Mitsubishi upbeat on KSA growth as reforms gather pace

The Mitsubishi financial group, which has its headquarters in Tokyo, expects Saudi privatization plans to accelerate this year. (AFP)
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Updated 13 January 2020

Mitsubishi upbeat on KSA growth as reforms gather pace

  • MUFG analyst believes the Kingdom will continue to be regional outperformer in 2020

DUBAI: Japanese financiers are taking a cautiously optimistic view of the Middle East, despite recent geopolitical stresses, and believe Saudi Arabia, in particular, is set for a year of financial and economic outperformance, with a revived privatization plan as the centerpiece.
Mitsubishi UFG Financial Group (MUFG), one of the country’s biggest investment institutions and a major player on the international financial scene, recently told investors: “Saudi Arabia was the regional outperformer in the Middle East and North Africa in 2019, and we believe this trend will follow in 2020.” 
According to Ehsan Khoman, head of MENA research and strategist for MUFG: “Investors have moved on from recent ‘black swan’ events and are taking increasing comfort with the lengths and vigour that the authorities are demonstrating in enhancing the operating environment, enticing foreign investment and implementing structural reforms in accordance with Vision 2030 targets.”
MUFG, which opened a Riyadh office just over a year ago and has close links with Morgan Stanley, one of the Kingdom’s top financial advisers, gave a vote of confidence to Saudi economic policymakers, on the eve of the visit to the Middle East by Japan’s prime minister Shinzo Abe.
“The Kingdom’s ample wealth buffers have offered policymakers options, allowing the authorities to retain an expansionary stance throughout 2019,” Khoman said.
“The 2020 budget strikes a more conservative tone, which is in line with the approach wherein the state slowly withdraws and allows the private sector to lead.
“The central cornerstone of the transformation strategy is to structurally change the operating model to make investment, not government spending, the engine of growth.
“The emphasis on diversifying state funding to ensure the private sector is not crowded out, in conjunction with robust corporate confidence readings (which continue to break records), are consistent with this objective.”
Last year the Kingdom was a record achiever in the World Bank’s annual “Ease of Doing Business” ratings, jumping a record 30 places as the pace of reform accelerated under the Vision 2030 strategy to diversify the economy away from oil dependency.
MUFG believes this will continue. “The momentum from the leadership centered on a KPI performance-based achievement approach is undoubtedly serious, and critical structural reforms are creating the necessary platforms for corporates to evaluate strategic risk-reward opportunities,” Khoman said.
Analysts expect that the historic initial public offering of Saudi Aramco last year will kick-start the privatization program under the Vision 2030 strategy.
The Kingdom’s ministry of economics has ear-marked around 162 businesses currently owned by the government for privatization either by IPO, sale to domestic and foreign trade buyers, and public-private partnership, but that program was delayed while the Aramco share sale was being organized. 
MUFG expects its will gather new momentum this year. “Privatization, particularly in an volatile oil price environment, is intended to enhance the operations of state-owned enterprises, as well as the efficiency and overall management of the business, and improve the quality of services,” Khoman said.
“Privatization initiatives are an integral part of regional government’s strategies for achieving economic development, structurally adjusting the economy away from not only the reliance on hydrocarbons, but also realigning it away from volatile oil and gas prices.
“As such, governments in the region have devised wide-ranging reform plans, with privatization central to such initiatives.”
In conclusion, Khoman said: “We at Mitsubishi believe that the Kingdom as well as the rest of the region will accelerate privatization plans this year, which is in line with the economic transformation strategy wherein the state slowly withdraws and allows the private sector to lead.”


Dubai carrier Emirates issued over $517 million in refunds in past two months

Updated 02 July 2020

Dubai carrier Emirates issued over $517 million in refunds in past two months

  • Dubai-based carrier is operating a limited numbers of flights on a reduced network after the coronavirus pandemic

DUBAI: Emirates, one of the world’s biggest long-haul airlines, has processed close to 650,000 refunds over the past two months, refunding over $517 million, it said on Thursday.
The Dubai-based carrier is operating a limited numbers of flights on a reduced network after the coronavirus pandemic brought global aviation to a near halt this year.
Emirates expects to process more than 500,000 refunds in the next two months, Chief Commercial Officer Adnan Kazim said in a statement.