May 30 - June 05, 2005



Gulf finance ministers, according to reports, have agreed that duty-free US imports may be exempted from their unified tariff system, accepting that they cannot stop bilateral free trade deals with Washington. They accepted in principle that the US should be given an exemption.
The agreement by finance ministers earlier this month to accommodate individual accords with the US will be presented to foreign ministers of the GCC for approval on June 4. It is said that Saudi Arabia was not happy when neighboring GCC member Bahrain signed a free trade accord with the US last year.



It said the deal violated the GCC's common external tariff agreement which set import duties at 5%. Other GCC members, Oman and the UAE, have since started their own free trade talks with the US. The principle has been accepted that the US and only the US is given that exemption. A technical committee will look into practical ways to accommodate individual deals reached with Washington without undermining the GCC customs union, under which the six member states plan to dismantle customs posts on their joint borders.

It may be recalled that Saudi Finance Minister Ibrahim al-Assaf had warned in January the kingdom would consider imposing customs duties on foreign goods imported duty-free through its neighbors. Reports said one GCC proposal was for the government of any country which agrees a free trade deal with Washington to pay the 5% duty on any US imports instead of the importers themselves and put the money in a regional fund.


Abu Dhabi may set up a dedicated special economic zone to attract Indian investment, even as the emirate initiates talks with major industries like Essar Group for possible collaboration.

Hussain J al-Nowais, member of the board of directors of the Higher Corp for Specialized Economic Zones was quoted as saying "We are looking at various options to enhance collaboration with Indian companies, including setting up a dedicated special economic zone."

Al-Nowais is part of a 10-member delegation, which includes prominent non-resident Indian businessmen, accompanying Sheikh Hamed bin Zayed al-Nahyan, chairman of the Department of Economy and Planning of Abu Dhabi, on his first visit to the capital to woo Indian investment.

Sheikh Hamed also met leading Indian industry representatives at a luncheon hosted by the Confederation of Indian Industry (CII) and Finance Minister P. Chidambaram.

Prior to arriving here, Sheikh Hamed and his team held talks in Mumbai with several industry representatives and also visited the steel and power complex of Essar Group at Hazira.

"We are looking at Essar for possible partnership in setting up a steel facility in Abu Dhabi. We are in the early stages of discussions and are looking at a joint partnership with them," Al Nowais said.

Plans for setting up a major steel complex with a 6 million tonne capacity were under active consideration in Abu Dhabi provided gas supplies at competitive rates was assured.


From a peak of almost $58 a barrel, oil prices have lost some ground over the past few weeks. For a change this is welcome. Not only will the consumers welcome it, but also the producers including the major player Saudi Arabia, who will also be happy with the trend. For they all realize prices that are too high are not in their long or medium term interests.

For many months though oil was in even higher territory, the real returns to the oil producer was somewhat compromised on account of the weakening dollar. And as soon as dollar started to regain some of its lost ground in comparison to major global currencies, black gold, as other factors are definitely playing their role in stabilizing the crude markets. Indeed the resolve of the oil producers, especially Saudi Arabia to supply to the markets as much oil as was required also has helped in soothing the nervy markets. Even the Saudi government at the highest level, during this week's cabinet meeting, reaffirmed its determination to keep the global economy well oiled.

Then oil inventories in the United States the major oil consumer has been reported to be rising lately quite significantly. The Energy Information (EIA) last week reported that crude oil inventories (in the US) rose by 4.3 million barrels to 334 million in the week ending May 13. This level is 25.1 million barrels 8.1 percent above the five-year US average for the week. This was the biggest stockpile of crude in the US since June 1999. With the summer driving season, just round the corner, the issue of gasoline inventory was also under tremendous scrutiny. Despite the concern about higher oil prices, as per the largest US travel organization AAA, a record 37.2 million Americans were expected to hit highways during the US Memorial day weekend end this month. According to the EIA, gasoline inventories in the meantime, also climbed by 1.1 million barrels. In fact gasoline stocks were just below the upper end of the average range, the EIA said. This allayed fears in the market that stockpiles won't be able to match summer driving demand in the US.

In the meantime, OPEC has brought down its projection of global oil demand growth for the year by 80,000 barrels a day to a total of 83.94 million bpd. It now expects the global demand to grow by 1.82 million bpd. "Slower demand growth of the United States or China coupled with large increases in OPEC output since mid-2004 and the substantial efforts by member countries to increase production capacity should remove a large part of the speculative premium in the oil price,' the OPEC monthly report observed.

OPEC's downward revision followed the International Energy Agency's cut in expected demand growth. The IEA forecasts that the global demand growth would slow down to 2.2 percent. This is in sharp contrast to the 3.5 percent demand growth registered by the IEA last year.

Higher than average oil prices have somewhat dented the market's capacity to absorb additional supplies, analysts in Dhahran, the virtual global energy capital concede.



Things however, may change in the crude markets later this year. A US weather forecast last week predicted that up to 15 tropical storms and hurricanes would form in the Atlantic and Caribbean this year, possibly heralding another difficult season for the oil and gas producing Gulf of Mexico, especially in view of last year's experience, when similar storms knocked out oil platforms for months.

Some concerns on Nigerian crude supplies have also emerged, as gang violence ahead of Nigeria's 2007 presidential election may disrupt exports from Africa's biggest crude oil producer, US CIA's analysts were quoted as saying last week. Unrest in Nigeria, instability in Iraq and elsewhere in the region and the unprecedented Chinese thirst for oil has been some of the many factors that have kept global crude markets on edge. Despite some apparent easing of the pressure, the markets are still not entirely off the hook!

Qatar's vision is based on building a vibrant and prosperous economy to the benefit of the people and the international partners, Minister of Economy and Commerce Sheikh Mohamed bin Ahmed bin Jassim al-Thani said.

Addressing the Third Annual Conference on Finance and Investment in Qatar on the second and final day, Sheikh Mohamed said Qatar's Economic Development Strategy is to promote a free and modern economy with a business friendly environment to accelerate growth in non-oil sectors as well as developing the oil and gas reserves and to enhance and encourage the role of the private sector.

Sheikh Mohamed told the conference that Qatar wants to attract foreign investment by expanding the bilateral trading agreements, improving Qatar's external competitiveness and heavily investing in the infrastructure, education and health.

He said Qatar's GDP jumped from $8.1 billion in 1995 to $23.6 billion in 2003 and to $28.4 billion in 2004. Qatar's per capita income ranks among the highest in the world ($32,070 in 2003 and $38,130 in 2004).


More insurance companies are likely to be licensed to operate in the Kingdom as the Saudi Arabian Monetary Agency (SAMA) urged 26 insurance firms that were previously operating in the country to re-apply after fulfilling the conditions set by authorities.

SAMA has announced that these 26 firms can present their intent to continue their activities in the Kingdom and complete licensing procedures after fulfilling necessary conditions. SAMA backed down from its previous decision to close down the 26 firms after the Council of Ministers gave them a three-year grace period to correct their situation. The agency also brought down the number of companies that have withdrawn from the market from four to two: Abu Dhabi National Insurance Co. and Aman Saudi Insurance Co.

The National Company for Cooperative Insurance (NCCI) is the only licensed insurance firm in the Kingdom at present. Saudi Arabian General Investment Authority (SAGIA) licensed 13 new insurance companies in March this year with a total capital of SR2.5 billion to operate in the Kingdom.

Kingdom's insurance regulator, the 13 companies as well as nine others are currently completing licensing procedures. The addition of 26 more would bring the total number of insurance companies in the market to 49. SAMA has listed 14 companies on its website, saying they have reached advanced stages in their licensing procedures. They are: Assurance Saudi Fransi, Saudi United Cooperative Insurance (AMITY), Saudi Indian Insurance Co., United Cooperative Assurance Co. (UCA), BUPA Arabia, Al-Ahli Takaful Co., Saudi National Insurance Co. SABB Takaful, Arabian Shield Insurance Co., Al-Rajhi Company for Cooperative Insurance, Al-Alamiya Insurance Co., the Mediterranean & Gulf Insurance & Reinsurance Co. (MedGulf), AXA Cooperative Insurance and Tokio Marine & Nichido.

SAMA included Arabian American Insurance Company (AAICO) and American Life Insurance Company (ALICO) among companies that had expressed their desire to withdraw from the market. But the new list does not comprise the two firms, indicating they would continue their operations in the Kingdom.

The 26 companies, which were allowed to re-apply, include Saudi-European Cooperative Insurance Co., SACIR, Arab-German Insurance Co., Islamic Assurance Company, Islamic Insurance Company, Delta and UCI.

The new move comes as part of SAMA's efforts to regularize the market, which is set to exceed SR15 billion by 2009 as a result of growing demand for medical and car insurance. The market is currently estimated at SR4 billion with car insurance having the largest share of 32 percent, medical insurance 22 percent, property insurance 17 percent and others 29 percent.

It is estimated that car insurance will grow to SR5 billion and medical insurance to SR6.3 billion within the next four years. He also predicted that per capita insurance spending could increase to SR750 per year, thus increasing the sector's contribution to the GDP from less than one percent to five percent.

Meanwhile, the Cooperative Health Insurance Council recently approved five companies to provide health insurance service in the Kingdom. The council also authorized 117 health institutions across the country 40 in Riyadh, 11 in Jeddah, nine in Dammam, 14 in Madinah, and three each in Makkah and Jubail to implement the scheme from June 1.


Saudi Television Manufacturing Company (Saudi SAT) has signed an exclusive dealership agreement with Egypt SAT Company under which 15,000 televisions manufactured by Saudi SAT will be exported to Egypt in 2005 for SR60 million.

The agreement was signed in Cairo and it is the first agreement to be implemented after the recent Arab free trade zone agreement that calls for customs exemption between Arab countries. These will be the first Saudi appliances in the Egyptian market and the first batch will be shipped next week.

Saudi SAT was established seven years ago. It has a manufacturing site in Jeddah which cost some SR600 million.

The company has already exported its products to Sudan and Syria. The Egyptian SAT ordered different a product line including many of the latest LCD television sets with flat screens which hang on walls.

Saudi Arabia is the third country to manufacture these LCD sets after Japan and Korea. Our products are of very high quality and our prices are 20 percent less than others in the Saudi market and much less than the cost of other brands in Egypt, company officials said. There will be an addendum to the agreement with Egypt SAT to export 300,000 units of its mobile brand called Jadailo for SR750 million. Jadailo is on the production line now and will be available in the Saudi market within two months. Our mobiles are also of the latest and best quality including the LCD screen and G3. We will be shipping the mobiles to Egypt in three months, company representatives said

According to reports, Laila Alfar, chairperson of Egypt SAT board of directors, said that this agreement would bolster trade relations between the two countries and open more investment opportunities. She also said that Saudi products have gained the confidence of the Egyptian people and that they look forward to future agreements between the two.



(Inputs from PAGE sources)