Scots weigh economic uncertainty of independent future

BP’s North Sea Headquarters in Aberdeen, Scotland. (Reuters)
Updated 22 March 2017
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Scots weigh economic uncertainty of independent future

ABERDEEN: The prospects for Scotland’s economy after Brexit are at the heart of the battle between its pro-independence first minister and British Prime Minister Theresa May, who wants Britain to stay united as it leaves the EU.
Nicola Sturgeon has warned that leaving the bloc’s single market will cause tens of thousands of job losses in Scotland, while May has said she will aim for the “best possible deal” with Brussels — for Scotland too.
Going it alone raises a host of doubts about Scotland’s economy including what currency it would use and how it could reduce a budget deficit of 9 percent of gross domestic product (GDP) — worse than crisis-hit Greece.
But the future of the North Sea oil sector — centered on the city of Aberdeen, where Sturgeon’s Scottish National Party (SNP) held its conference this weekend — is the key concern. World oil prices have declined in recent years and the offshore stocks are depleting. Deirdre Michie, head of Oil & Gas UK, the leading association for the North Sea industry, told AFP the sector was going through “quite a sustained downturn.” The oil industry employs around 330,000 people across the UK, including around 38 percent based in Scotland — many of them in Aberdeen.
Aberdeen’s business community is wary about another constitutional confrontation just three years after the last independence referendum in which Scotland voted to remain a part of Britain by 55 percent.
Sturgeon’s announcement last week of her plans for a referendum generates “continued uncertainty and it is just a matter of fact that business does not like uncertainty,” said James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce (AGCC).
But Bream said he was not surprised by the announcement since “the argument about independence has never gone away” despite the result of the 2014 plebiscite.
The unionist campaign in that vote was heavily focused on the economic benefits of being a part of the UK.
The argument emphasized the “broad shoulders” of the union, which can cushion Scotland from shocks such as a financial crisis or oil price crash, as well as raising doubts about Scotland’s ability to manage on its own.
As Scots face up to the prospect of a new referendum — the arguments on both sides are being rehearsed.
Sturgeon has said she wants to prevent Scotland, which voted strongly to remain in the EU in last year’s Brexit vote, being “dragged out” against its will. She is widely expected to get the Scottish Parliament’s support for her quest in a vote on Wednesday but still needs the agreement of the British government to proceed.
Alex Kemp, head of the Aberdeen Centre for Research in Energy Economics and Finance (ACREEF), said Scotland “comes out quite well” in economic comparisons to EU countries, particularly to poorer Eastern Europe.
Scotland’s GDP per capita of $41,239 (€38,360) is roughly equivalent to that of Belgium or Finland, and higher than the British average, according to data reported on the Scottish government’s website earlier this month.
The comparison members of the world’s leading economies group, the Organization for Economic Co-operation and Development (OECD), took into account “a geographic share of offshore oil and gas output” for Scotland. But the data is from 2014 statistics and in many ways Scotland is now in a worse position.
The oil price fall has blasted a hole in its public finances, creating a major deficit.
“As things stand at the moment, the Scottish economy would have a budgetary deficit for sure,” Kemp said.
“We have modeled the oil tax revenues, and for some years ahead they are really quite modest and the only thing that would change that would be a major, and really quite unexpected, increase in the oil price.”
With a flourishing financial sector, as well as tourism, textiles and fishing, Scotland is far from being a poor country, and does not necessarily lack the means to close the gap.
Scottish government minister Mike Russell told AFP it was “nonsensical” to argue that Scotland could not go it alone economically.
“But the issue now is democracy, a democratic choice, and the right of the Scottish people to decide their own future,” he said.


Abu Dhabi, Shanghai plan exchange focusing on China trade

Updated 24 April 2018
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Abu Dhabi, Shanghai plan exchange focusing on China trade

DUBAI: The emirate’s international financial center, has agreed in principle with the Shanghai Stock Exchange to cooperate in establishing an exchange focusing on China’s foreign trade and investment, ADGM said on Monday.
The partners signed a memorandum of understanding to develop the exchange in Abu Dhabi. It would cater to companies and investors involved in China’s Belt and Road initiative, a Beijing-backed drive to win trade and investment deals along routes linking China to Europe.
“At ADGM, we have the international platform to serve different kinds of enterprises and investors — global, regional and local — seeking exposure to the Middle East and North Africa and Belt and Road projects,” said Richard Teng, chief executive of ADGM’s Financial Services Regulatory Authority.
Teng said he could not give specifics of which instruments the new exchange would trade or when it might open, saying this would depend on demand among stakeholders in both ADGM and Shanghai.
Chinese financial institutions have approached ADGM to discuss the financial environment in Abu Dhabi and their development needs in the six-nation Gulf Cooperation Council (GCC), he added.
Trade and investment ties between China and the GCC have been growing rapidly. The region is a big oil supplier to China, and Sino-United Arab Emirates trade exceeded $46 billion in 2016, according to Beijing’s official Xinhua news agency.
Ultimately, the new exchange will support not only the Belt and Road initiative but also the internationalization of the Chinese yuan in the region, Teng said.
Abu Dhabi is trying to build up ADGM, which opened in October 2015 and is smaller than the international financial center in neighboring Dubai, as part of a drive to develop its economy beyond oil exports.