GCC needs to secure its investment landscape: Report
GCC needs to secure its investment landscape: Report/node/2138056/business-economy
GCC needs to secure its investment landscape: Report
The policies adopted earlier in the GCC were unfocused and aimed to attract all possible investments in all potential sectors, which proved unsuccessful, according to the report. (Reuters)
GCC needs to secure its investment landscape: Report
Call to focus on frontier sectors based on emerging technologies to attract FDI
Updated 07 August 2022
Farida Elgazzar
CAIRO: Real and perceived political risks, the lack of focus on non-oil sectors, laxity in regulatory policies and a restrictive business environment are some of the factors impeding the growth of foreign direct investment in the Gulf Cooperation Council region, said a recent study.
According to Oliver Wyman’s recent report titled “De-risking the Investment Landscape: High-impact FDI Policies for the GCC,” the region needs to prioritize regulations and policies to de-risk investment.
This approach should help them attract additional FDIs, the report recommended.
“The best way to attract FDI may be to focus on frontier sectors, which are based on emerging technology, generate high growth, and have few incumbent players to disrupt,” the report stated.
The policies adopted earlier in the GCC were unfocused and aimed to attract all possible investments in all potential sectors, which proved unsuccessful, according to the report.
Although most Gulf countries have been proactive in developing initiatives to stimulate FDI, few have successfully attracted foreign investment in the region.
“Historically, FDI into GCC economies has fluctuated with the rise and fall of commodity prices,” explained Wyman’s report. “However, it has failed to materialize as a consistent driver of economic opportunity in non-oil economic sectors.”
HIGHLIGHTS
• Oman and Bahrain are the only two GCC economies that saw FDI inflows over outflows in each of the years from 2016 to 2021.
• While Kuwait registered FDI outflows totaling $3.6 billion in 2021, it saw a sharp drop from $8 billion in the previous year.
“With such readily available domestic capital, many GCC states have historically not needed to prioritize FDI as a source of development finance,” it added.
The report further revealed that GCC states are becoming increasingly aware of the benefits of FDI and its potential impact on their economies, which could enhance productivity.
Foreign investment provides a good source of finance, promotes interactions of local suppliers and consumer markets, and stimulates human capital by training local workers and employing foreign ones.
As stated by the report, an increased level of private competition, an enhancement in technological know-how and a surge in cross-border activity are additional favorable consequences that arise from increased FDI.
The UN Conference on Trade and Development recently released the “World Investment Report 2022,” which showed that Saudi Arabia and the UAE, two of the largest economies in the GCC, saw 2021 FDI outflows exceed FDI inflows by $4.6 billion and $1.9 billion, respectively.
The difference for all GCC members stood at $6.4 billion, although a noticeable improvement from 2019 and 2020, where the differences were $11.1 billion and $8.3 billion, respectively.
Oman and Bahrain are the only two GCC economies that saw FDI inflows over outflows in each of the years from 2016 to 2021, according to the UNCTAD report.
In comparison, FDI inflows to Indonesia in 2021 surpassed the outflows by $16.5 billion. Similarly, FDI inflows to Vietnam and Malaysia trumped outflows by $15.4 billion and $6.9 billion, respectively, UNCTAD data show.
On the other hand, Saudi Arabia witnessed the highest FDI outflows in the GCC in 2021. It recorded $23.9 billion in net outflows in 2021 compared to only $4.9 billion in 2020. It is worth mentioning the Kingdom’s FDI inflows stood at $5.4 billion in 2020.
The UAE came in second with $22.5 billion worth of FDI outflows in 2021 compared to $18.9 billion the year before, the UNCTAD data showed.
While Kuwait registered FDI outflows totaling $3.6 billion in 2021, it saw a sharp drop from $8 billion in the previous year, the report stated.
Iraq Kurd oil exports to resume Monday under Baghdad supervision
Updated 9 sec ago
AFP
BAGHDAD: Iraq's autonomous Kurdistan region is to resume oil exports through Turkey Monday but in the future they will be supervised by the federal government in Baghdad, officials from both sides said.
The outcome, thrashed out in talks between federal and regional officials, spells the end of independent oil exports by the Kurdish regional government and marks a clear limit to its autonomy.
Ankara had stopped handling Iraqi Kurdish oil last month after an international tribunal ruled in a nine-year-old dispute that Baghdad was right to insist on overseeing all Iraqi oil exports.
"Sales of Kurdistan crude will be managed from now on by the State Oil Marketing Organization," a federal government official told AFP on Saturday.
A "joint committee" formed by the federal and regional governments will supervise the export process, the official added.
Revenues will be paid into an account "overseen by Baghdad", a Kurdish official said.
The halt to exports through a pipeline to the Turkish Mediterranean port of Ceyhan had left foreign oil firms with nowhere to pump Kurdish oil.
Norway's DNO, one of the main firms operating in Iraqi Kurdistan, announced it was halting production at its wells.
Prior to Ankara's action on March 25, the autonomous region was exporting roughly 450,000 barrels per day of crude.
Oil exports are the key revenue source for both the federal and regional governments and their management has long been a sensitive topic in relations.
The Kurdistan government sees Baghdad as trying to profit from the region's resources, while the Iraqi government argues it should enjoy sovereign control over all of the country's oil production.
Iraq, the second largest producer within the Organization of the Petroleum Exporting Countries, exports an average of 3.3 million bpd.
Gradual energy transition holds the key to a sustainable future
COP28 will help shine the spotlight on the region’s ambitious decarbonization goals
Updated 01 April 2023
Nirmal Narayanan
RIYADH: Concerns about energy security and the need to accelerate decarbonization seem to be growing with 2023 rolling on, as geopolitical issues that came to the fore last year show no sign of abating.
Amid the ongoing energy crisis catalyzed by these tensions, countries are realizing the necessity to embrace renewables as dependence on traditional energy imports could be impacted due to various factors including the internal affairs of energy exporting nations.
Even though energy transition is very much necessary to warrant a better future, a sudden transformation to renewables is expected to do more harm than good, especially considering the fact that the energy crisis has been battering the world’s poorest countries for several years.
“The IEA estimates that some 75 million people who recently gained access to electricity are likely to lose the ability to pay for it, meaning that for the first time since we started tracking it, the total number of people worldwide without electricity access has started to rise,” Abdullah Al-Abri, a consultant at the International Energy Agency told Arab News.
He added: “To solve the issue of the energy crisis in the poorest nations, the global community needs to invest more in sustainable energy solutions and provide competitive capital and expertise.”
The vitality of a gradual energy transition
Experts believe that a gradual energy transition, where both renewables and traditional sources operate, hand-in-glove could be the solution to smoothen the journey toward sustainability.
“There will be a transition period when investment in both fossil fuel and renewables must continue concurrently, without losing sight of the fact that renewables are the future of global energy,” Ian Harfield, managing director of ENGIE Energy Solutions, Gulf Cooperation Council, told Arab News.
There will be a transition period when investment in both fossil fuel and renewables must continue concurrently, without losing sight of the fact that renewables are the future of global energy.
Ian Harfield, Managing director of ENGIE Energy Solutions, Gulf Cooperation Council
He added: “To fortify energy systems against extreme weather, we need to diversify the renewable energy mix, incorporating hydroelectric, solar, wind and green hydrogen, and large-scale storage systems.”
Manish Laligam, managing director, of the Middle East Region of Protiviti Member Firm, shares identical views and said: “To satisfy the pledges under the Paris Climate Accord, developing countries where energy consumption is increasing faster than the rest of the globe are considering a combination of gas and renewable energy sources.”
Earlier in March, Francesco La Camera, director-general of the International Renewable Energy Agency, told Arab News divestment from fossil fuels must be a gradual process.
“We have to understand that the old system, the one that is centralized and based on fossil fuels, cannot shut down in a day,” La Camera told Katie Jensen, host of the Arab News program “Frankly Speaking.”
“There will be a slow decline of oil and gas. And to maintain a smooth decline of oil and gas, we need some investment again in oil and gas. If not, there will be a disruption.”
Al-Abri opined that it is necessary to develop climate-resilient fossil fuels to ensure a smooth energy transition.
“The question is not about fossil fuels versus new energies – the matter is more of how to develop fossil fuels that are climate resilient while ensuring that new energies are also developed to mutually satisfy the growing demand and climate agenda,” said Al-Abri.
Meanwhile, experts believe that the ongoing geopolitical tensions including the Ukraine conflict are expected to accelerate the energy transition journey.
COP28 will help shine the spotlight on the region’s ambitious decarbonization goals. (AP)
“Geopolitical tensions have only underscored the critical need for renewable energy — green energy sources are more resilient to global disruptions. International efforts are then needed to set benchmarks, share insights, and promote industry best practices,” noted Harfield.
In January, during the World Economic Forum, Fatih Birol, executive director of the International Energy Agency, warned the world is going through an unprecedented energy crisis.
“Our world has never seen an energy crisis of this depth and of this complexity. The biggest driver of renewable energy growth today is energy security,” Birol said.
COP28 holds crucial significance
Amid all these sustainability efforts and ongoing energy transition, the UN Climate Change Conference, also known as COP28, is set to be held in Dubai from Nov. 30 to Dec. 12 this year.
The upcoming conference is expected to have a crucial significance in the energy transition journey as countries in the Middle East and North Africa region — spearheaded by Saudi Arabia — are playing a crucial role in turning the earth green with their net-zero targets.
“COP28 will help shine the spotlight on the region’s ambitious decarbonization goals, most aligned with national socioeconomic visions,” said Harfield.
Laligam opined that COP28 will accelerate the region’s plans to achieve a clean economy, driven by renewable energy sources, technology developments, and climate-smart solutions.
HIGHLIGHT
Amid the ongoing energy crisis catalyzed by these tensions, countries are realizing the necessity to embrace renewables as dependence on traditional energy imports could be impacted due to various factors including the internal affairs of energy exporting nations.
“Many Middle Eastern countries have developed the Hydrogen Leadership Roadmap to position their nation as top hydrogen suppliers by fostering low-carbon sectors. Across the past two years, numerous solar, wind, and battery storage projects have been started across the Middle East,” Laligam added.
In March, Issam Abu Suleiman, regional director of the Gulf Cooperation Council at the World Bank, said COP28 will provide an opportunity to move to an economic path of green growth which could ultimately diversify the economy while making a positive impact on the climate.
Abu Suleiman further added that the conference is expected to provide chances to push toward green technology and carbon sequestration investments, which are crucial for the world to achieve net-zero emissions by 2050.
This year’s COP is also expected to include oil and gas companies in discussions, as without their contribution, it will be difficult to achieve a sustainable future.
During a recent exclusive interview with Arab News, Fahad Alajlan, president of the King Abdullah Petroleum Studies and Research Center, also reiterated this view and said that an inclusive approach is required to smoothen the energy transition journey.
“In the past, oil and gas companies have been excluded from discussions. If we look at emissions today, more than 50 percent comes from the energy sector. So, it is very important that we involve oil and gas companies in this discussion, to become part of the solution rather than demonizing and excluding them,” said Alajlan.
Al-Abri said that COP28 would play a key role, not just in the MENA region, but the entire world.
“To the region, I think COP28 could shed light on how producer economies are working to address the climate agenda through the energy transition, de-emissionization practices, and the incorporation of innovation and solution integration. COP28 could also be instrumental to the world as I think the hydrogen and new energies agenda would be more emphasized and opportunity for cross-learnings on how to establish the low-emission industrial clusters,” noted Al-Abri.
As the biggest oil-producing nations in the Middle East are spearheading the energy transition globally, the world will witness more monumental milestones in this journey, which will ensure that the future is green.
Saudi Arabia and UAE leading the MENA region in becoming AI hub
Market for the advanced technology in the region will witness a compound annual growth rate of 47.8 percent
Updated 01 April 2023
Arab News
RIYADH: The artificial intelligence market in the Middle East and North Africa region is expected to grow from $500 million in 2020 to $8.4 billion by 2026, according to a new report.
The findings by firm Research and Markets suggests that the market for the advanced technology in the region will witness a compound annual growth rate of 47.8 percent, with Saudi Arabia and the UAE leading from the front.
According to the report, the value of the artificial intelligence market in the UAE alone will reach $1.9 billion by 2026, representing 36.2 percent growth.
Business leaders in the Middle East region also consider AI crucial in the coming years for their operational growth. According to a study conducted by global consultancy firm Proviti Middle East, more than 80 percent of CEOs in the region believe the technology is critical to the future of their businesses, and over 70 percent of them are investing in the booming sector.
Understanding the potential of AI, Saudi Arabia is heavily investing in the industry, as the Kingdom’s sovereign wealth fund announced in 2019 a $500 billion investment in AI and other emerging technologies over the next decade.
The Kingdom has also launched several initiatives, including the establishment of the Saudi Arabian Data and Artificial Intelligence Authority and the National Data Management Office, to accelerate the implementation of AI in the Kingdom’s various sectors.
The UAE is also boosting its involvement in the technology, and has launched the National Artificial Intelligence Strategy 2031, with its focus on attracting talent for jobs of the future, funding research and innovation hubs, and developing appropriate infrastructure and data ecosystems along with a balanced legislative environment.
As nations and companies across the world steadily embrace AI, a recent report from investment bank Goldman Sachs suggested it could take the place of 300 million full-time jobs around the world.
FASTFACT
Understanding the potential of AI, Saudi Arabia is heavily investing in the industry, as the Kingdom’s sovereign wealth fund announced in 2019 a $500 billion investment in AI and other emerging technologies over the next decade.
The report predicted that administrative and legal sectors will be at the highest risk, with 46 percent of administrative jobs and 44 percent of legal positions at risk of replacement by AI.
According to the report, physically intensive jobs are expected to face less risk, with construction facing a 6 percent threat, whereas maintenance is at 4 percent threat.
“The combination of significant labor cost savings, new job creation, and a productivity boost for non-displaced workers raises the possibility of a labor productivity boom like those that followed the emergence of earlier general-purpose technologies like the electric motor and personal computer,” stated the bank in a note titled The Potentially Large Effects of Artificial Intelligence on Economic Growth.
The Goldman Sachs report, however, added that technological advances which initially replace workers will create employment growth in the long term.
“Although the impact of AI on the labor market is likely to be significant, most jobs and industries are only partially exposed to automation and are thus more likely to be complemented rather than substituted by AI,” said the report.
Goldman Sachs further pointed out that the roll out of AI could boost labor productivity, and push global growth up by 7 percent year-on-year over a 10-year period.
Saudi Arabia’s palm.hr takes the first step in regional expansion
Company to have a fully established team in Egypt and UAE by three months
Updated 01 April 2023
Nour El-Shaeri
CAIRO: Saudi-based human resources and employee experience platform palm.hr is taking its first steps in regional expansion with one foot already in Egypt and the UAE.
Founded in 2019 by Richard Schrems, Christoph Czichna and Dragan Nikolic, the service provides businesses with a portal to streamline work experiences for all teams including operations such as onboarding, vacation tracking, payroll, and offboarding.
In an interview with Arab News, Schrems, who is also the CEO, said the company will have a fully established team in Egypt and the UAE in just three months.
“We are already serving our first customers in UAE and Egypt and things are in motion to have teams in both countries within the next three months. Additionally, we are looking to offer our services to companies based across all Gulf Cooperation Council countries by the end of the year,” Schrems said.
The company has positioned itself as a regional provider of HR technology services with a mission to transform the space and allow businesses to better manage their most important asset – human resources.
Schrems described palm.hr’s business strategy as comprising three main pillars. The first is the software’s high configurability and flexibility that makes it easier to apply it to different business structures.
The second is a HR Tech Stack that is scattered across many different tools and solutions.
“We therefore are working on building the most integrated HR software in the market to merge all that information to be the single source of truth of any company’s people data. We have successfully integrated with many Saudi Government Solutions such as GOSI, Mudad and Muqeem,” he added.
The third pillar pinpoints the overload of communication tools used by companies, such as WhatsApp, email, calls, Slack, or meetings. The company provides a centralized communication hub for the organization to stay on top of all tickets and tasks.
Richard Schrems, Christoph Czichna and Dragan Nikolic founded palm.hr. (Supplied)
“Simply put, we proudly serve small and medium, growing and innovative companies that want to be people-centric organizations. Our focus currently lies on serving Saudi-based small and medium enterprises, however, throughout the year we will be offering our services across the GCC and beyond,” Schrems added.
He stated that the firm’s human centric approach gives it a competitive edge in the market where palm.hr focuses on supporting HR managers and employees through its platform.
“Many solutions were created to digitize processes; ours, however, aims to create a seamless experience for not only HR managers but just as much for their employees. That is why we have focused on not only creating a great desktop experience but combined it with intuitive and powerful mobile apps,” Schrems said.
“Both as a software and as an organization we focus on solving all the problems related to HR and work — for every stakeholder of any organization across Saudi Arabia and beyond,” he added.
Schrems stated that the level of support received from the Saudi government has been “astounding,” adding: “Every single government organization we dealt with has welcomed and supported us with open arms, which has helped us become the thriving company we are today.”
Schrems explained that the HR space still holds huge opportunities as millions of organizations are set to ride the wave of digitalization in the next couple of years.
Besides regional expansion, the company has aggressive goals in terms of product development and hiring.
Our platform will soon leverage business data to highlight Saudization achievements whether it is organization-wide or for specific professions.
Richard Schrems, palm.hr founder and CEO
Schrems added that the company is hiring talent across all functions, with its team of 70 set to double in size in the next 12 months.
“We also believe that HR tech and fintech will diverge in the future, and we will be offering financial services through partners on our platform,” he stated.
“Besides this, we are also building a dynamic content library to support customers and employees with all the insights they need about the Kingdom’s labor laws, employment and career development. We believe this will help nurture and support local talent, while attracting the best international professionals to choose to live and work in Saudi Arabia,” he added.
The company is doubling down on its product development efforts to ensure the solution is a perfect fit for clients, which means increasing more strategic HR modules and integrating artificial intelligence.
palm.hr currently stands on solid ground after it raised $5 million in a pre-series A funding round co-led by Speedinvest and RAED Ventures with participation from Wamda Capital.
Schrems stated that the company will focus on growing its presence in Saudi Arabia, Egypt and the UAE, and will thrive to raise another funding round within 12 to 18 months.
“At palm.hr, we want to make sure companies have the tools they need to remain compliant with Saudi nationalization and labor laws. Our platform will soon leverage business data to highlight Saudization achievements whether it is organization-wide or for specific professions,” Schrems said.
Former US secretary of treasury calls for bipartisan legislation to ensure safety of depositors
During the event, Steven Mnuchin discussed responsibilities, solutions after Silicon Valley Bank collapse
Updated 01 April 2023
Arab News
MIAMI: Former US Secretary of Treasury Steven T. Mnuchin has called for greater clarity and bipartisan legislation after the collapse of the Silicon Valley Bank.
“We don’t know if there’s another bank failure whether the government will or won’t guarantee all the depositors,” Mnuchin said at the Future Investment Finance forum in Miami.
“You could be a well-run midsize or regional bank today and you’re at a complete disadvantage because people are moving money to the money center panic. So, I think we need bipartisan legislation.”
“We shouldn’t have unlimited insurance, but we now need clarity because it’s unfair,” he said.
Talking about the recent collapse of SVB and the shockwaves experienced throughout the banking industry, Mnuchin explained that compared to the 2008 financial crisis, which “was about credit, a much more complicated issue to work through,” this event was a result of many missteps that could have been avoided.
“This banking crisis is all about interest rate risk, and this is simple, basic risk management 101.”
During the panel, Mnuchin discussed several key points about recent events in the sector, including the potential risk of a financial crisis caused by the Fed’s interest rate hikes and how this would impact the economy.
“The problem is most of the people we have in the financial markets in the US have never seen, quote, high-interest rates,” he said.
“Most people have been used to interest rates, short-term interest rates between zero and 2 percent. So you know, 4 percent, 5 percent is high on a relative basis.
“The economy is going to adjust pretty significantly. But as I said earlier, this is risk management 101 that a lot of people just got used to having low-interest rates forever.”
The discussion also covered the relationship between the US and China, including the need for better communication and coexistence.
“China is the second largest economy in the world. We have a responsibility to figure out how we deal with China in a proactive way,” Mnuchin said.
He added that although there were “legitimate national security issues with China, there’s a whole bunch of things that we should be doing with China, and we need to figure out how to coexist in the proper way.”
