New Gulf projects to hit $180bn this year despite oil price

Updated 18 October 2014

New Gulf projects to hit $180bn this year despite oil price

DUBAI: About $180 billion of contracts for new construction projects will be awarded in wealthy Gulf states this year, the largest amount for six years, despite falling oil prices, according to a study published on Thursday.
Brent crude oil sank to a four-year low below $83 a barrel this week because of ample supply and the prospect of a weak global economy. It has dropped from a peak of $115 in June.
If current prices are sustained for a long period, perhaps a year or so, oil revenues of the Gulf states will be reduced and governments could become less willing to spend, and decide to cut back on projects, construction industry executives and analysts said.
So far, however, there is no clear sign that cutbacks are looming in the Gulf Cooperation Council, which comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, they said.
“We are going to beat the 2013 figure this year with $180 billion worth of contracts awarded,” said Edward James, director of analysis at MEED Projects, an online project tracking firm which conducted the study.
“This is driven by substantial projects that were awarded this year by Qatar, the UAE and Kuwait.”
Last year, $156 billion of projects were awarded in the GCC, largely by governments and state-backed companies, as most Gulf countries recovered strongly from the global financial crisis and spent on major infrastructure projects designed to help their economies diversify beyond oil. At the peak of the boom in 2008, GCC contracts totaled about $200 billion.
The concern for the construction industry is that oil prices could drop for an extended period below the “break-even” levels which governments need to balance their budgets.
This would not be disastrous for the governments; they have built up huge financial reserves which in many cases could cover heavy spending for years to come. Also, governments in the big GCC economies have little debt and could easily borrow from markets.
But the experience of running budget deficits could cause governments to become more cautious about spending. Saudi Arabia will have a break-even price of $90.70 a barrel in 2015, the International Monetary Fund has estimated; the UAE would face a level of $73.30, Kuwait $53.30 and Qatar $77.60.
“I would say Saudi Arabia and the UAE are most likely to delay projects or put some on hold if there’s a sustained drop in prices,” said Regard Aboo Yakou, Qatar country manager at construction consulting firm Hill International.
Steven Miller, senior vice president for business development at construction firm Shapoorji Pallonji, said: “I’ve heard that the time to worry is if it goes below the $80 mark.”
He added, “We have not seen anything stopping yet, but if prices continue falling maybe it will. Metro projects may stop, but housing and hospitals will be built.”
David Clifton, regional development director for the Middle East at consultancy Faithful+Gould, said: “Should the oil price remain low for a sustained period or fall much further, it is quite reasonable to expect that there will be an evaluation of the feasibility of future government-related projects.
“This would appear to be an unknown at present. Should this occur, a slowing or suspension of some developments in the pipeline would almost certainly occur as governments look at the oil price barrel versus the break-even point for their budgets.”
One surprise in the MEED report was that Saudi Arabia, the biggest market in the region, looks set to slow its contract awards substantially this year. It is expected to award projects worth about $40 billion, down from $66 billion in 2013, MEED said.
This appears to be part of a trend toward fiscal prudence which started well before the oil price slide began. After years of rapid spending growth, the government last December announced a 2014 budget which envisaged total state spending rising just 4.3 percent — the slowest rate in a decade.
“Saudi Arabia’s performance this year has been surprising...We were expecting a lot more contracts. We certainly have seen a decline in tendering and awarding projects,” said James. “Whether or not that’s related to the oil prices is not known.”
Some construction firms in Saudi Arabia have blamed delays to projects on government bureaucracy, difficulties in making land available, and labor reforms designed to reduce the country’s reliance on foreign workers.
An estimated one million foreign workers left Saudi Arabia last year during a crackdown on illegal immigrants, and construction firms have sometimes struggled to assemble enough staff.


UBS fined $51 million by Hong Kong regulator for overcharging clients

Updated 11 November 2019

UBS fined $51 million by Hong Kong regulator for overcharging clients

  • Hong Kong regulator’s investigation exposed ‘serious systemic internal control failures’ at the bank
  • In March, the Securities and Futures Commission banned UBS from leading initial public offerings in Hong Kong for a year

HONG KONG: Swiss bank UBS was fined HK$400 million ($51.09 million) by Hong Kong’s securities regulator for overcharging up to 5,000 clients for nearly a decade, the watchdog said on Monday.
The Hong Kong Securities and Futures Commission (SFC) said in a statement that an investigation found UBS had overcharged clients on ‘post-trade spread increases’ and charges in excess of standard disclosures and rates between 2008 and 2017.
THE SFC said the investigation exposed ‘serious systemic internal control failures’ at the bank. UBS had failed to disclose conflicts of interests and had overcharged some clients in ‘opaque’ trades, it said.
The overcharging affected 5000 Hong Kong managed client accounts in about 28,700 transactions, it said.
UBS has also agreed to repay the clients HK$200 million, the SFC said.
The regulator said the over-charging occurred in the bank’s wealth management division on bond and structured notes transactions.
UBS was found to have increased the spread charged after the execution of a trade without the clients’ knowledge, it said.
In the statement, the SFC said UBS was also found to have falsified some account statements which were issued to financial intermediaries who were authorized to trade for the clients to “conceal the overcharges.”
UBS said the issues were ‘self-reported’ to the SFC and the results found were against the bank’s standard practice.
“The relevant conduct predominantly relates to limit orders of certain debt securities and structured note transactions, which account for a very small percentage of the bank’s order processing system,” the bank said in a statement.
SFC chief executive Ashley Alder said while each “overcharge represented a fraction of each trade” the bank’s “misconduct involved decisions and a pervasive abuse of trust resulting in significant additional revenue for UBS to which it was not entitled.”
In March, the SFC banned UBS from leading initial public offerings in Hong Kong for a year after it found the bank, and some of its rivals, had failed to carry out sufficient due diligence on a number of deals.
UBS was fined HK$375 million while Morgan Stanley was fined HK$224 million, Merrill Lynch HK$128 million and Standard Chartered (StanChart) HK$59.7 million, all for failures when sponsoring, or leading, public market floats.