CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 21 October 2019
  • Published inOctober 2019
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CRIF GULF WEEKLY INSIGHTS
Country Risk Update - Oman

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

The government is looking to ease pressure on public accounts through new taxes and austerity measures. However, public dissent has prompted a delay in the imposition of VAT, until at least 2020. New PPP and privatization laws should create new commercial opportunities. Oman is benefiting from the regional embargo on Qatar via higher trade flows. 
Market Overview
Financial close reached for giant $870m UAE desalination plant
Emirates Water and Electricity Company (EWEC), a subsidiary of Abu Dhabi Power Corporation (ADPower) and Saudi-based ACWA Power have confirmed the successful financial closing of the world’s largest reverse osmosis desalination plant. The new plant will be located at the Taweelah power and water desalination complex in Abu Dhabi, with completion expected in 2022. A partnership of Abu Dhabi Power Corporation and Mubadala Investment Company holds a 60 percent equity interest in the Taweelah project with the remaining 40 percent held by ACWA Power, a statement said. The project is to cost AED3.19 billion ($870 million), with funding sourced from a combination of senior project finance loans worth a total of AED 2.71 billion, in addition to equity contributions from shareholders and operating cash flow from pre-operations, it added. Loans have been arranged by a group of local and international banks including Emirates NBD, Natixis, Mizuho Bank, Siemens Bank, Bank Boubyan and The Norinchukin Bank. The Taweelah plant will supply 909,200 cubic meters per day and will be 44 percent larger than the world’s current largest reverse osmosis plant. It is sufficient to meet the water demand for over 350,000 households.
Saudi's Shoura Council calls for a freeze on expat fees for 2020
The Shoura Council in Saudi Arabia has requested a freeze on the expatriate fee on companies and dependents fees on expatriates for 2020. At a meeting on October 16, 2019, the call was made to keep the fees at the same level as what is charged for the current year. In 2017, the government in Riyadh introduced a monthly fee on dependants of expatriates starting at SR100 ($27). This is due to rise to SR400 ($107) by next year.  While the expatriate fee on companies, which was designed to increase the number of Saudi nationals in the workplace, currently stands at around SR400 per worker, rising to SR800 ($214) by the end of this year. According to the General Authority for Statistics (GaStat) labor market release for Q2, the total number of expats in the Saudi labor market declined by around 1.9 million since the start of 2017, with around 132,000 workers leaving the market during Q2.
Global sukuk issuance falls slightly to $30.6bn
International sukuk issuance from major Islamic finance markets was almost unchanged in the first nine months of 2019 compared with the same period last year, according to Fitch Ratings. Full-year volumes could still be highly influenced by the funding needs and strategies of large individual borrowers which may come to the market before year-end, as well as by geopolitical developments that could have a positive or negative effect on investor appetite, the agency said in a research note. Sukuk issuance with a maturity of more than 18 months from the Gulf Cooperation Council (GCC) region, Malaysia, Indonesia, Turkey, and Pakistan totaled $30.6 billion in the first nine months of 2019 compared to $31 billion in the year-earlier period. "This supports our view that volumes normalized rather than declined last year after hitting record levels in 2017," Fitch said. It added that GCC issuers have continued to access the sukuk market to diversify their funding mix and develop the Islamic debt markets in the region. Substantial international US dollar-denominated issuance in 2019 included deals from Turkey, Indonesia, Islamic Development Bank Trust Services Limited and First Abu Dhabi Bank, raising a total of $6.5 billion. These figures do not capture the recent growth in domestic local-currency issuance, such as Saudi Arabia's riyal-denominated local issuance program, Fitch noted.
Dubai's Emirates NBD plans $1.76bn rights share sale
Dubai’s biggest bank is seeking to raise 6.45 billion dirhams ($1.76 billion) from a rights share offering as it expands abroad and courts more foreigners to its stock. The state-controlled Emirates NBD plans to offer 758.8 million shares at 8.5 dirhams each, it said in a statement. That compares with its closing price of 13.15 dirhams on Oct. 16 and represents a discount of about 35%. The issue opens Nov. 10 and will close Nov. 20. Emirates NBD last year proposed selling new shares to help fund the acquisition of Turkey’s Denizbank AS. The lender plans to use the proceeds of the sale to strengthen its capital base and support growth, according to October 17, 2019 statement.  Lenders in the six-nation Gulf Cooperation Council are trying to broaden the base of their investors as a combination of low oil prices, slowing economic growth and geopolitical upheavals drain inflows. Emirates NBD last month raised the cap on foreign ownership holding in its shares to 20% from 5%, with plans to seek shareholders’ approval to double the new limit. It also raised $373 million from the sale of a stake in London-listed Network International Holdings Plc. Citigroup Inc., Morgan Stanley and ENBD Capital are managing the rights share offering.
UAE Central Bank removes 3% early settlement fee for mortgages 
Investment Corporation Of Dubai (ICD), the principal investment arm of the Government of Dubai, has signed an agreement with the Russian Direct Investment Fund (RDIF), Russia’s sovereign wealth fund, to explore mutually beneficial investment opportunities in both Russia and the UAE. The cooperation agreement aims to strengthen bilateral economic and investment ties between Russia and the UAE through the potential establishment of a co-investment platform. “Today’s agreement is a significant first step towards exploring the potential benefits and growth that are realizable on both sides,” said Mohammed Ibrahim Al Shaibani, executive director and CEO of ICD.  “We are enthused by the opportunities that lie ahead, and look forward to seeing them come to fruition in the near future,” he added. The agreement, signed as part of  Russia’s President Vladimir Putin’s visit to the UAE, is a joint strategic arrangement between two leading international investors. Kirill Dmitriev, CEO of the RDIF, said: “RDIF is pleased to announce a partnership with Dubai's leading investment corporation aimed at active development of relations with the UAE business community. I am sure that we will be able to find many attractive investment opportunities, we plan to start cooperating in the near future.”
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