• Monday, 20 November 2017
  • Published inNovember 2017



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CGI. 96

Country Risk Update – Bahrain

Saudi Arabia’s strong support for Bahrain provides a backstop to the economy in the event of a crisis, such as reserves depletion. Although the domestic market is small, it has a sizeable component that is highly affluent. Bahrain was the traditional financial and business services hub for the region, making up for its limited oil by providing a welcoming business environment.It improved significantly in the category of starting a business, which had been its weakest area in the index, rising by 69 places to 73rd, after lowering its minimum capital requirements.

Market Overview
UAE residential property to be exempt from VAT, FTA clarifies
The UAE’s Federal Tax Authority (FTA) has clarified that commercial real estate will be subject to the five percent value added tax (VAT), with residential units largely exempt.In a statement, the FTA noted that the first supply of a new residential building within the first three years following its construction will be zero-rated. Subsequently, all supplies will be exempt, even within the first three years.All commercial properties, however, are subject to the 5 percent VAT.FTA added that the owners of residential buildings do not need to register for VAT if they have no other business activities. Those who do, however, are advised to check whether they are required to register or not.Owners of non-residential buildings are required to register if the value of supplies over the course of the preceding 12 months exceeds AED 375,000, or if the value is expected to exceed that figure in the next 30 days.
Saudi Arabia to impose VAT on petrol, tax authority confirms
Saudi Arabia will impose VAT on petrol from January 1, the General Authority of Zakat and Tax (GAZT) confirmed.In response to a query on Twitter, the GAZT said the five percent tax will be applied when it’s implemented in January 2018.The body overseeing its implementation also confirmed that international transport of passengers and goods is zero-rated, in accordance with the ‘Unified VAT Agreement for the Cooperation Council for the Arab States of the Gulf’ and the VAT Implementing Regulations.In contrast, GAZT said the local transport of passengers and goods within the kingdom will be subject to the standard 5% VAT rate, with businesses expected to collect the tax from the traveller when selling the travel ticket.Saudi tax authorities and the Ministry of Municipal and Rural Affairs are set to sign off on a new agreement to help local businesses register to pay new taxes.
Vibrant private sector key to Kuwait’s future – IMF
The need for a vibrant private sector employing more Kuwaiti nationals has heightened as the Gulf country is facing “lower for longer” oil prices, the International Monetary Fund (IMF) has said.In a new report, the IMF said that although Kuwait is facing the oil price fall from a position of strength, the decline has weakened fiscal and external positions and generated large fiscal financing needs.Against this backdrop, the authorities have laid out a comprehensive reform strategy and have already taken steps to curtail spending and foster an environment more conducive to private investment, the IMF noted.It said the key challenge is to build on the strategy to accelerate reforms that underpin fiscal consolidation.The IMF said it supports a broad fiscal reform package that aims at tackling current spending rigidities – particularly wage bill, subsidies and transfers.
UAE invests nearly $2bn in UK’s renewable energy sector
Baroness Rona Fairhead, UK Minister of State for Trade and Export Promotion at the Department for International Trade, has revealed that the UAE has invested £1.5 billion ($1.97 billion) on renewable energy in the UK.”Brexit will help the UK pursue a more open economic policy. We are accelerating relations with more countries around the world and we are working extremely well with the UAE across multiple investment domains, particularly in areas of R&D, clean energy and new technologies,” the Minister told state news agency WAM.Speaking on the sidelines of the Abu Dhabi International Petroleum Exhibition and Conference, she added: “The UAE is UK’s fourth largest partner outside Europe. You come only next to US, China and India, which means that the UAE is a very significant partner for us.
Kuwait needs $100bn of financing over five years, IMF says
Kuwait will need $100 billion of additional financing over the next five years as mandated contributions to its Future Generations Fund leave a fiscal deficit, according to the International Monetary Fund.Contributions to the fund, excluding investment income, will mean an annual deficit of about 15 percent of gross domestic product, the IMF said in a statement concluding its 2017 Article IV consultation. Excluding FGF contributions and income, the lender expects Kuwait’s overall budget to remain “nearly balanced” through 2019, assuming a baseline oil price of $49 a barrel.Kuwait has cut subsidies and plans to introduce value-added taxation to plug a budget shortfall triggered by lower crude prices and production. It tapped international debt markets for the first time – raising $8 billion in March – and is also considering raising the debt ceiling, introducing an annual spending cap and changing the law to allow the sale of 30-year bonds.
SoftBank planning up to $25bn in Saudi investments
SoftBank Group plans to invest as much as $25 billion in Saudi Arabia over the next three to four years as the Japanese company run by Masayoshi Son deepens investment ties with the kingdom, according to people familiar with the matter. SoftBank aims to deploy up to $15 billion in a new city called Neom that Crown Prince Mohammed bin Salman plans to build on the Red Sea coast, the people said, asking not to be identified because the information is private.The Japanese company’s Vision Fund also plans investments of as much as $10 billion in state-controlled Saudi Electricity Co as part of efforts to diversify the utility into renewables and solar energy, the people said. SoftBank also will have some of its portfolio companies open offices in Neom, they said.The plans by SoftBank would bolster the crown prince as he cracks down on alleged corruption via a purge that has rattled investors.The infusion of cash also would aid the country as it seeks to diversify its economy away from oil. To put the magnitude of SoftBank’s plans into context, all foreign direct investment in Saudi Arabia totalled $7.45 billion last year, according to data from the Organization for Economic Cooperation and Development.
Saudi Aramco converts Jeddah refinery to distribution hub
Saudi Aramco has shut down its 80,000 barrel per day crude oil refinery in Jeddah indefinitely, converting the complex into a hub for oil products distribution, it said on Sunday.Aramco has been considering whether to shut the refinery for years because of age and environmental concerns as Jeddah’s growth had meant the refinery was in the middle of the city.Quoting its senior vice president for downstream, Abdulaziz al-Judaimi, Aramco said it could not expand the facility as demand for fuel from the refinery’s main consumers had dropped. In addition, it was not economically feasible and was close to residential areas.The plant, which started operations in 1967, served less than 20 per cent of demand from the Mecca region, western Saudi Arabia and its closure will increase demand at other Saudi facilities. A sources told earlier that the facility would be mothballed. The tanks will still be used to supply south Jeddah requirements through the Jeddah terminal, he said.
Citigroup, UBS said to be most exposed to tycoons in Saudi purge
Citigroup and UBS Group are among the international banks managing the largest share of assets for wealthy Saudis, some of whom are being investigated as part of a government probe into alleged corruption, according to people familiar with the matter. JPMorgan Chase & Co and Credit Suisse Group also manage billions of dollars for some of the kingdom’s richest individuals, the people said, asking not to be identified because of the sensitivity of the matter.Citigroup’s private bank counts Prince Alwaleed bin Talal, the world’s 58th-richest person, and Khalid al-Tuwaijri, former chief of the Royal Court, as clients, two of the people said. Both are among those who were detained in the probe, the people said.Saudi Arabia has long been the target of wealth managers such as UBS, Credit Suisse and Deutsche Bank, as well as other global banks seeking to advise the country’s ultra-rich. The kingdom was the 16th most populous country for high-net-worth individuals last year with 176,000, according to Capgemini’s 2017 World Wealth Report.It’s not immediately clear what implications the investigation will have on banks and their operations in the kingdom, the people said.
Active GCC oil and gas projects worth $331m

The combined value of the 361 active oil and gas projects in the GCC crossed $331.4 billion in November, according to new research.The Oil and Gas Construction Analytics report issued by BNC Network said the hydrocarbon sector represents 30 percent of the GCC economy and 60 percent of the total exports value.It added that the construction projects constitutes 2 percent of all active projects in the region while accounting for 14 percent of the total estimated value.The construction update comes at a time when the average oil price has recovered to $51.82 per barrel year-to-date in 2017, from the 13-year lowest average price per barrel of $42.55 in 2016, this is less than half of the $111.63 per barrel recorded in 2012.It added that the number of oil and gas projects in the GCC increased by 6 percent in Q3 compared to the previous quarter while the total estimated value of these projects increased by 5 percent. Avin Gidwani, CEO of BNC Network, said: “The renewed optimism in the global economy and a slight increase in demand is reflected in the latest Oil and Gas Construction Analytics issued by BNC Network.
Dubai’s DIFC launches $100m Fintech fund
Dubai International Financial Centre (DIFC) on Tuesday announced the launch of a $100 million FinTech-focused fund to accelerate the development of financial technology.The fund was announced during the inaugural Global Financial Forum, GFF, organised by DIFC, which was attended by over 350 influencers from the financial services industry.Essa Kazim, Governor of DIFC, said: “The fund will leverage the DIFC’s FinTech ecosystem consisting of attractive experimental licenses, market leading pricing and collaborative spaces. There is immense opportunity in this market, and this will be one more step towards shaping the future of finance in the region.The launch comes after Dubai was ranked 10th in The Banker magazine’s annual international financial centre (IFC) rankings, placing it alongside hubs such as London, New York, Hong Kong and Singapore.
Commodity Tracker
Commodity 13 Nov 20 Nov Chg.%
Brent 63.57 62.62 -1.49
WTI 56.82 56.76 -0.11
Natural Gas 3.17 3.07 -3.15
Gold 1277.1 1291.6 1.14
Business Events this week In UAE




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