State Street banker sees pace of reforms in Arabian Gulf accelerating

State Street banker sees pace of reforms in Arabian Gulf accelerating
Illustration by Luis Grañena
Updated 12 August 2018

State Street banker sees pace of reforms in Arabian Gulf accelerating

State Street banker sees pace of reforms in Arabian Gulf accelerating
  • Laurina began his career in banking at the Bank of New York’s Brussels and London offices
  • He believes that the pace of economic growth in the region will continue to accelerate

The rapid economic changes taking place in the Arabian Gulf economies require a cadre of top global financial institutions to help see them through, and State Street Corporation fits the bill completely.

The 226-year-old American financial group, ranked among the biggest banking businesses in the world, recently joined the Dubai International Financial Center (DIFC) through its investment banking and asset management unit State Street Global Advisers (SSGA), cementing a presence in the region it has held for 26 years.

Emmanuel Laurina, the 43-year-old Belgian who heads up the Middle East business for State Street, told Arab News that the UAE was a good place to be based to exploit the new economic environment in the region, and especially the business opportunities in Saudi Arabia, undergoing rapid change as a result of the Vision 2030 strategy to diversify away from oil dependency.

“The DIFC is a well-regulated global financial center through which we can accommodate those clients for whom it is most appropriate. SSGA has had a presence in the Middle East since 1992, and opening a DIFC presence is a natural complement to that business.

“We currently serve the needs of all our Middle East and Africa clients from our Dubai and Abu Dhabi offices. Saudi Arabia has always been a key contributor to our business in the region and we look forward to further deepening our presence and business in the Kingdom,” he added.

Laurina began his career in banking at the Bank of New York’s Brussels and London offices, before moving to State Street in 2005, transferring to Dubai eight years later to head up the Middle East and Africa business. 

He believes that the pace of economic growth in the region will continue to accelerate. The bank’s analysts see UAE growth at 2.5 percent this year, up from 0.5 percent in 2017, and have marked in 1.6 percent for Saudi Arabia, a jump from last year’s 0.9 percent, while the region as a whole is looking at 2.6 percent (up from 1.8 percent).

The recent stability in the oil market is the main reason for the forecast improvement in gross domestic product, and SSGA believes the current good run in oil is likely to continue. “Governments and central banks should be able to escape the tough economic decisions they have faced over the past few years,” he said.

That will be especially good for Saudi Arabia as it seeks foreign investment to help fund the economic changes under way in the Kingdom, boosted by recent upgrades to its financial markets to emerging market status.

“SSGA is very positive about the reform agenda in Saudi Arabia and the entire Vision 2030 plan. While the economic environment remains challenging, we feel that the reforms to companies, markets, and investment regulations are wholly positive.

“Of all the countries in the Gulf, Saudi represents one of the best opportunities for investors, and we are ready to support clients not only in equities, as the Tadawul opens up, but also in the debt markets, an important factor in the modernization plans of the Kingdom,” Laurina said.

Those modernization plans include the privatization of large chunks of the Kingdom’s state-dominated economy, including Saudi Aramco, the biggest oil company in the world. The partial sale of some of Aramco’s shares via an initial public offering (IPO) has been delayed, but most financial experts believe some form of sell-off will eventually take place.

“We made the point recently that the non-Aramco privatization plans were equally — if not more — important to the success of the Saudi reform agenda. These include many state assets whose valuation is relatively easy to assess and where there are clear templates for private-sector participation.

“In short, there is some lower-hanging fruit in the area of privatization and we believe this will be forthcoming. Above all, for Saudi Arabia, it is more important to see this program through correctly, rather than urgently, as the reform impetus is more valuable than the actual proceeds,” he said.

On Aramco, other options have recently emerged as an alternative to full-blown privatization, including raising debt in international markets and the multibillion-dollar acquisition of Saudi Arabian Basic Industries Corporation (SABIC). Laurina sees sense in considering these possibilities.

“The potential Aramco IPO is huge, complex, and far from straightforward. We are not surprised, and indeed we applaud, the pause for reflection that appears to be taking place. 

“While the delay of IPO may have disappointed some, it may be a welcome move,” he said.




Illustration by Luis Grañena

Emerging market equity investors have had a short time to adjust their portfolios for the inclusion of Saudi Arabia in the three main indices, Laurina explained. “Aramco’s IPO would likely lead to a larger weight to Saudi Arabia and lead to further turnover to fund that increase. A delay of the IPO to a later date would give investors time to adjust and accommodate the new IPO when this is issued,” he said.

“For an institution of Aramco’s size, any debt fundraising brings complexities: If Aramco was to buy the full stake Public Investment Fund holds in SABIC, for example, and fund it entirely out of debt issuance, it would be one of the biggest debt issuances ever from any corporate, and would catapult Aramco into a top-three spot in the EM debt indices. This alone brings new issues, and so again we would counsel a cautious approach,” he said.

The global investor view of the Gulf region wavers between enthusiasm for the economic opportunities presented by reform and privatization, and concern about the effects on investment prospects from geopolitical tensions, such as the current stand-off with Qatar and the increasing possibility that confrontation between Iran and the US will lead to trade dislocation in the region. 

Laurina is alert to the risks, but sanguine on the overall investment climate. “Having been in the region for 26 years, through two Gulf wars and the Arab Spring, SSGA is acutely aware of the geopolitical drivers and risks in this region. 

“But we remain positive on the investment prospects in the Gulf: Emerging market status is going to be a major driver of equity investment; Saudi reform, China’s Belt and Road initiative, and a stable oil price should combine to maintain our upbeat outlook on the region, in spite of regional tensions,” he said.

The Middle East, of course, is an increasingly important part of the international financial and economic system, and is subject to the swings and roundabouts of global forces. Some experts have forecast challenging times ahead, as the US economy tries to maintain the impressive growth of recent years amid the threat of all-out trade war with the second biggest global economy, China, as well as strains within European economies. 

“We predict that global economic performance is likely to become less uniform in the next few years. It is expected that the US will outperform if meaningful trade sanctions are imposed on China, the European Union, Japan and Mexico. Also, a ‘No Deal Brexit’ is likely to have a negative impact on the EU,” he said. 

On the US investment scene, some analysts have wondered whether soaring stock market indices — the “Trump boom” — will eventually have to give way.

“The US economy is increasingly driven by investment and technology-related growth, and this should drive productivity improvement. This, in turn, will help make the Trump boom sustainable,” Laurina said.

What does this mean for the economic prospects of the Arabian Gulf, still dominated by energy revenues? 

“The global oil trade should be relatively unaffected by trade wars. However, oil exporters may see some fallout in demand if there is economic slowdown in trade-impacted countries and regions. It is also worth noting that the US is no longer a significant source of demand — it has scaled back on oil imports over the years, for example — and currently generates a surplus in its balance of trade and services with Saudi Arabia,”
he added.

SSGA’s 12-strong team in the Middle East — now based in Dubai but with a branch office also in Abu Dhabi — looks set to grow as the asset management business expands. “The Middle East and Africa market is extremely dynamic and demanding, and we believe that only those firms that are nimble and agile enough will be successful in the long run,” Laurina said.

 


Egypt to start electric car production from mid-2022

Egypt to start electric car production from mid-2022
Updated 18 June 2021

Egypt to start electric car production from mid-2022

Egypt to start electric car production from mid-2022
  • Thirteen electric vehicles will be tested on Egyptian streets from next month

CAIRO: Egypt will begin testing electric cars on the country’s streets from July, ahead of plans to launch full-scale production of the vehicles from mid-2022.

Thirteen imported electric vehicles will be tested on Egyptian streets from next month, Hisham Tawfik, minister of the Egyptian public enterprise sector, said while attending the launch of the Nasr E70 electric car.

Nine of the electric cars will be tested by drivers nominated by Uber, the global ride-hailing company, he added.

The Nasr E70 is scheduled to start production in mid-2022 with the El Nasr Automotive Manufacturing Company, an affiliate of the Ministry of Public Enterprise Sector’s Metallurgical Industries Company.

Tawfik said that the ministry began studying the electric car production project in mid-2019 as part of efforts to reform and develop its affiliated companies, including the revival of El Nasr Automotive Company.

FASTFACT

E70

The Nasr E70 is scheduled to start production in mid-2022 with the El Nasr Automotive Manufacturing Company.

The project is in line with the global move toward electric cars and aligns with President Abdel Fattah El-Sisi’s directives to localize the manufacture of vehicles used for clean energy.

The Dongfeng Corporation, one of the largest automobile producers in China, is partnering in the production of the Nasr E70 vehicle, the minister said.

An agreement between El-Nasr and Dongfeng was signed in June 2020 following months of negotiations.

The Ministry of Public Enterprise Sector recently released images of the first electric car of its kind in the country.

El Nasr CEO Hani El-Khouly said that three types of electric car models will be available in Egypt, based on battery capacity.

Batteries initially will be made in China, with production later shifting to Egypt.

Trials of the imported cars will continue for up to four months under a range of Egyptian conditions and with different drivers.

The Nasr E70 can reach a speed of 145 kilometers per hour and travel up to 400 km on a single charge.

El-Khouly said that a delegation from China will arrive in Egypt in July to follow up on the tests.

Government subsidy of the car will total about EGP50,000 ($13,333) to support the local market, he said.


From Australia to Hong Kong, internet outages disrupt services

From Australia to Hong Kong, internet outages disrupt services
Updated 18 June 2021

From Australia to Hong Kong, internet outages disrupt services

From Australia to Hong Kong, internet outages disrupt services
  • Many of the outages were reported by people in Australia trying to do banking, book flights and access postal services.
  • Brief internet service outages are not uncommon and are only rarely the result of hacking or other mischief

SYDNEY: A wave of brief Iinternet outages hit the websites and apps of dozens of financial institutions, airlines and other companies across the globe Thursday.

The Hong Kong Stock Exchange said in a post on Twitter Thursday afternoon Hong Kong time that its site was facing technical issues and that it was investigating. It said in another post 17 minutes later that its websites were back to normal.

Internet monitoring websites including ThousandEyes, Downdetector.com and fing.com showed dozens of disruptions, including to US-based airlines.

Many of the outages were reported by people in Australia trying to do banking, book flights and access postal services.

Australia Post, the country’s postal service, said on Twitter that an “external outage” had impacted a number of its services, and that while most services had come back online, they are continuing to monitor and investigate.

Many services were up and running after an hour or so but the affected companies said they were working overtime to prevent further problems.

Banking services were severely disrupted, with Westpac, the Commonwealth, ANZ and St. George all down, along with the website of the Reserve Bank of Australia. Services have mostly been restored.

Virgin Australia said flights were largely operating as scheduled after it restored access to its website and guest contact center.

“Virgin Australia was one of many organizations to experience an outage with the Akamai content delivery system today,” it said. “We are working with them to ensure that necessary measures are taken to prevent these outages from reoccurring.”

Akamai counts some of the world’s biggest companies and banks as customers.

Calls to Akamai, which is headquartered in Cambridge, Massachusetts, but has global services, went unanswered.

The disruptions came just days after many of the world’s top websites went offline briefly due to a problem with software at Fastly, another major web services company. The company blamed the problem on a software bug that was triggered when a customer changed a setting.

Brief internet service outages are not uncommon and are only rarely the result of hacking or other mischief. But the outages have underscored how vital a small number of behind-the-scenes companies have become to running the internet.


Saudi and Russian business officials propose Russian bank in Riyadh

Saudi and Russian business officials propose Russian bank in Riyadh
Updated 18 June 2021

Saudi and Russian business officials propose Russian bank in Riyadh

Saudi and Russian business officials propose Russian bank in Riyadh
  • Russian ambassador to the Kingdom says new commercial attache at the embassy will help Saudi businesses

RIYADH: A proposal to open a Russian bank in Riyadh was presented at a meeting between Saudi and Russian officials on Thursday.
The move would facilitate trade and economic exchange between the two countries, a meeting of the Saudi-Russian Business Council of the Council of Saudi Chambers (CSC) was told.
Russia’s Ambassador to the Kingdom, Sergei Kozlov, said he promised to support and study the proposal to open the bank in Riyadh.
He said a commercial attaché had been appointed at the embassy in Riyadh to help Saudi business owners overcome obstacles.
Ajlan bin Abdulaziz Al-Ajlan, president of the CSC, said the meeting provided strong impetus toward developing more trade and economic relations.
Chairman of the Saudi-Russian Business Council Tariq Al-Kahtani said it was important to strengthen economic and trade cooperation.
The meeting also dealt with some challenges that contributed to the weak volume of trade exchange between the Kingdom and Russia, including the lack of a direct shipping line to facilitate import and export operations.


International companies to invest in Egyptian green hydrogen projects, says minister

International companies to invest in Egyptian green hydrogen projects, says minister
Updated 17 June 2021

International companies to invest in Egyptian green hydrogen projects, says minister

International companies to invest in Egyptian green hydrogen projects, says minister
  • Egypt has signed MOU for 1GW green hydrogen project
  • Other EU companies set to partner with Egypt's private sector

RIYADH: International companies are interested in investing in green hydrogen production in Egypt, according to Minister of Electricity and Renewable Energy Mohamed Shaker.

“There are companies from the European Union that will enter into partnerships with the Egyptian private sector,” he said.

The Egyptian government has signed an MoU with Siemens for the first project to produce green hydrogen with a capacity of 1 megawatt, doubling to 2 megawatts over five years, he said.

“Green hydrogen will be the world’s fuel in the next few years, and I see that Egypt started early in this field,” he added.

Work is currently underway to develop and formulate a strategy for the hydrogen industry in Egypt through a ministerial committee in which the Ministry of Petroleum and Mineral Resources participates as a main member, according to previous statements by the Minister of Petroleum and Mineral Resources Tarek El Molla.

Egypt is planning to invest up to $4 billion in a project to generate green hydrogen gas through water electrolysis, Shaker said this week.

The project is currently in the feasibility studies stage, in consultation with the Sovereign Fund of Egypt and a group of concerned ministries, and will be presented next week, he said.

The United States is planning to increase funding to Egypt to help it convert to solar energy and move away from fossil fuels, US special envoy for climate John Kerry said in Cairo on Wednesday.

Egypt is planning to double the state’s funding for green projects to 30 percent of its overall investment plan during the fiscal year 2021/2022 and to raise it to 50 percent by 2024/2025.


Aramco completes issuance of international trust certificates for $6bn sukuk

Aramco completes issuance of international trust certificates for $6bn sukuk
Updated 17 June 2021

Aramco completes issuance of international trust certificates for $6bn sukuk

Aramco completes issuance of international trust certificates for $6bn sukuk
  • Launched on June 9, sale was Aramco’s first dollar-denominated sukuk.

RIYADH: Saudi Aramco said it completed issuing trust certificates for $6 billion of sukuk.
Aramco issued 30,000 sukuk with a par value of $200,000 each, it said in a filing to the Tadawul stock exchange.
“The outcome demonstrates further evidence of Aramco’s unique value proposition, which is underwritten by its operational and financial resilience,” said Aramco CEO and President Amin Nasser.
The securities were issued in three tranches, with the three-year notes paying 0.946 percent, 5-year notes at 2.602 percent and 10-year bonds 2.694 percent.
The sale, launched on June 9, was Aramco’s first dollar-denominated sukuk.
Aramco’s debut $12 billion bond deal in 2019 was followed by an $8 billion, five-part transaction in November last year, both used to fund its dividend.
The sale attracted orders exceeding $60 billion and added 100 new investors across the globe, Aramco said.