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Capitalist Culture

Embracing a dictator

by Michael Young January 24, 2008
written by Michael Young

Thinking back to early December, we’re still not sure whether the visit to France by the Libyan dictator, Moammar Gadhafi, was good or bad. Good, because even members of French President Nicolas Sarkozy’s government openly expressed their discontent with receiving a chronic human rights abuser in Paris; or bad, because they all had to backtrack and accept that France is now in the business of “engaging” thugs for financial gain.

The contradiction between making money and defending human rights has long been at the center of international affairs. More often than not the imperatives of the first have overridden those of the second. For a moment after his election, Sarkozy looked like he might buck the trend. His appointment of Bernard Kouchner as foreign minister, like that of Rama Yade as secretary of state for human rights, suggested he would favor policies focused on the protection of individual liberties.

Instead, Sarkozy has been recklessly unprincipled in his behavior overseas. The opening to Libya was almost entirely done so that France could sign large contracts, in particular defense contracts, with the Libyan regime. Recall how several months ago Sarkozy played a key role in helping release Bulgarian nurses held by the Gadhafi regime (lubricated by a ransom paid for by the Qatari government). At the time, Seif al-Islam Gadhafi, son of the Libyan leader, let the cat out of the bag as to the real motivations behind the release in an interview with Le Monde.

Gadhafi told the newspaper: “First, the agreement [with France] involves joint military exercises; we will be buying Milan anti-tank missiles from France to the order of 100 million euros, I think. Then there is a project for the manufacture of arms, and for the maintenance and production of military equipment. You know it’s the first arms supply deal between a Western country and Libya [since the sanctions ended].” 

In an interview with the Le Nouvel Observateur just before Moammar Gadhafi’s visit to Paris, Sarkozy was at some pains to defend his embrace of the Libyan leader. His main argument, however, was that unless countries spoke with authoritarian regimes that showed a willingness to alter their behavior, there would be no progress on human rights.

Sarkozy had a point, sort of. For Western states to advance democratic values worldwide, they need to articulate these in their dealings with autocrats, or autocratic governments. But what Sarkozy didn’t say is that the democracies often start off with a concession by engaging dictators before the latter earn engagement first by making concessions of their own on human rights. The practical result of Sarkozy’s thinking is that democracies usually find themselves in a dilemma: talking about human rights but doing little about it because engagement is usually premised on a political or financial calculation that makes one want to deal with unsavory regimes in the first place. In other words, despots are only really “frequentable” if they have something the West wants; and if they have something the West wants, then that places them in the driver’s seat when it comes to such things as human rights and democracy.

That deadlock can be convenient for both sides. Western governments can say that they spoke out in favor of human rights, before moving on to the more lucrative business at hand; and the despots can take pleasure in watching the hypocrisy of their Western interlocutors.

There may not be many ways out of this dilemma. The reality is that two very different logics are confronting each other: the logic of rational compromise, which the democracies bring to the table; and the logic of the gun, which the autocrats bring to the table. Almost invariably, the logic of the gun wins out because, first, the international community is divided and a despot will always find a willing business partner somewhere; and, second, because the logic of rational compromise relies on persuasion rather than intimidation, and no amount of persuasion will change a dictator whose stock in trade is intimidation.

What does all this mean for a capitalist culture — the assumption that capitalism in its cultural manifestations should encourage the free exchange of ideas, minimal state-imposed restrictions, and, ultimately, the pursuit of human liberty?

Plainly, this equation has usually failed to work when it comes to relations between states. For France’s capitalists to prosper and be happy, Libya’s political dissidents have to suffer without the benefit of French solidarity. Until, and unless, the democracies place human rights and liberty at the forefront of their endeavors, the situation will remain as is. Leaders like Sarkozy will say, with hand on heart, that they are defending the dictators’ victims, then turn around and arm the dictators to the teeth.

Michael Young

January 24, 2008 0 comments
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Financial Indicators

Global economic data

by Executive Staff January 24, 2008
written by Executive Staff

Most popular car color for select regions

According to DuPont’s 2007 Global Automotive Color Popularity Report, silver no longer dominates others as the color of choice. Although silver maintained its lead in South Korea and China, it faced a decline in North America, Europe, and Japan, reporting a drop on year-to-year popularity from 2006 to 2007, while also falling behind white for North American and Japan, and black in Europe. Conservative colors are still the most popular, with tones of white, silver, black, and gray dominating market share in 2006 and 2007. As reported in the figures’ press release, industry experts believe the white revolution is a continuation in fashion and home decor trends in the various areas. One can infer from this idea that demand for the purest of colors will shift into other industries as well.

Percent of R&D spending for select OECD countries

The politics of spending are ever present for OECD countries whose research and development (R&D) spending vacillate around the OECD-average of 30% of R&D spending by the government and 63% of R&D spending coming from the private sector. Among the highest government R&D spenders are Portugal, Turkey, and Mexico while the least R&D spending is conducted by the Japanese, Luxembourg, and Swiss governments. For private R&D spending, Luxembourg, South Korea, and Japan rank highest, while Portuguese, Hungarian, and New Zealand spends the least on research and development. The US brings numbers of 65% for private spending, while 29% of the country’s R&D spending is public. The European Union has figures of 54% for industry and 35% for government.

Average hours worked per person in select OECD countries

Are the French the laziest workers in the world? According to data on select OECD countries, France is one of the lowest, as its average worker clocks in only 1,555 hours a year. However, the Dutch work even less hours then their increasingly boisterous counterparts, clocking just 1,391 hours a year. In accordance with stereotypes, the most overworked are South Koreans, who earn their vacation after 2,357 hours on the job a year on average, followed by citizens of the Czech Republic, who average 1,997 hours a year and Hungarians with 1,989 hours a year. The OECD average of 1,750 is higher than that of the Euro-zone, whose workers spend 149 less hours on the job at an average of 1,601 hours a year. The United States  found itself in the OECD and the Euro-zone average, with moderate figures of 1,715 per worker in 2,006.

Energy production for select OECD countries

From OECD data, it appears that countries best endowed with natural resources are the prime producers of energy within the OECD. Heading the pack is Canada, which produces 385.3 million tons of oil equivalent (mtoe), followed by Australia at 253.5 mtoe, and Mexico at 242.5 mtoe. Norway, with the help of its sea-based crude endowments, produces 233.2 mtoe, slightly lower than its North Sea neighbor the United Kingdom (UK), which produces 246.4 mtoe a year. Among the lowest energy producers of the OECD were Ireland and Iceland, which produced only 1.9 and 2.5 mtoe relatively. The two countries are joined by other single-digit performers, including Greece, Portugal, Austria and the Slovak Republic.

January 24, 2008 0 comments
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Financial Indicators

Regional equity markets

by Executive Staff January 24, 2008
written by Executive Staff

Beirut SE: Blom  (1 month)

Current Year High: 1,526.31  Current Year Low: 1,168.36

(Chart unavailable at time of going to print)

The Beirut Stock Exchange (BSE) closed December 18 with a Blom Stock Index reading of 1,543.72 points in a period that saw the number of delays in presidential elections increase to nine. The political wrangling was not good for investor moods or any other economic assessments; thus after the assassination of leading military officer Brig. Gen. Francoise el-Hajj and the murder’s implications for the political situation, the BSE could not maintain its year high of 1574.75 points reached in early December. The exchange is nonetheless in very positive territory at the end of 2007 when compared with the war period in mid 2006 and the internal crisis months since December of the same year. In the week leading to Dec. 14, Solidere supplied 85% of traded value; the scrip in its two incarnations closed cents from $24 on Dec. 18. Banks also could defend their overall good standings; Audi and Blom GDRs respectively closed at $76.95 and $93.20 on Dec. 18.

Amman SE  (1 month)

Current Year High: 7,298.95  Current Year Low: 5,296.32

The Amman Stock Exchange Index scored a 20-month high on Dec. 10 at 7,298.95 points before entering the Adha holidays with a close of 7,272.57 points on Dec. 17 after a spate of profit harvesting in the second week of the month. The market’s optimism thus has remained fairly relentless on a three-month trajectory that pushed the exchange up by over 1,600 points since mid-September and accounted for almost all its gains in the 2007 balance. The government added to the year-end stock boom by finally privatizing Royal Jordanian airlines in a 71% public sell-off that deserved the privatization label. The stock traded for a single day before Adha. According to regulator statements, RJ shares found institutional buyers at home, in Arab countries, and outside the region whereas retail buyers in the IPO were in their overwhelming majority Jordanians. Hikma Pharmaceuticals made an offer to buy Arab Pharmaceutical Manufacturing at a substantial premium to the latter’s recent share price and APM shareholders accepted the offer, bringing further consolidation to Jordan’s important pharmaceutical industry.   

Abu Dhabi SM  (1 month)

Current Year High: 4,291.22  Current Year Low: 2,839.16

The Abu Dhabi Securities Market seemed insatiable in its aspirations with a rise to a year high of 4,543.14 points on Dec. 16 before slowing a tad to its close at 4,520.80 points the next day and a well-deserved holiday break. Real estate and construction stocks paced the ADSM’s gains in December. Telecommunications firm Etisalat announced a purchase of 16% worth $438 million in a mobile operator in Indonesia. The company’s shares experienced a day of exceptional trading volume on Dec. 9; the stock advanced well in the first ten days of December and saw some selling thereafter. Shares of credit firm Financehouse shot up more 36% in a week and the company attributed the sudden rise to multiple factors working together. Apart from a small one-day dip in the Dubai Financial Market index on Dec. 10, the ADSM and DFM indices moved in tandem through the month, with the ADSM one step ahead at a gain of 5.93% from Dec. 1 to 17.

Dubai FM  (1 month)

Current Year High: 5,775.67  Current Year Low: 3,658.13

The Dubai Financial Market stayed its course of strength and closed at 5,737.39 points on Dec. 17, up 39% from the start of 2007. Both the DFM and the ADSM traded in December at levels which the exchanges had last seen in late spring 2006. Leading developer Emaar Properties said it focuses on international expansion and may raise debt to finance its growth. The stock made some gains in December but is still cheaper than target prices given it by most analysts. Real estate stocks Deyaar and Union Properties also scored gains in December, and so did real estate finance stock Tamweel which launched a $300 million exchangeable Sukuk that was oversubscribed “within hours”, according to the company. In the national outlook, currency alignment factors to the US dollar carry the potential to spice the UAE financial and equity markets with some uncertainties.

Kuwait SE  (1 month)

Current Year High: 13,175.20            Current Year Low: 9,584.50

The Kuwait Stock Exchange (KSE) was one of two tail performers (the other was Bahrain) among GCC stock markets in the truncated 2007 tail period of trading between Dec. 2 and Dec. 17. But as all GCC markets were positive in December, the KSE index moved up 2.24% over the period, to close Dec. 17 at 12,312.90 points on the eve of the Adha holidays. Trade volumes descended in the course of the month as, in addition to a pre-holiday lull, observers described investor attention as gyrating toward the upcoming results season. In sector terms, investment stocks did well. Macroeconomics seemed encouraging enough, as the year’s buoyant oil income gave Kuwaiti state revenues a 40% boost in the first 11 months of 2007 when compared with the entire year of 2006.

Saudi Arabia SE  (1 month)

Current Year High: 11,349.99            Current Year Low: 6,861.80

The crown of best performer in December 2007 went unquestioningly to the Saudi Stock Exchange (SSE) with a 16.6% gain in the Tadawul All Shares Index between Dec. 1 and Dec. 17 when the market closed at 11,349.99 points. Passing the 11,000 points line on Dec. 12, the TASI in December moreover reached its highest readings since 0ct. 10, 2006. Heavyweight Sabic shot up by 24.8%. Banking and petrochemicals had notable advancers. The initial public offering of real estate firm Dar Al-Arkan was covered more than four times by demand. Savola Group and SEC announced hefty new projects. Also the bonus share made a comeback as banks ANB and Jazira proposed bonus issues of 43% and 33.3%. The strong performance of the SSE and most regional markets in the wane of 2007 is ever more remarkable when contextualized to global trends.

Muscat SM  (1 month)

Current Year High: 9,057.78  Current Year Low: 5,532.64

The Muscat Securities Market took December as time to do the same as in most months of 2007 — move up. The index closed in heights the Omani bourse never reached before at 9,036.06 points on Dec. 18, near its historic high from a week earlier. For the year to date, the bourse tallied an index growth of 61.9%, the best upswing in the entire Middle East and North Africa region. Investment and brokerage stocks were hot and analysts saw banking stocks as fraught with expectations. Newcomer Galfar climbed to OR 1.388 on Dec. 18. Alliance Housing Bank recorded an upswing with fluctuations as it tied the knot with Bahrain’s Ahli United Bank and the International Finance Corporation to become a commercial bank in 2008. Oman’s second telecommunications operator, Nawras, said it wants to go public some time in 2008 but the IPO decision is not firm yet.

Bahrain SE  (1 month)

Current Year High: 2,684.14  Current Year Low: 2,106.70

The Bahrain Stock Exchange (BSE) closed at 2,652.96 points on Dec. 18, marginally up by about 2% on the month but almost 20% on the year. Ahli United Bank reported high demand for its 10% rights issue; which closed on Dec. 2 with 364 shares subscribed at issue size of 300 million shares. Gulf Finance House was both a newsmaker and notable performer. The company said it will invest in establishing a $3 billion financial center in Tunisia, after the same mold as hubs in GCC locales such as Doha and Manama; its share price moved from BHD 2.8 on Dec. 2 to 3.06 on Dec. 18. The BSE announced that it will move quarters and picked the Bahrain Financial Harbor as its future domicile. Although the smallness of the kingdom’s equities markets is a handicap, local analysts have voiced expectations for a good 2008 after the BSE announced that the cumulative profits of listed companies in the first three quarters of 2007 were up almost 45% year-on-year. 

Doha SM: Qatar  (1 month)

Current Year High: 10,057.59            Current Year Low: 5,944.03

A sudden 4% slide in the Doha Securities Market on Dec. 2 made the index dip below 9,000 points but for the time being put a halt to the market’s retreat from its Nov. 4 year high above 10,000 points. Thus, December awarded buying opportunities as the DSM rallied for a week after which it relaxed and closed at 9,462.40 points on Dec. 17 — up 3.7% on the month and close to 33% since the start of 2007. The insurance sector had a winning streak in December while the industrial sub-index, paced by Industries Qatar, softened. Newcomers added some spice to trading; conglomerate Aamal Holding advanced from its debut at QR 11.60 on Dec. 5 to QR 29.30 on Dec. 17. Qatar Oman Investment Co, which assumed trading as the 40th equity on the DSM Dec. 12, gained when measured by its issue price of QR 10.3 but had a sobering few days. After its first day open at QR 30.10, it fell back to QR 20.30 at the Dec. 17 close. 

Tunis SE  (1 month)

Current Year High: 2,712.33  Current Year Low: 2,316.10

The Tunisian Stock Exchange traded sideways in December and its close at 2,602.43 points on Dec. 18 represented a change of mere 4 points vis-à-vis its reading on Nov. 30. Year to date, the index was up 11.64% on Dec. 18. Of the three strongest stocks by market capitalization, drinks maker SFBT and bank BIAT moved sideways while Banque de Tunisie achieved modest gains in the first half of December. The Tunisian and Moroccan bourses differed from most Arab stock markets in that both recorded less growth in 2007 than in 2006; however, they did better than most regional markets in having gains during both years. The exchange that took the hardest beating was the Palestinian bourse which had lost 46.4% in 2006 and whose index in mid-December stood almost 16% below its reading at the start of 2007. 

Casablanca SE All Shares  (1 month)

Current Year High: 13,506.29            Current Year Low: 9,367.89

Shares on the Casablanca Stock Exchange closed at 12,586.08 points on December 17; more than 920 points lower than the index’s year high reported on Sept. 5. Although the index recorded gains in the trading sessions just ahead of the Adha holidays, the Casablanca bourse lost over 3% in the past three months and was the only North African market to recede on both its one-month and three-month performances in the last quarter of 2007. August entrant CGI traded sideways in December while October debutant, Atlanta Insurance, lost some ground during the month. Market heavyweight Maroc Telecom recovered in December share price losses it had seen in the second half of November. According to analysts, investors initiated some shifts in their portfolios away from local equities in response to a plan by Morocco’s government to hike its capital gains tax in 2008 to 15% from 10%. At its close on Dec. 18, the index was up 32.77% since the start of 2007.

Cairo SE: Hermes  (1 month)

Current Year High: 90,771.12            Current Year Low: 57,013.49

Taking a record high above 90,770 points on Dec. 9, the Cairo and Alexandria Exchanges ended a week of profit taking and new demand with a close of 89,993 points in the benchmark Hermes Index on Dec. 17. From Dec. 2 to Dec. 17, the index added 2.41%. Orascom Construction Industries was a main driver of the December gains and rose 10% during the period. OCI also agreed to sell its cement unit to multinational Lafarge, bagging a deal worth close to $13 billion. Among big name companies, Orascom Telecom Holding sold its stake in Hong Kong’s Hutchison Telecom for $962 million but denied media speculations that OTH itself could be for sale. OTH reached a year high of EGP 90.50 on Dec. 9. In the financial sector, the share price of investment bank EFG-Hermes gained 4.5% between Dec. 2 and Dec. 17.

January 24, 2008 0 comments
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Consumer Society

Facing the challenge

by Executive Staff January 24, 2008
written by Executive Staff

Test driving a new Porsche is like interviewing Haifa Wehbe. You’re already excited before even seeing the car and when you do, you have to concentrate hard not to lose focus on content over form.

Rule #1: Don’t get overexcited. Of course, the car will be gorgeous, of course, the interior will be refined, and of course, the engineering will be top-notch. From a German luxury car maker like Porsche we expect nothing less than Teutonic quality and precision. You just need to remember this when you sit in the Porsche Cayenne and look at the perfect finish of the interior, maybe comparing it to your own car at home. Then you turn on the engine, play around with the seat’s lumbar support and think “Mmmm …” — before you’ve even moved an inch, the car has already captivated you.

Rule #2: Start slow, don’t rush anything. Unless you’re a trained sports car driver, jumping in and pushing the pedal will result in a very short drive. And, since you’ve been invited to this event, flown across the Mediterranean to a plush resort (the name of the location — Porches — is not entirely a coincidence) on the Algarve, Portugal’s southern coast, the last thing you want to do is crash the car a minute and a half after you received the keys. Or later, for that matter.

Thus, at first you just take a seat and have a look at all the details. It’s the equivalent of making small talk with Haifa before you start the actual interview. These days, all cars have essentially the same layout — lights to the left, windshield wipers to the right of the steering wheel — but since you’re planning to drive fast, on windy mountain roads you really don’t want to have to take your eyes off the road to figure out how to turn on the air-condition.

More important than the A/C button will be the ones next to the gearshift, which let you select different suspension settings: Normal, Comfort, and Sport. You can call them the “Driving the girlfriend/wife to the restaurant,” “Driving to Work,” and “Driving on my day off” buttons. The big Sport button right next to them changes engine and transmission set-up and the gas pedal control to a more responsive, dynamic setting. And if you have air suspension, it lowers the chassis for better aerodynamics. It also increases the volume of the rear-end silencer, giving the car a bigger roar at higher speeds. Just to make sure that the driver does not mix up the “small” with the “big” Sport button, maybe one of them should be renamed.

Once you’ve looked at all the levers, switches and buttons, maybe even flipped through the manual (perfectly prepared ‘test drivers’ have already read it online before the trip), you have a last look at the steering wheel and see the “+” and “-” buttons. It’s the Tiptronic — shifting gears without having to take your hand off the wheel, just like a race-car driver. You eyes light up, thinking of the mountain roads mapped out in your roadbook. Now this will come in very handy …

Rule #3: After establishing a good relationship, you can (slowly) push the boundaries. The streets are excellent (it is Europe, after all) and the fact that it’s a Saturday means that traffic is light. You start to drive, slowly at first, and try out how it handles, how it reacts. ‘Well’ and ‘quickly’ come to mind. Then off to the highway. Too bad you’re not in Germany, as there wouldn’t be any speed limit. Oh well, a little over won’t hurt, but that’s what everyone else is doing and it doesn’t quite let you get the full Porsche feeling.

It turns out, then, that the mountain roads are much more fun. Granted, you can’t drive as fast as on the highway, but you can really enjoy the fact that the car you’re driving has almost three times as much power (405hp coming out of a 4.8l engine) than the ones you’re used to. And by now you have enough handle over this machine to start playing around with it. It’s all about acceleration. Which happens almost too fast for you to feel it. Instead of drifting over to the other lane, pushing the gas pedal to increase the speed, passing the car in front of you, looking in the mirror to see if you’re sufficiently ahead of it, then drifting back into the right lane, overtaking a car now goes like this: left, gas, right, done. If you’re in the passenger seat and blink, you will have missed it. But no worries — there’ll be plenty more opportunities to observe the maneuver.

However, this is where Rule #4 comes in: Never, ever forget Rule #1. If you think that after an hour on the road you’ve truly mastered a Cayenne GTS, you may be in for a rude awakening. (Thankfully, the brakes are excellent and the ABS totally reliable.) But then, it’s not like after an hour of chitchat with Haifa you’ll be part of her entourage or get invited to her birthday party. It takes some doing, and you have to be patient. I remember coming very close to flipping the first SUV I drove, when I learned almost too late that I couldn’t race it through the hairpin curves down Sunset Boulevard to Pacific Coast Highway the same way I did with my own sedan.

Conveniently, Porsche addressed exactly this issue. — an SUV’s innately high center of gravity that causes it to lean in curves — with a system called Porsche Dynamic Chassis Control (PDCC) that is optional in the GTS. When installed, the car stays glued to the road like a 911, even if you whip the steering wheel around at 90km/h. It’s a lot of fun, actually. Just make sure your passengers have their seatbelts on and whatever luggage you have is tied down. 

Rule #5: As long as you’re polite, and once you’ve shown that you’ve done your homework and are a competent journalist, it’s perfectly alright to question a few things. Like, was Haifa’s Bint el-Wadi really such a good idea? Regarding the Cayenne, as a resident of Beirut I had to smile about Porsche’s announcement that soon the GPS SatNav will have maps for Lebanon, as I got visions of drivers quickly becoming irritated at the computer’s (understandable) unawareness of constant ad-hoc construction, closure of streets, aks al-seer traffic, and creative parking. Also, as a die-hard “stick” driver, the automatic transmission, even in Tiptronic mode, doesn’t feel quick enough. Yes, one soon gets the hang of downshifting before the curves through the “-” button on the steering wheel — real drivers use the brakes as little as possible — but I did miss the good ol’ clutch. It’s too bad that the regional market doesn’t like manuals and consequently the Cayenne will only be sold in the automatic version.

Most test drives, not unlike most interviews, end too quickly. This one certainly did. There’s still so much to try, a drive in the rain, or in the snow. Or, seeing as how in our region, the vast majority of the Cayenne will be sold in the Gulf, perhaps trying out a bit of wadi-bashing? Oh well, maybe the next test drive will be in Oman …

Matthias S. Klein is managing editor of EXECUTIVE. The GTS is available in Spring 2008.

January 24, 2008 0 comments
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Banking & Finance

Money Matters by BLOMINVEST Bank

by Executive Staff January 24, 2008
written by Executive Staff

Regional stock market indices

Regional currency rates

Emirates Aluminum Company to Build World Largest Smeltery

Emirates Aluminum Company (EAC) completed the financing of the world’s largest aluminum semltering factory in Abu Dhabi. The overall cost of the project is $4.9 billion with an initial annual production capacity of 700 tons that will double by the completion of the second phase. EAC is a joint venture between Moubadala Development Company and Dubai Aluminum that will further the expansion of the project to reach $7 billion. City Group and Sullivan & Cromwell acted as the financial and legal consultants of the project in addition to a consortium of banking institutions that financed the deal including Goldman Sachs, Export Finance and Insurance Company, Abu Dhabi Bank, Royal bank of Scotland, BNP, Standard and Chartered and Somitomo to name a few. EAC started operations in 2007 in Abu Dhabi’s Tawile area and is due to reach production capacity by 2010.

Saudi Arabia Budget for 2008 at $120 billion

The Saudi Government has ratified its budget for 2008 at $120 billion with an over-budget ceiling of $10 billion. The budget figures revealed the good performance of the Saudi economy where state revenues reached $162.6 billion representing an increase of 55% over last year versus an expenditure of $120 billion increasing 16% from the previous year. The government also used the budget surplus to reduce the debt by $14.2 billion. Additionally, GDP is expected to grow 7.1% to reach $373 billion with a trade surplus of $148.16 billion and inflation at 3.1%. Interesting to note that the 2008 budget is the highest in the history of the Kingdom where the education sector has been given priority with $28 billion followed by the health at $12 billion, water and agriculture at $7.6 billion and the specialized projects at $6.7 billion. New and pending projects were also given $44 billion budget expenditures.

Paris Conference Pledges $7.4 billion for Palestinian State

Donor countries pledged $7.4 billion during last month’s Paris conference to support the Palestinian economy. The aid, that was originally estimated at $5.6 billion, will be channeled over a period of three years of which $2.9 billion will be released in 2008.   

The pledge is part of the Palestinian State’s plan to revive the faltering economy. The conference that was attended by representatives of 68 states and 20 global organizations is a push by the international community to establish a Palestinian state and reinvigorate the peace process. The biggest contributors were the EU with $640 million, followed by the US at $555 million, Saudi Arabia, Germany and the UK with $500 million each and France at $300 million. French president Sarkozy in his opening speech reiterated the need to establish a Palestinian state by the end of 2008 that will coexist with Israel.

January 24, 2008 0 comments
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Banking & Finance

2007 closes upbeat

by Executive Staff January 24, 2008
written by Executive Staff

Trimary markets in December ended 2007 on a much higher note than many had foreseen for the year when giving their expectations 12 months ago, depicting 2007 as recovery year for regional financial markets with little to get excited about. And specifically, after an erratic performance in 2006, the market for initial public offerings in 2007 was described as a bottle of champagne without the sparkle. Instead, the IPO market in 2007 has surprised analysts and inspired new trust that 2008 and the following years will bring larger and qualitatively strong IPOs. While not quite reaching the size of the two largest IPOs in 2007 – of banks VTG in Russia and Citic in China – the Arab countries’ largest IPO, by DP World, was not far behind as it fetched $4.96 billion compared with around $8 billion for VTG and almost $6 billion by Citic. 

2007 also proved that investor’s appetite for IPOs has not dampened and in the month of December, the market witnessed the announcement, closing or listing of at least seven IPOs. Starting with the UAE, Abu Dhabi saw three IPO announcements in December. Islamic insurance provider, Mithaq Lil-Takaful, said it will float 55% of its shares for general subscription in January 2008. But the company did not disclose the amount it wants to raise. Also on the Abu Dhabi Securities Market (ADSM), Al Nahda International Education Company plans to offer 72% of its shares to the public in an attempt to raise over AED 727 million ($198 million). With National Bank of Abu Dhabi as the lead manager, the IPO is scheduled to be launched in the first quarter of 2008. Third in line but in no way least, diversified group Al Qudra Holding announced that it will list on the ADSM after offering 30% of its shares in Q1 2008. Although the company did not disclose the amount it will raise, demand for Al Qudra’s shares is expected to be high according to market analysts.

But the most interesting announcement in the UAE which has generated a lot of buzz on the GCC’s stock markets came from Dubai-based Emirates Airlines, the region’s largest and the world’s eighth largest airline, which said it will launch an initial public offering that could value the carrier at up to $20 billion. The move is in line with the company’s expansion strategy and would help financing more than $60 billion of aircraft purchases. Although rumors about an IPO were leaked in early November, the country’s flagship carrier officially announced its plans for an IPO in December. Emirates Air, which is fully owned by the Government of Dubai, said the timing and the value of the offer will be determined at a later date. The shares are expected to list on the Dubai International Financial Exchange (DIFX).

In Saudi Arabia, Dar Al Arkan Real Estate Development Company, which offered 59.45 million shares or 11.01% of its stock at SR 56 ($14.90) each was oversubscribed 423%, attracting more than SR 14 billion, according to lead manager, Samba Financial Group. The offering’s retail tranche was expanded from 30% to half the total offering upon strong demand from almost 2 million individual investors and the stock has been scheduled to start trading on the Saudi bourse on December 29.

In North Africa, two IPOs are of note in Tunisia despite a shortage of information: the Société de Production Agricole de Téboulba (SOPAT) and Automobile Reseau Tunisien et Services (Artes). SOPAT, which produces and distributes frozen chicken products, offered on December 3 around 26% of its shares in effort to raise around TND 5.75 million ($4.65 million). Although the offering closed on December 15, there hasn’t been any announcement by the company in terms of the success of the IPO. Artes, a local distributor of Nissan and Renault cars, announced on December 7 that it will offer 30 to 35% of its shares on the Tunisian Stock Exchange, without providing further information. Moving west to Morocco, Microdata, a distributor of computers and information technology equipment, has announced in early December the offering of 30% of its shares on the Casablanca Stock Exchange. Looking to raise around MAD 121 million ($15.4 million), the Microdata IPO set December 26 as closing date.

A long awaited privatization measure in the Levant was implemented through the IPO for 71% of Jordanian flag carrier, Royal Jordanian (RJ). Its IPO raised JOD 184.5 million ($260 million) between November 21 and December 7. RJ has a market capitalization of JD 260 million. Over 29,000 subscribers, including regional and international institutional investors, participated in the offering.

Although the dollar’s slide and the debate over a possible revaluation has created some concerns in the IPO market, analysts believe this concern is not wide-spread and that 2008 is expected to be another record breaking year for IPOs. In the first nine months of 2007, the six Gulf countries raised $5.9 billion according to a report by the Abu Dhabi-based private equity firm Gulf Capital. In another step to open up the Middle East’s markets to the rest of the world, the region’s largest stock market, the Saudi Stock Exchange, announced in December that it plans to allow foreigners to subscribe to IPOs. Without stating the projected date for the move, Abdul Rahman Al-Tuwaijri, chairman of the kingdom’s Capital Market Authority, said in an interview that foreigners would gain permission to invest through domestic funds which will be established by licensed firms.

January 24, 2008 0 comments
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North Africa

Cementing the deal

by Executive Staff January 24, 2008
written by Executive Staff

Tunisia’s construction materials industry is reaping the benefits of the country’s location and trade deals, both of which serve to boost its exports to help meet increased demand from abroad. The cement sector is particularly dynamic, and has attracted several foreign firms, notably from Spain and Italy. However, the introduction of a new law that requires the majority of domestically produced cement to be kept for the internal market may act as a disincentive to others who have been looking to set up plants over the next few years.

Foreign cement manufacturers have been attracted to Tunisia because of its proximity to growing markets in the Mediterranean basin, and the relatively low cost of raw materials, with prices 20-30% below those elsewhere in the region. A free trade agreement with the European Union will come into full effect on industrial products at the beginning of this year, further increasing the opportunities for export.

Tunisia currently has seven cement plants, five of which have been privatized and are now owned by Italy’s Colacem, Spain’s Uniland and Prasa and Portuguese firms Cimpor and Secil. The remaining state-owned plants, in Bizerte and Oum El-Khélil are currently being prepared for privatization, and several local companies have announced interest. These seven plants produce almost 7 million tons of cement annually, of which 1.4 million tons were exported in 2006, up 11.7% from the previous year. Exports totaled $89 million that year, an increase of more than 40% on 2005, according to the Central Bank.

Since 2006, there have been 13 applications filed for the construction of new cement plants, including bids by Spain’s Lodos Secos and Aricam, as well as the Italian firm Italicimenti, which aimed to establish plants in Gafsa, Kairoun and Kef respectively. These three projects were given initial authorization but in the wake of new legislation, the provisional licenses have been withdrawn, pending a finalization of the law’s specific requirements.

In September, the government introduced a new investment code to govern the cement sector, in response to its recent rapid growth and growing domestic demand. The law stipulates that at least 70% of cement produced by a factory must be allocated to the Tunisian market. It also aims to reduce the amount of electricity used by the extremely energy-hungry plants.

The provisions are designed to ensure that domestic demand is met, at a time when construction is burgeoning and global costs for construction materials are soaring. Without these restrictions, it would be more profitable for the cement manufacturers to push as much as possible out into the more lucrative foreign markets. At home, demand is expected to grow on average 4.5% a year in the medium to long term, peaking at around 7% in 2013-14.

However, by putting what is essentially an export restriction on Tunisian cement plants, the authorities may be discouraging further development of the sector. The latest foreign firms seeking to enter the market are doing so partly because of the excellent access to European and North African markets Tunisia affords. While the FTA gives with one hand, the 70% requirement is arguably taking with the other. The law is to an extent a gamble that firms will find the Tunisian market lucrative enough to make it worth their while selling more than two-thirds of their product to local concerns. It will rely on the government offering an attractive regulatory and tax environment as well as a skilled, good value workforce.

January 24, 2008 0 comments
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North Africa

Banking

by Executive Staff January 24, 2008
written by Executive Staff

The Algerian government’s decision to delay the privatization of Crédit Populaire d’Algérie (CPA) has met with a mixed reception. While one of the banks involved in the bidding had called for suspension of the sell-off and labor unions have applauded the move, others have questioned the government’s fundamental commitment to privatization.

State banks are responsible for almost 95% of deposits and credits in the Algerian banking market. Despite their high levels of non-performing loans, they have retained the support of the authorities, particularly since the collapse of Algeria’s biggest private bank in 2003. However, the much-delayed CPA privatization had seemed to be a sign of renewed confidence in private banking.

On November 24, 2007, the government announced it had suspended the final bidding process for the sale of a 51% stake in CPA, the country’s first privatization of a public bank, to reassess the effects of the global mortgage crisis on the Algerian market. The announcement came two days before technical bids for the bank were scheduled to have been opened and will delay the privatization beyond the target date of the end of the year.

Deputy finance minister Fatiha Mentouri has said that the privatization process will recommence after the global effects of the collapse in the US sub-prime lending market have become apparent.

Citing “uncertainty” caused by the crisis, Mentouri said that “the opening of the sale has been postponed until there is some clarification about the international financial markets.”

However, no set date has been specified by the government and the delay could be longer than optimists might anticipate.

CPA has a 12% market share and assets totaling around $6 billion, and is seen as a prime candidate for banks hoping to expand their operations in Algeria, or establish a foothold there, without a capital outlay that runs to many zeros. The CPA privatization initially attracted France’s Crédit Agricole, Banque Populaire and BNP Paribas; Citibank, from the US; and Spain’s Santander when bidding opened in late 2006. However, Santander withdrew its bid in May to concentrate on expanding its operations in Europe and Citibank retired from the fray to attend to the wounds inflicted on it by over-exposure to the sub-prime market. Meanwhile, the government’s decision to postpone the technical bidding process came the day after Crédit Agricole called for more time.

Santander’s retreat, Citibank’s withdrawal to the sidelines and Crédit Agricole’s request for the process to be temporarily halted may have given the government a reason to re-open the bidding process to ensure greater competition and guarantee the bank makes its forecast $1.5 billion sale price.

However, for others, it is yet another unnecessary hold-up to the process which has already taken too many years. The CPA privatization plan was first drafted in 2000 and the sale slated to be completed by the beginning of 2007. However, the process was sidetracked by the collapse in 2003 of Khalifa Bank, Algeria’s largest private lender, which led to the uncovering of widespread corruption and mismanagement across the Algerian banking sector. This was a blow to confidence in private banking and caused the authorities to reconsider their policy. In the wake of the Khalifa scandal, the government barred private banks from lending to public institutions and prioritized strengthening the system and fighting corruption ahead of privatization.

The latest suspension has caused doubts that the government’s heart is really in privatization.

Former Algerian treasury minister Ali Ben Ouari has said that he is skeptical about the government’s stated reason for the suspension of bidding, noting that most of the bidders have not been affected by the sub-prime loss. Ben Ouari has warned that the government may be considering limiting foreign ownership in CPA. Given the fact that the economy is now in considerably better shape than when the privatization was first proposed, a majority stake may be offered to a domestic partner instead.

The government has also come under considerable union pressure to halt the privatization and the decision to postpone the sale indefinitely garnered praise from unionists representing CPA employees.

The halting of the sale calls into question not only the privatization of CPA but of the process of banking privatization in Algeria as a whole. The Banque de Développement Local is lined up for privatization this year and bidders will be watching recent events with interest. If the CPA sell-off suspension turns out to be a permanent change of heart, the banking sector as a whole risks being marooned from modernity in terms of technology, capital and the improved services that competition would engender.

January 24, 2008 0 comments
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GCC

Arab Media Group

by Executive Staff January 24, 2008
written by Executive Staff

Skyscrapers are not the only structures to tower above the UAE’s golden sands. Dubai, the business hub of the emirates is bracing itself for yet another new media comer: the Arab Media Group (AMG), a Dubai government communication company and part of TECOM (Dubai Technology, Electronic Commerce and Media Free Zone Authority). According to Patrick Samaha, the company’s head of marketing, “AMG was founded in 2005 and currently includes nine radio stations, three newspapers, television stations, printing and distribution activities, an events management arm and outdoor advertising.”

The company was initially launched in 2001 under the name ARN (Arabian Radio Network), which has since morphed into eight radio stations — Dubai Eye, Dubai 92, Pulse, City, Hit, Noor Dubai, Al-Khaleejiya, and Al-Arabiya. The most recent addition is the station Virgin Dubai, a branch of Virgin International.

Today, the company is a full media group. With a workforce of 2,000 employees, occupying four office premises in Dubai as well as other locations in the country, the company has sprawled into various sectors of media activities. “We are not called the Arab Media Group for nothing,” boasts Samaha, “we provide different media across the entire spectrum.”

MTV and Nickelodeon Arabia

Recently, the company has gained wide publicity for its television deals with MTV and children’s network Nickelodeon, through its broadcasting division Arabian Television Network (ATN). The subsidiary will incorporate MTV Arabia as well as four other channels, three of them to be launched before the end of 2007.

The children’s channel, Nickelodeon Arabia, is scheduled to begin broadcasts in 2008. According to AMG, it will reach into a market of more than 36 million TV households and its potential audience is estimated at 190 million people across the region. According to Samaha, “Programming will include a mix of international content from Nickelodeon’s portfolio as well as local Arab productions.” Nickelodeon Arabia is part of a long-term relationship between AMG and MTV Networks International. “It is a great partnership that we are actively building on,” Samaha added. “This cooperation will allow us to produce programs that are reflective of local culture and values, something that also defines our approach to the MTV Arabia station.”

The latter is the first TV music brand to specifically target the youth in the Arab region. The Dubai station features both international and Arabic music combining international content with Arabic productions of popular MTV programs. The station is managed by Arabs for Arabs with the MTV crew currently including people from different nationalities, such as Lebanese, Egyptians, Jordanians, Saudis, and others. The marketing manager also pointed out that MTV programs will be adjusted to local cultures and sensitivities. The channel is showing Hip-HopNa (Our hip-hop), a show that will be co-hosted by a Saudi rapper and Palestinian-American producer Fredwreck (Farid Nassar), who has worked with Snoop Dogg, 50 Cent, and other music industry giants. Farid Nassar was in Lebanon a few months ago hosting a rap contest organized by MTV in Beirut. “We are not only concerned with what is fashionable but also by what is right for our region, and we do not intend on moving away from this philosophy. Today, we are aware of the responsibility that comes with engaging Arab youth. While AMG brings the world to the Middle East, it also brings the Middle East to the world,” explained Samaha. MTV viewers seem to agree: according to the network, 60% of respondents loved MTV Arabia’s new website.

The online division, Arabian Digital Network (ADN), which complements other areas of AMG’s activity is in the process of introducing 18 websites by early 2009 with www.MTVa.com among the first websites to jumpstart the process. AMG has also experimented with ShoofTV.com, a website for posting user-generated content.

Publishing and events

Also falling under the AMG umbrella is its publishing arm, Awraq, showcasing English language newspaper Emirates Today, its Arabic counterpart Emarat Al-Youm, and the Arabic broadsheet Al-Bayan.

Events management has also become a focus of AMG, which has created a subsidiary division, Done Events, which among other things, is bringing world-class shows to Dubai, like the Broadway musical “Chicago” in 2006. 

AMG owns an outdoor advertising company, Shoof. “We are the fastest growing company in this particular segment,” Samaha pointed out. In addition to previously listed segments, AMG operates a logistics and distribution company, Tawseel, and a printing press, Masar. Tawseel will be offering advanced distribution and logistics support to the media industry, comprising retail and direct marketing activities, as well as subscription management facilities for local, regional and international publishing houses.

“AMG is aware of the media’s growing role, and offers an experience of seamless and perfectly integrated services,” added Samaha. According to the manager, the company’s diversified product base facilitates and enhances its market position while adding to its overall strategy. “When you use the name Arab Media Group, you need to feature the full line of media products. When it comes to commercialization, we are definitely more efficient as a group; we work in a full surround sound effect. It also makes more business sense for our clients, since we can reach out to a broader audience by using more than one choice of medium whether, radio, TV or outdoor media.”

The Group’s target market varies also from one sector of activity to the other and, according to Samaha, AMG’s audience differs from a local to a regional one depending on the medium used. While MTV Arabia targets Arab youth, the radio arm, ARN, targets Gulf nationals, other Arabs, Westerners as well as Asians. “You can call us a media solution provider. We create content, write it, publish it, print it, air it, advertise and sell it. I believe we are the only group to offer an A-to-Z approach, across so many vehicles, and this is why we are called the Arab Media Group.”

When asked about Abu Dhabi Media Company, the new rising media star of UAE’s capital, Samaha answered, “Competition is good and allows us to strive for the best. Evidently, there is always a need for new groups. We produce consumer goods, and the UAE’s growing population implies the need for a larger variety.” He believes that AMG has helped shape the industry by offering a large basket of brands under one banner. “We are not launching just any product but a very special one, and I believe that for now growth lies mainly in television, but who knows what tomorrow may hold?”

January 24, 2008 0 comments
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GCC

Missing out on Iraq

by Executive Staff January 24, 2008
written by Executive Staff

Several hundred Kuwaiti trucks a day roll over the Abdaly border crossing into Iraq, where the containers are then transferred onto Iraqi vehicles for the onward journey. Meanwhile, at the Safwan border crossing, only 40 minutes away by car, over 1,000 trucks a day pass through the Virginia-Hobari military camp to enter Iraq.

Such a difference is not an indicator of Iraq’s economic particularities or the security situation. Trade with other immediate neighbors — Syria, Turkey, and Iran in particular — is resurging, with Tehran and Damascus benefiting the most.

What this disparity really shows is that nearly five years after the invasion of Iraq, Kuwaiti cross-border trade is still predominantly traffic for the US military and associated dependents.

This reality runs against the grain of one of the expected economic spin-offs of the overthrow of the Saddam Hussein regime, that Kuwait would become the Gulf’s logistical hub to access Iraq’s emerging market after decades of hostility and minimal economic interaction.

But Kuwait’s barriers to foreign investment, negligible sea and air trade due to infrastructure shortcomings, and overly zealous, yet equally lethargic customs officials who create logistical headaches, are all holding back Kuwait’s transit hub potential.

Bolstering relations

“After the invasion there was a flood of companies coming to base themselves here but after several months they pulled out and went home due to the vague tax and investment laws,” according to Hani Mhanna, the chairman of the Iraq Trade Bureau in Kuwait.

By law, Kuwait requires foreign businesses to be 51% owned by a local investor, as all the GCC countries required in the not-so-distant past. But Kuwait is lagging behind other Gulf countries in revoking such measures, which have been dropped by the likes of the Emirates and Qatar, in efforts to attract FDI and diversify away from oil revenues.

With taxes as high as 45%, and foreign companies faced with paying taxes twice, to the government and the company’s local in-company representation, Kuwait’s draconian FDI laws have also resulted in foreign companies entering into illegal practices to bypass regulations to establish a local presence.

“This taxation on foreign investors is stopping companies from setting up here. It’s been a mess and not enhanced since the 1960s,” Mhanna noted, adding that this has affected cross-border trade with Iraq to the benefit of other countries that have inked bilateral trade agreements with Baghdad.

According to vice president of General Trading and Contracting in Kuwait, Lorie Killingsworth, logistics are coordinated through only a few countries. She said, “Foodstuffs are all from Iran and Turkey. I was surprised. But they are pretty much the only countries that will deal with Iraq.”

Iran has seen trade blossom with Iraq over the past five years, with Iraq’s direct purchases standing in 2007 at $2 billion, and a further $2 billion more in ‘exchanges of kind.’ And this, suggest analysts, is only the tip of the iceberg.

The Islamic Republic has numerous plans in Iraq, including establishing a car plant near Baghdad, funding industrial projects, constructing two 300,000 barrels per day pipelines between Basra and Abadan, as well as building electricity generators in the south. The most recent electric generator in Sadr City is worth $150 million and produces 160 megawatts. Tehran has also signed bilateral trade agreements with Iraq’s Kurds, with trade estimated at $1 billion in the past year.

Turkey, meanwhile, accounts for some $4.9 billion of Iraq’s imports, roughly 23% of the $20.8 billion imported a year. This is primarily with Iraqi Kurdistan, with Turkey accounting for 80% of FDI in the semi-autonomous area.

However, Istanbul is mulling selective economic sanctions against the Kurdish area due to ongoing forays by Kurdish rebel groups based in Iraq against Turkish forces, which prompted multiple military incursions late last year. Further political differences could also flare up again between Iran and Iraq, reaffirming Syria and Jordan as primary transit hubs, with Syria accounting for $4.8 billion (26.9% of all imports) and Jordan $1.3 billion (6.3%) of Iraq’s imports. Damascus has also just secured a lucrative contract to transport Iraqi grain imports and Syrian Trade Minister Amir al-Khalil in November said mutual trade agreements would be “activated”.

Other factors that will shape trade with Iraq could be the division of Iraq into three semi-autonomous regions for Shiites, Sunnis, and Kurds out of the country’s 18 provinces, as put forward in the Iraq Federalism Bipartisan Amendment to the 2008 Defense Authorization Bill in the US.

Iraqi federalism would mean that Kuwait would have to move goods through a Shiite-controlled corridor into Iraq.

On the ground however, this is already the modus operandi. “There is an unwritten code, a Shia truck will not go to the Sunni side, and vice-versa,” said Killingsworth. And although security is better, she added, it is still an issue. “It’s an unknown. You don’t know what’s going on. Recently, two housing units our trucks were carrying vanished, just outside of Basra.”

But once the security situation improves — the ever-present gorilla in the room for Iraqi trade issues — it is expected that traffic will shift from Kuwait’s military border crossing to the commercial side.

“That crossing is untapped and we will see a huge increase in business for Kuwait once there is peace,” believes assistant managing director of Global Logistics Services and Warehousing in Kuwait, Ahmad Hammauda.

Signs that this is slowly underway are evident at the border, with the US Camp Naval Star at the Abdaly civilian border closed down in September. Nonetheless, despite the current geopolitical tensions affecting Iraq’s neighbors, Kuwait, with minimal industry or agriculture, has yet to develop its transport hub status or to sink petrodollars into Iraq.

Killingsworth maintains that “Kuwait’s potential is in financial investment, setting up malls and selling processed foodstuffs, as well as partnerships with the oil ministry. I’m sure M.H. Alshaya [a Gulf retailer for clothing giants H&M and Marks and Spencers] will be there. Kuwait has this over Iran.”

Imports into Iraq (2006)

Sources: European Commission, US Census Bureau (2007)

Iraqi Exports (2006)

Source: US Census Bureau, 2007

By sea, by air, or across the desert?

Political animosity between Kuwait and Iraq has been a prohibitive factor in fostering relations, particularly over their turbulent history, the 1990 invasion, and the widely held notion in Iraq and much of the Arab World that Kuwait is a geographical part of Iraq. However, unlike the hostility between neighbors in other parts of the region, Iraq does have a diplomatic presence in Kuwait and Iraqi politicians have visited the country since 2003.

Hammauda thinks, “The hope is to turn cross-border relations into what they were in the 1950s and 1960s, when Kuwaitis went shopping in southern Iraq, and Iraqis came to Kuwait.”

To turn this hope into a reality, in November 2007 Kuwait earmarked $60-80 billion for infrastructure and construction projects, including airport expansion, road extensions and a North-South GCC railway. One major project will be the $1.2 billion port in Bubiyan Island, northeast of the Kuwaiti mainland and close to the Shatt al-Arab waterway that winds inland to Basra.

“Kuwait should focus on logistics, that’s why Bubiyan is being developed and free zones are at the border. Bubiyan’s location is a gold mine for access to Iraq, Iran, and eastern Saudi Arabia,” according to Hammauda.

However, like the overhaul of Kuwait’s foreign investment laws, the Bubiyan port project has been on the drawing board for years. Foot dragging by a government complacent with high oil revenues has prevented Kuwait’s sea cargo sector from developing, with a public-private joint venture inked in 2005 that should have seen the port completed by 2008. Equally, the viability of the port depends on extensive dredging to remove the mud that is washed down from the Shatt al-Arab, a factor that has prevented deep sea vessels from docking, in addition to the ships sunk and scuttled during the 1980-88 Iran-Iraq War. The downed ships continue to block sections of the northern Gulf.

“Kuwait is not doing a very good job, there are hardly any shippers that come here, as mother vessels go to Dubai then to here,” said Hammauda.

Deciding on whether to use land or sea, he said his company chose the three- to four-day land crossing from Dubai rather than use feeder vessels from the Emirates due to the uncertainty of customs and loading times.

This means, however, that for goods to enter Kuwait or Iraq, they have to cross Saudi Arabia, which has its own associated problems.

“Our biggest problem, outside of security in Iraq, is customs, mainly in Saudi Arabia and Kuwait,” Hammauda believed. “Our second problem is over-protection. There are layers of bureaucracy to check that a container is not smuggling in a bottle of Jack Daniels. Instead of investing in technology, they are increasing bureaucracy,” he added.

There is also the rather paradoxical position of two of Iraq’s potentially biggest trade partners, Saudi Arabia and Kuwait, building US-Mexico border style walls to keep Iraqis out (with Saudi’s slated to cost some $7 billion) while at the same time trying to boost bilateral trade. As Hammauda sees it, “Walls are going up in Kuwait and Saudi Arabia. For us, this will make it more difficult to do business.”

It is perhaps no wonder then that Iraqi-Kuwaiti trade is languishing while Dubai, several hundred kilometers from Iraq, is enticing Iraqi businessmen to the Jebel Ali Free Zone, and air cargo operators are opting for the Emirate rather than charter aircraft out of Kuwait, prompting Killingsworth to comment, “You wouldn’t think of it but Dubai is doing well out of Iraqi business.”

January 24, 2008 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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