Economy

Move towards renewables – Where is the problem?

The total power generated through renewables in the GCC has grown from a meagre 20 GWh in 2010 to 620 GWh in 2015. But looking at the bigger picture, it constitutes to less than 1% of the total power generated in the region while the global figure is at 23.3%. Europe and North America stand at 34.2% and 22% respectively in 2016 with Norway leading the way with 97.87%. Norway has long been a pioneer in renewables with focus on...

OPEC’s declining clout in a post-shale oil world

The first round of production cuts was agreed in November 2016 and was effective during January 2017 and was aimed at cutting down 750,000 barrels of oil per day from the global supply. Second round of the production cuts announced in May 2017 is aimed to take out 1.8 Mn barrels per day which is aimed at balancing the market. While most of the countries have agreed to the cut, some of critics of the plan point out that the...

Can startups be a solution for job creation?

The GCC region too has caught-up with this global phenomenon and has some successful start-up stories to boast about. Start-ups are being projected as forerunners of economic growth through job creation and also pursued as the solution for job creation. However, to what extent this presumption about start-ups holds well is debatable. Do start-ups create jobs? Table: Increase / Decrease in Employment Sectors 2012 2013 2014 2015 2016 Construction (27,780) (24,608) 99,087 69,313 56,937 Trade and Repair Services 56,312 41,756...

SME Startup Stories in GCC – What can we learn?

These success stories highlight the value SMEs deliver to GCC economic imperatives. Even a cursory glance at the case studies reveal that these companies have shown remarkable prowess in identifying ideas that speak to customer pain points and have turned them into practical companies through actionable business models. Another notable characteristic is that, in keeping with trends in the rest of the world, these companies have harnessed digital business platforms to drive their revenues, growth and scalability. Coinciding with the...

Why UAE interest rates are more negative than they appear

The article originally appeared in The National | Business Banks in the UAE pay 1.25 per cent on time deposits with a maturity of one year. While this may look measly, two things matter for consideration here. First, interest rates are still positive in the UAE, unlike Europe where they turned negative. (Yes, some European banks demand interest from depositors.) Second, while the interest received by UAE depositors is positive, this is technically termed as nominal rate. When adjusted for...

VAT in the GCC – How should companies prepare?

Preliminary details reveal that the United Arab Emirates (UAE) and Qatar will be the first states in the GCC to adopt the new tax regime in January 2018. But, all members of the GCC are anticipated to implement VAT by the close of 2018. It is notable that certain essential food items and socially-oriented sectors such as healthcare and education will be exempt from the VAT regime. The approval of the GCC VAT means that the countries and the business...

Planned GCC remittance tax could cost members economies in the long run

Though the idea is enticing and could – assuming a flat-rate remittance tax of 10 per cent – add US$10 billion to the non-oil income of the GCC region on an aggregate basis, the introduction of such as tax has more downsides, in my opinion. Transfer of money by foreign workers to their home countries represents a significant financial outflow from GCC countries. The World Bank estimates that more than $100bn left the GCC last year in the form of...

Brexit’s multi-level impact on GCC

GCC markets remained relatively unscathed except for UAE markets; Dubai index lost 3.3% while Abu Dhabi lost 1.8%. Dubai being largely a service economy driven by trade & services, tourism and real estate witnessed a fall as British pound lost 7.2% in value against UAE Dirham. Investor’s feared the depreciation of pound against AED would affect real estate investments and tourist’s inflow from Britain. Among non-GCC investors in Dubai, after Indians nationals, British nationals had invested AED 10billion (USD 2.7bn)...

Saudi Arabia and its US dollar peg dilemma

Most GCC countries are pegged to the US dollar to avoid currency fluctuation and eliminate uncertainties in international transactions (Kuwait is pegged to a basket of currencies dominated by the US dollar). This comes at the expense of monetary policy flexibility. Stable domestic currency and a fixed exchange rate imply that traders do not have to face currency risks, and therefore will be more willing to invest and facilitate trade. Since oil is the chief commodity in the GCC, and...

Kuwait Projects: KWD 10bn Awarded – Where is the trickle-down effect?

According to Marmore’s recently published report on Kuwait Projects, in 2015, Kuwait awarded projects worth KWD 10bn, an increase of 20% compared to 2014. The aggregate value of projects awarded during 2014 and 2015 was KWD 18bn. However, this is yet to impact positively on key areas of the economy. Projects Impact Indicator Source: Marmore; * World Bank estimates, **As per IIF, 2015 nominal GDP of Kuwait - USD 121.1bn As of Q1 2016, there are 420 ongoing projects in...