Turkey’s banks said to shy away from Erdogan’s ‘crazy’ canal

Turkey’s banks said to shy away from Erdogan’s ‘crazy’ canal
People wait in line to submit their petitions opposing a massive canal project in Istanbul, Turkey, Dec, 27, 2019. (Reuters)
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Updated 27 April 2021

Turkey’s banks said to shy away from Erdogan’s ‘crazy’ canal

Turkey’s banks said to shy away from Erdogan’s ‘crazy’ canal
  • Russia has signaled unease about the project
  • Cost of canal would eclipse other mega projects

ISTANBUL: Some of Turkey’s biggest banks are reluctant to finance President Tayyip Erdogan’s planned Istanbul canal due to environmental concerns and the investment risks hanging over the massive construction project, four senior bankers told Reuters.
Two of the sources said a global sustainability pact that six of Turkey’s top banks have signed was a barrier to funding the Kanal Istanbul, which Erdogan dubbed his “crazy project” when he floated it a decade ago.
The government expects to break ground in June on the canal, which would connect the Black Sea to the north with the Marmara Sea to the south, running 45 km (28 miles) through marshland, farms and towns on the western edge of the city.
Erdogan says the canal would protect the Bosphorus Strait, which runs through the heart of Istanbul, by diverting traffic.
Yet Istanbul’s mayor, engineers and, according to one poll, most citizens, oppose the project on enviromental grounds, saying it would destroy a marine ecosystem and resources that supply almost a third of the city’s fresh water.
Russia, meanwhile, has signaled unease about the project on security grounds as the canal would open a second passage to the Black Sea, which is home to a Russian naval fleet.
“I don’t think we can take part in the funding of Kanal Istanbul,” said a senior banker who requested anonymity. “It may trigger some environmental issues.”
Six Turkish banks, including Garanti Bank, Is Bank and Yapi Kredi, have signed the UN-backed Principles for Responsible Banking framework which calls on signatories to avoid harming people and the planet.
“Definitely we don’t want to give a loan to this kind of project because of the environmental issues,” a second senior banker told Reuters, adding that signatory banks must abide by the UN-backed sustainability pact.
In 2019, the canal’s price tag was estimated at 75 million lira — or $13 billion at the time — in a government report.
The reluctance of some Turkish lenders to finance the project makes it more likely state and foreign financing will have to play a bigger role for Erdogan’s dream to come true.
A Finance Ministry spokesman did not immediately respond to a request for comment.
Asked whether Turkish banks would participate in the financing, Erdogan’s spokesman and adviser, Ibrahim Kalin, told Reuters the project would “certainly” attract investors and creditors when tenders are held soon.
Garanti Bank declined to comment. Is Bank and Yapi Kredi did not immediately respond to requests for comment.
Denizbank and state-owned Vakifbank also declined to comment on the canal’s financing while Akbank and state lenders Halkbank and Ziraat Bank did not immediately respond to requests for comment.
The cost of the canal would eclipse other mega projects such as Istanbul’s vast new airport that have defined Erdogan’s legacy of credit-driven growth.
Massive foreign short-term debt worth some $150 billion for banks and companies has dogged the lira and laid bare the risks of Turkey’s depleted foreign exchange reserves.
A currency crisis in 2018 delayed the canal project but it is back on the agenda as the economy rebounds from the pandemic and the government approved development plans last month.
In an interview on Sunday, Erdogan’s adviser Kalin said there was already interest in the bidding that would be open to all including Turkish, European, American and Chinese firms.
“It’s a profitable project ... and we are positive it will move forward,” he told Reuters.
But for most of Turkey’s banks, especially lenders with European backers and those involved in loan syndications, the risks would likely be too high, the sources said.
They said taking on such a large project could limit their capacity to carry out further loan syndications while there was also a risk the project could be torpedoed at a later stage.
“No Turkish bank, neither state nor private, could take that risk,” said a former senior banker.
Turkey’s environment ministry has carried out environmental assessments which cleared the way for the project to proceed.
But European backers of Turkish banks would probably not see a Turkish environmental stamp of approval as credible, the former banker said.
“This is one of those white elephants. Other than land price speculation, it is hard to see any value in it,” he said.
The canal would destroy a marine ecosystem and basins that provide nearly a third of Istanbul’s fresh water, according to the Union of Chambers of Turkish Engineers and Architects.
Moscow is concerned the canal might not be covered by the Montreux Convention that restricts foreign warships’ access to the Black Sea through the Bosphorus Strait.
A Turkish official said in 2019 that the new canal would not be covered by the convention, which dates back to 1936.
This month, amid a build-up of Russia’s navy near Ukraine, the Kremlin said President Vladimir Putin told Erdogan on a call that the convention must be observed.
A fourth banker also said that given opposition parties oppose the project, construction could halt if Erdogan’s ruling AK Party is ousted. Presidential elections are set for 2023.
“The size of the project is tremendously big. It has reputational risks and loan risk,” the person said. “It also still seems like government’s pet project.”


Standard Chartered posts highest half-year MENA profit in 5 years

Standard Chartered posts highest half-year MENA profit in 5 years
Updated 19 sec ago

Standard Chartered posts highest half-year MENA profit in 5 years

Standard Chartered posts highest half-year MENA profit in 5 years
JEDDAH: Standard Chartered Bank reported its biggest half-year operating profit in the Middle East and North Africa for five years as wealth management income increased and credit impairments fell.

The emerging market-focused lender posted an operating profit in MENA of $476 million in the six months to the end of June, up from $91 million a year earlier, it said in a statement. Globally, it reported a 57 percent increase in pretax profit to $2.55 billion, announced a $250 million share buyback and a $94 million dividend.

Income in the MENA region was flat year on year after being impacted by rate cuts and currency devaluation, which provided a drag of about 8 percent, the bank said. Income in Africa grew by 6 percent on a constant currency basis.

There was a significant improvement in the bank’s return on tangible equity in the region, and it reported a “great turnaround story in the UAE, with significantly improved returns.”

“This is the result of all the hard work the team has put in over the years and the execution of some tough decisions we made to drive efficiencies and reduce risk,” said Sunil Kaushal, regional CEO, Africa and Middle East. “This has happened during a period when the backdrop, while improving, remains uncertain and challenging and is a true testament to the resilience of our underlying business.”

“We are excited about the recent expansion of our network into the Kingdom of Saudi Arabia,” he said. “We will leverage our presence in the Kingdom to promote trade, investment and capital flows in support of the Saudi Vision 2030.”

Standard Chartered has launched digital banking platforms in nine key African Markets – Cote d’Ivoire, Uganda, Tanzania, Ghana, Kenya, Botswana, Zambia, Zimbabwe and Nigeria – the adoption of which has been accelerated by the pandemic, the bank said.

Saudi Arabia’s financial wealth exceeds $1tn as next generation takes over

Saudi Arabia’s financial wealth exceeds $1tn as next generation takes over
Updated 53 min ago

Saudi Arabia’s financial wealth exceeds $1tn as next generation takes over

Saudi Arabia’s financial wealth exceeds $1tn as next generation takes over
  • Wealth to grow 4.1 percent annually through 2025
  • Saudi Arabia represents 45 percent of GCC financial wealth

RIYADH: Saudi Arabia’s financial wealth is expected to grow by 4.2 percent annually over the next five years, hitting $1.2 trillion in 2025 as the Kingdom sees more young people take over ventures, according to a study by Boston Consultancy Group (BCG).

The Kingdom’s wealth grew by 4.1 percent on annual basis from 2015 to hit $1 trillion in 2020, 84 percent of which is investable wealth, the report said, noting the Kingdom’s resilience in the face of the protracted COVID-19 pandemic.

Last year, Saudi Arabia represented 45 percent of the Gulf Cooperation Council’s (GCC) $2.2 trillion in 2020 of financial wealth, which is forecast to reach $2.7 trillion in 2025, BCG said.

The rise of the next-generation affluent and high-net-worth clients will have impact on the business landscape, BGC said in the report. These individuals, between 20 and 50 years of age, have longer investment horizons, a greater appetite for risk, and often a desire to use their wealth to create positive societal impact as well as earn solid returns, it said.

However, many wealth managers are not yet ready to serve the new young business leaders.

“Saudi Arabia’s growth of wealth has proven to be robust, springing back from challenges presented by the COVID-19 pandemic,” said Mustafa Bosca, managing director and partner at BCG.

“The Kingdom’s Vision 2030 has been a driving force to increasing economic productivity, which also is allowing Saudis to participate in an ever-more-global economy which has enabled growth in wealth despite the many economic disruptions that have occurred in recent times,” he said.


Bahri profit falls 93 percent in H1 as oil transport revenue slumps

Bahri profit falls 93 percent in H1 as oil transport revenue slumps
Updated 03 August 2021

Bahri profit falls 93 percent in H1 as oil transport revenue slumps

Bahri profit falls 93 percent in H1 as oil transport revenue slumps
  • Profit decline attributed to 67 percent drop in oil-transport revenue

JEDDAH: Profits at Bahri, formerly The National Shipping Company of Saudi Arabia, dropped 93 percent in the first half of the year as revenue from transporting oil slumped on lower volumes and prices.

Net profit after zakat and tax of SR82.5 million ($22 million) compared with SR1.18 billion in the same period a year earlier, Bahri said in a filing to the Saudi stock exchange, Tadawul. Total revenue of SR2.48 billion represented a decline of 56 percent on the first six months of 2020.

The drop in profit was attributed to a 67 percent slump in revenue from shipping oil due to the sharp drop in transportation rates and operations.

However, an increase in bunker subsidies and other income along with decrease in zakat and income tax, financing expenses and the provision on trade receivables and contract assets, helped offset the fall in oil-related revenue, the company said.

Bahri, established in 1978 as a joint venture between Saudi Aramco and the Public Investment Fund, owns and manages a fleet of 89 tankers and container ships dedicated to transporting oil, petrochemicals, dry bulk and other cargo.

The company's shares fell 1.9 percent to SR38.25 as of 3:12 p.m. in Riyadh. 


Oman adjusts electricity tariffs to ease burden on citizens

Oman adjusts electricity tariffs to ease burden on citizens
Updated 03 August 2021

Oman adjusts electricity tariffs to ease burden on citizens

Oman adjusts electricity tariffs to ease burden on citizens
  • Oman has been pushing through reforms to ease pressure on public finances

DUBAI: Oman has adjusted its electricity tariffs structure to offer consumers on lower rates more supply, a government official said on Monday, following consumer complaints about steep summer bills.
Household energy costs are sensitive in a country that recently saw protests over unemployment.
The government also wants to keep the public onside as the Gulf state’s ruling sultan, who assumed power last year, continues to push through reforms to ease pressure on public finances in the debt-burdened state. They include a value-added tax, introduced in April, and overhauling an expensive subsidies system.
A Public Services Regulation Authority official told a news briefing that after receiving over 5,000 complaints, authorities had decided to expand consumption categories for households in a move that would be applied retroactively to cover May and June.
Under the adjustment, consumers paying a tariff of 12 baisas ($0.03) per kilowatt/hour (kw/h) will now be able to get up to 4,000 kw/h of electricity, up from a previous cap of 2,000 kw/h.
Consumers paying a tariff of 16 baisas per kw/h will now be able to get up to 6,000 kw/h, against up to 4,000 kw/h previously.
“Most citizens fall under these two segments,” Authority head Mansoor Al-Hinai told reporters.
He said the body has instructed licensed firms to restore services cut off due to late bill payments during the summer.
Protests in May by hundreds of Omanis seeking employment had subsided after Sultan Haitham bin Tariq Al-Said, facing his biggest challenge yet, ordered acceleration of government plans to create thousands of jobs and amid a security crackdown.


Cryptocurrency promise for UAE’s unbanked migrants — but not yet

Cryptocurrency promise for UAE’s unbanked migrants — but not yet
Updated 03 August 2021

Cryptocurrency promise for UAE’s unbanked migrants — but not yet

Cryptocurrency promise for UAE’s unbanked migrants — but not yet
  • Migrants face high fees, long wait times to send money
  • Regulations on crypto assets still needed, experts say

DUBAI: Every month, 24-year-old parking attendant Ramesh Giri waits outside a money transfer office in Dubai to send $600 in cash to support his parents and two brothers in Nepal.
He dreads the routine, which costs him up to $7 each time and is keeping him from saving enough to fulfil his aspiration of becoming a restaurateur – but that could all change in the weeks ahead.
Dubai and the rest of the United Arab Emirates (UAE) is moving closer to opening licensed cryptocurrency exchanges, a step that could boost financial inclusion for the millions of expatriates who make up most of the region’s workforce.
Using online wallets, migrants could one day be able to send remittances home with smaller fees — or none at all — and within minutes, skipping the long waits in the Gulf’s heat and humidity.
“It’s free,” said Giri, who has been learning about cryptocurrencies and, along with the speed and savings, sees the added potential of letting him keep track of his finances more easily on his smartphone.
“I hope it can help me see what’s happening with my money and be able to save — because I can’t right now,” he told the Thomson Reuters Foundation.

‘NO THRESHOLD’
According to the World Bank, about 1.7 billion adults around the world did not have bank accounts as of 2017 – more than a quarter of them in India, Indonesia, Pakistan and Bangladesh.
Many of those countries are among the top senders of migrant workers to the Gulf, where they work in construction, the hospitality industry or domestic work to send money back home to their families.
Government data show that out of the UAE’s population of more than 9 million, nearly 80 percent are expats.
Last year, the region sent $43 billion in remittances, making it the world’s second-highest sender after the United States, according to the Global Knowledge Partnership on Migration and Development (KNOMAD).
The global think tank said the remittance industry makes up about 12 percent of the Emirates’ gross domestic product.
The UAE’s path toward digitising the industry began last year, when its Securities and Commodities Authority stipulated that anyone offering crypto assets in the Emirates must be formally licensed and comply with a range of anti-money laundering, cybersecurity and data protection laws.
So far, six companies have qualified under the regulations to create crypto exchanges, with two reaching the first stages of going live.
One of those, MidChains, is a crypto asset trading platform based in Abu Dhabi and is preparing to launch for trading.
Technically, the platform will be open to everyone. “There is no earnings threshold,” said MidChains co-founder and chief executive officer Basil Al Askari.
But he acknowledged that the documentation clients need to provide to meet regulations, including proof of residence, income and secure assets, means migrant workers will likely be shut out.
Askari said he hoped remittances will one day be a regular feature of the UAE’s cryptocurrency services.
“If you’re talking about finance and banking for the unbanked ... that’s where we want the technology to lead,” he said.
For now, though, access to cryptocurrency in the region will mainly be limited to trading firms, hedge fund investors and high-net-worth individuals. “It doesn’t really help (migrant workers) because they might not be able to go through the compliance requirements in order to open accounts,” Askari said.

PROTECTING DIGITAL ASSETS
Before cryptocurrency takes hold in the UAE, authorities need to boost awareness among users on how to safeguard their digital assets, said George Kuruvila, a partner at Fotis International Law Firm.
So far this year, Dubai residents have lost nearly $22 million in cryptocurrency scams, according to figures from the Dubai Police.
Kuruvila, whose firm advises clients in Dubai on financial technology regulations, says younger generations will be the first to learn how to trust cryptocurrencies and use them more securely.
“That same change is going to happen with migrant workers, but it’s not going to happen as fast,” he said, describing the demographic as more cautious with their money.
“It will happen in the next five to 10 years,” he added.
Part of that is due to one risk the UAE cannot mitigate, he said — the volatility of digital currencies.
Bitcoin, for example, had one of its most volatile months in May 2021, first increasing steadily before losing 35 percent of its value.
“Let’s say somebody puts all of their savings into bitcoin today. No one can guarantee that it won’t crash tomorrow. There is no regulator for that,” said Kuruvila.
Such highs and lows could be disastrous for anyone sending small amounts in remittances.
“When it comes to migrant workers, it’s their everyday bread and butter,” he said.
That volatility has already put off Emma Ogode, a Kenyan working in the hospitality industry in Dubai.
“I see it as betting money — you have to put in a certain amount. Then maybe you win, (but) if you don’t, you will have to put in more. Then, all your finances will go away,” said Ogode, 32.
She said she spends about a day every month calling different remittance offices to find the best exchange rates and transfer fees, before inevitably waiting in a long line to send money home.
But for her, cryptocurrency is not the answer.
“I don’t trust it,” she said.