France honors Saudi Arabia’s Russian investment partner

The CEO of Rusian Direct Investment Fund pictured at the opening ceremony of the Future Investment Initiative FII conference in the Saudi capital Riyadh. (AFP)
Updated 10 November 2018

France honors Saudi Arabia’s Russian investment partner

  • PIF has invested $2 billion in joint projects with the Russians
  • RDIF was prominent participant in recent FII event in Riyadh

DUBAI: One of the earliest joint investment projects between Saudi Arabia and Russia has been recognized by the French government as an example of cross-border “economic diplomacy”.
Kirill Dmitriev, chief executive of Russian sovereign wealth fund, Russia Direct Investment Fund — a major partner of the Kingdom’s Public Investment Fund — has been honored by French President Emmanuel Macron for his contribution to Russia-France economic relations.
Dmitriev was awarded the title of Knight of the National Order of the Legion of Honour — the highest honor France can bestow — for promoting French companies in Russia as well as the entry of Russian companies into the French market.
One of the biggest investments in France by RIDF was the €250 million ($285 million) injection in Arc International, the global glassware company that owns French homewares brand Luminarc. PIF was a major investor in that joint venture along with other sovereign wealth funds (SWFs)
Dmitriev told Arab News: ““The award from the French President recognizes the role SWFs are playing in the modern world, building bridges and long-term partnerships between countries in different regions of the world though economic diplomacy.
“In that context our partnership with PIF as well as other funds becomes increasingly important. The investment in Arc was one of our first joint projects with PIF. It demonstrated the cross-border reach of our partnership, which was beneficial for French and Russian factory workers as well as for international investors,” he said.
The RDIF was a prominent participant at the recent PIF-sponsored Future Investment Initiative in Riyadh, where plans were unveiled for a $500 million Saudi investment in a proposed three-way investment fund with Russian and Chinese sovereign investors, which will have $2.5 billion to invest in projects in Asia, Europe and the Middle East.
PIF has currently invested $2 billion in joint projects with the Russians, and nine new projects are planned in energy, infrastructure and information technology.
Dmitriev said that over the next five years, RDIF intends to quadruple the volume of investment in the Russian-French investment platform, created jointly with CDC International Capital, the French public investment vehicle.
“This will enable us to surpass the record amount of foreign direct investment reached at the beginning of 2018, when the total amount of accumulated French direct investment in Russia reached $16.3 billion,” he said.
The Legion of Honor award was established by French emperor Napoleon Bonaparte in 1802 to recognize outstanding service to the country. It will be formally presented to Dmitriev at an award ceremony later this month.


Lebanon’s credit ratings show reform urgency

Beirut is struggling to deal with waste and corruption in its public finances. (Reuters)
Updated 22 min 6 sec ago

Lebanon’s credit ratings show reform urgency

  • Fitch warns Beirut needs major capital inflows to fund twin budget and current account deficits

BEIRUT: Lebanon is committed to economic reforms and will overcome its crisis, the finance minister said after Fitch downgraded the country’s credit rating to CCC while S&P kept it
at B-/B. Minister Ali Hassan Khalil said the ratings reports showed the urgency for reform, which the government has long put off. “There should be no slacking for a single moment,” he told Reuters. Lebanon is grappling with one of the world’s heaviest public debt burdens at 150 percent of GDP and years of low economic growth. Government finances, riddled with corruption and waste, are strained by a bloated public sector, debt-servicing costs and subsidizing the state-power producer.
Lebanese leaders have warned of financial crisis without changes. The impetus to enact reforms has grown with the slowdown of deposits into its banking sector, a critical source of finance for the state.
The government is now trying to put public finances on a more sustainable path with a deficit cut in the 2019 budget and a plan to fix the state-run power sector, which bleeds funds while inflicting daily power cuts on Lebanese. Fitch said its downgrade of the country’s credit rating to CCC from B- reflected “intensifying pressure on Lebanon’s financing model and increasing risks to the government’s debt servicing capacity.” Lebanon requires substantial capital inflows to fund its large twin budget and current account deficits, it added.
“We will deal responsibly with the reports,” Khalil said. “We are confident we will be able to get out of the crisis.”
S&P Global affirmed Lebanon’s credit rating at B-/B and said the outlook remains negative. It considers Lebanon’s foreign exchange reserves sufficient to service government debt in the “near term.”
The report said it expects Lebanon to make progress on reforms to improve investor confidence given the weakness of foreign currency inflows. However it said it too could lower its rating in the coming 6 to 12 months if banks deposits and central bank foreign exchange reserves continue to fall.

FASTFACT

150% - Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

“Continued weakness in foreign currency inflows and the use of (the central bank’s foreign exchange) reserves to meet government debt-service could test the country’s ability to maintain the currency peg,” the report said. The Lebanese pound is pegged to the dollar. Moody’s downgraded Lebanon’s rating to Caa1 in January.
Markets have been pricing in the risk of a sovereign credit rating downgrade in recent days.
The latest downgrade would have no “material impact” on investor holdings of Lebanon’s bonds as the debt was already rated non-investment grade, said Jan Dehn, head of research at emerging markets investment manager Ashmore Group. “The government has done more on the reform side than many Lebanese governments in the past.”
Economists have questioned whether the government’s efforts were enough to meet its goals. The IMF said last month the deficit would likely be well above the government’s target of 7.6 percent of national output. In 2018, it was over 11 percent.
Nassib Ghobril, chief economist at Byblos Bank, said the current situation should be a “wake-up call” for politicians to form a credible plan that would result in an investment grade rating.
Ghobril said cutting the deficit was a good step, but the government must do more to trim expenditures instead of “the easy way out” by raising taxes and fees. “They have to restructure the public sector; they have to fight tax and customs evasion, not in words but in actions.”