A watershed year for Middle East business

Updated 25 December 2017

A watershed year for Middle East business

It was a watershed year across the region, with the old economic certainties of business life in the Kingdom and wider Gulf upended and disrupted by new realities. The price of oil was at the fulcrum of that shift as Gulf economies pondered how to plug deficits and boost revenues from raising valued added tax to selling shares in such titans as Aramco and Adnoc. Here the business writers of Arab News pick the big business stories that shaped the region in 2017.

Taxing questions
Saudi Arabia’s cabinet made the landmark decision to approve the introduction of a value-added tax (VAT), marking a significant shift away from the typically tax-free way of life for both Saudis and expatriates living in the Kingdom. The January approval was in support of an earlier agreement drawn up by all six Gulf Cooperation Council (GCC) countries to introduce VAT throughout the region. The decision was made in reaction to the slump in oil prices which began in mid-2014 and had placed increasing pressure on the country’s finances.
The International Monetary Fund (IMF) had already been calling for Saudi Arabia and other Gulf states to implement taxes such as excise tax or VAT to help the region balance its books.
The 5 percent levy will be applicable on certain products and come into force from Jan.1, 2018. The UAE is also expected to roll out the new tax from the beginning of the new year, while the timelines for the other Gulf states to implement the charge remain unclear.

Building blues
Arabtec posted a larger-than-expected loss for the full-year 2016, citing “adverse market conditions” that continued to plague the region’s construction industry as the year began. The company blamed its results on poor conditions which are “having a negative impact on the construction industry throughout the GCC,” according to a filing with the Dubai Financial Market.
With the region suffering from the ill-effects of low oil prices since mid-2014, the construction of many government-backed and private developments had to be postponed or shelved completely, hitting builders’ balance sheets hard. Arabtec did however manage to turn its fortunes around by the end of the first quarter of 2017, returning to profit for the first time since 2014. Since then it has consistently posted quarterly profit, in a sign that both the UAE and regional construction market was starting to recover. But the big builders would not be entirely out of the woods by year end.

Aramco fever
The prospect of a glimpse into state-owned Saudi Aramco’s books fueled enormous excitement as an audit took place in March amid speculation that the Kingdom’s vast oil reserves were even larger than expected. Stock exchanges in London, New York and Hong Kong fell over themselves to present the most attractive offer and secure what many believe will be the biggest IPO in history, which could be worth as much at $2 trillion.
The sale of 5 percent of Aramco will help fund sweeping reforms outlined in the country’s Vision 2030.

Green deserts
It is hard to look to a future beyond oil without considering new forms of clean energy to help power that transformation. So in April, Saudi Arabia revealed it aimed to produce 10 percent of its energy from renewable sources in the next six years. It represented an ambitious target for a country moving almost from a standing start as far as investment in renewables was concerned. The world’s top oil producer said it would develop as many as 30 solar and wind projects by 2023 to boost its power output and reduce the amount of crude oil it burned. Reaching the target of producing 9.5 gigawatt (GW) of renewable energy by 2023 involves investment estimated at between $30 billion and $50 billion.

Turbulent skies
The famed code-share alliance strategy of Abu Dhabi carrier Etihad imploded with the collapse of Italian flag-carrier Alitalia into administration. The Abu Dhabi carrier had rescued the Italian airline from a similar fate just three years earlier. But the collapse of Alitalia shone the spotlight on Etihad’s strategy of investing in struggling European airlines to boost its route network. A similarly sorry tale was being played out in Germany where Air Berlin, another company in which Etihad had invested, struggled for survival.

Boycott begins
Years of simmering tensions over Qatar’s alleged funding of terrorist organizations and its ties with Tehran came to a head in June when Saudi Arabia, the UAE, Bahrain and Egypt — together known as the Anti-Terror Quartet — cut ties with Doha. A land, sea and air boycott was imposed to pressure Qatar into meeting demands, including scaling back links with Iran — with which it shares a major gas field; ceasing contact with terror groups and shutting broadcaster Al-Jazeera. Qatar dismissed the allegations as “unjustified” and “baseless,” and subsequent mediation attempts by Kuwait and US Secretary of State Rex Tillerson have failed to resolve the dispute. The crisis has played out longer than expected by many analysts at the time, with the knock-on effects still being felt across the Middle East.

E-commerce wars
The region’s plush retail landscape of luxurious malls was disrupted in July when Amazon announced that it had completed its $650 million acquisition of Dubai-based competitor Souq.com. Initially announced in March, the deal was formally concluded in early July, with work quickly beginning on integration, allowing customers to log into Souq.com using their Amazon account details. Souq said that joining Amazon would allow it to bring more products and services to the region. Souq.com stocks more than 8.4 million products across 31 categories and attracts 45 million visits per month. It has localized operations in the UAE, Saudi Arabia and Egypt.

Confidence boost
August saw some positive indicators that the Saudi economy was on the upswing. There was evidence of rising demand and increased construction activity in the Kingdom, according to findings by the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI). The index, which measures economic activity in the non-oil sector, rose to 55.7 in July from 54.3 in June, the highest reading in three months. In the same month, Saudi Electricity Company (SEC) signed a $1.75 billion international syndicated loan to help finance capital expenditure plans. In banking, Goldman Sachs received approval to trade equities in Saudi Arabia, joining the growing band of western investment banks and fund managers expanding in the Kingdom.

Private party
The Saudi government revealed in detail those parts of the national economy that would be considered for privatization as part of the Vision 2030 strategy to diversify it away from oil dependency and public-sector domination. In addition to Saudi Aramco — set for a record breaking initial public offering (IPO) on international stock markets next year — other privatization candidates would include Saudi Arabian Airlines (Saudia), the King Faisal Specialist Hospital and Research Center in Riyadh, and the commercial aspects of Hajj and Umrah pilgrimage services. A value of $200 billion has been put on the privatization program over the next few years, double the estimated value of the Aramco IPO, making it one of the biggest sell-offs of state assets in history. Other potential listings could include the Saline Water Conversion Corporation, the King Abdullah City for Economic and Renewable Energy, government universities, the Saudi Health Council, and Saudi Post. Elsewhere, the Public Investment Fund (PIF) said it was in the process of forming a company that would channel investments into developing entertainment assets as well as boosting the Kingdom’s appeal as a tourism destination. PIF would form a vehicle called Entertainment Investment Company that would also target new employment opportunities aimed at the Kingdom’s young population.

Future city
A $500 billion mega city on the Kingdom’s Red Sea coast made global headlines.
The announcement was the highlight of a high-profile three-day international business conference in Riyadh, drawing over 3,500 people from 88 countries.
The 26,500 square kilometers zone, known as Neom, will focus on industries including energy and water, biotechnology, food, advanced manufacturing and entertainment. The business and industrial city will be located in the Kingdom’s northwestern region and will be the world’s first zone to extend across three countries, stretching its borders into neighboring Jordan and Egypt. Adjacent to the Red Sea and the Gulf of Aqaba, and near maritime trade routes that use the Suez Canal, the zone will power itself solely with wind power and solar energy. The city aims to offer its inhabitants “an idyllic lifestyle” paired with excellent economic opportunities that surpass that of any other metropolis. October also saw the Public Investment Fund establish two new companies to increase the number of pilgrims that the Kingdom can host in Makkah and Madinah. The investment at the holy sites is aimed at boosting revenues from tourism and offsetting the impact of lower oil prices. PIF said the companies — Rou’a Al Haram and Rou’a Al Madinah — would develop residential and commercial areas around the Grand Mosque in Makkah and in Madinah. The fund said that the new companies would help the Kingdom accommodate between 25 million to 30 million pilgrims a year. The companies will develop 150,000 hotel rooms in both cities near the holy sites.

Oil spoils
The planned Aramco IPO may have dominated the headlines for much of the year but it was the share sale of another regional national oil company that was in the spotlight during November. Abu Dhabi National Oil Company said it could sell as much as 20 percent of its fuel distribution unit, raising as much as $2.8 billion. While not quite on the scale of the Aramco IPO, it was a major development and underscored how regional economies beyond Saudi Arabia were also responding to changing economic realities — especially so around the oil business. And with all that regional liquidity about to be sucked up by the Aramco partial flotation, regional companies realized it was best not to delay for too long.

Saudi cinemas
Saudi business and social reforms continued to dominate the headlines in December as the Kingdom announced plans to lift the ban on cinemas which had been in place for almost 35 years. The announcement was part of the Vision 2030 social and economic reform program which gathered momentum in 2017 — especially in the area of entertainment as investors imagined a completely changed real estate landscape — from resorts on the Red Sea to entertainment complexes across the country’s biggest cities.
As many as 300 cinemas could be operating across the Kingdom by 2030 — a hugely significant development in a country with 70 percent of the population under the age of 30.
Property developers from around the region are eyeing the potential of the new market, which could lead to the redevelopment of a number of major shopping malls.

What We Are Reading Today: Yale Needs Women by Anne Gardiner Perkins

Updated 21 September 2019

What We Are Reading Today: Yale Needs Women by Anne Gardiner Perkins

  • The book is a historical novel based on the first females that were accepted and lived on campus at Yale

Yale Needs Women by Anne Gardiner Perkins is a historical novel based on the first females that were accepted and lived on campus at Yale starting the summer term of 1969.

“This is an academic work although written in a very accessible style for the average reader,” said a review in goodreads.com.

It said the book “started as a graduate paper and morphed into a dissertation over time.”

The review also said Perkins “really allows readers into the lives of several of the students and one administrator in particular.”

It said the author “straddles the line nicely between fitting in the comprehensive detailed research she managed and making it interesting enough that someone mighty think it was a novel.”

Perkins grew up in Baltimore and attended Yale University, where she earned her BA in history and was the first woman editor-in-chief of the Yale Daily News. 

She has spent her life in education, from urban high school teacher to elected school committee member. 

She has presented papers on higher education at leading conferences.

Although Yale Needs Women’s principal focus is on, well, women at Yale, Perkins also weaves in a lot of events that were also happening at the time and impacted Yale life, such at the Black Panther movement and the Vietnam War.