Holland Gulf Chamber of Commerce » economie

Diversification to fuel rapid growth in GCC

jochemgeheniau — Tue, 08 Oct 2013 12:20:57 +0000

DUBAI: According to EY’s most recent Rapid-Growth Markets (RGMs) Forecast, the GCC can expect to see robust economic growth over the medium term and successful diversification of its local economies. Qatar’s economy is expected to grow by six percent, the UAE by 3.9 percent and Saudi Arabia by 4.3 percent in the medium-term.

Bassam Hage, Mena Markets Leader, EY, said: “In the key Middle Eastern RGMs, a young population is helping to foster entrepreneurship and the growth of the non-oil sector is buoyant, protecting these economies from slower global oil demand. The economies in the GCC in particular are growing at a fast rate and over the medium-term, the further development of international trade flows and the expanding middle class are expected to fuel future growth. Rising FDI flows are helping to transform trade opportunities across Turkey, the Middle East and Africa, with particular expansion in financial services.”

GDP in the Mena region is expected to grow by three percent in 2013, down from 3.7 percent in 2012. This decrease can be partly attributed to lower commodity prices and reduced demand for Middle East exports. The current political situation in Egypt is also continuing to impact economic activity across the region. Egypt’s GDP is projected to rise by 1.7 percent in 2013 and two percent in 2014. More significant GDP growth is dependent on Egypt’s political stability and consequent economic recovery.

The situation is very different in the GCC, particularly in the UAE, Saudi Arabia and Qatar.

Qatar continues to demonstrate robust growth. The economy’s focus has been on diversification in non-oil sectors such as manufacturing, construction, transport, communications, trade, hotels and government services, which are projected to increase by nearly 10 percent annually. The Qatari government has plans for massive infrastructural development, with 2013-2014 budgets showing an 18 percent increase in spending. These include the construction of the Hamad International Airport and a $36bn rail system in preparation of hosting the FIFA World Cup in 2020 and a rapidly expanding population.

Growth in the United Arab Emirates is predicted to reach 4.1 percent in 2015, up from 3.3 percent in 2012. This increase will be driven primarily by the recovery of key sectors, including financial services and construction. The UAE has focused on diversifying its economy and concentrating on the non-oil sectors, with significant infrastructure projects planned in both Dubai and Abu Dhabi. Moreover, fiscal policy will remain accommodative in both Dubai and Abu Dhabi, with several infrastructure projects in the pipeline.

GDP growth in Saudi Arabia is projected at 4.3 percent in 2013 and 4.6 percent in 2014. These figures represent a slowdown from 6.8 percent in 2012, which can be attributed to reduced oil production, down by 3.5 percent in 2013. In contrast to developments in the oil sector, non-oil growth will remain robust in the next few years. Consumer spending will grow strongly, buoyed by fast growth in retail lending and a falling unemployment rate, particularly for males. Meanwhile, fiscal policy will remain supportive, with government spending forecast to rise by an average of 7.4 percent per annum across 2014-16.

Kingdom becoming key champion of free trade and investment

jochemgeheniau — Fri, 27 Sep 2013 11:48:42 +0000

Saudi Arabia’s inclusion in the G20 reflects its growing stature as a leading global hydrocarbons producer as well as a heavyweight in the strategically important Middle East-North Africa economy.
The dual underpinnings of the Kingdom’s stature are likely to remain in place for a long time.
At the same time, rapid population growth and massive focused investments in economic diversification will further boost the size and significance of the Saudi economy.
Saudi Arabia is a highly open economy given its dependence on oil exports and a wide range of imports. It is therefore a key advocate of free trade and investment in a globalized world.
Talking about the Saudi role in G20, Jarmo T. Kotilaine, a regional analyst, said: “Saudi Arabia can raise issues of importance for the Middle East region. It will continue to play an important role in supplying and stabilizing the global oil markets.”
He said: “Saudi Arabia is heavily integrated in global trade due to its oil exports and heavy reliance on imports. This will make it a key champion of free trade and investment. Its economic resources allow Saudi Arabia to play a role in anti-cyclical stabilization as happened in the post-Lehman Brothers days.”
Most G20 members saw growth pick up momentum in the first half of this year. Kotilaine said: “The situation in Saudi Arabia has been somewhat different due to oil output cuts in the spring. This meant that the oil sector made a negative contribution to growth in the first half of the year. However, the nonoil economy has remained robust throughout at around 4.5 percent.”
Kotilaine said Saudi Arabia is somewhat unusual because of the heavy importance of the oil sector. Also, in population terms, it is a relatively small G20 country, only ahead of Australia.
Saudi Arabia is one of the best performing rapid-growth economies in the G20 Entrepreneurship Barometer 2013, thanks to laudable efforts to reform its overall business environment in recent years.
However, the favorable overall performance masks significant variation across some of the different entrepreneurship pillars.
The country’s strongest performance is within tax and regulation. There’s no doubt that Saudi Arabia provides businesses with an accommodating and streamlined tax regime.
This has been a major selling point in recent years. A number of related schemes have been set up to further help support the growth of new small businesses.
Nevertheless, other aspects of the business environment have made it difficult for a vibrant innovation-led small business sector to emerge. Saudi Arabia’s oil-focused industry has influenced how its economy has evolved. Almost half of GDP is accounted for by oil, which has reduced the impetus to push for high productivity in the nonoil economy.
The government is now working to diversify away from oil.
This will be a gradual process, but in time it should provide the underpinnings for a strengthened culture of entrepreneurship.
After a significantly strong growth in 2012 as a result of high government and consumer spending and pickup in oil output, Saudi Arabia’s GDP is expected to be 4.4 percent in 2013 due to a decline in oil output.
“The nonoil sector is forecasted to grow at a strong rate, supported by buoyant private nonoil activity, high oil revenues and corollary state spending as well as strong consumer spending growth,” Said A. Al Shaikh, group chief economist at the National Commercial Bank, commented.
He said the government is continuing to invest in the infrastructure of the economy as well as education and health care.
The International Monetary Fund (IMF) confirmed that the Kingdom has been one of the best performing G20 economies in recent years and has supported the global economy through its stabilizing role in the global oil market.
The IMF also pointed out the positive outlook of the Saudi economy which grew by 5.1 percent in 2013, benefiting from high oil prices and output, strong private sector growth, and government spending, according to a statement issued by the IMF executive board after it concluded 2013 Article IV Consultation with Saudi Arabia.
Credit growth has remained strong and the banking system is well-capitalized and profitable, with (Basle III Capital Standards) implemented in January 2013. Following an expansionary fiscal stance in 2011, government expenditure growth slowed in 2012 and the nonoil deficit began to narrow.
Consistent with the exchange rate peg, monetary policy settings have remained unchanged.
Inflation has risen over the past year to 3.8 percent in May 2013, driven by higher food prices and housing costs. High oil prices and production led to large fiscal and current account surpluses, and international reserves rose further. Looking ahead, growth is projected to slow down to 4 percent in 2013. Private sector growth is expected to be strong, but oil production is likely to be below 2012 levels while government spending growth may slow.
Inflation is expected to ease toward year-end in line with declining international food prices. With oil prices and production expected to be lower, fiscal and external surpluses, while remaining large, are projected to narrow this year.
Fahad Alturki, head of research, Jadwa Investment, said: “Very high government spending remains the main stimulus to the real economy. Also, we expect oil revenues to remain sufficiently high to maintain and support business and investor confidence.”
While recent push to raise Saudi employment in the private sector will also contribute to higher disposable income leading to demand-pull type of inflation, it is also likely to result in cost-push inflation, though there is little evidence it has done so yet, he said.
“The expected revision to Nitaqat (Saudization initiative) to take into account wages for Saudi nationals working in the private sector will also contribute to the upside risk to domestic prices,” Alturki added.

MENA needs USD145.7bn investment in power generation amid demand

jochemgeheniau — Tue, 20 Aug 2013 07:57:25 +0000

JEDDAH – Strong economic and demographic growth associated with rapid urbanization has led to an increase in energy demand to meet rising electricity and desalinated water needs in the Middle East and North Africa (MENA) region, the International Renewable Energy Agency (IRENA) and Renewable Energy Policy Network for the 21st Century (REN21) said in their joint report recently.

The report estimates that investments worth $145.7 billion will be needed for power generation from 2013.
Of which, investments worth $63.1 billion will be in the GCC, $21.4 billion in Iran and approximately $53 billion in the combined other countries of the region.
Global demand for renewable energy continued to rise during 2011 and 2012, supplying an estimated 19 percent of global final energy consumption in 2011 (the latest year for which data are available), with a little less than half from traditional biomass.
Useful heat energy from modern renewable sources accounted for an estimated 4.1 percent of total final energy use; hydropower made up about 3.7 percent; and an estimated 1.9 percent was provided by power from wind, solar, geothermal, and biomass, and by biofuels.
Total renewable power capacity worldwide exceeded 1,470 GW in 2012, up about 8.5 percent from 2011. Hydropower rose 3 percent to an estimated 990 GW, while other renewables grew 21.5 percent to exceed 480 GW. Globally, wind power accounted for about
39 percent of renewable power capacity added in 2012, followed by hydropower and solar PV, each accounting for approximately 26 percent.
By the end of 2012, global bio-power capacity was approaching 83 GW, up 12 percent over 2011, with notable increases in some of the BRICS countries.37 Around 350 TWh of electricity was generated worldwide in 2012, a 5 percent increase over the previous year.
Averaging national bio-power generation outputs over
the period 2010-12, the United States had a substantial lead, with Germany second, followed closely by Brazil and China, both of which are gaining ground rapidly.
The main types of commercial bio-power systems are medium- to large-scale direct-fired (similar to most coal- and gas-fired power plants), co-fired, gasifiers, and smaller-scale, modular systems. Together, they produce around 1.4 percent of the world’s electricity generation (compared with coal at 41 percent).
Almost 90 percent of biopower is generated with solid biomass fuels.
Landfill gas, biogas, synthesis gas (also known as syngas), and liquid biofuels are also commonly used for bio-power generation and make up the remaining 10 percent.
With the regional renewable energy sector also continuing to accelerate, governments and experts will gather to debate industry developments, strategy and innovation at the second edition of the Power + Water Leaders Forum in Abu Dhabi, to be held on Sept. 23 at Abu Dhabi National Exhibition Centre (ADNEC).
The dedicated conference runs alongside the Power + Water Middle East exhibition, which takes place from 23-25 September, and will provide an ideal platform for experts to discuss sustainable best practices and innovative solutions across two of the region’s bourgeoning sectors.
A notable line-up of speakers will feature at the one-day forum, including Engineer Khaldon Khashman, Secretary General, Arab Countries Water Utilities Association (ACWUA), and Robin Mills, Head of Consulting at Manaar Energy Consulting.
Experts from the Saudi Electricity Company, Abu Dhabi National Energy Company (TAQA), Oman Authority for Electricity Regulation and Regulatory Supervision Bureau will be among the first group of panelists, in the morning of the one-day conference to discuss best practice to improve efficiency in power and water programs.
They will be joined later by Dr Michael Kraemer, Senior Associate at Taylor Wessing, Board Member and Legal Counsel for the Emirates Solar Industry Association, who will deliver a presentation about renewable energy, underlining clear policies and standards to drive investments into solar power projects.

Also speaking will be Dr Said Al Sheikh, Senior Vice President and Group chief economist at the National Commercial Bank, who will spotlight Saudi Arabia’s role as a leader and pioneer in regional renewable energy projects, highlighting new opportunities for the private sector.
Commenting on the rise of MENA renewable energy sector, Anita Mathews, Director of Informa Energy Group, organizers of Power + Water Middle East, said: “The development of the region’s renewable energy sector has seen a sharp interest from investors with regional investments set at $2.9 billion in 2012.”
“One of the key themes of the Power + Water Leaders Forum is renewable energy, and the growth of the sector in the MENA region is likely to continue over the next two decades, with over 100 projects currently under development.”
Held in strategic partnership with the Abu Dhabi Water & Electricity Authority (ADWEA), Power + Water Middle East brings together developers, manufacturers, buyers and service providers from a range of sectors in power and water to meet, discuss and invest in the current products and technologies in the related industries.
The exhibition has so far attracted more than 100 exhibitors from 25 countries wishing to network and offer solutions to regional power generation, water and nuclear energy industries.
Power + Water Middle East is run in partnership with Abu Dhabi Water & Electricity Authority (ADWEA) and is supported by the Society of Engineers – UAE and Confederation of Indian Industry (CII), who will be organizing a government supported national pavilion at the event.