China virus threatens to further dampen Gulf economies

Coronavirus cases have been reported across the Asia Pacific region and in North America and Europe, but a Wuhan family in the UAE are the first in the Middle East. (AFP)
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Updated 13 February 2020

China virus threatens to further dampen Gulf economies

  • Over 1.6 million Chinese tourists visited the Gulf states in 2018

DUBAI: The coronavirus crisis, which has already battered oil prices, could further undercut Gulf economies.

The six Gulf states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE — count China as their main trading partner and crude buyer, which soaks up about a fifth of their oil.

But China’s energy demand has sagged as authorities lock down millions of people in several cities to prevent the spread of the disease, now named COVID-19, that has killed more than 1,100 people so far.

The knock-on effects for a global economy that is dependent on a buoyant China — the powerhouse which accounts for one third of the growth in oil demand — have seen prices sink to a one-year low.

Analysts believe the crisis, which the World Health Organization said this week spells a “very grave” global threat, will undercut the industry and dampen prices.

“There is no question that the virus is having a significant impact on Chinese oil demand,” Bill Farren-Price of Petroleum Policy Intelligence (PPI) told AFP.

If the lockdowns continue into the year’s second quarter,” he said, “then it starts to look more serious and will have deeper impacts on the real economy.”

Non-oil trade between Beijing and the Gulf Cooperation Council (GCC) has grown from just several billion dollars two decades ago to nearly $200 billion last year.

One industry that has taken an early hit is tourism.

Over 1.6 million Chinese tourists visited the Gulf states in 2018, most of them heading to Dubai, and the number had been rising fast.

In recent weeks, however, Chinese visitors have been rarely sighted even in Dubai as airlines have suspend routes following the outbreak, threatening the ambitious tourism targets.

The latest shock comes shortly after the International Monetary Fund warned that Gulf states must undertake much deeper reforms or risk seeing some $2.5 trillion in accumulated wealth drain away in 15 years as global demand for oil slides.

Oil income is highly sensitive to Gulf states as it contributes more than 70 percent of public revenues.

Since Jan. 30, a month after the disease was discovered, oil prices have dropped by around 20 percent, slashing tens of billions of dollars from GCC revenues.

An oil price crash in mid-2014 had already seen public revenues dwindle and growth rates tumble, forcing borrowing and a drawdown on assets to plug budget deficits.

Major energy-producing countries, which had already cut production in an effort to revive the market, now face a “double whammy” of slumping prices as well as more fundamental economic trauma, said Ellen Wald, author of the book “Saudi Inc.”

“The declines, coming at a time of curtailed output, threaten economic shocks that, if long-lasting, could lead to the kind of political and regional instability that was avoided during the last steep drop,” she said in a Bloomberg news agency commentary.

London-based research consultancy Capital Economics also warned that a prolonged impact from COVID-19 could trigger a major economic downturn.

“Fears about the coronavirus outbreak have weighed on oil prices and clouded the near-term outlook for the Gulf countries,” it said in a report.

“Lower oil prices and a possible deepening of oil production cuts will act as a headwind to growth in early 2020.”

As a result of the sharp decline in oil prices, a technical committee for OPEC and its partners last week recommended additional production cuts of 600,000 bpd to add it to the 1.7 million bpd of cuts already in place.

Russia has been reluctant to commit, promising a decision soon.


UAE dives into Lake Manzala project

Updated 21 September 2020

UAE dives into Lake Manzala project

  • Egyptian campaign aims to return the lake to its previous state and revive local fishing industry

CAIRO: The UAE National Marine Dredging Company (NMDC) has announced that it won the rights to the expansion project of Lake Manzala in Egypt, valued at 600 million UAE dirhams ($163 million).

The company’s announcement of the new project came following a disclosure published on the Abu Dhabi Securities Exchange website. It ensures compliance with the principle of disclosure and transparency in force in the UAE.

Lake Manzala is one of Egypt’s largest natural lakes. It is known for its potential fishing opportunities, as it has the basis for high fish stocks due to natural nutrients and a moderate climate throughout the year. It produces about half of the natural fish production in lakes.

The lake has witnessed neglect in recent years, losing much of its importance and wealth. In May 2017 Egyptian President Abdel Fattah El-Sisi launched a national project to develop Egyptian lakes, with a key focus on Lake Manzala.

NMDC said in a statement that winning the project came through its partnership with the Egyptian-Emirati Challenge Company. It said that it will take about two years to implement the project.

NMDC is one of the leading companies in the field of dredging, land reclamation and civil and marine construction in the Middle East. The Lake Manzala development project aims to improve the quality of water to restore free fishing and return the lake to its previous state, which will boost the local market and export output.

President El-Sisi said that Lake Manzala will contribute to enhancing Egypt’s fishing industry, and export operations will be activated after its full development. He directed the border governorates, in coordination with the Ministry of Interior and the Armed Forces, to remove all encroachments and criminal outposts on the lake.

Several days ago, Dakahlia governorate completed a difficult operation to remove encroachments on the lake. A large campaign that used Armed Forces Engineering Authority equipment removed 301 houses in the Abdo El-Salhy area in El-Matareya city, known as the “fishermen’s land,” which was built on areas that were filled in from the lake. The operation occurred after local fishermen were persuaded to obtain compensation for vacating their houses.

Magdy Zaher, executive director of Manzala Lake, said that the engineering authority used 320 excavators and 20 imported suction dredgers to work in the lake.

The authority dredged the upper islands isolated from the water with the help of an Emirati bulldozing company to increase the efficiency and purification of Lake Manzala.

Zaher said the lake project will require several steps.

The most important is the removal of encroachments on the water surface and doubling its area to 250,000 feddans, he said. Dredging and deepening the lake, opening the gates and extending the radial channels to allow Mediterranean waters to enter the lake will follow, he added.

A safety belt will come in the form of a road 80 km long and 30 meters wide, which will surround the lake and prevent future encroachments. It will also divert the course of the Bahr El-Baqar water treatment plant, which pours 12 million cubic meters of sanitary, industrial and agricultural drainage into the lake, Zaher said.