% Argentina BUSE MERVAL IN/d - 11,670.91 - 11.4% 12.5% 38%

GCC Credit Curves for Investment Grade Corporate Bonds - US$ Denominated

Price to Earning Ratios (last-12-month)

Price to Book Ratios (last interim)

Dependents weigh on UAE expats' ability to save (Gulf News)

The bulk c.34% came from ENBD & NBAD which, combined with FGB and ADCB, account for 52% of total. Although these numbers are progressing (+6.5% 1Q15/1Q14), they are still behind pre-global recession levels. "It was easier to get loans before but Central Bank put restrictions & banks become cautious," said Alp Eke, senior economist at NBAD.

Almost 9 in 10 UAE professionals interested in a job change (LinkedIn)

In its Talent Trends survey, LinkedIn’s key findings included the fact that, while not actively looking for a new role, 86% of professionals in UAE are open to relevant job opportunities, & 63% of all candidates are using professional social networks as part of their search for their next role. The study included responses from 600 professionals in the UAE.

UAE ranked 5th in global readiness index, KPMG (Gulf News)

UAE emerged 5th in KPMG 2015 Change Readiness Index, just behind Singapore, Switzerland, Hong Kong, Norway, & ahead US, UK, Japan. It is the only Arab country in the top 5. Qatar came 7th. Produced with Oxford Economics, the index looks at business environments, technology access, fiscal, regulatory and security capabilities, among others indicators, of 127 countries.

MENA Talent Competitiveness Index by INSEAD (Gulf News)

Governments, employers & academic institutions in MENA have a role to play to address labor market inefficiencies, develop national talent, and ultimately drive long-term sustainability into the 21st century and beyond, according to the new MENA Talent Competitiveness Index (MTCI) report, developed by INSEAD, Centre for Economic Growth and PwC.

With $44bn remittances, KSA leads Gulf states (Arab News)

Foreigners working in GCC sent home >$100 bn in remittances last year, est. at 6.2% of GDP, compared to 0.7% & 0.8% in US and UK. KSA tops the list with 10 million expats & $44 bn, followed by UAE $29 bn. Kuwait & Qatar were $12 bn & $9.5 bn. Majority of expatriates are from India, Egypt, Philippines, Pakistan, Bangladesh, Indonesia, Sri Lanka, Yemen.

GCC countries have high proportion of millionaire households (Gulf News)

6 GCC countries figured in the top 15 countries in the ranking of proportion of millionaire households, according to The Global Wealth 2015 by BCG. Bahrain and Qatar came 2nd and 3rd globally with 12.3% and 11.6% share. Kuwait ranked 5th, the UAE, Oman and KSA came 10th, 12th & 15th.BCG’s estimates UAE with 3.8% of total households are millionaires.

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