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Middle East & African Monitor – 05 October 2017

  • Saudi King Makes Historic Trip To Russia.
  • New Angolan President Faces A Fragile Economy.
  • FX Reserves Levels Are “Still Good” – SAMA.
  • Bahrain To Host Amazon’s First ‘Cloud’ Centers In The Middle East.
  • Oman Announces Plan To Boost Job Creation.
  • Egypt Raises Bank Reserve Requirements.
  • Tunisia Keeps Interest Rates Steady.
  • Algeria Tinkers With Energy Law.
  • Tourists Return To Egypt.

REGIONAL COMMENTARY

Saudi King Makes Historic Trip To Russia.
King Salman is currently undertaking an official visit to Russia, the first time a Saudi Arabian monarch has made such a trip and highlighting the recent improvement in relations between Moscow and Riyad who only restored diplomatic ties back in 1992. The visit has already resulted in fresh trade deals being announced, including a US$1.1 bio agreement covering the construction of a petrochemical plant in the Kingdom by the Russian firm Sibur, the joint establishment of a US$1 bio technology fund and cooperation in the fields of desalination and biomedicine. “I think that both Russia and Saudi Arabia are facing similar challenges, meaning that cooperation between our companies is mutually beneficial. We should be working on creating an ecosystem, where investment and partnership is economically justified and aimed at developing our own technology and equipment for the benefit of our nations. There is a lot of interest towards cooperation in the petrochemical and oil field service segments, where we see big potential for cooperation, Saudi investors certainly show great interest in participating in the production and processing of oil and gas in Russia,” the Russian Energy Minister, Alexander Novak, was quoted as saying by the FT yesterday. Economic opportunities aside, a key driver of this rapprochement is probably also the OPEC/NOPEC output agreement to which Saudi Arabia and Russia are the main signatories and that has played a very important part in stabilizing oil prices.

New Angolan President Faces A Fragile Economy.
Angola’s first new President in 38 years, Joao Lourenco, officially took office last week but faces an economy which, despite the country’s plethora of natural resources, remains almost totally reliant on its oil sector which generates around 90% of foreign exchange revenues. Over 36% of the population still lives on less than US$2 according to the World Bank, the unemployment rate is close to 26%, inflation is 25.20%, the debt-to-GDP ratio is over 70% and FX reserves dropped to US$15.6 bio in August from US$17.47 bio in July. To his credit Lourenco has made some promising initial noises, pledging to reduce poverty and generate employment, boost free enterprise, reverse rampant corruption and improve public health conditions, however this will not be an easy fix, and the key question of whether or not he has the political weight within the ruling MPLA party (which is technically still headed by the former President who also has family members entrenched in strategically important positions) to carry out such steps in the near term remains to be seen.

FX Reserves Levels Are “Still Good” – SAMA.
The head of Saudi Arabia’s Monetary Authority, Dr Ahmed Alkholifey, was quoted by Bloomberg yesterday stating that the CB’s level of foreign exchange reserves was “still good” and covered over 30 months of imports, adding that in his view general liquidity remained “reassuring” and that he did not expect any sharp moves in SIBOR. He also announced that three new applications for a banking license in the Kingdom, by one foreign and two Middle Eastern banks were nearing their final approval. Meanwhile the governor of Qatar’s Central Bank, Abdullah bin Saud al Thani, was quoted by Reuters as saying that the CB and the QIA had enough reserves to support the country’s local financial institutions. Qatar experienced sizeable capital outflows following the sanctions implemented on Doha by the Arab quartet on June 5th with a recent Moodys report suggesting that over US$30 bio in such outflows occurred during June and July this year.

Bahrain To Host Amazon’s First ‘Cloud’ Centers In The Middle East.
Amazon’s cloud computing unit (AWS) has reportedly chosen Bahrain as the location for the company’s first data centers in the Middle East. The firm will build three such centers in the Kingdom and they are expected to become operational by 2019. The head of Bahrain’s Economic Development Board, Khalid Al Rumaihi was quoted as saying that; “AWS’s commitment to expanding its presence into the Middle East and North African region, from Bahrain, is a major enabler for technology and data-driven business across the GCC. This will benefit global corporates, SMEs, entrepreneurs, and governments alike. The ability to store and share data at speeds the Gulf has never experienced before has the potential to help companies gain competitive advantage, allowing them to compete more effectively at a global level. Amazon Web Services is delivering the Middle East a world class service. With such a young, technologically adept, and growing population, the Gulf is well positioned to drive innovation in mobile applications and digital services. I am very eager to see how our region’s entrepreneurs will make use of this exciting opportunity.” Amazon is also preparing to open an ‘Edge’ network location in Dubai next year and follows on from the company’s purchase of the UAE based online retailer ‘Souq.com’ in March this year.

Oman Announces Plan To Boost Job Creation.
Oman’s Council of Ministers have unveiled new plans to boost employment in the country, pledging to create up to 25,000 new jobs by the end of this year. According to the Oman Tribune newspaper the council has also urged the private sector to take the initiative and “shoulder their national responsibilities” with regards to the issue around the employment of Omani citizens, by offering them attractive service conditions. In a separate move the government also recently announced a decision to lower the minimum salary level expatriates are required to earn before they can bring their families into the Sultanate to join them, a move which the government hopes will trigger a rise in spending due to the consequent increase in expat numbers.

Egypt Raises Bank Reserve Requirements.
Egypt’s Central Bank has announced an increase in its required reserve ratio for local banks by 4% to 14.00% which brings it back to the same level it maintained between 2001-2012. In a statement following the decision the Central Bank said; "In view of the strong financial indicators shown by the Egyptian banks and their strengthening performance and profitability, which has resulted in financial and monetary stability, it is now suitable to return the ratio back to its previous rates."

Tunisia Keeps Interest Rates Steady.
Following its regular MPC meeting today, Tunisia’s Central Bank has kept its benchmark rate unchanged at 5.00%.

Algeria Tinkers With Energy Law.
In an attempt to attract more foreign investment the Algerian government is reportedly looking at amending its bureaucratic hydrocarbon law including potentially reversing a windfall tax introduced back in 2006 which many analysts suggest is behind the current difficulties in attracting fresh investment into the country’s energy sector. Algeria’s main exports are oil and gas and its primary customers are the EU and the US.

Tourists Return To Egypt.
Egypt’s important tourism sector, which suffered a significant impact following a series of terror attacks in recent years, is slowly recovering as visitor numbers continue to improve. The UK’s big travel firm, Thomas Cook, recently underlined this after reporting a more than 100% jump in interest from its customers looking at packages to Egypt’s Red Sea resorts, while the latest official central bank data estimates that tourism related revenues jumped to US$ 1.5 bio in the last quarter of the 2016/17 fiscal year compared to just US$510 mio in the same period for 2015/16.However a return to the sector’s heady performance experienced prior to 2011 still faces a long road ahead.

05-10-2017

AND FINALLY…
Did you know that during the 2nd and 3rd century BC, Algeria was known as the Kingdom of Numidia? At that time its people were called ‘Numidians’ and ‘Imazighen’ which meant “Free men.”

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