CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 08 July 2019
  • Published inJuly 2019
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Country Risk Update - Oman

Risk Indicator  -  DB4d
Risk Level       -  Moderate
Ratings Trend -  Stable

Dun & Bradstreet downgrades Oman's country risk rating after a sharp cut in our oil price forecasts, which will result in financing difficulties for the sultanate. The ports of Sohar and Salalah are emerging as regionally-competitive infrastructure facilities, soon to be joined by Al Duqm. 
The government is targeting high-end tourism as an area for growth
Market Overview
Banks scramble to re-pitch for Aramco IPO roles – sources
Investment banks are scrambling to re-pitch to advise Saudi Aramco on a possible initial public offering, sources familiar with the matter said, with Saudi Arabia’s energy minister confirming plans for the listing to proceed in 2020 or 2021. “Bankers previously involved in the IPO are pushing for meetings with Aramco,” one of the sources said. “There is some shifting in terms of what roles the banks might have if IPO talks go ahead.” JPMorgan, Morgan Stanley and HSBC were picked to play a leading role in the world’s biggest-ever IPO when the plan was first announced in 2016. Boutique investment banks Moelis & Co and Evercore were also hired by Aramco as independent advisers. But plans for a domestic and international listing were later postponed. The Saudi energy minister Khalid Al Falih, who also chairs Aramco, said on Tuesday the company was ready to start working on the long-awaited listing, adding it could happen in 2020-2021.  Al-Falih pointed to Aramco’s $69.1bn acquisition of a 70 percent stake in petrochemicals firm Saudi Basic Industries (SABIC) along with a recent $12bn bonds sale as the main reason for the IPO delay.  Al Falih confirmed the same timeline that Saudi Arabia’s Crown Prince Mohammed bin Salman, known as MbS, provided on June 16 when he said the government remained fully committed to the IPO project, expecting it to take place between 2020 and early 2021.
Abu Dhabi Commercial Bank said to mull 2,000 job cuts after merger
Abu Dhabi Commercial Bank, which completed a three-way merger earlier this year, may cut about 2,000 jobs as the lenders integrate operations, people with knowledge of the plans said. The state-controlled bank started the job cuts once it began combining with Union National Bank and Al Hilal Bank, the people said, asking not to be identified because the information is private. It will complete the process in the next few months, the people said. The expected losses are about double the 1,000 cuts people familiar with the matter had estimated in December. Before the combination, the three banks employed about 8,500 people, according to Bloomberg calculations. The merger, which created the Gulf region’s fifth-biggest lender with about $114 billion in assets, is expected to deliver cost savings of about $167 million annually, ADCB said in January. The job cuts are likely to weigh on the second-biggest Arab economy that’s already being battered by falling home prices and slow growth. Although economic activity is expected to accelerate to 2.8 percent this year, it’s still well below the average in the 15 years to 2015, according to the International Monetary Fund.
UAE’s Etihad Rail to seek about $2bn in financing
Etihad Rail, the developer, and operator of the United Arab Emirates’ national rail network is expected to approach banks for about $2bn to help finance the expansion of the network, banking sources familiar with the matter said. The UAE, which launched the first phase of its rail project in 2016, plans to have a network with 1,200 km of track costing about $11bn, running from the border with Saudi Arabia to Fujairah emirate on the Gulf of Oman. A spokeswoman at Etihad Rail, owned 70 percent by the Abu Dhabi government and 30 percent by the UAE federal government, was not immediately available to comment. Gulf states plan a range of regional infrastructure projects from power to transport and housing. A drop in oil prices in 2014 led governments to rein in spending, halting several projects, but a recent price recovery has improved prospects. Last year, the Department of Finance in Abu Dhabi, the richest of the seven emirates making up the UAE, and the UAE Finance Ministry signed a financing deal for the second phase. It did not provide details of financing involved at the time. 
UAE to allow 100% foreign ownership of maritime businesses 
The United Arab Emirates is preparing a draft law that would allow foreigners to own up to 100% of businesses in the maritime industry in accordance with specific criteria, Infrastructure and Development Minister Abdullah Al Nuaimi said Sunday in Abu Dhabi. The legislation, which is expected to pass in the first half of 2020, will address areas ranging from vessel ownership to dispute resolution, according to Al Nuaimi, who’s also chairman of the UAE Federal Transport Authority. The minister referred to a cabinet decision on 2 July that allows each of the country’s seven emirates to set foreign ownership limits in various sectors. A total of 122 economic activities across 13 sectors were specified to be eligible for up to 100 percent foreign ownership including renewable energy, space, agriculture, and manufacturing industry. The new rules essentially lifted a federal requirement that has long capped foreign ownership in local companies at 49%. The change frees the country’s seven emirates to open up their industries to foreign investors, many of whom demand full control over their operations. Economic free zones sprang up across Dubai and much of the UAE as a way to satisfy foreign companies that couldn’t fully own businesses onshore.
UAE limits VAT daily cash refunds at AED7,000 in digital push
The UAE's Federal Tax Authority has imposed a daily cash limit for VAT refunds at AED7,000 per tourist, the director announced on 7 July. Tourists can submit their tax invoices on purchases they made at retail outlets registered within the scheme, along with their passport and credit card. Eligible applicants can recover an unlimited amount of taxes incurred if it's transferred to their card, while cash refunds are limited to AED7,000 per tourist per day. The decision, issued by UAE's Minister of Finance Sheikh Hamdan, is aimed at providing speed and accuracy in processing applications in the tax refund scheme. "These systems are key components in driving the continuous development of the UAE’s financial and economic sectors; they facilitate the flow of money and financial assets securely, increasing trust in financial transactions – both local and international,” said Bustani."The new decision abides by best practices implemented in advanced economies, which prioritise effective and holistic risk management and promote e-payment solutions,” he added. 
Commodity Tracker
Business Events this Week In UAE
Budgeting, Forecasting and the Planning Process seminar
@ Fairmont Hotel, Dubai, UAE

Date: 7 July To 11 July 2019
Business Updates

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