Archive for August, 2009

The IMF issued a very positive report on Saudi Arabia last week, especially in light of the recency of the global financial crisis and ongoing global economic uncertainties. All systems are a go in the Kingdom, even as lower oil production is expected to pull down GDP to -1% this year. More importantly, the financial sector is “solid” and non-oil GDP growth is forecast at 3.3%, a solid figure in its own right.

clipped from www.google.com Saudi economy, banking system solid: IMF RIYADH — Saudi Arabia’s economy remains solid and its banks have weathered the global crisis, the IMF said in a report on Tuesday which also commended the world’s leading oil exporter for helping stabilise oil prices.”The outlook remains broadly positive” despite a projected one percent contraction in GDP this year due to lower oil production, the International Monetary Fund executive board said in the report. It noted that non-oil GDP, which points to the ability of the economy to create jobs, is expected to grow 3.3 percent this year on the back of a massive government capital spending programme. The IMF also said the country’s banking system remains on firm ground. “The banking system has weathered the global crisis. It remains profitable and well-capitalised with low non-performing loans.”

Although the value of the deal was not disclosed, it appears the acquisition of Maktoob is a timely one for Yahoo!, as it positions itself to grow its emerging markets segment fueled now by one of the world’s youngest, most dynamic, and highest-growth regions. A surge in internet usage in the Middle East is driving annual growth in on-line advertising of 25-50%, according to Yahoo’s Sr. VP of Emerging Markets.

clipped from online.wsj.com Yahoo Buys Maktoob Arabic Portal DUBAI (Zawya Dow Jones)–Yahoo Inc. (YHOO), said on Tuesday it agreed to buy Arabic online portal Maktoob.com as it seeks to add the Middle East to its expanding strategy for the fast-growing emerging markets. Yahoo has 44 million users a month in the North Africa and Middle East region, Nilsson said. Maktoob.com has over 16 million users, according to the company. Yahoo and rival Google, which already has Arabic internet services, are competing to tap the Arab World’s fast-growing population of over 320 million and high per capita gross domestic product, one of the highest in the world. “Saudi Arabia and Egypt offer tremendous size and growth opportunities that we will be looking at in addition to other countries in the Middle East,” Nilsson said.

In a recent blog post at the Council on Foreign Relations, economist Brad Sester and a counterpart at Roubini Global Economics made their best estimate of the size of sovereign wealth funds (SWFs). The financial crisis of 2008 put a dent in Gulf funds, but collectively they are still sizable, exceeding $700 billion (easily $1 trillion-plus when including Saudi Arabia’s conservatively managed reserves), and growing, albeit slower — ultimately contingent on the price of crude and domestic financing needs. See the table below (accessible by clicking the link at the end of the post to continue reading) and take note of the first two listings, both of the UAE and the total figure for the GCC (Gulf Cooperation Council), as well as the SAMA (Saudi Arabian Monetary Agency), although again the latter is said to be predominately invested in traditional reserves as opposed to riskier assets. Finally, see also a post from last summer by TradeFlow21′s Steven Towns, which briefly explains the importance of SWFs and takes a look at top funds’ assets per capita. Read the rest of this entry »

In the Wednesday (8/5) edition of RGE Monitor, the analysts at Roubini Global Economics (headed by Nouriel Roubini, aka Dr. Doom), suggested that there are in fact some regional and national bright spots despite a global oversupply of overwhelmingly uninspiring economic indicators. Since we at TradeFlow21 are primarily interested in accessing markets in the Middle East and North Africa, we’ll re-post a summary of what RGE had to say about the region:

Overall, countries in the Middle East and North Africa (MENA) region were relatively sheltered from the financial spillovers, but suffered from reduced demand. Expansionary fiscal policies throughout the region and effective – if belated in some cases – financial sector support offset the export and investment weakness. The GCC countries most reliant on foreign financing to fund credit expansion, such as the UAE, are suffering the sharpest effects. However, past savings provide a cushion. In the long-term the region’s growth outlook depends on the price and effective deployment of its hydrocarbon endowments.

Among the countries that RGE specifically mentioned in its regional summary include Egypt, Qatar, and Lebanon. Egypt seems to be managing quite well partially thanks to its counter-cyclical monetary and fiscal policies. Cylicality (pro-cylicality in particular) is something that was discussed as a feature in the July edition of our own Trade & Transactions. (See our About Us page for contact information if you’d like to subscribe). Meanwhile, Qatar is expected to be one of the fastest growing economies in the world, according to RGE. The Qatari government has made the right moves thus far to shore up the domestic banking and property sectors, while its sovereign wealth fund is eying outbound opportunities. Finally, Lebanon, one of the few positive exceptions among so-called frontier markets (along with Morocco and Tunisia) has had sustained success in attracting capital inflows. At the same time, stability has allowed for growth in real estate and tourism, says RGE.

Last week, the Financial Times reported that a UAE state-linked investment firm planned to acquire a 32 percent stake in Sir Richard Branson’s civilian space venture, Virgin Galactic.  Aabar investments will initially shell out $280 million, plus another $100 million for development of a satellite launch-capable spacecraft. Aabar will also build a science center and spaceport facilities in Abu Dhabi. The implications of this venture cannot be overstated. They are as vast as space itself. The Virgin-Aabar alliance is perhaps a harbinger of the future for a region where cash-rich nations, backed by solvent banks and sovereign funds, aggressively pursue the next generation of disruptive technologies derived from aeronautical research and exploration. The potential commercial as well as military (i.e. security) advantages of a successful space program could dramatically alter the geo-political landscape of the greater Middle East, creating dynamic economies where stakeholders also share in maintaining regional security.