Al-Gosaibi Empire Crumbling (Re-post)

Overnight Lehman Brothers collapsed and sent shockwaves throughout the Americas and then across the world to provide further evidence that we were truly in the midst of a massive recession. In the Gulf, today, we are facing the same problems but with different names.

Banks across the Gulf will face larger provisions due to Ahmed Hamad al Gosaibi and Brothers “AHAB” and Saad Group’s default on their obligations. Saudi banks alone are reported to have between $4 and $7 billion in lending exposure to the two groups.

Recent documents have been uncovered show that a total of 88 firms have exposure of $7.42 billion in syndicated loans to troubled Saudi conglomerates Saad Group and AHAB. Almost half of the 88 firms with exposure are from the Middle East, with 12 from the United Arab Emirates.

Laundering case ruling in August

The Dubai Court of Misdemeanour completed hearings in a money laundering case yesterday and adjourned to August 3 for the verdict. The four accused were from the UAE, Pakistan, India and the UK. Seven companies in the emirate were also charged.

Defence counsel Issa bin Haider said his clients were innocent and had been framed by certain people with vested interests who wanted to prevent them from entering the local market with their money.

Bin Haider based his defence on the integrity of the defendants' commercial activities outside the UAE and said authorities in Holland and the UK – where the accused have business interests related to the case – do not have evidence that they were involved in money laundering activities.

Trial begins in third Deyaar case

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The Dubai Court of Misdemeanour started hearings on Thursday in a trial of nine accused of embezzlement at real estate company Deyaar.

The nine have been charged with embezzling some Dh271 million from the company. The case is an offshoot of two other cases being heard by Dubai Criminal Court also relating to corruption in Deyaar. Three defendants are being tried in the first case, including former minister and Deyaar chairman MK, the company's former CEO ZS, a US citizen, and Indian national JD, who is at large. JD is also one of the accused in the case that started on Thursday.

The three are charged with corruption and the embezzlement of around Dh97.6m from Deyaar's funds.

FNC Speaker favours full foreign holding for major projects

UAE Federal National Council Speaker Abdul Aziz Al Ghurair is against full foreign ownership of companies in the small and medium enterprises (SME) sector but sees no objection to it in mega projects that have a positive impact on the nation's economy.

"I believe full ownership by foreigners has both advantages and disadvantages. Full foreign ownership in the SME sector, which attracts UAE nationals, is not economically efficient and may have negative consequences," Al Ghurair told Emirates Business in an exclusive interview.

"However, when it comes to mega-size financial and industrial projects, which have an assured positive impact on the economy, then this could be fine. There should not be a law that allows foreigners to have full ownership in all projects and there should be a pre-determined percentage of ownership [in SMEs]. And this is a decision to be made by the Cabinet and by the right minister," the FNC Speaker said.

The dimensions of governance

Qatar stands out among Gulf Cooperation Council (GCC) countries with regard to good governance. To be sure, GCC states achieved mixed results on 2009 version of Worldwide Governance Indicators (WGI) published by the World Bank.

WGI comprises six broad dimensions namely 1) voice and accountability 2) political stability and absence of violence 3) government effectiveness 4) regulator quality 5) rule of law and 6) control of corruption.

Kuwait tops fellow GCC countries on the voice and accountability variable, which looks into extent of participation of citizens in selecting their government as well as freedom of expression, association and press.

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• Bahrain drain (news.bbc.co.uk)

One in 10 residents have lost their jobs

One in 10 people in the UAE say they have lost their jobs in the past six months, according to a poll conducted for The National.

Almost half say their companies have trimmed their workforce and a quarter say colleagues have been asked to take unpaid leave.

In the second in a series of surveys by YouGov, the international research organisation, 821 people were asked about the impact of the recession on their lives.

Bahraini expatriates to get equal rights

Bahrain will become next month the first GCC state to give foreign workers the same employment rights as its own citizens.

Under the new law, which takes effect on Aug 1, expatriates will have the freedom to move between jobs and to leave employment without the fear of arrest or deportation.
“We already have the best trained workforce in the Gulf, but by levelling the playing field, and providing incentives to companies to hire Bahrainis, our aim is to improve our competitive edge,” said Sheikh Mohammed bin Isa al Khalifa, the chief executive of the country’s Economic Development Board (EDB).

As local oil resources have dwindled in recent years, the island’s rulers have worked hard to diversify the local economy. Heavy industry and manufacturing have grown steadily, while financial services now provide 27 per cent of GDP.

UAE shop rents climb as retail sales fall

Retailers in the UAE say they are struggling to survive as their rents rise up to 20 per cent, at a time when residential rates are decreasing and shoppers are staying at home.

Duncan McLellan, the general manager of Dubai Holding Group, which holds the local franchise for brands such as Zara, said turnover has fallen by as much as 35 per cent but mall rents, a retailer’s biggest expense, have risen between 5 per cent and 20 per cent upon renewal.

“We’re seeing quite significant decreases in our sales,” Mr McLellan said. “While everybody is trying to be more tight on their budgets, their staffing, salary increases – all of these areas which you can control – the one area you can’t control is your rent.”
A survey by the property consultancy CB Richard Ellis (CBRE) this month showed that retail rents in the first quarter fell in Dubai and Abu Dhabi for the first time in at least 10 years.

Saudi Basic Industries closes $3bn China petrochemical deal

Saudi Basic Industries Corporation (SABIC) received final approval from the Chinese government on Saturday to build a US$3 billion (Dh11bn) petrochemical complex in China, offering it a major foothold in the world’s fastest-growing chemicals market.

SABIC will establish a 50-50 joint venture with Sinopec, the Chinese national oil company, to build a plastics and chemicals complex in Tianjin, near Beijing, that will produce 3.2 million tonnes of products when it is completed in September, the company said in a statement.

The plant will be SABIC’s first major manufacturing centre in China, and is a key link in the company’s aim to become one of the world’s top three chemical companies by 2020. It is now the largest publicly traded firm in the Middle East.

Saudi clampdown on insider trading is welcome news (Comment)

The Capital Market Authority (CMA) of Saudi Arabia has bared its teeth and a prominent Saudi investor has been fined 100,000 riyals (Dh97,940) for insider trading, sending shivers down the spines of those who had assumed the authority might shy from going after such personalities.

The accused is no small fry, but a prominent investor in key Saudi companies such as Saudi Hotels Company, Savola, Riyad Bank and Calyons, the subsidiary of Saudi Fransi Bank.

Saudi press reports claim he is the third-largest retail investor in the Saudi market after Prince Al Waleed and Sulaiman al Rajhi, and reportedly worth US$2 billion (Dh7.34bn).

Saudi banks second-quarter profits seen falling

Saudi Arabian banks may report declines in second-quarter profit after they tightened lending rules and increased provisions for bad loans.

Net income at the 10 biggest Saudi banks probably dropped by an average of 19%, according to EFG-Hermes Holding, the largest Egyptian investment bank by market value. Dubai-based Al Mal Capital forecasts that profit at the five Banks it tracks declined an average of 11%.

Saudi banks have been hurt by falling oil prices, which slowed growth in the biggest Arab economy and forced some of the kingdom’s biggest family-owned companies to restructure debts.

Porsche reaches deal on Qatar stake

Qatar has bid €7 billion (US9.8 billion) for a stake in the parent company of troubled German sports carmaker Porsche, banking sources said Saturday.

The offer for shares and share options was made by the state-run Qatar Investment Authority (QIA) to Porsche Holding, which also has a majority stake in fellow German carmaker Volkswagen.

It was negotiated with Porsche chief executive Wendelin Wiedeking, who has been locked in a bitter power struggle with Volkswagen patriarch Ferdinand Piech.

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• Porsche rejects VW bid for minority stake (cbc.ca)

Saudi stock market July 2009

The Saudi stock market closed up 1.02% today (11-07-09) at 4572.

Is this significant, after posting a 12.44% loss in 18 trading sessions? You be the judge of that. The drop was steep and fast, indicating further losses are forthcoming.

The Saudi stock market is in an ongoing bear market while the deep global recession is yet to hit home with people. The recession could be almost 2 years old, if you take its beginnings to be July or August 2007, when subprime entered the average Hassan Ali’s lexicon.