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STRONG PRIVATE SECTOR TO HELP GCC TO SAVE $165 B IN CAPITAL SPENDING

GCC countries collectively can save up to $165 billion in capital spending by 2021 across utilities, airports, healthcare, and education by involving the private sector, a study said.

The six countries, which have to cope with challenges linked to oil dependence, workforce, and public services, also could generate $114 billion in revenues from sales of utility and airport assets, and up to $287 billion from sales of shares in publicly listed companies, said the study issued by the Ideation Center, the leading think thank for Strategy&.

“The GCC states could also narrow the innovation gap with other countries, enhance the delivery of and access to government services, and improve their infrastructure. With more Private Sector Participation (PSP), these countries can achieve operational efficiencies of 10 to 20 per cent, reducing government budget deficits,” it said. Salim Ghazaly, partner at Strategy& in Beirut, said past PSP in GCC countries occurred on an ad-hoc basis and in most cases without strong commitment from stakeholders, largely due to high oil prices.

“However, currently, we are witnessing a serious and structured approach to PSP supported by well-defined national programmes, proper legal and regulatory frameworks, and best-in-class institutional models. If properly implemented, these programs could yield significant benefits to the region, including increased job creation, enhanced quality of services, faster localization of industries, better innovation, foreign direct investment, and government expenditure rationalization,” said Ghazaly. Greater PSP could also help the GCC countries to close their innovation gap with other countries. Between 2013 and 2015, 70 per cent of global innovations stemmed from the private sector, versus 13 per cent from the nonprofit sector and only eight per cent from the public sector.

The study pointed out that GCC countries have been facing a few long-term challenges to the sustainability of their economies: a high dependence on oil for government revenues (73 per cent of revenues and 82 per cent of exports are linked to oil); a lack of workforce diversity and skills creating unbalanced labour markets (for instance 78 per cent of women in Saudi Arabia do not participate in the workforce, and 54 per cent of the workforce is made up of expatriates); a growing need for public services such as healthcare, infrastructure, and education (the UAE is investing $300 billion in infrastructure until 2030); and an under-developed ecosystem for innovation, which is a key driver of national competitiveness.

DEMAND FOR STEEL RISES

With real estate and local infrastructure development in full swing, demand for steel is on the rise Conares, the second largest and the only private steel manufacturer in the UAE, is geared for a busy 2017. The company has already earmarked the increase in its manufacturing capacity to 1 million tonnes. The conglomerate based in Jebel Ali Free Zone commenced the installation of its 12” pipe mill at its facility.

Steel manufacturing sector in the UAE is currently witnessing standard trends with improvement in growth by 15 to 20 per cent compared to that of the last year, thanks to the announcement of major infrastructure development projects across the country. From the steel industry standpoint, local manufacturers are in a strong position to cater to each of the upcoming projects.

The state-of-the-art steel plant of Conares spread in an area of over 1.5 million square feet at Jafza currently manufactures steel pipes and rebars. The rebars form about 20 per cent of the UAE market shareand the pipes cater to 25 per cent of the total market demand in the region. Operational in these two major segments of the steel industry, Conares has carved a niche for itself and grown to be a key manufacturer. Its global and regional presence gives Conares a competitive advantage in sourcing raw materials. Conares has been growing to deliver 1 million tonnes of steel annually. Being a 100 per cent privately owned entity, the company’s assets exceed $300 million of investments in the UAE.

“2016 has been fairly good with a consumption of 3 to 3.2 million tonnes of steel, while in 2017 we expect the market to grow to about 3.5 to 4 million tonnes. Looking further at 2018 and 2019, there willbe moderate growth. The steel market in the UAE is very active with the local producers being able to match up to the international prices and the country’s growing demand. We are indeed very thankful to the UAE’s Ministry of Economy for the support extended to us. We actively seek further considerations from the Government to protect the interests of local producers in the Emirates. The competition among the indigenous and international imports is fierce with the UAE manufacturers matching up to the prices at most times.

INDIA TO INVEST IN IRANIAN PORT CHABAHAR

After much dilly dallying, India has started special allocation for development of Chabahar port in Iran in its annual budget. Indian government has allocated $22.5 million for the development of Chabahar port in financial year starting from April this year.

India had received contract to develop a multipurpose cargo terminal (600 meters length) and a container terminal (640 meters length) at Chabahar port last year in May. Indian government had agreed to equipboth the terminals with equipment worth $85 million. Last year, Indian government had allocated $15 million for the said project. Indian has also planned major event at Chabahar port in April this year whereas it will showcase the opportunities for private players. India had pledged $500 million investment in the project mostly from Indian private companies having business interest in Iran.

India’s EXIM bank has also promised $150 million credit for the development of phase 1 of the port, within 4 months of receiving their application through Central Bank of Iran. Government sources told Sputnik that it was awaiting the submission of projects from Iranian side.

Gwadar will provide India an access to Eastern transit corridor to eastern part of Iran, landlocked Afghanistan and CIS countries like Turkmenistan, Uzbekistan etc. Under the port deal, India will also build rail road in Afghanistan aiming for Afghanistan’s iron reserves, which are estimated to be worth up to $3 trillion. Chabahar project is also considered as alternative to North South Corridor i.e. access to Russia and North Baltic countries.

Chabahar is considered as an India’s answers to China’s One Belt One Road policy under which it is developing Gwadar port in Pakistan; just few miles away from Chabahar.

 

IRAN TO BUILD REFINERIES IN SPAIN & BRAZIL

TEHRAN – Iran is negotiating with Spain and Brazil for construction of oil refineries in these countries, ILNA reported on Friday quoting an oil official. “The international affairs office of National Iranian Oil Company (NIOC) is in charge of these projects and we conduct the feasibility studies,” Abbas Kazemi, the managing director of National Iranian Oil Refining and Distribution Company (NIORDC), said.

According to Kazemi, NIOC plans to build several oil refineries abroad to expand the country’s oil market. “The refineries will be designed in a way that their feedstock will be only Iranian crude to guaranteesthe target market,” he noted. As Mehr News Agency reported, according to Arman Moqaddam, director of corporate planning and member of the board of directors of NIORDC, construction and implementation processfor 12 new oil and gas condensate refinery complexes has also begun recently inside the country.

IRAN’S OIL OUTPUT UP

TEHRAN – According to a new survey by Reuters published on Tuesday, Iran has increased its oil output by 20,000 barrels per day (bpd) in January after the country was exempted from the OPEC cuts. A deal reached on December 10 between the members of OPEC and non-OPEC producers marked the first such pact since 2001.

Under it, producers agreed to lower output by nearly 1.2 million bpd starting from January 2017, to ease a global glut that has weighed on oil prices for more than two years. Iran was exempted from the OPEC deal, a boon for Tehran which had argued it needs to regain the market share it lost under Western sanctions targeting its nuclear program.

In a report last week Shana quoted Iranian Oil Minister Bijan Namdar Zanganeh as saying that Iran’s crude oil output was 3.9 million bpd in January. Speaking on the sidelines of a government cabinet meeting on January 25, the official denied Iran having stored crude oil in floating tankers, saying only gas condensate has been stored on water which will be sold by the calendar yearend (March 20, 2017).

EMIRATES OFFERS REFUND TO AFFECTED PASSENGERS

Emirates will continue to comply with entry requirements for travel toand from the United States, as required by U.S. Customs and Border Protection, Emirates Airline has stated. “A very small number of our passengers travelling were affected by the new U.S. immigration entry requirements implemented by the US Customs and Border Protection on 28January 2017. Where applicable, we are assisting the affected travellers with their flight re-bookings,” said Emirates spokesman in a statement.

Emirates is offering both re-booking and refund options to passengers holding passports from the seven affected nations that are booked to travel to and from the USA. Passengers are also responsible for ensuring that they have the required documents for their travel, and they can view the airline’s website for more information, the statement added.

“The recent change to the US entry requirements for nationals of seven countries applies to all travellers and flight operations crews. To date, no Emirates crew has been affected by the change. We have made the necessary adjustments to our staffing to comply with the latest requirements. Emirates continues to operate flights to the US, as scheduled,” said the spokesman.

SAUDI  ARABIA DRIVES FOR SOLAR POWER GENERATION

Saudi Arabia’s long-awaited drive to free up more oil revenue byshifting to solar power generation is expected to pick up speed next quarter, according to local developers eyeing contracts.

“I’m fully expecting within the first quarter 500 megawatts to come out in tenders and then it’ll ramp up,” said Paddy Padmanathan, the chief executive officer of ACWA Power International in Riyadh. “That will be a game changer for the region.”

The world’s biggest crude exporter also burns more oil than any other country to generate electricity. According to the most recent International Energy Agency figures, the kingdom consumes at least 900,000 barrels a day at peak periods of the year to keep the lights on — an amount worth over $16 billion a annually based on current oil spot prices. Integrating more solar power onto the Saudi grid could free up more crude for export.

KUWAIT ONEROUS TASK TO MAKE A NEW START

Kuwait’s budget for fiscal year 2017-18 has been prepared on the assumption of a gradual return of normality to the oil markets. Kuwait stands out for allocating a portion of its oil revenues for the next generation, a fact contributing to the higher than forecasted budgetary deficit. By one account, the equilibrium point of expenditures and revenues requires an average oil price of $71 per barrel, something not attainable in the current circumstances.

The budget assumes an average $45 per barrel as opposed to $35 in the previous one. Oil prices have hovered around$50 since Opec’s agreement late last year to limit production. Kuwait produces an average of 2.8 million barrels per day. (Kuwait’s fiscal year runs from April to March, the sole Gulf state who doesn’t operate one on a straight calendar year.) Projected expenditure and revenues for fiscal year 2017-18 stand at $65.2 billion and $43.6 billion, respectively. Expenditures are up by 5 per cent while total revenues are up by 30 per cent on the back of stronger oil income. The data suggests a budgetary deficit of $21.6 billion.

Notably, the gap is 25 per cent below that assumed for fiscal year 2016-17 which ends in March. A primary change concerns the assumption of stronger revenues, projected at $38.4 billion, up by nearly 36 percent from the earlier budget exercise. This marks the third year in a row of a deficit. Until then, Kuwait had developed a habit of recording surpluses for 15 consecutive years. This was made possible via under-estimating revenues and overestimating expenditures, in turn supported by relatively strong oil prices, a luxury no longer available.

The economy is heavily dependent on the petroleum sector for its well-being. Collectively oil and gas revenues account for 88 per cent of the total projected. Higher expenditures should help the authorities meet some goals related to the New Kuwait strategy. The plan initiatives call for a diversified economy, advanced infrastructure, quality health care, creative manpower resourcing, a sustainable living environment, and distinguished international status.

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