GULF VIEW

 

Aug 22 - 28, 2005

.

OIL BOOM NARROWS DOWN UAE'S FISCAL DEFICIT

High oil and gas prices helped the UAE to narrow down its fiscal deficit by 94.1 percent to 855 million dirhams in 2004 from 14.4 billion dirhams in 2003, said official figures released by the banking circles.
Revenues increased by 22.6 percent in 2004 to 94.4 billion dirhams up from 77.0 billion dirhams in 2003, mainly due to the increase in oil and gas earnings. The gross national product at constant prices rose to 323.6 billion dirhams in 2004, up 7.4 percent over 2003, the report said. GDP at base price and at constant prices of 2000 rose from 301.3 billion dirhams in 2003 to 323.6 billion dirhams in 2004.

 

 

GDP at current prices jumped from 321.75 billion dirhams in 2003 to 378.76 billion dirhams in 2004. GDP at constant prices provides a more accurate picture of the economy as it does not take into account inflation.

The value of total exports and re-exports increased by 23.3 percent in 2004 compared to 2003, reaching 303.9 billion dirhams. This was mainly due to the increase in receipts of exports of the hydrocarbon sectoring other exports and re-exports.

The UAE's balance of payment (BoP) surplus reached 12.8 billion dirhams in 2004 against 4.7 billion dirhams in 2003. Both the trade balance and the current account reflected higher surpluses compared to 2003, while the negative balance of the capital and financial account increased by 8.3 percent.

The increase in value of exports of the hydrocarbon sector was mainly due to increased production volumes resulting from increase in the refining capacity gas production capacity and expansion in production of condensates on the one hand, and to the increase in oil prices, said the report. Weighted average price of oil rose from $28.1 a barrel in 2003 to $36.1 a barrel in 2004. This led to an increase in value of exports of oil (including condensates which are not included in the country's production quota set by OPEC) from 81.2 billion dirhams in 2003 to 108.8 billion dirhams in 2004 and in value of exports of gas by 19.9 percent compared with 2003 to 17.2 billion dirhams.

The value of exports of petroleum products also increased to 15.2 billion dirhams in 2004 against 13 billion dirhams in 2003. The value of commodity exports, including those from the free zones, continued to rise over the past few years to reach 60.9 billion dirhams in 2004 compared with 51.2 billion dirhams in 2003.

Exports from the free zones constitute 80 percent of the country's commodity exports valued at 48 billion dirhams in 2004. The value of re-exports (including non-monetary gold) also rose from 81.6 billion dirhams in 2003 to 101.8 billion dirhams in 2004.

A substantial portion of the increase reflected in increased reliance by some GCC countries on the country's seaports for imports, as a result of the GCC countries Customs Union. The value of total imports FOB (including free zone imports) increased from 168.3 billion dirhams in 2003 to 199 billion dirhams in 2004. This was attributed to rapid construction and building activity, rising domestic and external demand resulting from population increase and the need to meet the requirements of re-exports.

The report said that the geographical distribution of the total value of imports shows that the share of European countries dropped from 30.1 percent in 2003 to 29.8 percent in 2004. Within this group, the share of Germany was the highest, increasing from 7.1 percent to 7.5 percent. The share of Asian countries rose slightly to 45 percent against 44.7 percent in 2003.

SAUDI ARABIA'S SURPLUS BUDGET

Saudi Arabia's budget surplus is expected to cross SR110 billion ($29.33 billion) this year, banking on surging oil prices, a report issued by Saudi British Bank (SABB) said. The report said it expected the Kingdom's revenues from oil exports to reach SR420 billion ($112 billion). "Our forecast is for Saudi government revenues to reach SR420 billion, with a budget surplus of approximately SR110 billion. In the IQ2005, our estimates put oil exports revenue for Saudi Arabia at SR105 billion. If this continues throughout 2005, oil export revenues alone will reach SR420 billion," the report said.

Last year, the Kingdom made a budget surplus of SR98 billion ($26.1 billion) reaping a windfall from record prices for its crude exports. The government then said part of the surplus would be used for repaying public debts estimated at SR660 billion.

An official statement said that revenues in 2004 soared to SR393 billion, almost double the initial government projections, while spending was SR295 billion. More than SR30 billion of last year's surplus will go toward development projects. Another SR11 billion will be used to raise the capital of the Saudi Credit Bank and Saudi Real Estate Fund. "The remaining revenues will be allocated to settle part of the public debt," the Finance Ministry said.

In its second quarter report, SABB based its oil revenue forecast on the US Energy Information Administration, which continues to predict WTI above $50 a barrel throughout 2005 and 2006, taking Saudi government revenues well in excess of SR400 billion a year.

With Saudi oil production already averaging 9.5 million bpd in 2005, even a drop in output through the summer months in the Northern Hemisphere, could still see overall Saudi production in 2005 averaging well above 9 million bpd, the report pointed out.

The bank said rising oil revenues would have a "knock-on" effect for the non-oil private sector, adding that it would boost government spending and create a much higher consumer and business confidence. "It will also have substantial monetary effects assisting credit creation and greater liquidity," it pointed out. The report also highlighted growing foreign investment in the Kingdom.

 

 

FUEL OIL CONTRACTS

Dubai Gold and Commodities Exchange (DGCX) will launch its energy portfolio with a fuel oil contract next year to help position Dubai as the Gulf's energy trading hub, it is learnt.

DGCX, a joint venture between free zone authority Dubai Metals and Commodities Center and Indian partners, expected to be launched in November with a gold futures contract. Freight, energy and more metals contracts will follow on the electronic derivatives market in Dubai emirate, part of OPEC producer United Arab Emirates.

Tilak Doshi, executive director of the energy division, said the focus would be on fuel oil at first and then incorporate other refined products such as gasoline and gas oil. "Now, we are in the process of industry consultations. We've held a first round in Dubai as well as in Bahrain and Sharjah to talk to producers, traders and storage companies," he said. "We are looking at the first half of 2006 for the actual launch of the contract," he told Reuters, adding that work on finalizing contract structure and details would take place after industry consultations. He said the fuel oil trade involves a range of commodities with different specifications, including 180-centistoke and 380 centi-stoke fuel oil as well as straight-run and cracked material.

Dubai government has also signed a deal with the New York Mercantile Exchange to launch the Dubai Mercantile Exchange (DME) by the middle of 2006. DME organizers have said they plan to launch by the middle of 2006 with an initial offering of a crude futures contract and that fuel oil futures will also be introduced early in the exchange's operations.

Doshi said the DGCX exchange would create a transparent pricing benchmark for Middle Eastern refined products. "The Middle East is emerging as a price discoverer in its own right. For instance, the UAE emirate Fujairah is already the second largest bunkering center behind Singapore," he said.

The port of Fujairah had annual fuel oil sales of 12 million tons in 2004, netting $2.5 billion. Still stronger crude oil prices are expected to ensure even higher sales of marine fuels this year and further investment in the East Coast emirate's marine fuels, or bunkering, industry is also anticipated. "The feedback from the industry is that there is a requirement for price discovery," Doshi said.

Doshi said both DGCX and DME would help boost transparency. "They are focusing on sour crude and ours is on the refined products side. If we feel there is space for us in other areas including crude that will be for the industry to decide" he said. "In Dubai, initiatives are undertaken by several groups and this creates healthy internal competition."

The exchanges are part of Dubai's ambitious plans to boost its position as the Middle East's prime trading center. It is already the Gulf region's tourism hub and is working on establishing itself as a financial district.

SAUDI WATER PROJECT

Kingdom of Saudi Arabia has signed an agreement with a French water management company to evaluate a water distribution project in Jeddah it is learnt

The project was signed by Abdullah ibn Abdul Rahman Al-Hussayen, minister of water and electricity and Jacques Bertrand, president of Safege Consulting Engineers, for the SR20 million project, which will be completed in six months. "The effort is part of the Kingdom's plan to privatize its water and electricity sector.

He said that a similar agreement was signed in May this year to evaluate the water project in Riyadh. According to the agreement, the company is expected to submit a detailed report on the production and distribution of drinking water, billing, and sewage and identify other priorities in the water sector, the minister said.

A special committee headed by Loay Al-Mussallam, deputy minister for planning and development, has been set up by Al-Hussayen to supervise the evaluation of the projects in Riyadh and Jeddah and to explore ways and means for the privatization of water projects. The minister hopes to carry out a similar project in the Eastern Province.

Speaking to Arab News, Bertrand said his company was not new in the Kingdom, "It was the first company which detected ground water in the city of Riyadh in the early 60s," he added.

Two years ago, he said, the company undertook a detailed study on institutions dealing with water in the Kingdom. "It took nearly seven months to study the water distribution system in Jeddah prior to the signing of the agreement."

He said his company is one of the two leading water management companies in France, which serves more than 100 million inhabitants throughout the globe. "We are happy to cooperate with the Kingdom in its efforts to effect improvements in the Kingdom's water sector."

The company assists its global customers in the water sector in diagnostics, audits, scheduling, feasibility and impact studies and training.

"One of the top priorities of the Kingdom is to give fresh potable water to its people. We are happy that we are able to join the Kingdom in its efforts and also feel confident that the French company will do a good job in this project," Christian Bodin, economic and commercial counselor at the French Embassy said

HUMAN CHAIN AROUND ISFAHAN UCF

Over 1700 Iranian students joined hands to knit a human chain around the Isfahan Uranium Conversion Facility (UCF) last week, the Students' Justice-Seeking Movement issued a statement reaffirming the Iranian nation's inalienable right to access nuclear energy.

The statement said that guaranteeing the independence and dignity of the Islamic Republic is among the great causes of the Islamic Revolution, for which Iranians have paid a heavy price.

"The recent resolution of the International Atomic Energy Agency Board of Governors indicates that authoritarian countries intend to impose their demands on Iran and thus deny Iran's inalienable right to access peaceful nuclear technology, but the Iranian nation should now prove that it will never accept the West's discriminatory behavior," the students declared in their statement.

Following are the main positions of the Students' Justice-Seeking Movement as elaborated in their statement:

1. While condemning the recent resolution of the IAEA Board of Governors, we hereby announce that it seems that the real mission of the IAEA is safeguarding the interests of authoritarian powers, including the United States. Iran has never sought to produce nuclear weapons and has proven this with efficient objective guarantees. We believe that these authoritarian powers are actually afraid that Iran will become a model for independent nations seeking to oppose them. Fear that the ideology of the Islamic revolution and religious democracy could spread throughout the world is the main reason behind all these pretexts.

2. The recent resolution of the Board of Governors once again proved that these authoritarian powers cannot be trusted, and so the Iranian nation is now quite sure that it should expect no cooperation whatsoever from them in safeguarding its independence and national interests. Therefore, the future government should rely on Almighty God as well as the support of its people. It should also review its foreign policy and take measures to defend the national dignity of Iranians.

3. It has been proven over the course of history that the only way to oppose the extremist demands of authoritarian powers is by insisting on maintaining revolutionary principles and values. That is to say, this is the only way to force the enemies to back down and to guarantee independence. The resumption of nuclear activities at the Isfahan Uranium Conversion Facility is an appropriate measure, which should be followed by the resumption of nuclear activities at the Natanz complex as well.

4. It is quite clear that Iran's insistence on using peaceful nuclear technology will impose some political and economic costs on the country. However, the Iranian nation will withstand all pressure but will not surrender its independence and dignity.

5. Over the past two years, Iranian students have shown that, despite all their differences, they are quite united in regard to Iran's nuclear dossier and will not allow the country's officials to back down from their justified positions. So the Students' Justice-Seeking Movement hereby underlines the necessity to resume nuclear activities.

At this juncture, it is essential to maintain total unity and awareness and to monitor the performance of governmental organizations responsible for Iran's nuclear dossier.

Prior to the event on Tuesday, the director of the Isfahan Nuclear Energy Research Center, Dr. Faqihiyan, said that Iran does not seek confrontation with any nation but at the same time will not forgo its inalienable right to access nuclear energy.

He told the students that the human chain they formed around the Isfahan UCF could be regarded as a chain of dignity, nobility, and resistance because making use of nuclear energy for peaceful purposes is the inalienable right of every nation.

He went on to say that anti-Iranian propaganda is being disseminated to make the world scared of the Islamic Republic, although the United States was the first and only country which ever dropped nuclear bombs on innocent people, thus betraying the human race.

IRAN CABINET NOMINEES RECEIVE MIXED RESPONSES

President Mahmud Ahmadinejad's proposed cabinet for the new Iran government has received mixed responses from conservative lawmakers who form the majority in the Majlis and from some political activists. Some have praised the proposed cabinet nominees but others have raised doubts about the qualifications and experiences of certain nominees.

 

 

President Ahamdinejad won a landslide victory on promises of establishing justice, increasing the purchasing power of the poorer classes, preventing the waste of state coffers, fighting economic corruption, and cracking down on elements who amassed great fortunes by abusing governmental privileges.

In order to implement these goals, the members of his cabinet team must have two important qualifications: expertise and honesty. Experience has shown that these two characteristics go hand in hand. Of course, oversight bodies still must constantly monitor the performance of officials and encourage them to consult experts in state affairs.

Some proposed cabinet members are new faces but that does not necessarily mean that they are unqualified. However, it must not be forgotten that top posts are not a place for trial and error. High-ranking officials have gained valuable experiences during the years since the victory of the Islamic Revolution, and the incoming government and even future governments should avail themselves of these experiences.

The new government should acknowledge that since the end of the 1980-1988 Iraqi imposed war against Iran, the succeeding governments of Akbar Hashemi Rafsanjani and Mohammad Khatami have taken painful but necessary steps for the purpose of making the country more self-reliant and boosting the national economy. Though there had been some deficiencies with the two previous governments, as a whole, the economic, political, and cultural approaches adopted should not be questioned.

So, in order to achieve the goals set in the 20-Year Outlook Plan, the government in general and ministers in particular should be careful not to turn the clock back just because of the existence of some tactical and managerial deficiencies. Considering these facts, the ministers should be realistic, look to the future, act transparently, and be held accountable for their performance.

With some minor differences, all governments are concerned about social justice, unemployment, corruption, social disorder, and so on. Therefore, the Ahmadinejad administration should take advantage of the experience of other governments in managing the country.

It has been proven in different administrations in different countries that unscrupulous measures only rob a country of material wealth and time and that it takes a long time to put the things in order.

The goals and plans proposed by the government are very promising, but the people want to see results in four years and actions speak.

YEMEN POWER PLANT

A contract on construction of power transfer substations for Marb power plant of Yemen was signed between the Power Ministry of Yemen and the Iranian Parsian Company in Sana'a last week.

The total cost for implementing this project is estimated at $45m, which will be provided by the government of Yemen and Arab Fund for Economic and Social Development.

The project involves the construction of four substations by the Parsian Company. Two of them, from Marb reroute to Sana'a, will transfer 400 kV and 1,200 MVA of electricity and the other two, located in Rahban and Haziz regions in the vicinity of the capital Sana'a, will be constructed with the capacity of 33,132 kV and 248 MVA correspondingly.

TEA INDUSTRY DOWN

Some 80 percent of tea factories in the northern parts of Iran have been shut down; a tea industry official said. Only 83,000 tons of tealeaves have been produced since March, stated Nemat Yavarzadeh, executive manager of Shomal Tea Factories Syndicate.

He noted the figure for the corresponding period last year was 200,000 tons, which means the tea industry is completely down, adding the State Tea Organization was dissolved due to its failure to protect national tea production. He further noted that only 20 percent of tea factories are operating.

Experts say tealeaves to be produced this year would be of poor quality, stressing those smugglers and not farmers meet some 80 percent of the country's demand for tea.

Production of tealeaves is expected to decline by 60,000 tons in the year to March 2006, while processed tea output that will also drop by 30,000 tons.

Some 80 percent of last year's tea crop have reportedly been stockpiled as a result of import and smuggling of the product.

Agriculture officials have been criticized for their failure to remove the challenges facing the once lucrative industry, which is now undergoing its worst period. Northern Province of Gilan ranks first in tealeaves industry with 34,000 hectares of land allocated to tealeaves plantation and an annual green tea production of 50,000-60,000 tons.

(Inputs from PAGE sources and courtesy to Tehran Times)