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Qatar Now Ranked 2nd in MENA Region for . . .

Qatar Now Ranked 2nd in MENA Region for . . .

CROWDFUNDINSIDER By Omar Faridi reported that Qatar Now Ranked 2nd in MENA Region for . . . Early-Stage Entrepreneurial Activity as Fintech Sector Expected to Grow Rapidly as the MENA Region Is Poised To Be The Next Fintech Hub.

June 26, 2020

Qatar Now Ranked 2nd in MENA Region for . . .

Randy Rivera, Executive Director of FinTEx, a member-led community focused on promoting innovation and collaboration within Fintech in Qatar and the MENA region, has said that his organization continues to work with international financial services industry participants.

During a June 23, 2020 virtual panel discussion (hosted by the US-Qatar Business Council) on “Qatar’s Growing Fintech Sector & Business Opportunities,” Rivera stated:

“We [aim to] … match talent with opportunity and what is going on in Qatar fits as an attractive platform not just for the Fintechs involved but for the Qatari market and the Middle East overall.”

He added:

“The design of these programs reflects thoughtfulness, broad participation and commitment of the right mix of leaders who can affect change and attract the talent to make that change uniquely impactful, not just to the market, but to the regional fintech community as well.”

Qatar is now a major financial hub in the Middle East. The country’s human development index (HDI) value is around 0.85, which puts it in the “very high” human development (and quality of life) category.

Qatar is ranked at 41 out of 189 countries and territories. Its HDI value has increased from around 0.75 to 0.85 in the past two decades – which indicates that the living standards of its residents may have improved significantly due to its booming economy.

As mentioned in a release shared with CI, Qatar aims to further support and develop a strong business community and a competitive environment that will help local SMEs while also attracting foreign SMEs.

The release revealed:

“Qatar has advanced 18 spots in the national level of entrepreneurial activity, securing the 15th rank globally and the 2nd in the MENA region for the Total Early-Stage Entrepreneurial Activity (TEA) index, according to the Global Entrepreneurship Monitor (GEM) Report 2019/2020.”

Amy Nauiokas, founder and CEO at Anthemis, a VC investment platform with over 100 portfolio firms, believes Qatar provides “a promising environment and set of opportunities for Fintech growth.”

Nauiokas, whose company supports an ecosystem of over 10,000 investors, incumbents, and high-potential Fintech firms, globally, stated:

“We look forward to solidifying some key relationships in Qatar as Anthemis further builds our MENA strategy.”

Mohammed Barakat, MD of US Qatar Business Council, who also attended the webinar, said:

“Considering Qatar’s large payment processing and remittance market and its strategy to become a regional gateway for a huge market, I foresee rapid growth in Qatar’s FinTech sector.”

The US-Qatar Business Council aims to support trade and investment between the two nations and to also build strategic business relationships.

As noted in the release, there are over 120 wholly-owned US firms operating in Qatar, and over 700 U.S.-Qatar joint projects currently active in the Middle Eastern nation.

As reported recently, the Qatar Financial Center will launch “Fintech Circle,” a co-workspace for qualifying financial technology firms free of charge for a year.

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MENA’s trade performance, and its projected growth

MENA’s trade performance, and its projected growth

Rebecca HardingCEO of Coriolis Technologies, invitee of Trade Briefing, discusses MENA‘s trade performance, its projected growth and key political risks for 2020.


Note on the impact of Covid-19: 

This report was compiled before the Covid-19 pandemic and therefore refers to patterns and trends based on data that was current at the time of writing in February 2020. The full impact of Covid-19 on trade is unknown, but the World Trade Organization estimates that trade will fall by anything between 13% and 32% globally during 2020. Alongside this, and ahead of any impact on trade, the Mena region was already being affected by the collapse in global oil prices, which happened in March and, again, was not factored into this report. However, the points in the report remain valid: that the region’s dependency on oil will have an impact on its trade and economic performance, greater in net oil exporting countries than in net oil importers.

There are other general concerns amongst trade finance professionals around the role of the trade credit insurance sector, which is now heavily exposed to the sharp downturn in global trade. Inventories are collapsing as just-in-time distribution models struggle to cope with restrictions on the physical movement of goods. This is affecting invoice payments and, while it is too early to say exactly how this will affect the recovery from the current crisis, it is undoubtedly the case that many businesses in supply chains worldwide will not survive. As a result, the role of government agencies at present is vital in supporting exporters. In addition to fiscal support, countries will also need clear and robust strategies to rebuild economically once lockdowns are lifted.

GTR: 2019 was a sluggish year for trade. How was MENA affected by this general climate of uncertainty?

Harding: Mena has had a tough few years and last year was not really any different. The combined effects of the trade war between the US and China, the UK’s exit from the EU and enduring intra-regional tensions, particularly between the US and Iran, made 2019 a poor year for trade.

This follows five years of sluggish growth. A weak or volatile oil price over the period since 2013 to the end of 2018, which is where the data is actual rather than forecast, has meant that export revenues have dropped at an annualised rate of 6% in Mena – the highest decline of any global region (Figure 1). This has had a spill-over effect on the region’s economies as well, with imports falling back by nearly 3% annually over the period, suggesting weaker demand both within Mena and globally for the goods that are re-exported from the region.

MENA's trade performance, its projected growth

The Mena region is particularly vulnerable to underlying uncertainties globally. It is highly dependent on two things: oil prices and global demand for the goods that are shipped through the Gulf via its largest ports. As a result, the overall picture for the region in 2020 is likely to be mixed and show no particularly clear pattern of recovery from the uncertainty that has dominated the last few years in terms of oil prices, and 2019 in terms of broader geo-economic and geopolitical issues (Figure 2). The collapse of oil prices, following an OPEC meeting in early March, was a product of Saudi Arabia’s decision to launch a price war; this will have major repercussions for the region.

What stands out from Figure 2 is that, in spite of the difficult environment around sanctions and its fraught relationship with the US, Iran is projected to fare well in trade terms during 2020, especially in terms of its exports. That said, care should be taken when interpreting Iran’s data as a lot of its trade is hidden or executed with poor reporting partners.

MENA's trade performance, its projected growth

Even if the figure of a 55% increase in the projected value of Iran’s exports seems extreme, it arguably reflects a slowdown in trade in 2018 as a result of US sanctions, and a pick up into 2020 as the country finds a way to work around the restrictions it now faces. Its largest export partner is China and the projections suggest an increase in export trade during 2020 of around 8%, alongside imports from China of around 17%. But it is not just China where Iran is seeing trade growth. Exports to the UAE are set to grow by nearly 39%, to the Republic of Korea by over 52% and, perhaps most intriguingly of all, to parts of Asia not indicated elsewhere (Asia NIE) of more than 2,000% year on year.

Asia NIE is Iran’s second largest export partner. It is an amalgamation of trading partners that are too small or too unreliable in their reporting to be classified individually as countries in trade statistics. The fact that it is both a large partner and that its growth is volatile but substantial during the course of the coming year suggests some of this growth is a reaction to the political and economic uncertainties that exist in the region.

Morocco is another country in the region which is predicted to see export growth in 2020. This reflects its position as a non-oil-dependent trading nation with an increasingly strong manufacturing base. Its top five trading partners are European, which points to its role as a gateway for trade between Mena, Europe and Africa. Its imports from Spain, for example, are increasing rapidly, with growth predicted at 8% during the course of the coming year. While oil and gas are important imports to Morocco from Spain, machinery and components, automotives and electrical products and equipment imports are also large and growing sectors. Spain has also taken over from France as Morocco’s largest export partner.

Nonetheless, the region remains vulnerable to global trade’s broader fragilities. These are likely to continue into 2020, not least because there is no sense that trade tensions have gone away, even if in an election year for the US there may be a slightly toned-down rhetoric. Trade growth remains negative or flat for most of the region’s countries and this will affect the extent to which GDP picks up.

GTR: Is there any sign that Mena has increased its resilience into 2020 and beyond?

Harding: The real measure of resilience in the region is the extent to which it is managing to reduce its dependency on oil. This is most evident in its imports (Figure 3). The region’s GDP expansion has failed to pick up since the collapse of oil revenues and, according to the IMF, is likely to be around 1.6% in 2020, down from 2.2% in 2017.

The fact that economic growth looks to have slowed somewhat has had an impact on the region’s imports. For example, imports of machinery and components (which includes computer machinery as well as tools for infrastructure development projects), will decline by 0.6% in 2020. The longer-term outlook to 2023 also points to an annual drop in imports of 0.3%. Iron and steel products, aircraft and automotives all exhibit a similar pattern.

MENA's trade performance, its projected growth

This could arguably be a function of two things. First, the region’s infrastructure has gone through a growth phase as ports and airports have been constructed to support its increased role as a trade hub. The slowdown now may well be because this construction process has slowed as more projects have been completed.

The second cause may be a slowing of regional or global demand, as might be suggested by the drop in automotive imports. This could suggest that there is a bigger picture to the sluggishness of trade in the region.

However, the data does not support this interpretation. The Mena region imports over US$75bn in automotives each year and exports just US$13bn. Exports are forecast to increase both in 2020 and for the next few years (Figure 4). This suggests that the region is potentially becoming more important as a hub, and that it will be re-exporting more in the coming years. The slowdown in imports therefore looks as if it can be attributed to the region’s economic fortunes. Indeed, the fact that iron and steel product imports are also declining indicates that there is less construction work going on.

MENA's trade performance, its projected growth

Even so, the projected growth in exports is encouraging. The region has a trade deficit in all of its largest sectors except mineral fuels and some of the import sectors where growth is slower, such as infrastructure products like iron and steel, may simply be a function of the fact that a lot of resource has been put into catching up over the past couple of decades and that this development is now slowing. Growth in exports of other infrastructure sectors such as machinery and components, aluminium and electrical products, alongside growth in automotives, suggests that the region’s role is changing – and this will mean that its long-term resilience is somewhat more assured.

GTR: How is intra-regional trade developing in Mena?

Harding: Mena will see an increase in intra-regional trade from 2019 to 2023, and this is noticeable in comparison to the pick-up in intra-regional trade in other net oil exporting regions such as South America and Sub-Saharan Africa (Figure 5). The only other region with faster intra-regional trade growth is Asia Pacific (APAC).

While oil remains the dominant traded sector in Mena, this greater intra-regional trade indicates either that the region’s oil dependency is declining or simply that there is a greater amount of cross-border trade within the region.

MENA's trade performance, its projected growth

Could this therefore mean that more export diversity across the region is behind the growth in regional trade? A first glance suggests not. The top five countries for intra-regional exports are the UAE, Saudi Arabia, Iran, Iraq and Oman. In terms of export growth, the UAE, Iran and Saudi Arabia are growing quickly, but Iraq and Oman are falling back. Similarly, the top five countries for intra-regional imports are the UAE, Saudi Arabia, Egypt, Iran and Oman. All of these countries are likely to see growth in intra-regional import values between 2019 and 2020 (Figure 6).

A couple of points stand out from this chart: first, the impact on Qatar’s trade because of the blockade, which began in June 2017, is evident. Intra-regional trade values fell back between 2013 and 2018 at an annualised rate of over 20%. While this initially aligned with the collapse in oil prices, an annualised decline of 16.1% in imports between 2016 and 2019 covered the pick-up in oil prices and the onset of the blockade, while intra-regional exports over the same three-year period fell annually at over 22%. The data suggests that this will continue into 2020.

MENA's trade performance, its projected growth

Furthermore, Morocco’s trade with the region looks set to decline at the same time it increases with the EU27 and Spain and France in particular. The country’s trade with Mena spiked during the financial crisis, largely because of an uptick in gold prices, with a three-year growth in imports of over 300%, albeit from a low base. Other imports, such as automotives, clothing and accessories, and milk and dairy products have remained on a consistent downward trend since 2014.

Morocco exports hard commodities and plastics to the rest of Mena, and these have also been on a downward trend since 2014 because of weak commodity prices. In other words, the structure of Morocco’s trade with the rest of the region is very different to its trade outside of the region, which is focused on intermediate manufactured goods.

This leads to the conclusion that, in fact, growth in intra-regional trade has been driven by a rise in oil prices, rather than any diversification efforts. Indeed, between 2017 and 2020, intra-regional trade in oil and gas grew by nearly 6% annually. The UAE, Egypt, Jordan and Bahrain have been major beneficiaries of this pattern, which looks set to continue.

GTR: Geopolitical tensions between the US and Iran have added a layer of uncertainty into the 2020 outlook. How will this play out during the course of the year?

Harding: On January 3, US forces carried out a drone strike near Baghdad International Airport killing Qasem Soleimani, commander of Iran’s Quds Force and right-hand man to Ayatollah Ali Khamenei, Iran’s supreme leader. Khamenei vowed “severe revenge”. Five days later, on January 8, 16 short and medium-range ballistic missiles were launched at two US airbases in Iraq (Ain al-Asad and Erbil). No fatalities were reported, which US officials attributed to an effective satellite early warning system known as the Space Based Infrared System. It is likely that Iran’s response was an example of ‘escalation for de-escalation’; by providing the US with a degree of early warning, casualties could be minimised and direct conflict with the US avoided, while still demonstrating to Iran’s domestic base that action had been taken. From the US perspective, President Trump was equally unlikely to be willing to become embroiled in a costly war during an election year.

Although tensions between Iran and the US are unlikely to lead to direct conflict, there are two real risks to the region. The first is that of miscalculation – in other words, the danger that either Iran or the US misinterprets the actions of the other and acts accordingly. For example, had the US had any fatalities from the Iranian response, there may have been a more severe, escalatory response. This risk is always there but the fact that neither side appears to have much appetite for conflict means that it is unlikely to be the major issue affecting trade during the course of the year.

Of more consequence is the second risk that is apparent in the region at present, which is that it is increasingly caught in the power struggle between Russia, China and the US. As Coriolis Technologies has been observing for some time now, Russia is increasing its influence in the region. Our data suggests that the average annualised growth in imports from Russia for the period 2016-2020 will be around 14%. While much of this is oil and gas, the period 2015-2018 saw a worrying exponential growth in so-called commodities not elsewhere specified – trade in which closely correlates with conflict around the world. This reflects Russia’s role in Yemen and Syria in particular.

The consequence for trade of this type of uncertainty is obvious. It holds back investment as businesses outside of the region tread cautiously to avoid conflict. However, while Russia’s engagement in the region provides a backdrop to traditional “hard” power, the US is now using its financial power rather than military means to support its regional objectives.

The tightening of sanctions on Iran since the US withdrew its support for the Iranian nuclear treaty (JCPOA) has affected the way in which banks can operate in the region. The risk of secondary sanctions, for example inadvertently using the US dollar for a transaction, as well as the direct risk of trading with a sanctioned entity or person is the core way in which trade with the region will be affected.

Mena continues to be dominated by trade with areas not elsewhere specified (Areas NES), which is an agglomeration of countries which are either too small or report too irregularly, potentially indicating hidden trade. Exports to this partner were worth US$519bn in 2018; US$97.1bn of these exports were in commodities not elsewhere specified. The region’s exports to Asia NIE were worth US$19bn in 2018.

What this says is that trade in the region remains opaque. While this continues to be the case, it is very difficult for dollar-denominated trade finance to work with banks in the region. Swift has shut down its messaging services to Iran; and although European government officials announced in April that Instex, a trade vehicle set up to bypass US sanctions on Iran, has successfully completed its first transaction, there remain doubts over the viability of the mechanism. China, Russia, Iran and Turkey have been building an alternative to the Swift network, but as this would be subject to the same sanctions constraints as other regions, unless and until US strategy changes, the opacity and political nature of trade will be a core challenge for the region as a whole.

GTR: The largest ports like Dubai are increasingly focusing on their role as trading hubs for re-exports. How will this expand in the coming year?

Harding: The best way of approaching this question is to look at trade with free trade zones (FTZs). These are the economic areas around ports or airports which are specific to a sector and which enable re-export activity by providing tax and customs duty incentives to overseas investors and trading businesses. Dubai alone has more than 30 of these zones; the UAE has the greatest number of FTZs of any country in the region.

Because countries report exports to FTZs, but FTZs do not report imports as a country in their own right, the data depends on the reliability of the partner country and, as a tax and duty payment mechanism rather than as a trading partner, the numbers tend to be small. The Mena countries are amongst the least reliable reporters globally, so the data is somewhat erratic but nevertheless tells an interesting story:

  1. Mena as a region exported some US$981mn to freeports in 2018. The dominant products that the region exported were electrical products and equipment, precious metals and stones (gold and diamonds), commodities not elsewhere specified, machinery and components and mineral fuels (oil and gas).
  2. Mena imported some US$220mn of goods from freeports in 2018. The dominant sectors were commodities not elsewhere specified, mineral fuels, electrical products, machinery and components and coffee and tea.
  3. Exports to FTZs declined between 2013 and 2018. However, Coriolis Technologies is expecting growth in exports to be nearly 150% between 2018 and 2019, and to fall back to around 2% between 2019 and 2020.
  4. The trade with FTZs is not necessarily attributable to hidden trade as such. By way of comparison, the region trades over US$519bn with areas not elsewhere specified and US$27.5bn with Asia not elsewhere specified. Since these have been shown to be highly correlated with sanctions avoidance and conflict as discussed, the distinction is an important one to be made.

These patterns tell an interesting story about how FTZs may be utilised at present. Oil and gas, precious metals and stones and commodities not elsewhere specified are sectors which hide other patterns in trade. However, trade in electrical products, automotives, machinery and components and coffee and tea suggest that something else is happening given the expected overall growth in trade with FTZs.

Because trade looks to have grown so quickly between 2018 and 2019, FTZs clearly play an important role in the region’s trade. The data is naturally opaque, so any conclusion is to some extent speculative. However, tighter sanctions and the risk of secondary sanctions against Iran from the US means that trade with one of its main trading partners became very difficult for Mena during that year. Alternative mechanisms, such as FTZs, mean that trade technically does not touch either Iran or its financial institutions. As a result, FTZs may become a route to continued legal trade with sanctioned countries.

GTR: China is playing an increasingly active role in Mena. What are the key developments and are there any particular sectors of interest?

Harding: One cannot overstate the importance of China to the Mena region. Imports from China were worth US$146bn and exports worth US$169bn in 2018.

Mena’s exports to China are dominated by oil and gas, which makes up nearly 76% of the total at US$128bn.

Imports from China are far less concentrated. The top five imports from China are electrical products and equipment (US$38.1bn), machinery and components (US$22bn), knitted clothing and accessories (US$4.6bn), iron and steel (US$6.2bn) and automotives (US$6.2bn).

China is strategically focused on its electronics exports and, in 2019, Mena is estimated to have imported US$9.2bn of specialised electronic equipment from China. This represents an annualised growth of 27% since 2016, when President Trump came to power in the US and China became more explicit about its global aspirations. While China’s imports from Mena may well be focused on energy security, it is extending its reach into the region through technology.

Yet trade growth overall has been sluggish. Over the period between 2013 and 2018, imports from China grew at an annualised rate of 1%, while exports increased by just 0.6%. This is largely because of oil price related economic weakness in Mena, which has affected both domestic demand as well as the value of exports to China.

Even so, Mena’s trade with China is twice the size of trade with its second largest country-level export partner, the US. China overtook the US as the region’s largest country partner (excluding blocs like the EU27) in 2009. The growth in the trading relationship was particularly evident between 2002 and 2014, likely driven by Chinese investment into the energy sector, given that post-2014 growth has trailed off amid lower oil prices (Figure 7).

MENA's trade performance, its projected growth

Despite China’s expansionary policy through the Belt and Road Initiative (BRI) to develop infrastructure more generally, it is energy security that seems to underpin its trade with the region. Investment has supported that with the majority going into the energy sector. This highlights the fact that China invests for its strategic purposes, although real estate (construction) and transport have featured strongly. In effect, then, the BRI has just given a name to an investment trend that has been growing gradually since before the financial crisis (Figure 8).

Up to 2013, all investments by China into Mena were classified as non-BRI, but since 2014, all investments have been classified as BRI – this is again a reflection of how China is now categorising its investments. The pattern is clear, though: the general trend is for more investment in the region, both in terms of consistency and in terms of value. The fact that investments appeared to drop in 2019 may reflect two things: first, the general uncertainties during the course of the year that arose from the US-China trade war which held back investments globally. Second, and as a result of the dispute, China was relatively quiet about the BRI during the course of the year having been very public about its intentions the previous year – perhaps as a signal to the US that it was growing its economic power.

Whatever may be the case, what is important is that the investments appear to support China’s trade aspirations in the region.

MENA's trade performance, its projected growth

GTR: What are the key upside and downside risks to growth in the region in 2020 and what are the consequences for trade finance?

Harding: Trade within the region is substantial and the value of bank-intermediated trade finance from intra-regional trade alone is as much as US$122bn per year. Electronics trade between countries in the region has grown by 36.7% since 2016, machinery and components by nearly 19% and, against the odds perhaps, Iran’s intra-regional trade is growing by an annualised figure of 47%.

Much of the growth in trade finance will depend on the risk appetite of the region’s financial institutions. There is plenty to invest in, as is clear from this report, but the region itself has a number of challenges which banks will need to overcome: Coriolis Technologies risk indicators for the region, particularly around the risk of terrorism, the risk of repression and threats from regimes, are among the highest in the world. While businesses on the ground are trying to reduce the region’s dependency on oil, particularly in technology and digitalisation, this reputational risk cannot be ignored.

The region is particularly prone to commodity price fluctuations. The collapse of oil prices since the beginning of 2020 presents a serious threat to Mena’s economic wellbeing. Saudi Arabia is unlikely to be able to thrive economically at an oil price below US$70 a barrel. With 82% of its export revenues coming from oil and gas (approximately US$455bn in 2019) and its next largest export products like plastics also being heavily oil dependent, its overall trade is 96% correlated with the price of oil.

Russian influence in the region is growing as a result of the US strategy to withdraw militarily and, in reality, economically as well. Since the global financial crisis, imports from Russia have grown from US$11.8bn in 2009 to US$27.8bn in 2018. Similarly, exports have grown over the same period from US$1.9bn to US$4.2bn. Increased trade with Russia and China is likely, not least because of the sanctions that are now associated with any trade in US dollars that might touch Iran. This will have the effect of limiting trade and investment – and the role of global banks – in the region if there is any compliance risk from supporting intra-regional trade in particular. Meanwhile, greater Russian involvement in Mena will add to the complexity of already fraught relations between countries in the region, with the potential of an escalation into broader conflict.

The Covid-19 pandemic has caused widespread economic disruption around the world. This is a key risk which could impact events in the region, travel and tourism and, of course, oil trade. These are risks that are the same for everywhere in the world at present, but the potential for a global recession is obvious. The extent to which the region’s reforms over the past few years have created economic resilience are likely to be tested during the course of this yea

MENA Region Is Poised To Be The Next Fintech Hub

MENA Region Is Poised To Be The Next Fintech Hub

SCOOPEMPIRE‘ s TECH wondering Why The MENA Region Is Poised To Be The Next Fintech Hub, its Scoop Team on June 4, 2020, answered by posing another question such as What is Fintech, and where is it most prominent in this essay.


As the world braces itself for a potential global recession, it’s hard to countenance the idea of growth markets or lucrative industries. However, entities such as the fintech sector undoubtedly challenge this mindset, with the global market worth an impressive $127.66 billion by the end of 2018.

The market is also poised for further expansion in the near-term, with a compound annual growth rate rate of 25% forecast through 2022. This will create a fintech sector worth approximately $309.98 billion, while also helping to drive significant innovation and technological advancement in the wider financial services space.

Interestingly, we’re also seeing the geographical diversification of fintech, with locations in regions such as Africa and the Middle East now competing with established financial powerhouses like London. But why exactly will the Middle East and North Africa (MENA) jurisdiction become the next major fintech hub?

What is Fintech, and where is it most prominent?

In simple terms, fintech refers to financial technologies, while it continues to drive a diverse range of innovations and applications within the financial services sector.

Historically, it was used almost exclusively by financial institutions themselves, but over time it has continued to evolve to represent emerging technologies in their own right and the widespread disruption of the traditional financial services sector.

MENA Region Is Poised To Be The Next Fintech Hub

The history of fintech can also be traced back to the origins of the 21st century, while over the course of the last decade it has evolved into a rapidly growing and advancing customer-oriented spectrum of services. This is true across a number of financial industries too, although it’s fair to surmise that the impact of fintech innovation has been more prominent in some markets than others.

Take the foreign exchange, for example, which has been gripped by a fintech revolution that remains largely unchecked to this day. Make no mistake; the impact of fintech has been felt throughout every aspect of forex trading over the course of the last two decades, from the emergence of online and mobile brokers to the implementation of high-frequency trading tools and automated risk-management measures.

These fintech innovations have helped to make the forex market far more accessible to a wider international audience, while enabling everyday and non-institutional investors to trade variable derivatives and forex trading sessions.

This includes lucrative and high-volume entities such as the Asian trading session (which operates between the hours of 12am and 9am GMT), along with an entire basket of emerging currencies and asset classes associated with regions such as Africa and the Middle East).

The rise of Fintech in MENA – a marriage made in heaven?

Of course, this is just one measure of the growing relationship between fintech and the MENA region, and one that becomes increasingly formidable with every passing year.

This is borne out by the figures too; with the fintech market in the MENA region expected to account for 8% of the areas’ total financial services revenue by 2022. This growth has been largely inspired by a rising number of fintech startups in sectors such as forex, combined with increased mobile Internet penetration and sustained economic reforms throughout the region.

Overall, the number of fintech startups offering fiscal services in the MENA jurisdiction will peak at 250 by the end of this year, up from a paltry 46 back in 2013. This evolution has also been driven by sustained investment in the sector, with the Dubai International Financial Centre (DIFC) having launched a notable $100 million fintech fund back in November 2017.

The main purpose of this investment was to accelerate the growth and influence of fintech in Dubai and the Middle East as a whole, and this has already had a marked impact in terms of achieving this objective. This also involved market-leading financial institutions such as HSBC, who have recently committed to renewing their participation for the third year.

This means that the region’s most dynamic and profitable fintech startups will continue to benefit from sustained support and nurturing, paving the way for the MENA region to become increasingly influential in the marketplace and challenge established entities such as London and Hamburg.

WE SAID THIS: The region is booming in more ways than you know!

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Grim short-term Forecast for the Coronavirus-era Economy

Grim short-term Forecast for the Coronavirus-era Economy

‘The immediate issue for all businesses, in whichever industry they’re in, is survival’ – Shehab Gargash by Bernd Debusmann Jr who on 30 May 2020 reports that Gargash Group managing director and CEO Shehab Gargash has a grim short-term forecast for the coronavirus-era economy. But out of the ashes, opportunity will arise.
10 Scenarios for the MENA region in the year 2050 elaborated by @Eubulletin amongst many others predicted similar outcome, even though the world was not going through the same exceptional circumstances.

Grim short-term Forecast for the Coronavirus-era Economy
Gargash believes many companies in the UAE are preoccupied with survival, rather than in longer-term outcomes

Like most globetrotting travellers and businessmen, Shehab Gargash’s office has souvenirs of his trips. But these souvenirs aren’t postcards, fridge magnets or cheap trinkets. Gargash collects boarding passes – hundreds of which are kept in a massive glass display case in his office, atop of which sits a silver and red aircraft wing.

“Oh! I have slipped the surly bonds of earth,” reads a sonnet on the case, written by American poet and pilot John Gillespie Magee Jr, killed flying a Spitfire over England during the Second World War. “And danced the skies on laughter-silvered wings.”

This, I think to myself when I see it, is a man who really loves his travel. His Instagram account proves it.

From India and China to Barcelona, Monaco and the Maldives, Gargash gets around – and that’s just in the last year alone.

But like the rest of us, Covid-19 has put a damper on Gargash’s travel plans.

“When will I travel again? That’s a good question,” he tells me, chuckling through the grainy screen of our video teleconference meeting.

“If I’m going on holiday, I want to enjoy it.  So I’m not itching to get back on a plane. I don’t think we’ll be there anytime soon.”

In the current climate, an Instagram-worthy trip is the least of Gargash’s concerns. At the moment, he’s preoccupied with facing the impact of the coronavirus pandemic, both on Gargash Group – of which he is managing director and CEO – and on the wider economies of the UAE and GCC.

Some estimates – such as that of the International Monetary Fund (IMF) – forecast that the GCC economies will collectively record negative real GDP growth in 2020, with the UAE slipping to -3.5 percent from 1.3 percent growth last year.

When it comes to the crisis, Gargash’s warm smile and friendly banter come to a stop. This isn’t a situation he minces words about.

“The immediate issue for all businesses, in whichever industry they’re in, is survival,” he tells me. “I think we are facing worldwide, industry-wide, existential issues that a lot of us have never even dreamed of. It’s all-encompassing and covers all sorts of areas of the economy.”

Hard times ahead

When it comes to the pandemic-related issues that the UAE’s economy faces, few are in a better position to comment than Gargash. A scion of one of the country’s most prominent Emirati families, Gargash leads the Gargash Group, which has diverse interests including automotive, real estate, hospitality and financial services. He’s also the founding chairman of Daman Investments – not to mention a long-time banking industry and prolific socio-economic commentator.


Gargash Enterprises is the authorised distributor for Mercedes-Benz in Dubai, Sharjah and the Northern Emirates

In the short-term, he says with startling matter-of-factness, the forecast is grim. He predicts that many businesses will not last.

“People aren’t looking at their strategies, or their plans. They’re looking at the daily details of expenses, revenue, cash in the bag. The immediate oxygen for the business to live through this,” he says. “Many businesses will not appreciate the impact of what they thought were very small elements, like levels of leverage and borrowing that seemed manageable a few weeks ago. These will deal a fatal blow to a lot of businesses.”

Perhaps more alarmingly, Gargash believes that most businesses are “nowhere near” a stage in which they can even think of what the future holds. What businesses will look like, and how they can adapt to new realities, are still unknowns.

“We haven’t even considered that future yet. A lot of businesses, through no fault of their own in many cases, will not survive simply because they have underappreciated the need to have that safety cushion,” he adds.

‘Soul searching’

According to Gargash, the businesses that do survive the immediate impact of the pandemic over the coming weeks and months will soon have to start thinking of their next moves.

“You can’t afford to be firefighting too long. Over the weeks and months, [companies will] regain their balance. Subsequent to that, strategy kicks back in,” he explains. “Where am I going as a business? What are my priorities? What are new opportunities, and what’s a dying, sunset industry?

“It’s time we ask ourselves these questions as businesses, as they’ll define how we act, post the shock-therapy. Once we do that, our priorities are better defined, and actions put together accordingly,” Gargash adds. “That’s the kind of soul searching that will occupy our minds this year, and possibly into next year.”


The company has diverse operations in financial investment and real estate

Gargash Group is far larger than most businesses that operate in the country. For the average resident, the company is most readily associated with the automotive sector, being the authorised distributor for Mercedes-Benz in Dubai, Sharjah and the Northern Emirates. It is, however, much more than that, offering a wide range of financial, investment and real estate services in various sectors.

But the company’s size and status did not spare it from the impact of the coronavirus. “We went through shock and panic, and saw revenues tumble to extremely low levels, and like everyone had to grapple with a 24-hour lockdown,” Gargash recalls. “Those were the issues that we dealt with as a group in the early days of the pandemic. Nobody knew how to deal with Covid-19.”

And although Gargash says it is “far too early” for decisions to be made on the company’s future, it has already begun a soul-searching process he advises for companies across the wider economy.

“That’s where we are at right now. Let’s say I have 10 lines of business. Which ones are still valid propositions? The ones that aren’t, do I adjust them? Do I integrate them into something else? Or do I just cut the rope and let them sink?,” he says. “Those kinds of questions are still being tackled.”

While it may be too early to determine what the group’s focus will be going forward and what it may need to be cut loose, Gargash says he isn’t particularly worried. The group’s core businesses – automotive, real estate, and financial services – will form a key part of the post-Covid economy in some form.

In fact, he adds, the shock of the pandemic may end up being a blessing in disguise that forced the company to become “more daring in its implementation.”


Businesses that will survive the impact of the pandemic over the coming months will soon have to start thinking of their next moves, Gargash believes

“We’ll try new ideas, new thoughts, concepts and industries that in the past I dismissed,” he explains. “Let’s imagine, for a second, potato farming. Potato farming has been proven to be a strategic source of nourishment. That’s a silly example, but understand, I’m obliged to become a more entrepreneurial business, and regardless of how ‘classic’ I’ve been in the past. I must investigate new avenues. I have the same eagerness to survive as a brand new start-up.”

A new GCC?

Gargash is undoubtedly an optimist. Even while speaking about the challenges of the economy, he peppers his comments with reminders that, sooner or later, things will return to something resembling normality. As he puts it, the masks will fall off, and the glove won’t be a necessity – even if the “trauma” of the event stays with us.

Even widespread job losses, he says, will eventually lead to something better. “In the longer term, jobs will be replaced, rather than lost. We still [in the UAE] have an economy serving 10 million people, and a broader GCC economy with 50 million or so. Jobs will be created, possibly in new industries and in new roles.”

These new roles – which Gargash admits he isn’t sure what will be, exactly – will require many employees, from blue-collar workers to managers, re-skill themselves, or learn entire new professions. Although challenging, he is confident the region’s youth in particular will manage.

“This [trend] will disproportionally [benefit] young people,” he says. “They’re more adept and more able to align themselves with industry trends.”

These ‘new roles’ don’t just apply to employees. The pandemic, he believes, may ultimately change the UAE’s economy as a whole by encouraging more home-grown entrepreneurs to step up with fresh new ideas.

“Most of the businesses that are set up in the UAE are in the ‘last-mile’ economy: the delivery of a product or service that has evolved somewhere else, or was manufactured somewhere else. Your control over what your supplier gives you is fairly limited. I can’t invent a better wheel, so to say. I’m just distributing the wheel that was manufactured somewhere else.”


Young people could align themselves with industry trends, says Gargash

What we’ll see instead, Gargash hopes, is an opportunity for motivated entrepreneurs to try and forecast where the future is headed and where they can step in with an idea.

“In a post Covid-reality, we’ll be asking what is going to drive businesses, and what those businesses will look like,” he says. “There needs to be a proper reading of what demands will need to be fulfilled. Businesses will need to alter their offerings to suit the new realities.”

He adds, “It’s by no means an easy task. There’s still a lot of projection and reading into the future that is required.”

Once that’s done, he says, the UAE’s economy will be able to take off – as will he, on his next trip abroad. For Gargash, that day will be welcome news.

“I have a fear of losing my frequent flyer miles,” he laughs. “But that’s another story.”


Advice for investors

When asked what advice he’s given to would-be UAE investors in the pandemic, Gargash responds without hesitation: “hold on to it and watch what happens.”

“Do not rush into investments today. I do not think there will be an imminent, overnight bounce back of growth and activity,” he says. “It’s going to come back, but it will be more deliberate.

“It’ll take more time. If I was an investor with AED1m, I’d hold back and watch and observe. I’d make a convinced decision before I take that plunge and go into one asset class.”

Green economy saving the day

Green economy saving the day

Sally Farid, an associate professor of economics at Cairo University thoughts on this Friday 29 May 2020, are to put it in few words as only a Green economy saving the day would be a viable way out of this traumatic conjecture. This is at a time when Egypt presses on with a new capital in the desert amid virus outbreak, and its Officials seeing these mega-projects as the key source of jobs, the author of this article advises the following.
The world needs to adopt a green economy to enhance growth and job creation amid the crisis of the Covid-19 pandemic

Green economy saving the day

A green economy is the means to salvation for the global economy after the coronavirus pandemic has affected 81 per cent of the world’s workforce. After millions of people had been infected and thousands had died due to the virus, the tourism and travel industries collapsed and the oil and gas sector plummeted owing to the preventive measures countries have adopted to curb the spread of the coronavirus.

However, a green economy would allow countries to achieve growth and generate jobs in the wake of the pandemic. The coronavirus has brought the green economy to the fore as the virus is expected to negatively impact the world’s economies for years to come.

Austria has announced that 13 European countries are joining hands to support economic activities that reduce toxic emissions, for example. The European states are also discussing emergency measures at the cost of more than half a trillion euros to stimulate their economies after controls on the spread of the coronavirus led to airline stoppages, factory closures, and restrictions on public life. The leaders of the European Union countries have vowed to focus on environmentally friendly policies to revive their economies.

The measures adopted to recover from the repercussions of the virus should encourage clean solutions instead of the current infrastructure that causes pollution. They should also encourage electric transportation technology and a reduction in the use of fossil fuels. Green projects, such as enhancing the use of renewable energy, can create more jobs, bring in more revenues, and be cost-effective in the long run. The world is standing at a crossroads at present: either to pursue zero-emissions goals or to fall under the mercy of fossil fuels once more.

The industrial countries should focus on supporting their material infrastructure, such as wind farms, solar plants, renewable electric and clean energy networks, and the use of hydrogen. They should carry out modifications to improve the quality of construction and invest in education, training, and clean-technology research.

The green economy is an opportunity to benefit from its advantages in terms of growth, food security, and the provision down to the village level of energy, clean water, housing, sewage networks, and public transport. These opportunities can create jobs, help to eliminate poverty, achieve sustainable development, preserve natural resources, and give access to green technology that reduces pollutants and increases production.

Egypt launched a work plan to promote the green economy in Africa in 2019, and Africa’s financial centres now have a golden opportunity to transform their sister countries into global green hubs.

According to the United Nations Environment Programme (UNEP), the green economy can improve human well-being and reduce social inequalities in the long run. It can help to decrease the risk for future generations to be exposed to environmental degradation and ecological depletion. It is necessary to help to protect the environment and create an economic system that generates jobs and covers the whole social spectrum.

Global estimates now put the increase in greenhouse-gas emissions responsible for global warming across the world at around 70 per cent, giving rise to temperatures that could go up by four to six degrees Celsius by the end of this century. According to the UN, water scarcity will become a chronic phenomenon in many parts of the world by 2030, imposing vast challenges to policies and the costs of acquiring clean water.

The international community is therefore looking at the green economy as a means to economic recovery and sustainable development by encouraging investments in the environment to achieve sustainable economic growth, or “green growth”, and to reduce poverty. For the green economy to be successful, environmental elements should be incorporated into economic development models, policies, and projects at the earliest stages of their preparation.

In its simplest form, the green economy is one in which carbon emissions are reduced and the efficient use of resources is maximised. It covers all social groups whose incomes increase with their opportunities for work. This kind of economy is driven by public and private investments that help to prevent the loss of biodiversity and preserve a healthy environment.

These investments should be supported by amended policies and regulations as well as public spending. The development of a green economy should help to maintain, enhance, and rebuild natural capital, seeing this as a source of public benefit, particularly to the poor whose security and lifestyles depend on natural resources. Africa remains the wealthiest continent in the world in terms of mineral resources, including fossil fuels. However, many African countries have been attempting to adopt a green economy as a means for growth, including Botswana, Ghana, Kenya, Nigeria, and South Africa.

Many countries have applied different economic policies to encourage the conversion to a green economy, whether by investing in green energy, providing financial facilities and loans at low interest rates, applying preferential tariffs and prices on products in which renewable energy is used, taxing products produced by non-renewable energy sources, or imposing taxes on waste and cash transfers.

The conditions necessary for the growth of a green economy include the application of policies and visions for sustainable development, coupled with legislative, institutional, and financial procedures, social awareness, and coordination between all the parties concerned.

Legislative measures include reformulating and amending laws, adapting them to the principles of the green economy, and clarifying implementation mechanisms.

Institutional procedures are concerned with adopting a national strategy for developing and identifying priority sectors that can easily go green. This is in addition to incorporating environmental considerations into five-year national plans and development strategies, while preparing government authorities, educational entities, non-governmental organisations, civil society, and the private sector for a green transformation.

It is the role of present economic policies to transform the economy in the long run into a green economy through, for example, licensing laws, incentives, and pricing policies, modifying import restrictions, financial aid, fines and taxes that give preference to the proper use of resources, and the integration of the cost of pollution and the use of natural resources within the total cost of goods and services.

Financial procedures include investing in green infrastructure and modern technologies and encouraging the private sector and civil society to be incorporated within a green system.

This batch of measures should be adopted in tandem with national studies to identify the opportunities for going green and the factors of success and challenges associated with this transformation, as well as developing research, monitoring, and environmental knowledge management.

*A version of this article appeared in print in the 21 May, 2020 edition of Al-Ahram Weekly

IMF reveals how COVID-19 could disrupt Arab economies

IMF reveals how COVID-19 could disrupt Arab economies

ZAWYA’s ECONOMY on 7 May 2020, elaborated on IMF reveals how COVID-19 could disrupt Arab economies. Here is how the COVID-19 pandemic by bringing unprecedented challenges, and strict lockdowns in some parts of the MENA region, could make it even worse for those petro-economies of the Gulf, the obvious object of this article.


Governments responded quickly to the pandemic and Arab youth will play a major role in economic recovery.

The Arab economies are facing a multi-level shock from COVID-19 despite the prompt responses by many governments in the region, the regional head of the International Monetary Fund has stated.

Image used for illustrative purpose. Financial Market Charts.
Image used for illustrative purpose. Financial Market Charts.GettyimagesBy Atique Naqvi, ZAWYA

Low oil prices will not only further distress producers but will also impact non-oil Arab economies, said Dr Jihad Azour, Director of the Middle East and Central Asia Department at the IMF.

“Starting with long-term structural problems, Arab countries will have difficulties addressing the direct impact of the ongoing slowdown,” said Dr. Azour, adding that one thing that helps in the recovery in Arab countries is that they have young populations.

Two-thirds of the Arab population in the region is less than 30 years old, and this human capital advantage would play a key role in speeding up the regional economic recovery in the post-COVID19 market, he said.

Dr Azour expects Arab countries to continue their technology adoption programs as the economic recovery would depend on the efficiency of such initiatives.

What is needed, he noted, are dedicated efforts to implement what Arab governments and international organizations know are essential reforms to the structure and emphasis of Arab economies.

Economic diversification

Oil producers in the Arab world should continue their economic diversification drive, he said, adding that ongoing COVID-19 pandemic should prompt countries in the Middle East and North Africa to focus on public health and social security. “The countries must work towards reducing trade barriers, decreasing financial vulnerability and avoiding high costs of armed conflicts.”

Dr Azour was answering questions in a webinar last night hosted by Khalil E. Jahshan, who is the executive director of Arab Center Washington DC.

In Tuesday’s IMF podcast on Arab economies, Dr. Azour said all countries in the region were affected by the COVID19-led economic crisis and most of them have introduced a certain number of measures to protect life and livelihoods and also to protect certain sectors in the economy.

“Most challenging moments”

“If we compare to the last hundred years, this is one of the most challenging moments in economic history for both Central Asia Caucuses as well as also for the Middle East and North African countries,” he said.

The IMF’s Middle East head believes the oil exporting countries in the Arab world will face the impact of the shock on their revenues and  fiscal situation.

Countries with ample buffers could use them to mitigate some of the repercussions of the shock, but the economic management is going to be more complicated for the nations with less buffers. Oil importing countries will be impacted due the fluctuations in the levels of remittances, capital flows and investment coming from the oil producers, he said.

During the Arab Center webinar, Dr. Azour also provided some global perspective on the impact of COVID19 pandemic.

The current economic crisis caused by COVID19 is not like that of 2008-2009 since it has precipitated a deeper and wider shock to the economies of individual countries as well as to the international economy at large, he said.

What also specifically differentiates the current economic crisis is the degree and level of uncertainty associated with it. He said the international community and organizations knew what instigated the 2008 financial crisis; however, the severity and impact of the current one remains unknown, thus addressing its effects is still indeterminable.

He stressed that the IMF’s current policy, which includes loans and advisory services, is to give breathing space so that “emerging economies and low-income countries are not left behind” in this period.

He predicted that there will be a new globalization effort that may try to address the deficiencies of the former international economy. The international economy, he argued, will have to determine how to address challenges to growth and to make sure that this growth is equitable between low income and developed countries.

(Reporting by Atique Naqvi; editing by Seban Scaria)

(seban.scaria@refinitiv.com)

Indian billionaire Ambani accelerates debt plan

Indian billionaire Ambani accelerates debt plan

Oil, telecom and retail conglomerate Reliance Industries now expects to reach zero net debt ahead of the March 2021 target as reported by Arabian Business of 1 May 2020. Here is the story of how and why Indian billionaire Ambani accelerates debt plan as stake sale to Saudi drags.

Indian billionaire Ambani accelerates debt plan as stake sale to Saudi drags

Ambani’s focus on paying down debt and attracting investors comes as Reliance on Thursday reported its biggest profit slump since 2008

Mukesh Ambani, Asia’s richest man, accelerated the timeframe for wiping out $21 billion in net debt at his Reliance Industries Ltd., seeking to quash skepticism that emerged as talks to sell a stake in some assets to Saudi Arabian Oil Co. have dragged on.

The oil, telecom and retail conglomerate now expects to reach zero net debt ahead of the March 2021 target Ambani had set in August, the Mumbai-based company said in a statement Thursday. A $7 billion share sale to existing investors was approved by the board on Thursday, a week after Facebook Inc. agreed to invest $5.7 billion in Reliance Industries’ Jio Platforms business.

The rights issue — the latest in a series of fund-raising efforts — may help Ambani, 63, pay down borrowings that piled up as the company spent almost $50 billion to roll out a wireless network. Building investor confidence has become all-the-more crucial after the pandemic caused a crashin oil prices, undermining prospects for Reliance’s proposal to sell an estimated $15 billion stake in its oil and chemicals business to Saudi Arabian Oil.

Talks on the investment by the world’s biggest oil producer are on course, Reliance said Thursday in the statement. The company also said it has sought regulatory approvals to carve out the oil and chemicals division. Investors have sought clues to the progress of negotiations with Aramco, as the Saudi company is known, helping drag the stock to a two-year low in March. The shares have rebounded, gaining about 66% since the March 23 close, on renewed confidence in Ambani’s ability to attract investors.

“Reliance Industries has demonstrated excellent timing for fund raising,” said Chakri Lokapriya, chief investment officer at TCG Asset Management. “The Jio Platforms-Facebook deal provides Reliance a huge, scalable business venture with first-mover advantage. The rights issue is a smart way of raising capital.”

Ambani’s focus on paying down debt and attracting investors also comes as Reliance on Thursday reported its biggest profit slump since 2008, missing analyst estimates, on a plunge in oil prices and slumping demand.

Profit plunged by nearly 40% in the March quarter as the coronavirus outbreak slammed fuel demand. To cut costs, Ambani is foregoing his pay and has cut salaries at the oil unit, the company said Thursday.

The billionaire has vowed to shift Reliance away from dependence on profit from its energy-related businesses to faster-growing consumer segments including its digital platform and retail.

Reliance said Thursday that it has received interest from new potential global partners in taking a stake of similar size to Facebook’s agreement to buy a 10% stake in the company’s platform business.

Reliance “has received strong interest from other strategic and financial investors and is in good shape to announce a similar sized investment in the coming months,” it said in a statement. The company “is set to achieve net zero debt status ahead of its own aggressive timeline.”

The Facebook-Jio Platforms transaction is to be closed by end of this quarter, the company said in a presentation to investors on its website.

Under the planned rights offering, Reliance will issue shares worth 531.3 billion rupees, it said Thursday. The deal includes one rights share for every 15 held, at 1,257 rupees each, or 14% lower than the closing price on Thursday. Ambani and other members of the founding family who own stakes will subscribe to their entire entitled portion and will buy any stock left over, under the plan.

The offering comes at a tumultuous time for many companies in India.

Even before the pandemic triggered one of the world’s most extensive lockdowns and slammed economic growth, companies were struggling to raise money as banks cut back lending. The atmosphere may make it hard for Ambani to come through on his plans, said Arun Kejriwal, director at KRIS, an investment advisory firm in Mumbai.

“The rights issuance is not attractive,” said Kejriwal. “Hence, the math is not adding up for Reliance in cutting its net debt to zero ahead of the promised deadline. The road map needs to be clearer as the earnings were below expectations.”

In April, Reliance said it would raise as much as 250 billion rupees through non-convertible debentures.

Adjusted debt peaked at 2.7 trillion rupees in fiscal 2020, according to S&P Global Ratings. The ratings company expects that to decline to about 2.2 trillion rupees in the following year and 1.7 trillion rupees by fiscal 2023.

Earnings growth at the company’s digital and retail segments will be about 50% in fiscal 2020, S&P estimates. The businesses will account for about 40% of the company’s earnings before interest, taxes, depreciation and amortization, from just 3% in 2017, S&P said.

“The company’s strategy of transforming its upstream energy focus to domestic consumption-driven businesses has been successful,” S&P said in an April 28 report affirming Reliance’s BBB+ credit rating. “We expect digital and retail growth to continue in fiscals 2021 and 2022.”

Worst Economic Downturn Since the Great Depression

Worst Economic Downturn Since the Great Depression

Well before the sudden irruption of the COVID-19 pandemic, we entered a phase unknown before, that of a slowdown in the world economy. The economies north of the MENA region were first to feel the pinch of the Dollar. The MENA petro-economies know this since the advent of oil. What they did not perhaps know is that it is the worst economic downturn since the Great Depression.

A small story before going into the latest IMF blog of April 14, 2020. In Europe, the German machine seemed running out of steam, with a few small cracks appeared by the questioning the German miracle. The locomotive of Europe tired by putting up so much effort trying to pull and strengthen the stragglers of the union that are Greece, Portugal, Spain, and other Eastern countries. 

These countries however were integrated into the European Union for geopolitical reasons aimed at creating a strong Europe in the face of the communist challenge on the one hand and US exuberance on the other. Without going into the technical details of the financial mechanisms and destabilization processes devised by the US, the thinly veiled objectives of the dominant states are first security imperatives and eventually the long-term control over global wealth.

Moreover, the countries lagging above have brought nothing useful to the EU if not ever more unemployed and care to manage. After Brexit, all that remains is Germany and France to pull the EU train.  Germany, knowing that these countries were plagued by chronic corruption and mismanagement, did not want to sacrifice itself to fish them, and this is understandable because prestige politics is never good in bad weather. Indeed, the €500 billion injected by the state into the banks was the lifeline to avoid the crash of the entire German financial system and thus the collapse of the European Union.

So here is Gita Gopinath who wrote The Great Lockdown: Worst Economic Downturn Since the Great Depression.

Worst Economic Downturn Since the Great Depression
Photo: WILLY KURNIAWAN/REUTERS/Newscom)

The world has changed dramatically in the three months since our last update of the World Economic Outlook in January. A rare disaster, a coronavirus pandemic, has resulted in a tragically large number of human lives being lost. As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.

April World Economic Outlook projects global growth in 2020 to fall to -3 percent.

This is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods. A lot depends on the epidemiology of the virus, the effectiveness of containment measures, and the development of therapeutics and vaccines, all of which are hard to predict. In addition, many countries now face multiple crises—a health crisis, a financial crisis, and a collapse in commodity prices, which interact in complex ways. Policymakers are providing unprecedented support to households, firms, and financial markets, and, while this is crucial for a strong recovery, there is considerable uncertainty about what the economic landscape will look like when we emerge from this lockdown.

Worst Economic Downturn Since the Great Depression

Under the assumption that the pandemic and required containment peaks in the second quarter for most countries in the world, and recedes in the second half of this year, in the April World Economic Outlook we project global growth in 2020 to fall to -3 percent. This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.

COVID-19 – The financial crisis of 2008 was a piece of cake

COVID-19 – The financial crisis of 2008 was a piece of cake

With, the omnipresent COVID-19 – The financial crisis of 2008 was a piece of cake as proposed by ELECTRIFYING on 9 April 2020 we are given a comparative view of the different crises that currently shake not only the world of finance but the world at large.

The world has seen difficult financial times before, like the ‘Black Tuesday’ in 1929, which we all know as the ‘Great Crash of Wall Street’. Only 13 years ago, we were able to observe another crash originating in the USA but spreading all over the world to end in a global financial crisis. Yet we see ourselves heading towards the next crisis at a frightening pace, but surely, we should be prepared and have learned our lesson from mastered crisis’. 

Unfortunately, the unpleasant truth is that the world has not seen this kind of crisis before, as it is constituted genuinely different from the ones we already went through. This time the financial insecurity hasn’t been caused by banks or real estate market; it has been triggered by a global virus which led to the shutdown of economies backbone – SME businesses. The mentioned shutdown has resulted in a short-term demand and supply shock of real-economy to first affect the stock exchange due to its pro-active market responsiveness. 

Further effects are the inflation of bonds and company shares as it takes some time for rating agencies screening forecasts and month-end reports until updating the credit rating of companies and governmental entities. The United Kingdom, Mexico, Brasil, Argentina, Iran, Irak and many others have already been cut.

The world has seen difficult financial times before, like the ‘Black Tuesday’ in 1929, which we all know as the ‘Great Crash of Wall Street’. Only 13 years ago, we were able to observe another crash originating in the USA but spreading all over the world to end in a global financial crisis. Yet we see ourselves heading towards the next crisis at a frightening pace, but surely, we should be prepared and have learned our lesson from mastered crisis’. 

Unfortunately, the unpleasant truth is that the world has not seen this kind of crisis before, as it is constituted genuinely different from the ones we already went through. This time the financial insecurity hasn’t been caused by banks or real estate market; it has been triggered by a global virus which led to the shutdown of economies backbone – SME businesses. The mentioned shutdown has resulted in a short-term demand and supply shock of real-economy to first affect the stock exchange due to its pro-active market responsiveness. 

Further effects are the inflation of bonds and company shares as it takes some time for rating agencies screening forecasts and month-end reports until updating the credit rating of companies and governmental entities. The United Kingdom, Mexico, Brasil, Argentina, Iran, Irak and many others have already been cut.

COVID-19 – The financial crisis of 2008 was a piece of cake

Eventually, the real estate market will as well see a correction of the booming prices due to a rising supply but limited buyers in the market, partially as an effect of travel boundaries and decreasing cash pools of investors and individuals. If there are only ten local prospective buyers compared to hundreds of international interested parties, the current peek prices will no longer be achieved. 

As an upside, we don’t expect hyperinflation to kick-in caused by billions of Pounds, Dollars and Euros simultaneously flooding the markets for the sake of securing liquidity. Indeed, central banks had no other choice but to keep the printer on full throttle to steer against the sharp drop in the stock market. In contrast to an earlier crisis, globalisation and digitalisation have driven the supply of equivalent products to a majority of goods and services, e.g. Cinema vs Netflix, Restaurants vs Delivery Services, Physical Meetings vs Video Conferences. Besides, shelves in most supermarkets around the world are still filled with necessities despite numerous media promotions regarding panic buying.

As it happens, the real threat this time is the shutdown of SMEs, the resulting mass unemployment and the dropping purchasing power. Millions of people all around the world are losing their jobs, struggling to pay their rent and mortgages while facing severe existential issues. In the aftermath, tax deficiency, reduced economic growth, and ongoing down grades of institutions and countries as a whole will also impact the stock market in the long run. Hence, we expect further global economic struggles to highly depend on the realisation of global decision makers’ strategies 

A lesson taught from past experience illustrates that a financial crisis always shows unexpected long-term collateral. The Imperial College of London has released a study in 2016, stating an additional 260,000 deaths linked to the financial crisis of 2007/08. This frightening result has been assigned solely to unaffordable or late cancer diagnosis/therapies of countries without universal healthcare in the OECD like the US or UK. 

COVID-19 – The financial crisis of 2008 was a piece of cake

Within the energy sector, business is still running as usual with some effects of dropping prices due to the reduced demand. On the other hand, postponement of new installations is inevitable. Power utilities and O&M companies are classified as being essential infrastructure, which enables their staff to hit the road and keep the energy flowing. Although the restrictions and enhanced H&S measures (PPE, scheduling of lone working, unavailability and avoidance of hotels, increases of travel time, etc.) also bear additional costs to the energy sector, it has been vastly unaffected so far. 

Ending this blog post with some good news, Forbes has published an astonishing figure of 72% of all energy project in 2019 were renewable, which would be an eager target for the FY2020 as well. 

What direction do you see our economy heading towards?  

Global leaders urge G20 to set up $8bn COVID-19 fund

Global leaders urge G20 to set up $8bn COVID-19 fund

TradeArabia News Service in Dubai, reported that Global leaders urge G20 to set up $8bn COVID-19 fund before concluding that “The UN, the G20 and interested partners should work together to co-ordinate further action.” Saudi Arabia that was readying itself to take over the G20 reins never imagined that the world’s situation could go this way.

A 165-strong international group including 92 former presidents and prime ministers, along with current economic and health leaders in the developed and developing world, have come together to demand the creation of a G20 executive task force and an immediate global pledging conference which would approve and co-ordinate a multi-billion dollar coronavirus fighting fund. 

In an open letter addressed to G20 leaders, the group – which wants both to speed up the search for a vaccine, cure and treatments and revive the global economy – urges global collaboration and commitment to funding ‘far beyond the current capacity of our existing international institutions’.  

“The economic emergency will not be resolved until the health emergency is addressed: the health emergency will not end simply by conquering the disease in one country alone but by ensuring recovery from COVID-19 in all countries,” the statement says. 

The plea is for agreement within days for:

  • $8 billion to rapidly hasten the global effort for vaccines, cure and treatment;  
  • $35 billion to support health systems — from ventilators to test kits and protective equipment for health workers; and
  • $150 billion for developing countries to fight the medical and economic crisis, prevent a second wave of the disease flowing back into countries as they come out of the first wave. This means waiving debt interest payments for the poorest countries, including $44 billion due this year from Africa. 
  • $500-$600billion issue of additional resources by the IMF in the form of special drawing rights.  

The letter also urges the co-ordination of fiscal stimuli to avoid a recession becoming a depression. 

While welcoming the G20’s first communique on the COVID-19 crisis, the group is pressing the G20 to speed up an action plan. 

The group states: “All health systems – even the most sophisticated and best funded – are buckling under the pressures of the virus.  Yet if we do nothing as the disease spreads in poorer African, Asian and Latin American cities which have little testing equipment, hardly any ventilators, and few medical supplies; and where social distancing and even washing hands are difficult to achieve, COVID-19 will persist there – and re-emerge to hit the rest of the world with further rounds that will prolong the crisis. 

“World leaders must immediately agree to commit $8 billion – as set out by the Global Preparedness Monitoring Board – to fill the most urgent gaps in the COVID-19 response. This includes $1 billion this year for WHO, $3 billion for vaccines and $2.25 billion for therapeutics.  

“Instead of each country, or state or province within it, competing for a share of the existing capacity, with the risk of rapidly-increasing prices, we should also be vastly increasing capacity by supporting the WHO in coordinating the global production and procurement of medical supplies, such as testing kits, personal protection equipment, and ITU technology to meet fully the worldwide demand. We will also need to stockpile and distribute essential equipment. 

“$35 billion will be required, as highlighted by WHO, to support countries with weaker health systems and especially vulnerable populations, including the provision of vital medical supplies, surge support to the national health workforce (70% of whom in many countries are underpaid women) and strengthening national resilience and preparedness.  

“According to WHO, almost 30% of countries have no Covid\\\OVID-19 national preparedness response plans and only half have a national infection prevention and control program. Health systems in lower-income countries will struggle to cope; even the most optimistic estimates from Imperial College London suggest there will be 900,000 deaths in Asia and 300,000 in Africa. 

“We propose convening a global pledging conference – its purpose supported by a G20 Executive Task Force – to commit resources to meeting these emergency global health needs.” 

On the global economic outlook, the group proposes a range of measures and says: 

“Much has been done by national governments to counter the downward slide of their economies. But a global economic problem requires a global economic response. Our aim should be to prevent a liquidity crisis turning into a solvency crisis, and a global recession becoming a global depression. To ensure this, better coordinated fiscal, monetary, central bank, and anti-protectionist initiatives are needed. The ambitious fiscal stimuli of some countries will be all-the-more effective if more strongly complemented by all countries in a position to do so. 

“The long-term solution is a radical rethink of global public health and a refashioning – together with proper resourcing – of the entwined global health and financial architecture.  “The UN, the G20 and interested partners should work together to co-ordinate further action.”

– TradeArabia News Service

Gulf faces recession as oil deluge meets COVID-19

Gulf faces recession as oil deluge meets COVID-19

MENA sovereign wealth funds are set to yank billions from stock markets, with the cash needed back home reported Alison Tahmizian Meuse in an article Gulf faces recession as oil deluge meets COVID-19 in an Asian Times article dated March 30, 2020. It is said elsewhere notably in the local media that these sovereign funds could shed something like $300 billion.


A stairwell in the Queen Elizabeth II cruise liner docked at Port Rashid in Dubai, where the tourism sector has been devastated by the COVID-19 pandemic. Photo: AFP

Middle East oil exporters are bracing for recession and the lowest growth rates since the 1990s, with economists warning that the “twin shocks” of Covid-19 and plummeting oil prices will have a knock-on effect across the region.

“Quarantines, disruption in supply chains, the crash in oil prices in light of the breakdown of OPEC+, travel restrictions, and business closings point to a recession in the MENA region, the first in three decades,” the Institute of International Finance warned this week.

Oil exporters in the Gulf and North Africa are projected to see growth levels drop to 0.8%, IIF said, based on an average price per barrel of $40. At the time of publication on Monday, crude was hovering at cents above $20 per barrel.

Petro-titans like Saudi Arabia, which have shifted major resources toward sovereign wealth funds in recent years, are expected to recall funds back home as their collective surplus of $65 billion is flipped inside out to a deficit of the same amount or more.

These sovereign wealth funds could shed up to $75 billion in stocks in the coming period, Reuters on Sunday quoted JPMorgan’s Nikolaos Panigirtzoglou as saying.

Saudi Arabia’s Public Investment Fund currently holds significant shares in everything from ride-hailing app Uber to Japan’s SoftBank.

Such funds have likely already offloaded as much as $150 billion-worth of stock in the month of March, said Panigirtzoglou.

How did we get here?

Saudi Arabia earlier this month launched an oil price war, flooding the market with crude in a game of chicken against Russia after the latter refused to collaborate on production cuts.

Moscow, which desired lower prices to compete with US shale, did not blink.

The result has been, Bloomberg reports, a “cascade” of oil surplus, with some landlocked producers literally paying buyers to relieve them of supplies they cannot store.

From Saudi Arabia to Algeria, MENA exporters are expected to see hydrocarbon earnings fall by nearly $200 billion this year, according to the Institute of International Finance report, resulting in a loss of more than 10% of GDP in this sector alone.

As the price war was launched, the novel coronavirus began spreading through the Gulf, shattering hopes of diversifying toward tourism in the near future.

Saudi Arabia, with approximately 1,300 confirmed cases as of Monday, has shuttered the gates of Mecca over fears it could become the new virus epicenter after Iran.

The religious pilgrimage to Islam’s holiest sites, mandatory for every Muslim, nets Saudi Arabia billions of dollars each year.

Knock-on effect

The financial troubles in the Gulf do not stop at the Persian Gulf, but are slated to have a painful knock-on effect across the Middle East region.

Young people from Lebanon, Jordan, and Egypt – with its population of 100 million, have for decades turned to the Gulf Arab states for jobs after graduation, doing everything from running restaurants in Riyadh to working in banks in Dubai.

Such positions have become even more crucial in a time of heightened visa restrictions in the United States and Europe.

A recession in the Gulf, thus spells an even worse outlook for already struggling economies in the Levant, which often look to the oil producers for help during hard times.

“A global recession will lead to a reduction in trade, foreign direct investment, tourism flows, and remittances to Egypt, Jordan, Morocco, and Lebanon,” IIF said.

Egypt, the report notes, is expected to see a “significant drop” in critical Suez Canal transit revenues, as global trade suffers.

The Egyptian government earlier this month revoked the press credentials of Guardian correspondent Ruth Michaelson after she reported on a researcher’s findings that Egypt was seeing a higher number of Covid-19 cases than reported.

UAE best-positioned in GCC to absorb oil shock

UAE best-positioned in GCC to absorb oil shock

Following the recent oil price collapse, risks of a political and financial storm for MENA producers can easily be imagined but here is Waheed Abbas, Dubai, March 18, 2020, with his UAE best-positioned in GCC to absorb oil shock.


Nation will be able to finance current account deficit for 35 years even with prices this low


UAE best-positioned in GCC to absorb oil shock
Oil prices have plummeted over the last few weeks, with Brent dropping 45 per cent in the past month.
(Reuters file)

The UAE is best-positioned among GCC economies to weather the decline in oil prices as it can finance its current account deficit longer than any of its regional peers, says a new report.

According to Capital Economics, the UAE can finance its current account deficit for 35 years if oil prices stay at $25 a barrel. Kuwait comes second followed by Qatar, Saudi Arabia, Bahrain and Oman.

“In the four largest Gulf economies – Saudi Arabia, the UAE, Kuwait and Qatar – current account deficits could be financed through a drawdown of large foreign exchange savings for a considerable amount of time. Saudi Arabia could do so for around a decade and the other three countries for even longer,” said Jason Tuvey, senior emerging markets economist at

Capital Economics. The report said the UAE still runs a current account surplus at $30 a barrel.

Brent crude was trading down $3.37, or 12 per cent, at $25.35 a barrel by 1720GMT after dropping as low as $25.23, its weakest since 2003. US crude was down $5.19, or 19 per cent, at $21.76. The session low was the lowest since March 2002.

Data showed that UAE-based sovereign wealth funds held over $1.21 trillion worth of assets in August 2019 compared to $825.76 billion by Saudi Arabia, $592 billion by Kuwait, $320 billion by Qatar and $22.14 billion by Kuwait.

Oil prices have plummeted over the last few weeks, firstly due to coronavirus and then the collapse of Opec+ talks on production cuts. Brent has dropped 45 per cent in the past month from $57.60 a barrel on February 17 to $31.60 on March 17.

Tuvey noted that large foreign exchange savings provide substantial buffers and the likes of Bahrain and Oman, which are most vulnerable to a period of low oil prices, and can probably rely on financial support from their neighbours to avert devaluations.

He said dollar pegs in Bahrain and Oman are more vulnerable, with foreign exchange savings only able to cover current account shortfalls for a couple of years at most. Bahrain secured a $10 billion financing package from its neighbours in mid-2018.

In recent days, GCC governments have stepped up fiscal support in order to mitigate the economic hit from efforts to contain the virus. “If oil prices stay low even after the virus fears have subsided, austerity will come on to the agenda and this means that an eventual recovery in non-oil sectors will be slow-going,” he said.

Khatija Haque, head of Mena research at Emirates NBD, has said that the UAE posted a budget surplus of Dh37 billion ($10 billion) in 2019 and is well-positioned to withstand lower oil prices in 2020.

“If we strip out volatile oil revenues, we estimate the UAE’s non-oil budget deficit narrowed to just under 20 per cent of non-oil GDP, down from 27 per cent of non-oil GDP in 2015, and pointing to a tightening of fiscal policy in recent years,” Haque said.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the sharp fall in oil prices and the outlook for a price war adds significant downside risks to the economic outlooks of GCC countries.

“We estimate that all GCC countries will realise a significant fiscal deficit at the current oil price of $37 per barrel, with Oman and Saudi Arabia seeing particularly significant shortfalls relative to GDP. A weaker oil revenue backdrop will require a meaningful pull-back in government spending, as was the case in 2015 and 2016, to limit the size of the fiscal deficit,” Malik said.

She sees a forecasted increase in output from Saudi and Russia and the changing dynamics of oil market fundamentals will likely bolster global oil stocks significantly in 2020. A number of oil-importing countries are also likely to accumulate inventories at the current low price levels, which in turn would lower oil demand during second-half of 2020.

Furthermore, the outlook for inventories beyond 2020 will depend on global demand and coronavirus-related developments in the coming months, she added.

Edward Bell, commodity analyst at Emirates NBD Research, has said that dust has not entirely settled yet caused by travel restrictions and lockdowns due to coronavirus.

– waheedabbas@khaleejtimes.com

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