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Allies, Investors, Protesters press for Change in Lebanon

Allies, Investors, Protesters press for Change in Lebanon

Lebanon pushed to the brink, faces reckoning over graft after allies, investors, protesters press for change in the country as per Jonathan Spicer, Tom Perry and Samia Nakhoul, Reuters News in this ECONOMY‘s article dated 21 October 2019.

Demonstrators hold Lebanese flags as they gather during a protest over deteriorating economic situation, in Beirut, Lebanon October 18, 2019.
Demonstrators hold Lebanese flags as they gather during a protest over deteriorating economic situation, in Beirut, Lebanon October 18, 2019. REUTERS/Mohamed Azakir

BEIRUT – Lebanon is closer to a financial crisis than at any time since at least the war-torn 1980s as allies, investors and this week nationwide protests pile pressure on the government to tackle a corrupt system and enact long-promised reforms.

Prime Minister Saad al-Hariri‘s government on Thursday hastily reversed a plan, announced hours earlier, to tax WhatsApp voice calls in the face of the biggest public protests in years, with people burning tyres and blocking roads.

The country – among the world’s most indebted and quickly running out of dollar reserves – urgently needs to convince regional allies and Western donors it is finally serious about tackling entrenched problems such as its unreliable and wasteful electricity sector.

Without a foreign funding boost, Lebanon risks a currency devaluation or even defaulting on debts within months, according to interviews with nearly 20 government officials, politicians, bankers and investors.

Foreign Minister Gebran Bassil said in a televised speech on Friday that he gave a paper at an economic crisis meeting in September saying Lebanon needed “an electric shock”.

“I also said that what little remains of the financial balance might not last us longer than the end of the year if we do not adopt the necessary policies,” he said, without describing what he meant by financial balance.

Beirut has repeatedly vowed to maintain the value of the dollar-pegged Lebanese pound and honour its debts on time.

But countries that in the past reliably financed bailouts have run out of patience with its mismanagement and graft, and they are using the deepening economic and social crisis to press for change, the sources told Reuters.

These include Arab Gulf states whose enthusiasm to help Lebanon has been undermined by the growing clout in Beirut of Tehran-backed Hezbollah, and what they see as a need to check Iran’s growing influence across the Middle East.

Western countries have also provided funds that allowed Lebanon to defy gravity for years. But for the first time, they have said no new money would flow until the government takes clear steps toward reforms it has long only promised.

Their hope is to see it move towards fixing a system that sectarian politicians have used to deploy state resources to their own advantage through patronage networks instead of building a functional state.

A crisis could stoke further unrest in a country hosting some 1 million refugees from neighbouring Syria, where a Turkish incursion in the northeast this month has opened a new front in an eight-year war.

“If the situation remains, and there are no radical reforms, a devaluation of the currency is inevitable,” said Toufic Gaspard, a former adviser to Lebanon’s finance ministry and former economist at its central bank and the International Monetary Fund.

“Since September a new era has begun,” he added. “The red flags are large and everywhere, especially with the central bank paying up to 13% to borrow dollars.”

The first reform on Beirut’s agenda is one of the most intractable: fixing chronic power outages that make private generators a costly necessity, a problem many see as the main symbol of corruption that has left services unreliable and infrastructure crumbling.

Hariri, in a televised speech to the nation, said he had been struggling to reform the electricity sector ever since taking office. After “meeting after meeting, committee after committee, proposal after proposal, I got at last to the final step and someone came and said ‘it doesn’t work’,” he said.

Presenting the difficulties of implementing reform more widely, Hariri said every committee required a minimum of nine ministers to keep everyone happy.

“A national unity government OK, we understand that. But committees of national unity The result is that nothing works.”

Underscoring the pressure from abroad, Pierre Duquesne, a French ambassador handling so-called CEDRE funding, is traveling to Lebanon next week to press the government on the use of offshore power barges, a banker familiar with the plan said.

Duquesne wants the barges included in the electricity overhaul plan, the person said, requesting anonymity.

Duquesne could not immediately be reached for comment.

The contents of the 2020 budget will be key to helping unlock some $11 billion conditionally pledged by international donors under last year’s CEDRE conference. But a cabinet meeting on the budget set for Friday was cancelled amid the protests.

‘TAX INTIFADA’

Hariri’s government, which includes nearly all of Lebanon’s main parties, had proposed a tax of 20 cents per day on calls via voice-over-internet protocol (VoIP) used by applications including WhatsApp, Facebook FB.O and FaceTime.

In a country fractured along sectarian lines, the protests’ unusually wide geographic reach may be a sign of deepening anger with politicians who have jointly led Lebanon into crisis.

Fires were smoldering in central Beirut, where streets were scattered with glass of several smashed shop-fronts. Tear gas was fired on some demonstrators.

The newspaper an-Nahar described it as “a tax intifada”, or uprising. Another daily, al-Akhbar, declared it “the WhatsApp revolution”.

“With this corrupt authority, our kids have no future,” said protestor Fadi Issa, 51. “We don’t just want a resignation, we want accountability. They should return all the money they stole. We want change.”

As confidence has faded and dollars have grown scarce, new cracks have emerged between Lebanon’s government and its private lenders, according to several of the bankers, investors and officials who spoke to Reuters.

After years of funding the government with the promise of ever higher rates of return, the banks – sensing the country is approaching collapse – are pressing for it to finally deliver reforms to win over donors.

Most said Lebanon would likely feel more economic and financial strain in the months ahead but avoid haircuts on deposits or a worst-case sovereign default.

Yet Beirut’s years of failure to deliver reforms and the new determination among its traditional donors to press for them has left even top officials, bankers and investors divided over whether a devaluation is in store for the Lebanese pound.

“You need a positive shock. But unfortunately the government thinks reforms can happen without touching the structure that benefits them,” said Nassib Ghobril, head of economic research and analysis at Byblos Bank.

Lebanon must promote reforms to increase capital inflows, he said.

“We can’t keep going to the Emirates and Saudis. We need to help ourselves in order for others to help us.”

CLOCK TICKING

This month, Moody’s put Lebanon’s Caa1 credit rating under review for a downgrade and estimated the central bank, which has stepped in to cover government debt payments, had only $6 billion-$10 billion in useable dollars left to maintain stability.

That compares with some $6.5 billion in debt maturing by the end of next year.

The central bank says its foreign assets stood at $38.1 billion as of Oct. 15.

An official told Reuters Lebanon has only $10 billion in real reserves. “It is a very dire situation that has five months to correct itself or there will be a collapse, around February,” he said.

Hariri’s government may have only a few months to deliver fiscal reforms to convince France, the World Bank and other parties to the CEDRE agreement to unlock $11 billion in conditional funding.

The head of regional investments for a large U.S. asset manager said Lebanese officials are privately saying a plan that addresses short- and long-term electricity shortages will be announced before year-end, after which the government will raise tariffs.

But critics say no concrete steps have been taken despite energy ministry statements that the plan is on track.

Hariri left Paris last month with no immediate cash commitment after visiting French President Emmanuel Macron. Likewise this month he left Abu Dhabi empty-handed after meeting Crown Prince Sheikh Mohammed bin Zayed al-Nahyan.

Lawmakers in Beirut struggled to explain what happened in Abu Dhabi after Hariri claimed the United Arab Emirates had promised investments following “positive” talks.

EYES ON HEZBOLLAH

Investors, bankers and economists say at least $10 billion is needed to renew confidence among the Lebanese diaspora whom for decades have underpinned the economy by maintaining accounts back home.

But so far this year, deposits have shrunk by about 0.4%.

The government has sought a smaller cushion from Sunni Muslim allies to buy some time. But to secure funding from the UAE or Saudi Arabia, Beirut would likely have to meet conditions meant to weaken Shi’ite Hezbollah’s hand in Lebanon’s government, said several sources.

Hezbollah, which faces U.S. sanctions, is seen to be gaining more control over state resources by naming the health minister in January after last year’s elections brought more of its allies into the legislature.

Some say Saudi Arabia, UAE and the United States are motivated to hold out on Beirut as part of their wider policy seeking to weaken Iran and its allies which have been fighting proxy wars with Gulf Arab states on several fronts.

“Their tolerance of Iran and Hezbollah has lowered significantly. The ‘Lebanese exception’ is gone,” said Sami Nader, Beirut-based director of the Levant Institute for Strategic Affairs.

“The balance has tilted and we are now at odds with our former friends because Hezbollah now has the upper hand politically.”

The former regional head at a major Western bank put it bluntly: “People have lost patience with the corruption in which a frozen Parliament with no authority is simply divvying up the pie among politicians.”

“But at the end of the day the Lebanese political class usually succeeds in convincing allies that they should not let the system collapse and bring civil war again,” he added.

WANING TRUST

Lebanon, straddling the Middle East’s main sectarian lines, was historically the region’s foreign-exchange hub into which deposits flowed, especially since 1997 when its currency was pegged to the dollar at 1,507.5 pounds.

But after a reckoning in August and September in which the cost of insuring Lebanon’s sovereign debt surged https://tmsnrt.rs/2MORZfM to a record high, things have changed.

Depositors, including the diaspora drawn by rates much higher than in Europe or the United States, are pulling funds in the face of Lebanon’s swelling twin deficits, inability to secure foreign funding, and unorthodox central bank efforts to attract dollar inflows.

Among Lebanon’s 6 million citizens, trust has worn thin.

Depositors can no longer easily withdraw dollars, and most ATMs no longer provide them, forcing people to turn to so-called parallel FX markets where $1 is worth more than the official peg.

“I am with the protesters,” said Walid al-Badawi, 43. “I have three children, I am a taxi driver, I work all day to get food for my kids and I can’t get it.”

Gaspard, the central bank’s former research head, said foreign exchange was easy even through Lebanon’s 15-year civil war. There was also always a balance of payments surplus – until 2011 when deficits began to grow, reaching $12 billion last year.

LOST RESOLVE AT BANKS

Three events precipitated the crisis of confidence that for years seemed inevitable: a series of central bank efforts since 2016 to keep growing deposits with rates of more than 11% on large deposits; a public sector pay hike last year that raised the budget deficit to more than 11% of GDP; low oil prices in recent years that have weakened Gulf allies.

In a report on Thursday, the IMF described Lebanon’s position as “very difficult,” adding “substantial new measures” are needed to protect it and reduce large deficits.

As dollars have dried up, banks have effectively stopped lending and can no longer make basic foreign-exchange transactions for clients, one banker said.

“The whole role of banks is to pour money into the central bank to finance the government and protect the currency,” he said. “Nothing is being done on the fiscal deficit because doing something will disrupt the systems of corruption.”

The resistance from banks has been subtle but telling given their central role in financing the government.

When Beirut proposed a $660 million reduction in debt service costs in its 2019 budget, banks never signed up to the idea. They have also been less enthusiastic about subscribing to Eurobonds including a planned $2-billion issuance later this month, officials said.

Without reform, “banks agree we can no longer support the public sector,” said Byblos Bank’s Ghobril.

(Reporting by Jonathan SpicerTom Perry and Samia Nakhoul; Additional reporting by Yara Abi Nader and Ellen Francis in Beirut and John Irish in Paris; Editing by Hugh Lawson) ((jonathan.spicer@reuters.com; Reuters Messaging: jonathan.spicer.thomsonreuters.com@reuters.net @jonathanspicer))

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Algeria’s Political deadlock and economic breakdown

Algeria’s Political deadlock and economic breakdown

The political impasse in which Algeria has been mired for more than seven months would result in a sharp economic slowdown in the short term. This Algeria’s Political deadlock and economic breakdown that the World Bank forecasters have reached is by any means comprehensive but could be read as some sort of alert.

By  Hakim Ould Mohamed in REPORTERS DZ of October 12, 2019.

The institution expects non-hydrocarbon sectors, as well as all oil and gas-related activity, to run through an air hole this year; which should have some unavoidable consequences on the country’s GDP growth. In effect, in similar way to other developing countries, it is expected to come down to 1.3% in 2019 from 1.5% the previous year.

Algeria's Political deadlock and economic breakdown

“Uncertainty policy is expected to lead to a slowdown in the non-hydrocarbon sector in 2019,” reads a World Bank report released last Thursday. The Bretton Woods institution has not failed to highlight the impact of the arrests of business leaders on investment morality grounds or lack of these, and more generally, on the economy. “Business leaders from various sectors were arrested in connection with corruption investigations, which has disrupted the economy due to sudden changes in the direction and supervision of these companies, as well as uncertainty over investment,” the same report said. Since the beginning of the crisis, a wave of arrests affected the business community, public institutions, banks and social bodies alike. This blocking situation had worsened over the weeks; appropriation sets did not meet, officials at the level of economic administration were careful not to take the slightest risk. That is to say how violent the shock wave was. The impact on the economy could be disastrous as the situation continues to worsen by the day. As such, the World Bank (WB) estimates that “the pre-election period also risks further delaying the fiscal consolidation process scheduled for 2019, increasing the budget deficit to 12.1% of GDP and increasing the risk of a more abrupt adjustment in the future.” For the WB, widening budget and current account deficits is almost inevitable. While the fiscal deficit would be unlikely to be reduced internally, “on the external front, the current account deficit is expected to widen to 8.1% of GDP, mainly due to a significantly larger trade deficit.”

 Investment is being impacted

 “As the course of political events is expected to have an impact on economic activity, it is also expected that more resources will be allocated to social measures, to the detriment of public investment spending,” the Bank predicts. The report, stating that “private sector activity and investment will be affected by political disruptions and an unfavourable business climate, as well as disruptions caused by delays in payment of workers in several industries.” This is the case, since the draft Finance Bill 2020 foresees a sharp decline in capital expenditure, to the tune of 20.1%, while operating expenses and social transfers are maintained as they are. WB experts are merely saying out loud what Algerian economists and operators are thinking, warning of a situation that could go along if solutions to the political impasse run out. “The delays at the end of the political impasse and political uncertainty could further damage the country’s economy, leading to increased imports and further dwindling foreign exchange reserves,” concludes the WB report. Moreover, macroeconomic indicators are unlikely to improve at any time under current political conditions.

 Economic growth to only 1.9% in 2020

 Moreover, against a background of falling capital spending and low morale among investors, the growth of the Algerian economy would be only 1.9% in the year 2020. A stagnation is due in particular to the “slow” growth of the hydrocarbons sector, combined with the contraction in economic activity, which has limited growth in non-hydrocarbon sectors, according to the WB’s economic monitoring report released on Thursday. “Growth in the hydrocarbon sector has been slow, with economic activity contracting by 6.5% and 7.7% in 2018 and the first quarter of 2019, respectively, partially off-sparing the effects of the slight increase in non-core growth 3.4% and 3.9% in 2018 and the first quarter of 2019, respectively,” the WB noted. The tiny increase in investment in the first half of the year (4.9%) was driven by public investment in construction, public works and hydraulics, as a result of the expansion of social housing programmes, the WB said. Furthermore, the institution believes that “the recent discovery of a new gas field suggests a rebound in gas production and exports, but only in the medium term, and if and only if the framework for investment in hydrocarbons lends it to it.” The World Bank is merely bringing water to the government’s mill, which has called the enactment of the new hydrocarbon law urgent.

Lebanon reforms on a sound path but must not stop

Lebanon reforms on a sound path but must not stop

Reuters BUSINESS NEWS in an article dated June 28, 2019, informs that the World Bank stated: Lebanon reforms on a sound path but must not stop.

BEIRUT (Reuters) – Lebanon has taken a sound path with reforms in its 2019 draft budget and power sector but it will have to keep going, World Bank MENA vice president Ferid Belhaj said on Friday in Beirut.

FILE PHOTO: Ferid Belhaj, World Bank vice-president for the Middle East and North Africa, speaks during an interview with Reuters at Africa 2018 Forum at the Red Sea resort of Sharm el-Sheikh, Egypt December 8, 2018. REUTERS/Amr Abdallah Dalsh

The bank and other donors helped arrange pledges of $11 billion in soft loans and aid at a Paris conference last year to build new infrastructure. But the money depends on the Lebanese government launching reforms it has put off for years and tackling its huge debt burden.

“In general … we are optimistic, but at the same time our optimism is cautious because of the economic situation in the region,” Belhaj was cited as saying in a statement from Lebanese Prime Minister Saad al-Hariri’s office after the two met.

Parliament is debating the 2019 draft budget approved by the cabinet last month, a critical test of Lebanon’s will to enact reforms. Leaders have warned of a financial crisis if there are no changes.

The budget aims to cut the deficit to 7.6% of gross domestic product from 11.5% last year. Lebanon has one of the world’s largest public debt burdens at 150% of GDP.

Hariri plans to use the funds from the Paris donor meeting for a 10-year capital investment program that would boost low growth. The country also has plans for about 250 projects which include transport, water and power sectors.

International Monetary Fund officials, who also met Hariri on Friday, urged Lebanon to speed up the process of implementing the projects and program, the premier’s office said.

“Lebanon is going down a sound path when it comes to the reforms at the level of the budget and electricity … but the reforms do not end. They are continuous,” Belhaj said.

The government approved an electricity plan in April that aims to boost generation capacity and bring down subsidies straining state finances.

Reporting by Ellen Francis; Editing by Catherine Evans and Raissa Kasolowsky


Our Standards: The Thomson Reuters Trust Principles.

Making sure there’s ‘No Lost Generation’ among Millennials

Because it is felt that “Young people are graduating with no clue on how to implement what they have learned,” the UNICEF is making sure there’s ‘No Lost Generation’ among millennials.

By Mariam Nabbout 2019-06-24

The Middle East is plagued with some of the highest unemployment rates among the up-and-coming generation. One reason behind this could be that most education systems in the region do not link what students learn with the knowledge they actually need in the future. 

However, it seems that’s about to change thanks to the efforts of individuals and organizations who are tirelessly working to bridge the gap between learning and earning. This specific issue is at the center of the region’s third annual “No Lost Generation Tech Summit,” which is set to be held in Jordan’s capital Amman on Tuesday and Wednesday. 

The two-day event is primarily organized by UNICEF’s regional office for the MENA region and NetHope – an NGO “eager to make a difference in this world through technological innovation.” It is also “supported by the steering committee for youth from the region, and representatives from the International Labor Organization, the International Rescue Committee, Mercy Corps, the Norwegian Refugee Council, UNESCO, UNHCR and World Vision.”

The summit focuses on presenting tech-enabled solutions attemped to link learning and earning among youth from vulnerable communities across the region. 

The event’s packed agenda is “almost entirely developed and managed by young people who have all pioneered ways to bridge the gap between young people’s schooling and employment.” (These juniors were selected by involved committees after applying for various roles.)

Speaking to StepFeed, a few of these bright young participants told us more about the ambitious initiative and what it means for youth across the Arab world. 

“What makes this summit special is its impact on youth”

Balqees Shahin Al Turk, a 22-year-old Jordanian, has been participating in youth engagement programs and events with UNICEF and other NGOs since 2016. When she learned about this year’s Tech Summit, she immediately applied for a leading role. 

“What makes this summit special is its impact on youth, since youth engagement is very high pre, during and post-summit,” Shahin explained.

There are 75 youngsters from across the MENA region working on this summit, she says. The fact that people her age are organizing such an event and have their voices heard among adults is a boost of self-confidence and energy to work harder.

“The rate of unemployment in the MENA region is about 30% although most of the MENA populations is composed of youth,” which Shahin finds disappointing. A main problem, according to her, is the gap between what young people learn and what real work environment requires. 

“Young people are graduating with no clue on how to implement what they have learned so its quite important to work on minimizing this gap first by figuring out that there is a problem and second by talking about it and trying to find solutions for this and that’s what the summit is about,” she explained. 

“I think the impact on adolescents and youth after the NLG Tech Summit will be wonderful”

For Syrian teens – and those a bit older – it’s not easy to cope with all that’s been lost. “This summit is very important for me as a young person because I have lost a lot of important things like education and my country Syria because of the war,” Saber Al-Khateeb, a 22-year-old Syrian and one of the representatives of youth at the NLG Tech Summit, said.

The summit will bring together “youth, private sector companies, development and humanitarian experts, academic institutions and donors to leverage technology and cross-sector collaboration to connect learning to earning for young people in the region, particularly those affected by the crises in Syria and Iraq,” he explained. 

Al-Khateeb remains hopeful when it comes to learning-to-earning solutions, as he believes proper implementation will lead to a decrease in unemployment rates. 

NLG’s young participants are here to inspire future generations

Speaking to StepFeed, 24-year-old Palestinian Shahenaz Monia, another young participant in the summit, said the gap between learning and earning should be reduced before unemployment rates skyrocket. 

“Never underestimate the power of any opportunities to get more experience,” as these, in her belief, will allow anyone to enhance and hone their skills.

The two-day event will be packed with people from different backgrounds, and with divergent experiences and success stories, which should be interesting and educational to young people.

“Passing through a hard and long way doesn’t mean you are wrong,” Monia said. “If you believe in something work hard to make it true. It’s okay to feel nervous, it only means you are stretching out of your comfort zone,” she continued. 

MENA debt boom leading to private sector growth

MENA debt boom leading to private sector growth

Mouayed Makhlouf says governments have become more receptive to private sector involvement in economies as debt levels have grown reports Zawya #financial services.

Zawya produced this article dated March 12, 2019, about how the MENA debt boom leading to private sector growth would afterall result in a more sustainable development model.

MENA debt boom provides a route for private sector growth: IFC chief

By Michael Fahy, ZAWYA

Governments in the Middle East are becoming more receptive to growing private sector involvement in their economies because public sector debt in many markets is ballooning, an official from the World Bank’s International Finance Corporation (IFC) has said.

Speaking on an investors’ panel debate at the Global Financial Forum in Dubai on Monday, the IFC’s Middle East and North Africa (MENA) director, Mouayed Makhlouf, said: “For the first time, because of the massive rise in public debt across the region, we see a difference. Our narrative with these governments has changed.  Now, they are coming to us and they are saying ‘can you help us with the reforms?'”

General view of the world’s tallest building Burj Khalifa in Dubai, United Arab Emirates, December 22, 2018. Image for illustrative purposes. REUTERS/Hamad I Mohammed

Makhlouf said that the MENA region needs to create 300 million new jobs – “basically, double the population” by 2050 due to the burgeoning youth population in the region, and that Egypt alone needs to create around 700,000 jobs per year, although he said it is MENA’s fastest growing economy currently, with GDP growth of 5.3 percent, compared with a regional average of around 2-3 percent.

“The social contract in MENA is as such where most of the services (are) provided by the public sector.  But what you have ended up with… is a huge public debt that has been rising for the past few years,” he said, adding that debt-to-GDP ratios stand at around 96 percent in Egypt, 97-98 percent in Jordan and 150 percent in Lebanon.

“For us, the main thing we need to find in this region are… growth and jobs.  And I really believe both of these things can only come through a larger private sector participation,” Makhlouf said.

In a separate panel on the outlook for the region’s banking sector, JP Morgan‘s Asif Raza said that the decline in oil prices that began in 2014 had created opportunities for international banks to advise governments that are looking to diversify on how to embark on “monetisation and privatisation” of assets.

Naveed Kamal, MENA head of corporate banking at Citi, said that governments had run up deficits as oil revenues fell, and had financed these through “various instruments where banks have been involved”.

“And we expect to see that continue over the next 2-3 years.”

Although total GCC fixed income issuance declined by 16 percent year-on-year to $145.3 billion in 2018 as oil prices rallied, according to Kamco Research, JP Morgan’s Raza said the current pipeline is “huge”.

A faster flow

Raza said that at this stage last year, “over $15.4 billion worth of issuance was done in the MENA region – this year, it’s $28 billion”.

He added that in 2018, “the loan market was (at an) all-time high in this region”.  Figures published earlier this month from Acuris showed that syndicated loan activity in the MENA region last year outstripped bond issuance – with $133 billion of syndicated loans issued, compared to $89.5 billion in bonds.

Raza said that at the top end of the corporate banking market, “there’s lots of activity still happening”.

“There’s still quite a decent pipeline of financing and refinancing,” he said.

However, Citi’s Kamal argued that the market has been much tougher for SMEs in recent years.

“I believe that there is room for improvement for all countries in the region as far as creating the right balance for SMEs (is concerned),” he said.

He said that “time and again” in tougher economic times large corporates, government-related entities and even government departments have delayed payments to SMEs, which causes cashflow problems and affects their ability to repay creditors.

Quick exits

“And some of the legal framework that surrounds the corporate sector – we all know about bounced cheques and the consequences of that.  In summary, what happens is SMEs can’t stay back in a number of cases (to) fight through these cycles.  So, we see skips, people leave and that does not leave a very strong impact as far as consumer confidence is concerned.”

Yet funding shortages for private sector firms can also create opportunities – not least for the region’s private equity sector, according to Karim El-Solh.

Speaking on the investment panel, El-Solh said that his firm’s pipeline “has increased dramatically as a result of a lack of availability of funding for businesses elsewhere.

“The IPO market is not open; the bank liquidity has dried up so for us it’s an opportunity to come and be a provider of growth capital.  We are seeing more companies, better quality companies, we’re acquiring controlling stakes at lower valuations,” he said.

Makhlouf said more opportunities need to be created for the private sector, stating that levels of private sector involvement in the economy in the region lag behind other emerging markets.

“MENA region is only one-fifth in terms of private sector participation compared to Latin America,” he said.

© ZAWYA 2019

More Middle East billionaires during 2018-2023

More Middle East billionaires during 2018-2023

11 per cent growth will be seen in Middle East billionaires during 2018-2023.

Why the number of millionaires is set to rise in UAE

By Waheed Abbas / Dubai

March 7, 2019

The number of millionaires in Dubai and Abu Dhabi will increase from 440 last year to 511 in 2023 and from 192 to 223, respectively.

The number of millionaires in the UAE increased last year and this trend will continue over the next five years as growing investment opportunities will generate more millionaires locally as well as political and economic stability will also woo rich individuals and families from foreign countries, say researchers and analysts.

According to the latest report released by global consultancy Knight Frank, the number of millionaires, or high net worth individuals, in the UAE expanded 3 per cent to 53,798 last year from 52,344 in the previous year. The numbers are projected to grow 14 per cent to 61,292 by 2023. Similarly, the number of ultra-high net worth individuals (UHNWIs) – who own more than $30-million wealth – in the UAE grew from 672 in 2017 to 693 last year and will reach 799 by 2023.

The study predicted that the number of UHNWIs in Dubai and Abu Dhabi will increase from 440 last year to 511 in 2023 and from 192 to 223, respectively.

Issam Kassabieh, senior financial analyst at Menacorp, believes that the ultra-rich will continue to flock to the UAE in coming years.

“At the moment, Dubai is attractive for foreigners. Now, it is a place not just for good investments returns but also to stay for long term. Government is focusing on key sector so that the cash comes in and stays in the country through different measures such as longer visas and ease of doing business initiatives,” Kassabieh said.

“The UAE is an attractive place for foreign investors – financial markets are at an early stage and have a long way to go. Real estate was the first to anchor the economy and that brought foreign investors here. Going forward, the focus will be on more diverse sectors. Also, the ease of doing business chart shows the UAE is first in the region and also competitive globally,” he added.

“Dubai offers a full package – good quality of life, healthcare, education and investment opportunities. All these complement each other and attracts high net worth individuals to this country. In addition to that, diversity of population plays a big role in this,” said Kassabieh.

Knight Frank data revealed that Dubai and Abu Dhabi will witness higher growth in UNHWIs as compared to Manama and Riyadh.

Raju Menon, chairman and managing partner, Kreston Menon, said the number of millionaires will undoubtedly continue growing in the UAE in coming years.

“Whatever the business challenges or revenue decline the companies are facing today, it is temporary. We need to look at long-term of 5 to 10 years. Millionaires should grow here in the UAE because money is available here so the investment avenues will be opened. The UAE’s economy offer big opportunities,” he said.

Menon believes that most of the new millionaires will be homegrown mainly in retail, trading, healthcare, real estate, services and shipping sectors. 

Iyad Abu Hweij, Managing Director of Allied Investment Partners, said the UAE, home to over 9.4 million residents, remains an attractive destination for HNWIs in the region.

With investor and business friendly policies, world class infrastructure and a stable outlook, HNWIs are expected to continue to grow in numbers in the country over the next coming years. Such policies and initiatives have played an important role in bolstering the confidence of investors and attracting Foreign Direct Investments in the UAE, which in turn creates jobs for a highly talented workforce,”  Abu Hweij said

Additionally, the UAE, viewed as a regional startup hub and a digital leader, continues to boast more startups than any other country in the region. Naturally, such startups attract more venture capital and private equity investments locally than anywhere else regionally, he added.

“The UAE continues to provide solid investment opportunities for investors locally and globally, which, along with a rapidly developing financial services sector, has played a catalyst like role for the growth of HNWIs in the country.”

Regional performance

The number of millionaires in the Middle East with wealth below $30 million grew three per cent from 446,384 in 2017 to 459,937 last year. The number is projected to grow 18 per cent to 541,311 by 2023. Similarly, the ultra-high net worth individuals with more than $30m assets grew four per cent year-on-year to 8,301 last year. It’s estimated that the number will grow 20 per cent over the next five years to 9,997.

According to Knight Frank forecast, the number of billionaires in the region will grow from 89 last year to 99 by 2023.

Globally, the number of millionaires with less than $30 million assets are projected to expand from 19.6 million in 2018 to 23.4 million by 2023, an increase of 19 per cent. While ultra rich will increase 22 per cent during 2018 to 2023 from 198,342 to 241,053.

waheedabbas@khaleejtimes.com