IMF endorses Saudi plan for $500bn Neom zone

Visitors watch a 3-D presentation during an exhibition on ‘Neom,’ a new business and industrial city, in Riyadh. (Reuters)
Updated 01 November 2017

IMF endorses Saudi plan for $500bn Neom zone

DUBAI: The International Monetary Fund (IMF) has endorsed an ambitious Saudi Arabian plan to build a $500 billion business and industrial zone extending into Jordan and Egypt, saying the project could benefit the whole region.
Jihad Azour, head of the IMF’s Middle East department, said Riyadh would need to balance the huge cost of the zone and other economic projects with its drive to cut a big state budget deficit caused by low oil prices.
But the plan to develop the zone, known as Neom, could stimulate trade and allow the Middle East to capitalize on its location as a bridge between Asia and Europe, Azour said in an interview.
“It is a signal that greater regional cooperation is back on the table,” he said.
“We see value and necessity in regional cooperation.”
The Neom scheme, unveiled by Saudi Crown Prince Mohammed bin Salman at an international conference in Riyadh last week, would develop industries such as energy and water, biotechnology, food, advanced manufacturing and entertainment in a 26,500 square-kilometer (10,230 square mile) zone with its own laws and judicial system.
The project has been welcomed by Jordanian officials but so far there has been little public response from the Egyptian government, a diplomatic ally of Saudi Arabia. Riyadh has indicated that much of the huge cost of the zone will be borne by the Saudi government, but a large, though undisclosed, portion would come from domestic and international private investors.
Azour said major private sector participation would be important for Neom’s success, with the Saudi government providing land and regulation rather than trying to be closely involved in most investment decisions.
Governments in the region are starting to look outward again after having spent the past five or six years focused on coping with political instability and a plunge in oil prices, he added.
“Authorities in various countries are now reassessing more and more the need to do reforms and projects to grow faster and to address the issue of job creation.”
Neom could fit in with two other international economic schemes, Azour said: The Belt and Road Initiative, Beijing’s drive to win trade and investment deals along routes linking China to Europe, and the G-20 Compact with Africa that aims to promote private investment across the ­continent.
—  REUTERS


Oil up after drone attack on Saudi field, but OPEC report caps gains

Updated 32 min 4 sec ago

Oil up after drone attack on Saudi field, but OPEC report caps gains

LONDON: Crude oil prices rose on Monday following a weekend attack on a Saudi oil facility by Yemen’s Houthi militia and as traders looked for signs of progress in US-China trade negotiations.
Price gains were, however, capped to some degree by an unusually downbeat OPEC report that stoked concerns about growth in oil demand.
Brent crude, the international benchmark for oil prices, was up 85 cents, or about 1.4%, at $59.49 a barrel at 1225 GMT.
US West Texas Intermediate (WTI) crude futures were up $1.01, or 1.8%, at $55.88 a barrel.
A drone attack by the Iran-backed Houthi militia on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected.
“The oil market seems to be pricing in again a geopolitical risk premium following the weekend drone attacks on Saudi Arabia, but the premium might not sustain if it does not result in any supply disruptions,” said Giovanni Staunovo, oil analyst for UBS.
Iran-related tensions appeared to ease after Gibraltar released an Iranian tanker it seized in July, though Tehran warned the United States against any new attempt to seize the tanker in open seas.
Concerns about a recession also limited crude price gains.
Meanwhile, China’s announcement of key interest rate reforms over the weekend has fueled expectations of an imminent reduction in corporate borrowing costs in the struggling economy, boosting share prices on Monday.
US energy firms this week increased the number of oil rigs operating for the first time in seven weeks despite plans by most producers to cut spending on new drilling this year.
“WTI in recent weeks has performed relatively better than Brent... Pipeline start ups in the United States have been supportive for WTI, while the ongoing trade war has had more of an impact on Brent,” said Warren Patterson, head of commodities strategy at Dutch bank ING.
The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market would be in slight surplus in 2020.
It is rare for OPEC to give a bearish forward view on the market outlook.
“Such a bearish prognosis will heap more pressure on OPEC to take further measures to support the market,” said Stephen Brennock of oil broker PVM.