Saudi Arabia establishes logistics zone in Djibouti to expand economic presence in Africa

Saudi Arabia establishes logistics zone in Djibouti to expand economic presence in Africa
During a delegation visit of Saudi investors to the capital city of the East African country, the contract was signed by Hassan Al-Huwaizi, president of the Federation of Saudi Chambers, and Aboubaker Omar Hadi, chairman of Djibouti Ports and Free Zones Authority. Supplied
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Updated 05 June 2024
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Saudi Arabia establishes logistics zone in Djibouti to expand economic presence in Africa

Saudi Arabia establishes logistics zone in Djibouti to expand economic presence in Africa

RIYADH: Saudi Arabia has signed a deal to establish a logistics zone in the port of Djibouti, leveraging Africa’s gateway to propel the Kingdom’s products and exports, fostering economic interplay. 

During a delegation visit of Saudi investors to the capital city of the East African country, the contract was signed by Hassan Al-Huwaizi, president of the Federation of Saudi Chambers, and Aboubaker Omar Hadi, chairman of Djibouti Ports and Free Zones Authority. 

Under the leadership of Al-Huwaizi, the delegation, including over 100 entrepreneurs and government representatives, came together to advance this transformative initiative. 

The 92-year contract for the logistics zone, spanning an expansive area of 120,000 sq. m. in its inaugural phase, underscores a pivotal milestone in Saudi-Djibouti economic relations. 

The Saudi logistics city, serving as a nexus for commerce and innovation, is positioned to strengthen the Kingdom’s economic presence across the African continent, as reported by the Saudi Press Agency. 

Djibouti’s port, strategically located as Africa’s gateway, facilitates the expansion of Saudi products and exports into new markets, promoting robust economic interplay. 

Simultaneously, the Saudi-Djibouti Business Forum, attended by over 300 stakeholders, unveiled a range of investment opportunities, highlighting Djibouti’s appeal as a free zone. 

In return, Djibouti authorities have promised equal treatment for Saudi investors, guaranteeing fair opportunities across sectors, from renewable energy to technology. 

This collaborative effort emphasizes a steadfast commitment to fostering lasting economic cooperation between the two nations. 

In February, Djibouti’s president reaffirmed his country’s dedication to promoting maritime security in the Red Sea. 

Ismail Omar Guelleh noted that the East African nation was collaborating with major powers, including Saudi Arabia, to ensure safe passage for international shipping in the Bab El-Mandeb and the Gulf of Aden. 

He emphasized that Djibouti’s strategic position made it a key player in facilitating global trade, mentioning cooperation with nations such as the US, France, the UK, and Red Sea coastal states, especially Saudi Arabia, in counterterrorism efforts and maritime security. 

Guelleh had underscored Djibouti’s longstanding ties with Saudi Arabia, dating back to 1977 when his country gained independence. 

The president added that Djibouti aimed to further enhance collaboration with Saudi Arabia, especially in maritime transport, logistics, and port services, building on significant progress in port development. 

Dya-Eddine Saïd Bamakhrama, Djibouti's ambassador to Saudi Arabia, told Arab News: “This contract, signed between the Ports and Free Zones Authority of Djibouti and the Saudi Investors Alliance, will make it possible to create the largest logistics city outside the Kingdom.

“This Free Zone will facilitate access for Saudi products and exports to a large number of African countries.”


Chinese investors embrace Saudi equities as 2 ETFs debut in Shanghai, Shenzhen

Chinese investors embrace Saudi equities as 2 ETFs debut in Shanghai, Shenzhen
Updated 5 sec ago
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Chinese investors embrace Saudi equities as 2 ETFs debut in Shanghai, Shenzhen

Chinese investors embrace Saudi equities as 2 ETFs debut in Shanghai, Shenzhen

RIYADH: Chinese investors showed strong interest in Saudi equities as two new exchange-traded funds focused on the Kingdom’s stocks debuted in Shanghai and Shenzhen.

The feeder funds, operating under the Qualified Domestic Institutional Investor program, began trading on July 16, with both briefly hitting the 10 percent daily limit on their launch day.  

The first fund, CSOP Saudi Arabia ETF QDII, managed by China Southern Asset Management, is listed on the Shenzhen Stock Exchange after raising 634 million Chinese yuan ($87 million). 

The second fund, the Huatai-PineBridge managed CSOP Saudi Arabia ETF QDII, started trading on the Shanghai Stock Exchange after raising 590 million Chinese yuan, Bloomberg reported. 

The new offerings mark a significant step in the deepening economic ties between China and Saudi Arabia, allowing mainland investors to diversify their portfolios with exposure to the Kingdom’s stock market.   

This comes as investor relations between the two nations flourish with China becoming the top greenfield foreign direct investor in Saudi Arabia with investments amounting to $16.8 billion in 2023, a 1,020 percent rise from the previous year.    

The two ETFs indirectly invest in the Kingdom’s stock market through the CSOP Saudi Arabia ETF, which was listed on the Hong Kong Stock Exchange, marking the first Saudi Arabia-focused ETF in the Asia-Pacific region. 

Following their approval from the China Securities Regulatory Commission last month, these funds are designed to facilitate greater international diversification for Chinese investors, particularly in sectors where Saudi Arabia has considerable influence, such as energy and oil. 


China’s envoy to KSA meets with Saudi finance vice minister

China’s envoy to KSA meets with Saudi finance vice minister
Updated 19 min 39 sec ago
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China’s envoy to KSA meets with Saudi finance vice minister

China’s envoy to KSA meets with Saudi finance vice minister

RIYADH: China’s newly appointed ambassador to the Kingdom met with Saudi Arabia’s finance vice minister in Riyadh, signaling that relations between the two countries are set to flourish.

Abdulmuhsen Al-Khalaf welcomed Chang Hua on July 15 at the headquarters of the Ministry of Finance, where the pair discussed joint relations between their nations and ways to enhance them, as well as additional economic and financial topics of common interest, according to the Saudi Finance Ministry.

Diplomatic and economic ties between Saudi Arabia and China have been strengthening in recent years. In November 2023, the Kingdom’s central bank, also known as SAMA, and the People’s Bank of China signed a local currency swap agreement worth $6.93 billion


Global sukuk issuance hits $91.9bn in H1: S&P Global 

Global sukuk issuance hits $91.9bn in H1: S&P Global 
Updated 43 min 29 sec ago
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Global sukuk issuance hits $91.9bn in H1: S&P Global 

Global sukuk issuance hits $91.9bn in H1: S&P Global 

RIYADH: Global sukuk issuances reached $91.9 billion in the first half of 2024, marking a marginal year-on-year increase of 0.87 percent, driven by issuers from Saudi Arabia and the UAE. 

According to the latest report from S&P Global, foreign currency issuances reached $32.7 billion in the first six months of 2024, marking a 23.8 percent surge compared to the same period the previous year.  

The credit rating agency highlighted that improved visibility on the medium-term trajectory of interest rates has boosted foreign currency-denominated sukuk issuance. 

A sukuk is an Islamic financial certificate that represents ownership of an asset and complies with Shariah law, distinguishing it from conventional bonds. 

Saudi Arabia has strategically expanded its sukuk issuance to diversify financing sources and promote Islamic finance within its economy, supporting infrastructure and economic development while attracting global investors seeking Shariah-compliant opportunities. 

“High financing needs in core Islamic finance countries, stable rates, and improved clarity on the future path of rate cuts explain the continued increase in foreign currency-denominated issuances,” stated S&P Global. 

Its findings follow a recent report by Saudi Arabia’s Capital Market Authority, indicating significant growth in the Kingdom’s sukuk and debt capital market since 2019, exceeding SR30 billion, and achieving an annual growth rate of 7.9 percent. 

Moreover, Saudi Arabia’s National Debt Management Center reported completing the issuance of a riyal-denominated Islamic bond for June totaling SR4.4 billion. The Kingdom had issued sukuk amounting to SR3.23 billion in May, SR7.39 billion in April, and SR4.4 billion in March. 

Global forecast  

Meanwhile, S&P Global has maintained its global sukuk issuance forecast at around $160 billion to $170 billion, buoyed by strong market performance in the first half of 2024. 

The US-based firm emphasized that the Islamic bond market’s steady growth will be propelled by economic diversification initiatives in countries such as Saudi Arabia, as well as the robust expansion of the non-oil sectors in the UAE. 

The report also underscored contributions to the sukuk market’s growth from countries like Oman, Malaysia, and Kuwait. 

It added that geopolitical risks are not expected to adversely impact the issuances of these Shariah-compliant debt products globally. 

“Geopolitical risk has not yet dragged on issuance but could pose some downside risk, though, under our base-case scenario, we do not expect significant disruption,” said the agency.  

S&P noted that the adoption of the Accounting and Auditing Organization for Islamic Financial Institutions’ Sharia Standard 62 might lower issuance volumes in the medium term if it significantly changes the nature and risk profile of sukuk instruments. 

In late 2023, the AAOIFI released its exposure draft of Sharia Standard 62 on sukuk, delaying the industry feedback deadline twice, with the final extension set to July 31, 2024, from March 31, 2024. 

According to the credit rating agency, the proposed draft could potentially alter the nature of the sukuk market and lead to increased fragmentation.  

The guidelines cover Shariah requirements for issuances, asset backing, and ownership transfer. They also address investment structures, financing mechanisms, and trading and settlement procedures. 

“A key requirement of the standard is that the ownership and risks related to the underlying assets are to be transferred to sukuk holders. As such, the market will shift from structures where the contractual obligations of sukuk sponsors underpin the repayment to structures where the underlying assets have a more prominent role,” said S&P Global.  

The report further noted that the adoption of these proposed standards could make these Islamic bonds more expensive than conventional issuances.  

It added: “However, it is difficult to anticipate the appetite for such instruments from both investors and issuers, as well as the legality of moving assets off their balance sheets, given the current market structure. This could either lead to further market fragmentation or worse, issuance could be put on hold until sukuk structures figure out a middle ground.”  

The report, however, added that the adoption of the AAOIFI’s Standard 62 guidelines is unlikely to disrupt existing sukuk, since any changes in contractual obligations are subject to investors’ consent.  

Local issuances  

Despite the growth of foreign issuances, local currency-denominated issuances witnessed a decline of 8.8 percent in the first half of this year compared to the same period in 2023. 

S&P Global noted that this downturn was driven by the drop in local currency issuances in countries like Turkiye, the UAE, and Pakistan.  

“The largest drop of local currency issuances was in Turkiye, where monetary tightening combined with better fiscal policy coordination continues to help rebalance the economy,” said the report.  

It added: “In the UAE, the decline can be explained by lower local-currency denominated issuance by the Federal Government and other authorities. For Pakistan, the issue might be related to a lack of data on issuances in the first half of 2024.”  

On a positive note, the report underscored the growth of Saudi Arabia’s local currency issuance.  

“We have observed that local currency issuance in Saudi Arabia has resumed its growing trend. The government has tapped the market with jumbo issuances and has also started to issue retail sukuk,” added S&P Global.  

On the other hand, financing needs in core Islamic finance countries, stable rates, and improved clarity on the future path of rate cuts drove the continued increase in foreign currency-denominated issuances.  

“We have seen a high issuance volume in Saudi where the government and banks continue to tap into the market to finance various projects related to the economic transformation plan. We now expect the Saudi banking system to shift to a moderate net external debt position in the next few months,” said the report.  

S&P Global added that countries like the UAE, Malaysia, Kuwait and Qatar also witnessed a rise in foreign currency-denominated issuances during the first half of this year.  

Sustainable sukuk  

According to the analysis, the total volume of sustainable sukuk issuance reached $5.2 billion during the first half of 2024, down from $5.7 billion during the same period last year.  

The credit rating agency projected that the volume of these green bonds is expected to hover around $10 billion to $12 billion, barring any significant acceleration in the implementation of net-zero policies by key Islamic finance countries or regulatory actions. 

Sustainable sukuk is a Shariah-compliant financial tool wherein issuers utilize the proceeds solely to finance investments in renewable energy or other environmental assets. 

The report also highlighted that 80 percent of sustainability issuance in the first six months of 2024 came from banks in the Gulf Cooperation Council region as they started pursuing their climate transition journey.  

In May, another analysis by Fitch Ratings projected that the global sukuk market linked to environmental, social, and governance principles is expected to exceed $50 billion in the next two years.  

The credit rating agency noted that the projected growth of the market is driven by new ESG mandates, regulatory frameworks, and government-led sustainability initiatives. 

Fitch also revealed that the GCC debt capital market has reached $940 billion in outstanding sukuk and is steadily approaching the $1 trillion mark. 


Saudi Arabia in top 2 among G20 in ICT development for 2nd consecutive year

Saudi Arabia in top 2 among G20 in ICT development for 2nd consecutive year
Updated 16 July 2024
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Saudi Arabia in top 2 among G20 in ICT development for 2nd consecutive year

Saudi Arabia in top 2 among G20 in ICT development for 2nd consecutive year

RIYADH: Saudi Arabia has maintained second place among G20 countries in a UN ICT Development Index, highlighting the resiliance of the Kingdom’s digital infrastructure.

Published by the international organization’s International Telecommunication Union, the ranking tracks the digital development and progress of 170 nations in information and communication technology services through sub-indicators divided into two axes: inclusive and effective communication. 

It also measures the strength of digital infrastructure, according to a statement.

The analysis also revealed that the Kingdom ranked first among the G20 countries in the effective communication axis and second in the inclusive communication axis, according to the Saudi Press Agency.

The Kingdom’s Communications, Space, and Technology Commission indicated that Saudi Arabia’s continuous advancement in the index underscores the robustness of its digital infrastructure and its role in propelling the growth and expansion of the digital economy and attracting investment, the SPA report noted.

This comes as the Kingdom’s communication and technology market is the largest and fastest growing in the Middle East and North Africa region, with an estimated value of SR166 billion ($44.2 billion).


Abu Dhabi’s GDP grows by 3.3% in Q1, driven by non-oil sectors

Abu Dhabi’s GDP grows by 3.3% in Q1, driven by non-oil sectors
Updated 16 July 2024
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Abu Dhabi’s GDP grows by 3.3% in Q1, driven by non-oil sectors

Abu Dhabi’s GDP grows by 3.3% in Q1, driven by non-oil sectors

RIYADH: Abu Dhabi’s gross domestic product increased by 3.3 percent annually during the first quarter of 2024, driven by the growth of non-oil economic activities.

According to the Statistics Centre of Abu Dhabi, this rise is primarily attributed to the performance of non-oil economic activities; non-oil GDP increased significantly by 4.7 percent during the first three months of this year.

This trend of strong performance in non-oil sectors extends beyond Abu Dhabi, with Saudi Arabia’s real GDP expected to grow by 2.5 percent in 2024, driven by a robust 4.8 percent increase in non-oil private activities. 

Similarly, economic growth in the Gulf Cooperation Council region is projected to rebound to 2.8 percent in 2024 and 4.7 percent in 2025, according to the World Bank’s Spring 2024 Gulf Economic Update.

The SCAD’s report noted that transportation, construction, financial activities, and accommodation, as well as food sectors, led the positive trend, reflecting the success of the government’s economic diversification policies.

The center’s estimates revealed that non-oil activities contributed 54.1 percent to Abu Dhabi’s overall economy in that period, the highest level since 2015. 

The quarterly value of the non-oil economy reached 154.7 billion dirhams ($42.1 billion), while the total value of Abu Dhabi’s economy, including oil and non-oil sectors, was 286 billion dirhams.

Chairman of the Abu Dhabi Department of Economic Development, Ahmed Jasim Al-Zaabi, stated: “Our economy continues to deliver consistent, stellar growth, reaffirming its resilience and dynamism to navigate headwinds and global challenges impacting all economies and sectors.”

He added: “Guided by the leadership’s far-sighted vision and backed by strong fundamentals, Abu Dhabi’s soaring Falcon Economy has taken great strides to accelerate growth and transition to a smart, diversified, inclusive and sustainable economy.”

Al-Zaabi noted that with this growth, they are forging ahead with their strategies to cement Abu Dhabi’s position as a global magnet for outstanding talents, businesses, and investments. 

He also highlighted that their attributes as the Capital of Capital are attracting global financial powerhouses to Abu Dhabi, supporting monetary activities to grow by 9.7 percent, and supercharging non-oil sectors, which have contributed 54.1 percent to total GDP in the first quarter of 2024.

Abdulla Gharib Al-Qemzi, acting director general of SCAD, emphasized the sustained growth in non-oil sectors, which enhances Abu Dhabi’s local and international leadership position.

The emirate’s competitive climate attracts foreign investments, especially in construction, which contributed 8.8 percent to the overall economy, exceeding 25 billion dirhams in value. 

This growth reflects Abu Dhabi’s commitment to advancing its global position, focusing on increasing GDP, non-oil exports, and tourism’s economic contribution.

Construction activities grew by 9.5 percent in the first three months compared to the same period in 2023, contributing 8.8 percent to the overall economy—the highest in the past five years. 

This sector’s attractiveness for local and foreign investments is evident in its consistent quarterly growth of 22.6 percent over the past decade, coinciding with an increase in the number of real estate units in the emirate, totaling 754,555 units since 2011.

The finance and insurance sector grew 9.7 percent in this quarter compared to the corresponding period last year, contributing 7 percent to the emirate’s economy. The value added by this sector increased by 39 percent over the past decade, reaching 20 billion dirhams in the first three months of 2024.

Telecommunications, accommodation, and food activities grew by 5.9 percent and 6.2 percent, respectively, highlighting efforts to enhance the tourism sector’s GDP contribution. Transport and storage activities saw a 14.4 percent year-on-year growth.

Manufacturing activities grew by 1.7 percent, contributing 8.7 percent to the emirate’s GDP. The quarterly value of this sector exceeded 24.8 billion dirhams, marking a 102 percent increase over the past decade.

Abu Dhabi’s continuous growth rates result from strategic initiatives focused on economic diversification, industrial sector development, and encouraging foreign investments, reflected in the high performance of the non-oil GDP, which exceeded 9.1 percent in 2023.