UAE Econ Min:Annual Inflation At 3.5%-4% By Yr End

Inflation forecast + New Laws relating to Foreign Ownership

The United Arab Emirates is expected to see annual inflation to range between 3.5% and 4% in 2009, and there is no risk of deflation, the country's economy minister said Sunday.

"It is 3.5% to 4% this year, that is what we are expecting," Sultan Al Mansouri said when asked if the ministry of economy has an inflation target for the year.

Last year, inflation in the second-biggest Arab economy hit 12.3%, largely driven by a hike in property rents.

Mansouri added that there is no risk of deflation this year. "No, we don't have that," he said. "We don't worry about it."

In a report earlier this month, EFG-Hermes said the U.A.E. will most likely suffer from deflation in 2009.

Prices of basic commodities in the U.A.E. have fallen by 20% to 40% this year, and the ministry aims to keep them stable, Mansouri told reporters in Abu Dhabi.

"Our objective is as much as possible to keep the prices stable although there are changes in different sectors of commodities," he said. "Definitely there is stability in prices this year as compared to previous years, not only during Ramadan."

NEW LAWS

Two new draft laws, which will be submitted to the cabinet within two months, could see the U.A.E. change its rule on foreign ownership of companies, Mansouri said.

"The industry law provides some options for 100% ownership," he said. "Within two months we will submit it to the cabinet and after that it will go through the legal process."

The law proposes options for complete foreign ownership outside the country's free zones, currently the only areas within the country where foreign companies can set up with full ownership.

The industry law could pave the way for complete foreign ownership outside of the U.A.E.'s free zones, Mansouri said.

"Industry is one of the most important sectors we are trying to attract to the U.A.E. and is a major contributor to GDP," Mansouri said. "We need to create the right environment to attract these industries from worldwide."

A draft foreign investment law is expected to pass by year-end, Mansouri said. When asked if the law proposed increasing the current 49% foreign ownership limit, he said: "everything is open."

Economists expect any relaxation of the foreign ownership restrictions to positively impact the U.A.E. economy.END

Dubai, Abu Dhabi Shares End 6-Day Rally; Etisalat, Arabtec Fall

United Arab Emirates shares dropped, ending a six-day rally, led by Emirates Telecommunications Corp. and Arabtec Holding PJSC, as crude oil fell below $70 a barrel late last week.

Emirates Telecommunications, the U.A.E. telephone-service provider known as Etisalat, lost the most in five months after gaining 13 percent last week. Arabtec, the country’s biggest construction company, fell as much as 2.6 percent. Abu Dhabi’s ADX General Index dropped for the first time since Sept. 2, retreating 1.4 percent to 3,018.14. Dubai’s measure slid 0.5 percent.

“The markets need to take stock and may flush out some short-term traders,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. The 3.7 percent slump in crude prices to $69.29 a barrel on Sept. 11 is also hurting investor confidence, Khan added.

UAE records deficit of $46.96 bln in '08

The United Arab Emirates recorded a 172.49 billion dirham ($46.96 billion) balance of payments deficit in 2008 versus a surplus of 183.24 billion dirhams ($49.9 billion) the year before, official data show, due to an outflow of funds.

The net balance of the capital and financial accounts was negative at 203.06 billion dirhams ($55.5 billion) in 2008 compared with the previous year, according to the data released on the UAE's central bank website on Sunday.

This was a "result of outflow of funds, including hot money which entered the UAE. in 2007, speculating on an increase in the dirham exchange rate, financial transfers abroad through banks (44.86 billion dirhams), non-banking private sector (50.40 billion dirhams) and public sector institutions (108.20 billion dirhams)," the central bank said in the report.

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Farmland investment fund is seeking more than Dh1bn

The Gulf’s first agricultural investment fund is due to launch next month, focusing on land acquisitions related to cash-crop farming.

The US$350 million (Dh1.28 billion) fund, which will focus initially on rice farming in Africa and cereal cultivation in eastern Europe and former Soviet countries, is actively seeking joint ventures with Gulf family-owned conglomerates and sovereign wealth funds.

John Papesh, the managing director of Pharos Financial Group, a fund management firm based in the Dubai International Finance Centre, said: “The sky is the limit for agricultural investments and we have found tremendous appetite among our clients.

Chip maker enters a different class

Globalfoundries, the Abu Dhabi computer chip venture, will expand its business to “a whole new class of customers”, when the acquisition of Singapore’s Chartered Semiconductor is completed later this year, its chief executive said.

The Advanced Technology Investment Company (ATIC), the Government-owned investment business that runs Globalfoundries in a joint venture with the California-based chip maker AMD, said last week that it had struck a deal to buy Chartered for Dh14.4 billion (US$3.92bn) in cash and debt.

“What this does for us is gives us an even bigger worldwide capacity footprint,” said Doug Grose, who was named as the interim chief of Chartered after the acquisition.

Gulf efforts show realistic future for financial centres

In the Gulf, a measure of international success has been achieved by creating local financial centres.

Both international and regional players were welcomed to these centres and it seemed that the era of globalisation and deregulation could do no wrong as the centres in Dubai and Bahrain flourished.

Riyadh, with its more insular programme, watched from the sidelines.

DIFC stays on growth curve despite tough economic conditions (Interview)

The number of companies operating in Dubai International Financial Centre (DIFC) continues to increase, while prices of commercial properties are holding up too.

This is because "we are offering state-of-the-art infrastructure", Abdulla Al Awar, DIFC Authority Chief Executive Officer, told Emirates Business.

"The fees in DIFC are maintained in terms of office space accommodation."

DFM, Nasdaq Dubai merger a 'possibility'

A merger between Dubai Financial Market (DFM) and Nasdaq Dubai can be "possibly looked at", said a senior official.

Borse Dubai, the holding company of both exchanges, is already planning to integrate their trading and clearing systems. But the full merger would need to address regulatory issues first.

"Under a consolidated approach – because Borse Dubai owns both DFM and Nasdaq Dubai – the merger can be looked into," Abdulla Al Awar, CEO, DIFC Authority, told Emirates Business.

UAE shelves Rs102b tallest building project in City: Pervaiz

Senior Central Leader PML, MNA Ch Pervez Elahi has blamed the provincial government for showing lukewarm interest towards the foreign investors whereof they have run away from investing in the province.

Among the investors, he said, also include those who had agreed during his (PML) government to invest billions of dollars in the mega development projects of Punjab. These investors belonged to UAE, China and other countries, Pervez Elahi reminded in a statement Saturday.

He said, with the untiring efforts of his government in the Punjab, the foreign investors agreed to spend billions on various projects in the province which had to provide job opportunities to tens of thousands of people. He said due to lack of interest and attitude of the Punjab Government, Sheikh Mubarek Al-Nihyan Company has given up the project of constructing the tallest and the biggest commercial and residential complex in the City.

Saudi's non-oil exports plunge 22 percent

Saudi Arabia's non-oil exports in June fell 22 percent to 8.14 billion Saudi riyals ($2.17 billion) from a year earlier amid weak demand for petrochemicals.

The kingdom's imports in June also fell, dropping 25 percent to 26.81 billion riyals, compared with 35.57 billion riyals from a year earlier, the country's national news agency, or SPA, reports Saturday, citing the Department of General Statistics & Information.

Saudi's main non-oil exports in June were petrochemical products, plastic and metals, with petrochemical products dominating 28 percent of the non-oil exports worth 2.31 billion riyals, SPA reports.

Iran, Turkey in transit gas deal

Iran and Turkey have reached an agreement that will allow 35 billion cubic meters of natural gas from Turkmenistan to transit through Iran to European markets, the semiofficial Mehr news agency reported Saturday, citing a senior official.

The two countries, however, have not reached an agreement yet to build a pipeline under the Caspian Sea, said Hojatollah Ghanimifard, deputy director of Investment Affairs at the National Iranian Oil Company, according to Mehr.END