Newsletter 100 Issue December (Copy 95)

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Country Risk Update - Bahrain

Risk Indicator - DB5b
Risk Level - High
Ratings Trend - Improving

Saudi Arabia's strong support for Bahrain provides a backstop to the economy. Dun & Bradstreet upgrades its rating outlook for Bahrain due to the agreement made with Saudi Arabia, UAE and Kuwait to provide USD10bn in financial support.A giant oil and gas find off the west coast offers the promise of vast wealth if it proves commercially viable to extract.
Market Overview
New AED 100 banknote to enter circulation this week
A new AED 100 banknote will enter into circulation later this week, according to the UAE Central Bank. An ad posted by the Central Bank in a local newspaper stated that the banknote will be introduced on Tuesday, October 30. “The currency note will be put in circulation as legal tender, along with the [AED 100] denomination currency notes currently in circulation,” the Central Bank said in an ad in Gulf News. According to the ad, the new notes will feature a number of new security features, including a color-changing portion in the bottom corner of the bill that shifts from green to blue when tilted and shows a bar of light moving from top to bottom. The number ‘100’ is also included in the feature. Additionally, the center of the bill includes a Galaxy three-dimensional security thread, which is activated when the note is tilted. Other features into an ‘intaglio overprint’ and the removal of the denomination value of ‘100’ at the bottom right of the bill. UAE authorities have repeatedly warned residents about counterfeit banknotes.
Oman's privatization of electric companies to have 'modest' impact on the fiscal deficit
The Omani government’s plans to privatize two state-owned electricity companies will have only a “modest” positive impact on the fiscal deficit but signal a shift towards more open investment policies and diversification, according to a new report from Fitch Solutions. Recently, Oman’s government-controlled Nama Holding announced plans for a partial sale of the Oman Electricity Transmission Company (OETC) and Muscat Electricity Company (MEDC) in 2019. The sales will be open to foreign investors. According to Fitch, “the decision to invite foreign investors thus underlines a broader drive by the government, accelerated since the oil price slump that began in 2014, to diversify the economy away from hydrocarbons production.” “This strategy…rests, in turns, on attracting greater flows of foreign direct investment,” the report added. The report also notes that the sales form part of a larger plan to collect a cumulative $1.8 billion from privatizations between 2017 and 2022, which Fitch said is equivalent to 5 percent of non-oil revenues per year, and about 1 percent of total revenues. Fitch estimated that the government’s fiscal deficit is 7.9 percent of GDP in 2018, compared to 6 percent in 2019. Combined, OETC and MEDC have combined assets worth approximately $3.2 billion.
Over $800 Billion Invested In Saudi Arabia’s Construction Projects
More than 5,200 construction projects are currently rolling out in the GCC’s largest and most populous country, the Kingdom of Saudi Arabia, a BNC Network report shows. Valued at $819 billion, these account for 35% of the total value of active projects across the GCC. Despite recent challenges faced by the sector attributed to low oil prices and a reported shortage of qualified workers, construction is recording a 4.1% increase this year in KSA. A recent BMI research forecasts the sector’s annualized average growth at 6.13% from 2018 to 2022. “The construction sector’s immediate outlook is extremely promising,” said Roni El Haddad, Event Director of the Kingdom’s premier construction event, The Big 5 Saudi. “The recent launch of the Public Investment Fund backed multi-billion dollar Amaala resort in September, along with the already announced NEOM and Red Sea Project, in what is already being dubbed the “Riviera of the Middle East”, is a proof of that. “Saudi Arabia’s Vision 2030, along with significant investment in housing and infrastructure development promoted across the country by local authorities, are revitalizing the construction industry and generating interest in a growing number of international players,” El Haddad added.
UAE Consumer Confidence Drops As Summer Expenses Bite Hard
Consumer confidence in the UAE dropped significantly during the third quarter of 2018, as more UAE residents reported worrying about keeping up with a rising cost of living. The Consumer Confidence Tracker Q3 reveals that 52.6% of UAE residents are now less confident about their finances than they were 12 months ago. That’s compared to 41.2% who said the same thing in the second quarter of the year. Moreover, the Q3 Tracker recorded a major increase in the number of UAE residents worried about not being able to afford any rise in the cost of living in the country. Over half (51%) said they are worried that they will not be able to get by if the cost of living rises – a 10-percentage-point increase on the number of people who said the same thing in the second quarter of the year. The Q3 Tracker also revealed that more UAE residents are struggling to cope with the increase in costs related to the introduction of value-added tax (VAT) at the beginning of the year. Over a quarter (26.9%) said that they are now struggling to make ends meet, compared to 13.9% in the second quarter of the year.  “The increase in the number of people reporting financial strife is alarming when compared to the first two quarters of the year, which saw relatively flat levels of financial confidence. However, we believe that these numbers are likely seasonal,” said Jonathan Rawling, CFO of yallacompare.
Gems Inks Deal To Invest $800 Million In Saudi Arabia’s Education Sector
Dubai-based Gems Education has signed a deal with state-owned Hassana Investment to invest up to $800 million over the next 10 years to develop schools within Saudi Arabia. The deal, which was signed on the sidelines of the Future Investment Initiative, will help educate 130,000 students and employ 16,000 people- out of which 40% would be Saudi citizens. Through this partnership, the group would also be building new schools while upgrading existing ones. Hassana Investment is part of Saudi Arabia’s General Organization for Social Insurance. Saudi Arabia is aiming to undertake a massive modernization drive as it looks to diversify its income away from its traditional sources of oil money. It is seeking to attract foreign investments into sectors such as healthcare, education, leisure, and entertainment in order to boost local employment and to reduce the pressure on the government coffers. Valued at $5 billion in 2017, Saudi’s K-12 education market is expected to grow to an attractive $12 billion by 2023, according to a report by Research and Markets. However, investment in the Kingdom’s education sector has been slow, mainly due to various barriers to investment. But that is changing gradually. 
Commodity Tracker
Business Events this Week In UAE
​Islamic Economy Week by DIEDC
@ Various locations
Date: 27 October 2018 To 1 November 2018
Business Updates
Many opportunities exist within a business environment but it is important for a business owner or an investor to understand the true value of any proposition. Buying a business, selling a business or leveraging a business’s value to raise funds can be quite complex and there will always be situations where one party to a business transaction will have more knowledge about the transaction than the counter-party.
At D&B we understand these kind challenges faced and strive to put everyone on equal footing in order for more informed decision making.
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