Saudi Arabia Establishes ‘Fund of Funds’ for Small Enterprises

Saudi Arabia Establishes ‘Fund of Funds’ for Small Enterprises

Riyadh- The Public Investment Fund (PIF) has announced the establishment of the Fund of Funds, a new investment vehicle designed to provide small and medium-sized enterprises (SMEs) with access to capital by investing in venture capital and private equity funds.

The Fund of Funds will also support the creation of a thriving private equity and venture capital ecosystem in the Kingdom.

The Fund will empower the private sector and increase its contribution to national GDP by encouraging venture capital and private equity investments. With a capital of SAR4 billion, the Fund is aligned with the Saudi Vision 2030 objective of facilitating private sector growth and supporting the development of SMEs in creating job opportunities, promoting innovation, and increasing exports as per the commercial by-laws, to support and encourage investment in SMEs.

The Fund of Funds’ vital role will be reflected in its contributions to national GDP, estimated to be around SAR400 million by the end of 2020, and the provision of more than 2,600 jobs. Its contribution to GDP is expected to increase to SAR8.6 billion by the end of 2027, creating around 58,000 jobs.

The PIF is expected to be one of the most capable global funds to diversify investment tools, and therefore achieve profits and contribute to attaining financial resources to the country’s economy.

The Saudi PIF was established in 1971 to provide financing support for projects of strategic significance to the national economy before it expanded its role to include other aspects.

Fitch Downgrades Tunisia to ‘B+’

The Fitch Ratings logo is seen at their offices at Canary Wharf financial district in London

Cairo- Fitch Ratings has downgraded Tunisia’s long-term foreign and local currency issuer default ratings to ‘B+’ from ‘BB-’. The outlook is stable.

The agency explained this by “the collapse of tourism in the context of elevated security risks, slowdown in investment amid frequent government changes and episodes of strikes and social unrest that have weakened economic growth performance and prospects.”

Fitch estimates GDP growth for 2016 at 1.2%, compared with a pre-revolution long-term average of 4.5%, and versus medians of 4.0% for ‘B’ peers. Inflows from tourism continued to slow, though at a moderating pace (down 8% yoy in September, versus a 38% decline in H1 2016).

Fitch projects GDP growth of 2.3% in 2017 and 2.5% in 2018

Fitch’s estimate for the 2016 general government deficit of 6.4% of GDP and that the government will need to borrow the equivalent of 7% of GDP externally to meet its amortization and budget needs in 2017.

GCC Food Services Market to Reach USD28 billion by 2020

GCC

Dammam – Al Masah Capital Limited has prepared an economic report that expects an annual growth of 6.8% in the food services market in GCC countries, up to USD28 billion by 2020.

UAE has been ranked among the greatest 20 countries in the food service markets around the world in 2015 – it achieved a growth of 56.3% between 2010 and 2015. Fast food or Quick Service Restaurants (QSR) remained the largest segment, accounting for 58.2 of the GCC food services market in 2015.

Fast food segment is the largest in the market accounting for a total of USD20.1 billion in the end of 2016 — This segment is dominated by international brands, largely due to their affordability, the sheer volume of outlets across the region and heavy advertisement, according to the report.

Major industry trends like online ordering, casual dining, food trucks, kiosks and changing consumer palates are further increasing demand for fast food options in the region. On the other hand, casual dining registered mass appeal and interest in western-styled coffee culture, especially among youths.

Despite growing population, the continued GDP growth in the region has led to higher personal income levels, supporting food-service providers. Over the last decade, the GCC’s per capita income grew 3.4%, highlighting the region’s rising affluence levels.

Most of the GCC nations have also been developing their tourism industry as part of their economic diversification strategy, which has helped drive demand for the food-service sector, particularly in Saudi Arabia and the UAE, the report stated.

Food services sector has surfaced as one of the most promising sectors in the GCC and has been rapidly growing over the past decade as a result of the flourishing economy, booming tourism, favorable demographics, rising urbanization and a sturdy rise in per capita income.

The sector appeals to consumers across a broad income and cultural spectrum, including locals, expatriates and visiting tourists from all over the world.

Report: World’s Eight Richest as Wealthy as Half Humanity

London- Just eight individuals, all men, own as much wealth as the poorest half of the world’s population, Oxfam said on Monday in a report calling for action to curtail rewards for those at the top.

As decision makers and many of the super-rich gather for this week’s World Economic Forum (WEF) annual meeting in Davos, the charity’s report suggests the wealth gap is wider than ever, with new data for China and India indicating that the poorest half of the world owns less than previously estimated.

Oxfam, which described the gap as “obscene”, said if the new data had been available before, it would have shown that in 2016 nine people owned the same as the 3.6 billion who make up the poorest half of humanity, rather than 62 estimated at the time.

In 2010, by comparison, it took the combined assets of the 43 richest people to equal the wealth of the poorest 50 percent, according to the latest calculations.

Inequality has moved up the agenda in recent years, with the head of the International Monetary Fund and the Pope among those warning of its corrosive effects, while resentment of elites has helped fuel an upsurge in populist politics.

Concern about the issue was highlighted again in the WEF’s own global risks report last week.

“We see a lot of hand-wringing – and clearly Trump’s victory and Brexit gives that new impetus this year – but there is a lack of concrete alternatives to business as usual,” said Max Lawson, Oxfam’s head of policy.

“There are different ways of running capitalism that could be much, much more beneficial to the majority of people.”

Oxfam called in its report for a crackdown on tax dodging and a shift away from “super-charged” shareholder capitalism that pays out disproportionately to the rich.

While many workers struggle with stagnating incomes, the wealth of the super-rich has increased by an average of 11 percent a year since 2009.

Bill Gates, the world’s richest man who is a regular at Davos, has seen his fortune rise by 50 percent or $25 billion since announcing plans to leave Microsoft in 2006, despite his efforts to give much of it away. While Gates exemplifies how outsized wealth can be recycled to help the poor, Oxfam believes such “big philanthropy” does not address the fundamental problem.

“If billionaires choose to give their money away then that is a good thing. But inequality matters and you cannot have a system where billionaires are systematically paying lower rates of tax than their secretary or cleaner,” Lawson said.

Oxfam bases its calculations on data from Swiss bank Credit Suisse and Forbes. The eight individuals named in the report are Gates, Inditex founder Amancio Ortega, veteran investor Warren Buffett, Mexico’s Carlos Slim, Amazon boss Jeff Bezos, Facebook’s Mark Zuckerberg, Oracle’s Larry Ellison and former New York City mayor Michael Bloomberg.

IMF: Immigration Boosts Wealth of Hosting Countries

Brussels – Immigration has a generally positive economic impact on receiving countries but the benefits depend on how well the migrants are integrated, the International Monetary Fund’s First Deputy Managing Director David Lipton has said.

Speaking at a seminar in Brussels earlier this week, Lipton noted that the politics and economics of migration were at odds with each other because like trade, immigration created winners and losers and required time for societies and businesses to adjust.

“We have found that immigration has significantly increased GDP per capita in advanced economies because skill levels … boost labour productivity and because in some places an influx of working-age migrants helps counteract labour shortages arising from demographic developments,” Lipton said.

“Although the top 10 percent benefit most, the gains from migration are shared across all income groups. Moreover, inequality does not increase as a result of the entry of migrants into the workforce,” he said.

“We find no significant negative effects on the middle or lower income groups in receiving countries,” he said.

Europe is struggling to contain a migration crisis started in 2015 when more than a million people entered the 28-nation EU from the Middle East and Africa seeking safety and better economic prospects.

Immigration has triggered a popular backlash in the EU that has boosted far-right and nationalist parties and was one of the main factors in Britain’s vote in June 2016 to leave the European Union.

“People may be placing less value on the economic benefits of migration because they dislike the social and cultural change that they fear inevitably comes with immigration,” Lipton said.

“Second, they may not be perceiving the real benefits that economists have shown to exist. Or third, economists may not have figured everything out. Perhaps there is an element of truth to all three,” he said.

For the economic benefits of migration to show, the migrants should be well integrated into the labour markets of the countries they enter.

“This process of integration is critical if countries are to secure maximum economic benefits from migration,” Lipton said.

“We already know that the eastern Europeans … by and large have integrated rapidly. But policy makers will now need a clearer understanding of the assimilation experience of refugees and migrants from the Middle East and Africa,” he said.

King Salman: Saudi Economy Possesses Sufficient Strength despite Challenges

Saudi

Riyadh – Saudi Arabia has announced its general budget of 2017, which was approved by the Saudi cabinet in its exceptional session held on Thursday in Riyadh and headed by Custodian of the Two Holy Mosques King Salman bin Abdulaziz who ensured that the Saudi economy is strong enough despite the current fiscal and economic challenges.

“We are determined to strengthen the components of our national economy and accordingly we adopted the Kingdom’s Vision 2030 and its executive programs in line with a comprehensive reform vision that would take the Kingdom to much broader and comprehensive horizons,” said King Salman.

“Our vision is not only a set of ambitions, but also executive programs so as to enable us to achieve our national priorities and opportunities for all through the strengthening and development of partnership with the private sector, in addition to raising the pace of coordination and integration among all government agencies, and to continue fiscal discipline, and promoting transparency and integrity,” the King added.

The King said that the government has sought, through this budget and its programs, to improve the efficiency of the capital and operational spending of the state, as well as to strengthen public finances and enhance its sustainability.

“We also gave priority to development projects and service programs that serve the citizens directly, and contribute to activating the role of the private sector and increase its contributions to the gross domestic product (GDP). We are optimistic in our ability to deliver, and then support the citizens of our country in order to achieve the desired economic well-being,” King Salman added.

In the same context, the Minister of Finance said the gross domestic product (GDP) of the kingdom for 2016 at constant prices would be SR2,581 billion, according to estimates of the General Authority of Statistics. He continued that the oil sector is expected to grow by 3.37 percent, the governmental sector 0.51 percent and the private sector 0.11 percent — The oil refining sector achieved a growth of 14.78 percent, the highest growth rate within the economic activities of the real total GDP.

He pointed out that the kingdom aims to strengthen its financial position and raise the efficiency of the governmental spending as well as to reach a balanced budget by 2020.

“Due to the measures taken in the field of spending, it is expected that the deficit will reduce in 2016 to SAR297 billion after reaching its highest level in 2015 of SAR366 billion. The deficit has been funded through borrowing from the domestic and international markets,” the minister said.

IMF: Kuwaiti Economy to Revive in the Medium Term

Kuwait's central bank Governor Mohammad al-Hashel attends the GCC Governors meeting in Manama March 13, 2013. REUTERS/Hamad I Mohammed

Kuwait- The Central Bank of Kuwait announced that the International Monetary Fund (IMF) mission to Kuwait expected a gradual revival in Kuwaiti non-oil sectors GDP up to 3.5% in the upcoming year and 4% in later years.

The mission, in its concluding statement, also expected the investment in infrastructure to push the economic growth in the medium term.

The Governor of the Central Bank of Kuwait (CBK) Dr. Mohammad Yousef Al-Hashel said that the statement included three themes: fiscal developments in Kuwait, fiscal forecasts and the risks facing these forecasts.

In the aspect of fiscal developments, Hashel said that the economic activity continued to expand in non-oil sectors even if at a slow pace—this actually reflects the effect of the drop in oil prices in which the growth average of non-oil sectors GDP reached around 3.5% compared to 5% in 2014.

According to Hashel, the mission pointed in its statement the solidity of the financial and banking sector and the adequacy of credit conditions in which banks’ capitalization reached a high average up to 17.9% as well as high profitability averages.

Furthermore, the rate of irregular loans dropped around 2.4% while the banking liquidity enhanced supported by the increase of governmental deposits. The statement also noted that credit facilities granted to the private sector witnessed a remarkable development.

Hashel said that the mission’s statement reported that “the drop of oil revenues led to a huge financial deficit in the public budget of the fiscal year 2015-2016, exceeding 17% of the GDP.

Opinion: The Cost of the Arab Spring is Half a Trillion Dollars

The UN’s Economic and Social Commission for Western Asia’s report stated that the Arab Spring led to a net loss of $613.8 billion in economic activity in countries involved in it. This is equivalent to 6 per cent of the region’s GDP in the period between 2011 and 2015.

Nevertheless, the unforeseen losses are bigger than all of this as the revolutions failed with regards to almost everything that they promised: democracy, individual rights and freedoms, transparency, development, stability, securing jobs and raising the standard of living and economic prosperity. Absolutely none of these things were achieved and in all cases, they declined dramatically.

Those who believe that change comes in stages and that the revolutions of the Arab Spring that started in 2011 are just experiencing a setback that will be followed by hurricanes will not be able to see even a little progress made in the societies where the revolutions took place. I do not mean physical improvement but rather intellectual change. Not only that, but the principles that the revolutions were supposed to have instilled into society have been hit by a terrible setback as a result of the frustration, despair and shock that followed the operations of change.

No one can defend the Libyan ruler Colonel Muammar Gaddafi or his rule. His people revolted against him in a genuine and popular revolution and it continued until his regime was destroyed and he was killed at the hands of angry citizens in a brutal manner. Gaddafi was a model of an insane and bad dictator who squandered his country’s wealth, left it poor and mistreated his citizens. Although we thought that it was impossible for any alternative to Gaddafi to be worse than him, the result is that Libya has become worse than before and is being governed by extremists and tribal leaders who are more repulsive than he was. The country is in deep chaos, and political and community leaders have been killed or exiled instead of being allowed to rule and achieve the desired change. The situation in all the other countries where the Arab Spring took place is no better at the moment.

Some may consider Libya to be an extreme case compared to the birthplace of the Arab Spring, its neighbour Tunisia. It is true that Tunisia is experiencing better stability than Libya, that only one political system governs there, and that there is some public participation and freedom. However, Tunisia was better off socially and economically. The situation in Tunisia is still subject to the control of its politicians and the protection of its military which is not guaranteed.

The problem is structural and the values of a modern state have still not been introduced. That includes the elite that failed to put aside their idealistic proposals that suit their political positions, the Islamists who insisted on controlling everything and the leftists who wasted their chance in Egypt, Tunisia, Libya and Yemen.

What has been achieved in accordance with the standards of reform and development or slogans of the revolution itself, even in a stable country like Egypt? Nothing, and it will take a long time to recover from the wounds that it sustained due to the Arab Spring uprising.

There are those who deny the failure of the revolutions of change and consider what happened as just an exercise that will be followed by change! There are those who admit failure but shift the blame to others and claim that the revolutions have been subject to conspiracies to end them.

In my opinion, a culture of change towards sophisticated systems that have modern values does not exist as we imagine it. There are bread revolutions but not revolutions of freedom.

Saudi Arabia Eases Procedures to Boost Mining Sector

oil market

Jeddah- The Ministry of Energy, Industry and Mineral Resources in Saudi Arabia announced willingness to launch more investment licenses in the mining sector for the purpose of developing the domain and increasing its contribution to USD25 billion by 2020 amid rising interest of foreign investors in exploiting opportunities.

Reliable sources in the mining sector told Asharq Al-Awsat that “the Ministry of Energy, Industry and Mineral Resources received new instructions on easing procedures to urge foreign investors’ involvement in the sector. Previously, some investors faced prolonged procedures that led them to change their mind.”

Same sources added that the ministry has presented a new ongoing project that targets re-planning mining chances, knowing its details and offering them to investors during investment related conferences as well as providing motives that would boost investors in the domain.

Deputy Minister of Petroleum and Mineral Resources Sultan Shawli declared that efforts are exerted to develop the mining sector and increase its contribution to the GDP via the implementation of the Saudi Vision 2030 goals.

According to the ministry, the current contribution of mining in GDP is 2.5% and is expected to rise in case investments grew and opportunities were exploited. The sector also grants licenses in zink, phosphate and other minerals.

The ministry is implementing a strategy that enhances investment opportunities in the mining sector, provides an appealing investment environment, develops skills of Saudi labor force, protects promising mining zones and improves technical information and data related to mining investments.

Saudi lands are rich in natural mineral resources and there are several factors that ensure success in this field, represented in availability of: nearby energy, financial solvency, increasing demand and mining investment regulations.

The domestic market is expected to witness a rising demand on local products of metal ores, which are forecast to grow up to 7.5% in upcoming years.

Saudi Arabia Promotes First International Bonds

Khobar- Saudi Arabia will meet investors on Wednesday and Thursday in London followed by three-day meetings in the U.S. which will conclude on October 18 to sell its first international issuance of Saudi government bonds.

During the meetings, attendees will discuss the Saudi plan to issue dollar denominated bonds for a period of five, ten and 30 years.

The government published a bond circular of around 220 pages rich in information about the financial market in Saudi Arabia.

Major points mentioned in the circular were: The income of oil dropped 70% in the past five years, the kingdom dropped capital and government expenditure, and oil reserves (around 266 billion barrels) are sufficient for seventy years.

The circular added that Saudi Arabian Monetary Agency (SAMA) is still dedicated to pegging the currency to the dollar, adding there are no guarantees that the government might not reconsider the exchange rates in case of any unexpected future events.

Bloomberg revealed, based on the Saudi government bond circular, that capital expenditure is forecast to drop 71% in 2016 to reach USD20.21 billion (SAR75.8 billion) compared to USD70.32 billion (SAR263.7 billion) in 2015.

Bloomberg added that the circular highlighted the government’s appreciation of the reduction of deficit in the budget to 13.5% of the GDP in 2016 compared to 15% in 2015. The circular also expected a decrease in the current expenditure to USD154.98 billion (SAR581.2 billion) compared to USD190.56 billion (SAR714.4 billion), before the decision to reduce government bonus and salaries.

Saudi Arabia’s Ministry of Finance announced on Monday developing an international program to issue bonds, the first borrowing of Saudi Arabia from the international market. As part of this program, local and international banks were mandated as joint lead managers and joint book runners on the Saudi bond sale.