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 5. TRADE  6. GULF



Dec 17 - 30, 2001

Turkey passes tight 2002 budget

Turkey's hopes of new loans from the International Monetary Fund (IMF) have been boosted after its parliament passed the country's 2002 budget.

Turkey needs the IMF's money to help it sort out its domestic debt problems and lift the country out of its worst recession since 1945.

To that end, it has promised the IMF that it will slash spending and raise revenue.

Ankara is ready to reform the country's tax system and improve spending management although the plans are controversial even within the government.

The 2002 budget puts tight controls on state spending, particularly wages for state employees and aims to slash inflation to just over 30% by the end of next year from its current level of 84.5%.

The measures should help boost growth to 4% in 2002, compared to a sharp fall in output this year when the economy is expected to shrink by 8.5%.

Turkey's budget deficit should also fall, to below 10% of the country's gross national product (GNP), while public sector revenues before debt payment should reach 6.5% of GNP.

Turkey's budget debates are closely watched by an IMF delegation which is currently in Turkey.

Both Ankara and the Fund are in talks to finalise conditions on a fresh $10bn (7bn) loan this week.

The loan would come in addition to a $19bn rescue package granted by the IMF earlier this year.

Turkey's stock market rose on the news that the budget was approved amidst high hopes that the government's negotiations with the IMF are about to completed.

IMF officials said earlier that the country is starting to climb out of its disastrous recession and the government is ready to set in motion the Fund's proposed reforms of the banking sector, along with widespread structural and fiscal reforms.

Africa's economy stumbles

Africa's economic growth is being hit as the global economic slowdown impacts on both aid and foreign direct investment in the region.

And the president of the African Development Bank (AfDB) has said the combination of the 11 September terrorist attacks and the economic fallout will be 'devastating' for Africa.

The African Development Bank predicts that current economic growth in Africa is barely 3-3.5% no more than the continent's rate of population growth.

In other words, said AfDB President Omar Kabbaj, "We are not growing at all in real terms."

Gross Domestic Product the broadest economic indicator growth - is usually much higher in countries with rapid population growth.

Before the onset of the global economic slowdown, the AfDB's had forecast a growth rate of 4-5% for 2002 and 2003.

While many countries are suffering from the economic slump, sub-Saharan Africa also boasts the fastest growing economy in the world.

According to the Economist Intelligence Unit (EIU), Equatorial Guinea's economy will rocket 34% next year.

Zimbabwe is expected to suffer a 5% decline in GDP, and its political and economic turmoil especially in the runup to a hotly contested presidential election in March 2002 is impacting on its neighbours, especially South Africa.

Somalia is though to be one of the biggest losers in the fallout from the post-September attacks.

Many oil producing countries especially Nigeria and Angola are suffering from the slump in oil demand and prices as a result of the slowing global economy.

Iran calls on UN to stop "massacre" of Palestinians

Iran has called on the United Nations "to stop the massacre" of Palestinian civilians, and give them international protection.

"The foreign ministry has called on the UN to stop the massacres of Palestinian women, youths and children, and to provide them with international protection", the foreign ministry said in a statement received by AFP.

Iran's foreign minister, in an interview with Qods (Jerusalem), a newly set-up news agency covering Palestinian issues, accused the United States of "targetting defenseless Palestinians instead of tackling terrorism at the root".

"Washington's approach toward the Middle East is one-sided", Kamal Kharazi said.

Saudi declares $12 bln budget deficit

OPEC kingpin Saudi Arabia on Sunday announced a 45 billion riyal (12 billion dollar) deficit for the 2002 fiscal year, following a cabinet meeting chaired by King Fahd.

Revenues were projected at 157 billion riyals and expenditures at 202 billion riyals, said Saudi Information Minister Fuad Al-Faresi, quoted by the news agency SPA.

The sharp drop in revenues from an estimated 215 billion riyals for 2001 is attributed to a major decline in oil prices following the September 11 attacks in the United States and cuts in oil production.

Saudi oil production stands at 7.541 million barrels per day (bpd) and its oil price is about two dollars less than the Brent crude which closed Friday at 18.10 dollars a barrel. Production is expected to be slashed to around seven million bpd in January.

Saudi Finance and National Economy Minister Ibrahim Al-Assaf estimated in a separate statement that the Saudi budget in the current fiscal year which ends on December 31 will boast a deficit of 25 billion riyals (6.7 billion dollars).

Economic test for Egypt

The Egyptian government is facing the first serious test of the new currency regime it introduced in August.

Egypt earns most of its dollars from foreign visitors, many of whom are reluctant to travel following the 11 September attacks in the US.

There are no figures as yet as to how much tourism has fallen in the past month, but officials forecast a 30% to 50% drop in the next year.

If the currency weakens as a result as many analysts think is likely the government may be tempted to discard its new policy and try and control the currency market.

Egypt devalued its currency by 6% in August, under pressure from the financial markets. It also broadened the band within which the Egyptian pound traded against the US dollar.

By making it easier for Egyptians to buy dollars, the previously flourishing local black market all but vanished.

Israel renews assault on Palestinians

The Israeli air force has launched fresh strikes on Palestinian targets in the Gaza Strip.

Helicopters and F-16 jets attacked a number of buildings in Gaza City, including a compound used by Palestinian leader Yasser Arafat.

The air raids took place as the American envoy to the Middle East, Anthony Zinni, met Israeli Prime Minister Ariel Sharon to seek an explanation for Israel's decision to sever all contacts with Mr Arafat.

Mr Zinni is expected to make an announcement later on Friday about the next steps he plans to take in his attempts to curb violence in the region.

The latest strikes followed helicopter attacks on targets in the West Bank in which a police station in Ramallah and offices of Mr Arafat's Fatah faction in Jenin were hit.

More housing loans for Bahrainis

Housing loans for homes worth BD41 million will be given to more than 2,000 Bahrainis to mark the country's National Day on December 16.

The loans will be used to buy land, construct new housing units and renovate the existing houses.

Firms keen to allow foreign stakes

Even as market authorities are mulling ways to push listed public joint stock companies to open up for foreign investment, more companies listed on Dubai Financial Market (DFM) are said to be readying themselves to do so on their own.

Several companies have evinced interest in offering stake in their companies to foreigners, according to Essa Abdulfattah Kazim, DFM director general. "Several have approached us and we have held discussions with a few regarding this. I think that once the market improves, these companies will come out with concrete schemes," he added.

TII share offer nearly trebles equity capital

The recent share offering by Kuwait-based The International Investor (TII) has nearly trebled the capital of the company from Dh212.86 million (KD17.68 million) to Dh605.55 million (KD50.68), followed by a significant change in the shareholding structure.

The company board met recently and approved the final allocation of shares. It has now just below 507 million shares with some 39 per cent being held by Sheikh Saleh Kamel and Dallah Albaraka Holding Co EC.

Daman Fund to be listed in 2002

Shares of Daman UAE Value Fund will be traded on the Dubai Financial Market (DFM) from 2002, with the fund's NAV to be displayed on the board beginning next week.

Shell signs deal with Oman LNG

Multinational Royal Dutch/ Shell has reached an agreement to buy 700,000 tonnes a year of liquefied natural gas from Oman from 2002 for its customers in Spain, Shell and Oman LNG said.

The contract, which is subject to board approval, will last for five years and is the fourth major supply contract signed by Oman LNG.

Under the deal, the LNG will be shipped to Spain on an LNG tanker chartered by Shell but Oman LNG has an option to replace this with its own ship from 2004.

Egypt devalues Pound

Egypt has devalued its currency in the hope of giving its troubled tourism industry a shot in the arm.

The move, a 7.8% devaluation of the Egyptian pound to 4.50 to the US dollar, is seen as a bold bid to bolster the country's economy.

Egypt, Syria condemn Israel

Egypt and Syria have accused Israel of being a threat to peace and security in the Middle East.

A joint statement was issued after a brief visit by Egyptian President Hosni Mubarak to his counterpart Bashar al-Assad in Damascus.

The statement said Israel's conduct in the Palestinian territories was an act of aggression and added that the Palestinians had the right to defend themselves.

The two presidents called on the international community to intervene to put pressure on Israel to halt its military operations.

US officials meet Iraqi Kurds

US State Department officials are meeting Kurdish opposition leaders in northern Iraq, fuelling speculation that the US is planning to extend its war on terror to the country.

The US delegation, the first to visit since February, arrived in the Kurds' UN-sponsored safe haven on Monday.

The region is outside Baghdad's control, so Kurdish forces there could be key to any attempt to remove the Iraqi President, Saddam Hussein, from power.

The move came as US temporarily transferred the headquarters of its military operations in the Middle East and Central Asia from Georgia to Kuwait.

Syria to have new cabinet

The Syrian Government has resigned at the request of President Bashar al-Assad in a move which appears linked to planned economic reforms.

The president, who came to power last year, instructed Prime Minister Muhammad Mustafa Miro to form a new cabinet with the existing ministers retaining their posts until it is up and running.

The move was announced briefly by the Syrian state news agency Sana, which gave no reason for it.

But an official quoted by the French news agency AFP said that the 60-year-old Mr Miro had failed to make good on Mr al-Assad's promises to revamp the economy and attract foreign investment.

Turkey to drill for oil in Iraq

Turkey will drill for oil in northern Iraq, a mainly Kurdish region which has been outside Baghdad's control since the Gulf War.

The head of the state-owned Turkish Petroleum Corporation (TPAO) Kenan Veziroglu said on Tuesday the 10 wells were planned in the Barzani region.

Exploration work is expected to start in January in areas held by the Kurdistan Democratic Party (KDP) which is led by Massou Barzani, a close ally of Ankara.

Iraq, which runs oilfields near the town of Kirkuk just south of the Kurdish-held areas, has not made an official response to the plans.