Corruption is ‘key threat’ to Middle East economies, IMF chief warns

Corruption is ‘key threat’ to Middle East economies, IMF chief warns
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Christine Lagarde, managing director of the International Monetary Fund, has warned that the economies of the Middle East face a challenging time. (File/AFP)
Corruption is ‘key threat’ to Middle East economies, IMF chief warns
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Christine Lagarde, managing director of the International Monetary Fund, has warned that the economies of the Middle East face a challenging time. (File/AFP)
Updated 10 February 2019

Corruption is ‘key threat’ to Middle East economies, IMF chief warns

Corruption is ‘key threat’ to Middle East economies, IMF chief warns
  • Hard-hitting analysis by IMF chief as leaders gather for World Government Summit
  • She was speaking at the Arab Fiscal Forum that traditionally precedes the World Government Summit

DUBAI: Corruption, poor governance and a lack of transparency are the key challenges facing Middle East economies, International Monetary Fund chief Christine Lagarde has warned in a hard-hitting analysis of the region’s economic prospects.

Speaking ahead of the opening day of the World Government Summit in Dubai, Lagarde also warned of the impact for regional economies if further measures to implement good governance practice and transparency were not put in place. 

The IMF is planning talks with regional policymakers to implement new frameworks to strengthen governance and tackle corruption, “the great disruptor of fiscal policy,” she added.

Her hard-hitting analysis of the region’s economic prospects come against the background of a weakening outlook for global economies. The IMF recently downgraded its forecasts for global growth.

“Unfortunately, the region has yet to fully recover from the global financial crisis and other big economic dislocations over the past decade,” she told regional finance ministers.

“Among oil importers, growth has picked up, but it is still below pre-crisis levels. Fiscal deficits remain high, and public debt has risen rapidly—from 64 percent of GDP in 2008 to 85 percent of GDP a decade later. Public debt now exceeds 90 percent of GDP in nearly half of these countries,” Lagarde said.

She went on: “The oil exporters have not fully recovered from the dramatic oil price shock of 2014. Modest growth continues, but the outlook is highly uncertain—reflecting in part the need for countries to shift rapidly toward renewable energy over the new few decades, in line with the Paris Agreement.

“With revenues down, fiscal deficits are only slowly declining—despite significant reforms on both the spending and revenue sides, including the introduction of VAT and excise taxes. This has led to a sharp increase in public debt—from 13 percent of GDP in 2013 to 33 percent in 2018.”

The bottom line, the IMF boss said, is that "the economic path ahead for the region is challenging. This makes the task of fiscal policy that much harder, which in turn makes it even more important to build strong foundations to anchor fiscal policy.”

She said that there was scope to improve fiscal frameworks in the region, to offset the impact of short-termism and lack of fiscal credibility.

“I am referring to such factors as large amounts of spending kept off-budget and poor risk management. Across the region, it is common for sovereign wealth funds to directly finance projects, bypassing the normal budget process. And state-owned enterprises in some countries have high levels of borrowing—again, outside of the budget,” Lagarde said.

She commended Saudi Arabia and some other Middle East countries for setting up macro-fiscal units, but added: “Perhaps the oil exporters could follow the example of other resource-rich countries such as Chile and Norway in using fiscal rules to protect key priorities such as social spending from commodity price volatility,” she suggested.

Without such a framework, corruption - “a social poison” - becomes a greater risk. “Without trust in the fairness of the tax system, it becomes harder to raise the revenue needed for critical spending on health, education, and social protection. And governments might be tempted to favor white elephant projects instead of investments in people and productive potential. Add this up, and we have a recipe for unsustainable fiscal policy combined with social discord,” Lagarde added.

She was speaking at the Arab Fiscal Forum that traditionally precedes the World Government Summit, which formally opens Sunday for three days of high-level discussion and debate by world thought leaders from the worlds of public policy, business and entertainment.

Pakistan's Prime Minister Imran Khan, actor Harrison Ford and Lebanese Prime Minister Saad Hariri are among 4,000 delegates who will attend the three-day event, along with Estonia’s prime minister Jüri Ratas and President of Rwanda Paul Kagame.


OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout

OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout
Updated 6 min 18 sec ago

OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout

OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout
  • The “top policy priority” is to deploy vaccines as quickly as possible, to save lives as well as to speed economic recovery.

PARIS: The OECD sharply hiked its 2021 global growth forecast on Tuesday as the deployment of coronavirus vaccines and a huge US stimulus program greatly improve the economic prospects.
The Paris-based Organization for Economic Co-operation and Development said it now expects the global economy to grow 5.6 percent, an increase of 1.4 percentage points from its December forecast.
“Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus,” it said in a report.
The recovery will be largely led by the United States thanks to President Joe Biden’s $1.9 trillion stimulus program, Laurence Boone, chief economist of the OECD, told AFP.
The OECD sees the US economy growing 6.5 percent this year, a very sharp increase of 3.3 percentage points on its previous forecast, with the world as a whole returning to pre-pandemic output levels by mid-2021.
But for the moment, only China, India and Turkey have surpassed pre-pandemic levels and the picture is very mixed elsewhere.
“Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022,” said the OECD, which groups the world’s most developed economies.
It said the “top policy priority” is to deploy vaccines as quickly as possible, to save lives as well as to speed economic recovery.
“There are huge and significant risks to our economic projections, most notably the pace of vaccination,” Boone told AFP.
“What we know is the faster countries vaccinate, the quicker they can reopen their economy,” she said.
Britain, which also has rolled out vaccines quickly, got a 0.9 percentage point increase to 5.1 percent — higher than the UK’s own forecast, which was lowered last week.
The eurozone, where vaccination campaigns have been slower, received only a 0.3 percentage point bump to 3.9 percent, as the recoveries in both Italy and France were revised lower.


Abu Dhabi opens region’s first COVID-19 test lab inside an airport

Abu Dhabi opens region’s first COVID-19 test lab inside an airport
Updated 27 min 31 sec ago

Abu Dhabi opens region’s first COVID-19 test lab inside an airport

Abu Dhabi opens region’s first COVID-19 test lab inside an airport
  • assengers arriving at Abu Dhabi International Airport through terminals 1 and 3 will be tested at the new facility
  • Results will be available in 90 minutes

DUBAI: Abu Dhabi is set to open the region’s first airport polymerase chain reaction (RT-PCR) testing laboratory for COVID-19.


The laboratory will be located within the Abu Dhabi International Airport (AUH), and will provide quick coronavirus test results in line with global travel standards.

“Through partnering with Pure Health and Tamouh Healthcare, Abu Dhabi International Airport is now able to offer travelers state-of-the-art rapid testing services delivered by a dedicated laboratory facility,” said Shareef Hashim Al-Hashmi, chief executive of Abu Dhabi Airports.

The move comes as airports around the world explore new ways to accelerate the revival of air travel demand, which was heavily affected by the COVID-19 pandemic.

“The introduction of the RT-PCR COVID-19 testing is a milestone achievement in our ongoing efforts to facilitate the safe resumption of international air travel and support the recovery of the aviation industry,” Al-Hashimi said.

The 4,000-square-meter testing site has the capacity to test more than 20,000 travelers per day, according to a release.

Passengers arriving at Abu Dhabi International Airport through terminals 1 and 3 will be tested at the new facility, where results will be shared via SMS, WhatsApp, and the Alhosn mobile application in 90 minutes.

Those who test negative and are coming from predetermined low-risk countries will not have to self-isolate. Otherwise, quarantine rules will apply – 10 days of self-isolation and mandatory use of quarantine wristband, which will be fitted at the facility.

Abu Dhabi Airports, the operator of AUH, earlier implemented safety mechanisms at the airport as it restores people’s confidence in traveling.

These airport enhancements include touchless elevator technology, thermal scanners with facial recognition capabilities, as well as sterilization tunnels.


Pandemic to stall UAE banks’ recovery in early 2021: A&M report

Pandemic to stall UAE banks’ recovery in early 2021: A&M report
Updated 43 min 47 sec ago

Pandemic to stall UAE banks’ recovery in early 2021: A&M report

Pandemic to stall UAE banks’ recovery in early 2021: A&M report
  • Growth in loans and advances during 2020 slowed sharply to 1.4 percent from 13.2 percent in 2019

DUBAI: The pandemic will continue to affect profitability for banks in the United Arabia Emirates (UAE) in the early quarters of 2021, after a sharp drop in return on equity last year, consulting firm Alvarez & Marsal (A&M) said on Tuesday.
Return on equity fell to 7.7 percent in 2020 from 13.3 percent the previous year, A&M said in a report on the UAE’s top 10 banks.
“We possibly have not turned the corner,” Asad Ahmed, head of Middle East financial services for A&M told a briefing, saying this goes for banks globally as well as in the UAE.
“In terms of the region and the UAE, 2021 will continue to be a year which does not produce stellar results, but hopefully next year onwards we will see the numbers turn around.”
Growth in loans and advances during 2020 slowed sharply to 1.4 percent from 13.2 percent in 2019, the report said.
2021 is expected to be less volatile than the past year, but banks might see a deterioration in their asset quality after the completion of the central bank’s stimulus scheme later this year, it said.
Total loan-loss provisions jumped 79 percent year-on-year to 28.1 billion dirhams ($7.65 billion) for the top 10 UAE banks last year, as a challenging economic environment and banks’ exposure to several high-profile cases boosted impairments, A&M said.
UAE banks have been hurt by their exposure to hospital operator NMC Health, which disclosed more than $4 billion in hidden debt after short-seller Muddy Waters questioned its financial reporting.
The hospital operator filed for administration in London in April last year.


Vodafone towers unit set for 14.7-bn euro valuation

Vodafone towers unit set for 14.7-bn euro valuation
Updated 52 min 16 sec ago

Vodafone towers unit set for 14.7-bn euro valuation

Vodafone towers unit set for 14.7-bn euro valuation

LONDON: British mobile phone giant Vodafone on Tuesday announced the price range for the upcoming German stock market flotation of its towers business, valuing the unit at up to 14.7 billion euros ($17.4 billion).
The float of up to one-quarter of Vantage Towers comes amid increasing demand for mobile telecommunications connectivity across Europe, driven by data growth, 5G roll-out and regulatory coverage obligations.
Mobile phone giants are also floating or selling off their tower businesses in order to slash debt.
German-headquartered Vantage Tower will have its first day of trading on the Frankfurt stock market on or around March 18, with a price-per-share range of between 22.5 euros and 29 euros, Vodafone said in a statement.
The initial public offering (IPO) “implies a total market capitalization for Vantage Towers of 11.4 billion euros to 14.7 billion euros,” it added.
Digital Colony, a digital infrastructure investor and operator based in the US, has agreed to be a cornerstone investor in the IPO, alongside RRJ, a global equity fund based in Singapore, with commitments of 500 million euros and 450 million euros, respectively.
“The Vantage Towers IPO is moving ahead at pace,” Vantage chief executive Vivek Badrinath said in the statement.
“Today’s price range announcement is accompanied by the news that two leading global investors have committed to cornerstone our IPO with the purchase of 950 million euros of shares at the offer price.”
Vantage Towers’ portfolio includes 82,000 macro sites — towers, masts and rooftops — across 10 European countries.
“Demand for data and connectivity across Europe is powering growth in the towers sector,” Badrinath said.
“Our superior grid and leading market positions mean we are well placed to benefit from this growth and our recent financial results highlighted the good commercial and operational momentum across the business,” he added.
Vodafone said it was targetting proceeds of up to 2.8 billion euros from the IPO, helping to reduce its debt pile.
Earlier this year, heavily-indebted Telefonica agreed to sell its telephone masts in Europe and Latin America to US-based telecom infrastructure firm American Towers for 7.7 billion euros.
The Spanish group said it would use the proceeds to cut debt by 4.6 billion euros.
Vodafone meanwhile rebounded into profit during the first half of its financial year, or six months to September.
During the same period a year earlier, the group had suffered a hefty loss after India’s Supreme Court ordered telecoms companies to pay long-standing licensing fees.


UAE-based venture builder eyes Saudi startup market

UAE-based venture builder eyes Saudi startup market
Updated 09 March 2021

UAE-based venture builder eyes Saudi startup market

UAE-based venture builder eyes Saudi startup market
  • Hatch and Boost has launched two tech startups in the UAE, with three more in the pipeline

DUBAI: Hatch & Boost, an Abu Dhabi-based venture builder (VB), was officially launched this week to spur further growth in the region’s hyperactive startup scene, particularly supporting homegrown “impact-driven business models.”

The venture builder will co-create startups alongside entrepreneurs – from concept stage to market introduction – and help to reduce costs by offering a shared pool of resources to participants.

“Our mission at Hatch & Boost is to bridge the gap between ideation and growth through our unique venture building model, which offers hands-on support from a startup’s early-most stages,” Faris Mesmar, the VB’s co-founder and managing partner, said.

Hatch and Boost has launched two tech startups in the UAE, with three more in the pipeline.

“The startup scene in the UAE has evolved considerably in recent years, and today it is a hotspot for startup activity, supported by an excellent entrepreneur-friendly infrastructure,” Mesmar added.

This startup outlook also applies to Saudi Arabia, he told Arab News, adding that they plan to bring the venture builder to the Kingdom to capitalize on its potential.

“KSA is on our radar, predominantly because it is a flourishing market with an ecosystem that’s suitable for startups,” he said.

“The PIF (Public Investment Fund) is a great example of this, as it continues to move the needle on supporting the startup ecosystem and creating a successful SME infrastructure,” Faris explained.

He added: “We have our eyes on the market, as do investors, on the rising talent and wave of entrepreneurship in the Kingdom.”