CGI Gulf Insights of the Week (170)

ByCGI Gulf Insights of the Week
Monday, 17 June 2019
Published inJune 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update
United Arab Emirates

Risk Indicator - DB3b
Risk Level - Slight

Ratings Trend - Stable

Growth outperforms expectations in Abu Dhabi and Dubai but remains weak; furthermore lower for longer oil prices will undermine growth prospects. The UAE continues to strengthen its position as a regional safe-haven and business hub.

Market Overview

UAE second in global token sales
The UAE has been ranked second in the world for the largest token sales up to June 2019. According to Coin Schedule, the UAE accounted for more than a quarter of global funds raised in Q1 – last year the country didn’t even rank in the top 10. Only the British Virgin Islands has attracted more token sales in 2019. One of the main reasons for this leap in token sales is tied to two specific deals; GCBIB raised $142 million in developing banking and insurance products for the UAE token economy, and Bolton Coin’s STO raised $67 million by offering a way to invest in various asset classes including real estate and crypto mining. Ahmed Jacob, managing partner and CTO of INVAO, said: “The major players in the UAE understand the growth potential of blockchain technology used for developing an economy and are looking for the right investment opportunities with the right advice on return on their investments, this can be comfortably achieved with many local digitalized projects and initiatives we are currently managing.” The UAE government has launched it's Emirates Blockchain Strategy 2021, with the goal of transferring 50 percent of government transactions onto a blockchain-based platform by 2021.

Insurance costs soar for Gulf-bound tankers after the latest attacks
Oil tanker owners face spiraling insurance costs to load cargoes from the world’s largest crude-export region after the latest round of attacks on vessels. War risk premiums that owners pay each time they go to the Gulf have now surged to at least $185,000 for supertankers, according to people with knowledge of the market. They rose to $50,000 after the attacks a month ago. Both owners and the companies that charter their ships paused bookings in the immediate aftermath of attacks on 13 June 2019, as they re-evaluated risks to shipping barrels from the Middle East in the wake of attacks on two more tankers just a month after similar incidents. Insurance costs from the Gulf are soaring. The US pointed the finger at Iran for the attacks just outside the Strait of Hormuz, a vital corridor for crude oil exports. The country immediately denied being responsible. Regardless, six tankers, hauling a variety of petroleum cargoes, have now been targeted in the space of just 32 days -- the kind of threat to merchant shipping that hasn’t been seen in the region for decades. “We need to remember that some 30 percent of the world’s crude oil passes through the Straits,” said Paolo d’Amico, chairman of Intertanko, the biggest trade group for tanker owners. “If the waters are becoming unsafe, the supply to the entire Western world could be at risk.”The Joint War Committee, a group that advises insurers, designated the entire Gulf and waters just outside it a so-called Listed Area after the incidents a month ago. The classification gives underwriters room to charge more.

Abu Dhabi's Adnec secures VAT waiver for UAE exhibitors
Abu Dhabi National Exhibitions Company (Adnec) has announced that it has obtained FTA license for a waiver from VAT for all international companies and organizations participating in or holding shows and conferences at its venues across the UAE. The VAT waiver covers exhibitions and conferences held over a period not exceeding seven days, Adnec said in a statement. It added that the waiver also stipulates that recipients shall not have a permanent base or established business in UAE and shall not be registered or obliged to register in UAE as per the UAE VAT Law. Humaid Matar Al Dhaheri, the group CEO of Adnec, said: "The VAT waiver for Adnec-hosted event organizers and participants will further stimulate the business tourism sector in the UAE through enhancing the competitiveness of our venues to host major international exhibitions and conferences. "This move supports our strategy to attract new and world-renowned events to our venues and increase our direct and indirect contributions to the economy of the emirate of Abu Dhabi.” He added: “The business tourism sector is a major contributor identified by Plan Abu Dhabi and Abu Dhabi Economic Vision 2030 to accelerate non-oil GDP growth. Through hosting more than 3,390 events and welcoming nearly 17.5 million visitors to date, our venues - Abu Dhabi National Exhibitions Centre and Al Ain Convention Centre - have delivered a direct and indirect economic impact of more than AED32 billion since ADNEC’s inception in 2005.”

Saudi investments in US bonds increase to $170bn
Saudi Arabia has increased its exposure to US treasuries and upped its bond holdings to a peak of $170 billion, according to a new report by the Institute of International Finance (IIF). The report noted that Saudi Arabia’s Public Investment Fund (PIF) is close to reaching its target of increasing assets to $400 billion by 2020. “We now estimate PIF’s assets at around $300 billion, of which one-fourth are invested abroad,” Garbis Iradian, IIF’s chief economist for the Middle East and North Africa was quoted as saying in the National. Saudi plans call for the government to deposit proceeds from the sale of state assets to the PIF, which in turn will help boost foreign investments. The PIF and Saudi Arabia’s pension fund, the General Organisation for Social Insurance (Gosi) are primarily concentrated on investments in US Bonds. “The increase in Saudi holdings of US bonds largely reflects the restructuring of the investment portfolios” of Gosi and the PIF, IIF said, adding that its “appetite for US bonds coincided with relatively higher US yields and unfavorable investment sentiment in EMS [emerging markets] and the Eurozone.” Additionally, the composition of the kingdom’s assets holdings also demonstrates that Saudi Arabia is moving away from the euro and pound-denominated holdings, according to the IIF. The IIF’s data shows that Riyadh’s holding of dollar-denominated assets stands at about 80 percent, as it has since 2014.

Uber’s $3.1 Billion Acquisition Of Careem Gets UAE Regulator’s Nod
Ride-hailing giant Uber’s move to buy its Middle Eastern rival Careem, announced in March, was a step hailed by many. The deal has now received approval from the UAE Ministry of Economy, clearing the regulatory procedures for the merger in the country. The $3.1 billion deal was the largest technology transaction in the Middle East, which is a fast-growing region for both Careem and Uber. As per the transaction, Careem would be a wholly-owned subsidiary of Uber but will continue to retain its brand name and independence in operations. While the companies are yet to receive approvals from other markets across the Middle East, North Africa and Pakistan in which they operate, both Uber and Careem welcomed the UAE regulator’s go ahead, saying that it will help them in pursuing opportunities in the region. Careem’s acquisition has helped both companies in ending an expensive rivalry in the Middle East that has thinned margins in what is a highly profitable market. The deal will also give Uber a leeway into markets in the Middle East and Africa that it previously did not tap into. A profitable operation in the Middle East market could also help Uber shore up its overall losses. The company, which went public this year, posted a $1.01 billion loss in the first quarter of 2019 and has been under the spotlight for its less than stellar IPO. Compounding the San Francisco-based firm’s troubles, a number of senior executives including Uber’s COO Barney Hartford and it's Chief Marketing Officer Rebecca Messina announced their departure recently. CEO Dara Khosrowshahi said that he will be more involved in Uber’s day-to-day operations, especially in its Rides and Eats businesses.

Commodity Tracker

Business Events this Week In UAE

The Indian Property Show
@ Dubai World Trade Centre
Date: 20 June To 22 June 2019

Business Updates

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