CGI Gulf Insights of the Week (151)

ByCGI Gulf Insights of the Week
Monday, 11 November 2019
Published inNovember 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Oman

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

Oman saw a strong demand for its USD3bn bond in late July, this came despite downgrades but amidst brief indications of an easing deficit. The government is targeting high-end tourism as an area for growth. The ports of Sohar and Salalah are emerging as regionally-competitive infrastructure facilities, soon to be joined by Al Duqm.

Market Overview

Oil demand could peak in 20 years, says Saudi Aramco IPO prospectus
Global oil demand may peak within the next 20 years, according to an assessment included in the prospectus for Saudi Aramco’s initial public offering, suggesting views are slowly changing in the kingdom where officials long dismissed the notion as overblown. Rather than providing its assessment, Aramco used a forecast from industry consultant IHS Markit Ltd. that forecasts oil demand to peak around 2035. Under that scenario, demand growth for crude and other oil liquids will be “leveling off” at that time. In an accompanying chart, the Saudi oil giant showed global oil demand lower in 2045 than in 2040. Global oil demand may peak within the next 20 years, according to an assessment included in the prospectus for Saudi Aramco’s initial public offering, suggesting views are slowly changing in the kingdom where officials long dismissed the notion as overblown. Rather than providing its assessment, Aramco used a forecast from industry consultant IHS Markit Ltd. that forecasts oil demand to peak around 2035. Under that scenario, demand growth for crude and other oil liquids will be “leveling off” at that time. In an accompanying chart, the Saudi oil giant showed global oil demand lower in 2045 than in 2040.

Strong rupee, falling interest rates lead to a plunge in NRI deposits in India
Deposits by non-resident Indians (NRIs) in Indian banks have plunged by nearly 30 percent in the first five months of the current fiscal year (FY20), due to the dual effect of the relative strengthening of rupee and sliding interest rates on deposits. Fresh NRI bank deposits dropped to $4.04 billion during April-August 2019, against $5.70 billion in the corresponding period of last year, according to the latest data put out by Reserve Bank of India (RBI). According to banking sources, NRI remittances during this period were also impacted due to the relative strengthening of rupee. Detailed RBI data on remittances, however, was not available. The exchange value of Indian currency, the rupee has been in the range of 69 - 71.60 against the US dollar during April-August this year, as against a high of 74 in October 2018. Interest rates on NRI rupee deposits have also seen a drop of 50 to 70 basis points to 6.4-6.6 percent currently in the last 12-month period. Gulf region accounts for a significant part of both NRI remittances and bank deposits in India.

Total assets of UAE banks rise to $820bn
The total assets of UAE-based conventional banks increased to about AED2.457 trillion ($670 billion) by the end of September, according to official figures from the UAE Central Bank. The data also showed that AED173 billion of assets were added by the banks over the past nine months of 2019. Up to 19.7 percent of these assets are owned by Shariah-compliant banks, state news agency WAM reported, adding that the total assets of Islamic and commercial banks combined exceeded AED3 trillion ($820 billion) by the end of September. It added that the asset growth was driven by a rise in deposits from AED1.354 trillion in December 2018 to AED1.406.4 trillion in September. Retail loans provided by conventional banks amounted to around AED1.2 trillion, making up 78.6 percent of total banks' credit, of which Islamic banks contributed AED367.3 billion. Separately, Islamic banks' assets were down to AED565.7 billion at the end of September from AED582.6 billion at the end of 2018. There are 59 banks operating in the UAE, 51 or which are conventional and eight Shariah-compliant.

Abu Dhabi's financial hub issues new employment rules
Abu Dhabi Global Market (ADGM) has issued new employment regulations, replacing its previous legislative framework regarding employment matters. The new legislation takes into consideration the public consultation that was undertaken earlier this year to review and improve ADGM’s regulations. The financial hub said in a statement that the new rules strengthen ADGM’s employment framework in the interests of both employers and employees. The amendments were formulated after the ADGM Registration Authority conducted a thorough multi-jurisdictional benchmarking exercise to promote the highest standards in employment practice among firms operating on Al Maryah Island. The fundamental changes introduced include new overtime provisions for employees, aligning individual certain employees’ entitlements with those onshore, including repatriation flight tickets and sick leave and changes allowing employers and employees more flexibility in negotiating notice periods. They also introduce protective provisions for youths aged between 15 and 18 years and bring in discretionary power to the ADGM Courts to impose penalties on employers for failure to pay employees’ entitlements due on termination.

The UK said to ban Emirates airline's first-class shower attendants
UK authorities are said to have banned Emirates airline’s first-class cabin ‘shower attendants’ from operating on all UK-bound flights as they are not technically crew members. According to travel blog and website One Mile at a Time, UK Border Control has told the airline that these staff members may no longer fly to the UK, as the country has a “restriction with an entry of non-licensed crew.” The website noted that shower attendants – who work full time on flights – ensure that shower facilities are clean. They do not receive the same training as cabin crew and must be seated when the seatbelt sign is on. Additionally, the shower staff does not have the same flying licenses and special visas as cabin crew. It is believed this is the reason for the UK’s ban on the staff. In a statement sent to Arabian Business, an Emirates spokesperson said the airline “abides by the rules and regulations of the respective issuing country for our operating crew.” “We are reviewing our resources and making adjustments on board to ensure our customers continue to receive the signature Emirates service,” the spokesperson added. The airline, along with Abu Dhabi’s Etihad, are the only airlines that currently offer in-flight showers.

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