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LONDON: Defense spending by Gulf Arab states is expected to rise to more than $110 billion by 2023, driven partly by localized military initiatives by Saudi Arabia and the UAE, a report has found.
Budgets are increasing as countries pursue the modernization of equipment and expansion of their current capabilities, according to a report by analytics firm Jane’s by IHS Markit.
Military expenditure in the Gulf will increase from $82.33 billion in 2013 to an estimated $103.01 billion in 2019, and is forecast to continue trending upward to $110.86 billion in 2023.
“Falling energy revenues between 2014 and 2016 led to some major procurement projects being delayed as governments reigned in budget deficits,” said Charles Forrester, senior defense industry analyst at Jane’s.
“However, defense was generally protected from the worst of the spending cuts due to regional security concerns and budgets are now growing again.”
Major deals in the region have included Eurofighter Typhoon purchases by countries including Saudi Arabia and Kuwait.
Saudi Arabia is also looking to “localize” 50 percent of total government military spending in the Kingdom by 2030, and in 2017 announced the launch of the state-owned military industrial company Saudi Arabia Military Industries.
Forrester said such moves will boost the ability for Gulf countries to start exporting, rather than purely importing defense equipment.
“Within the defense sector, the establishment of Saudi Arabia Military Industries (SAMI) in 2017 and consolidation of the UAE’s defense industrial base through the creation of Emirates Defense Industries Company (EDIC) in 2014 have helped consolidate and drive forward industrial defense capabilities,” he said.
“This has happened as the countries focus on improving the quality of the defense technological work packages they undertake through offset, as well as increasing their ability to begin exporting defense equipment.”
Regional countries are also considering the use of “disruptive technologies” such as artificial intelligence in defense, Forrester said.
Meanwhile, it emerged on Friday that worldwide outlays on weapons and defense rose 1.8 percent to more than $1.67 trillion in 2018.
The US was responsible for almost half that increase, according to “The Military Balance” report released at the Munich Security Conference and quoted by Reuters.
Western powers were concerned about Russia’s upgrades of air bases and air defense systems in Crimea, the report said, but added that “China perhaps represents even more of a challenge, as it introduces yet more advanced military systems and is engaged in a strategy to improve its forces’ ability to operate at distance from the homeland.”
LONDON: Brent crude oil climbed above $65 a barrel to its highest this year as OPEC-led supply cuts and this week’s announcement of a higher-than-expected cut by Saudi Arabia encouraged investors.
The international oil benchmark reached $65.20 late on Friday, the 63 cent gain equating to a rise of about 1 percent. Brent approached near three-month highs and was set for a gain of nearly 5 percent on the week.
US West Texas Intermediate crude futures were also up about 1 percent, rising 53 cents to $54.94.
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia started voluntary production cuts last month, aiming to tighten the market.
Leading exporter and de facto OPEC leader Saudi Arabia said on Tuesday it would cut more than half a million barrels per day (bpd) more in March than the deal called for, sending prices surging.
Prices were also buoyed by reports of a partial closure of Saudi Arabia’s Safaniya, its largest offshore oilfield with production capacity of more than 1 million bpd. The shutdown occurred about two weeks ago, a source said.
State oil giant Saudi Aramco said in a statement to Reuters that all of its facilities and operations — including Safaniyah — are safe and normal.
“Brent should average $70 per barrel in 2019, helped by voluntary (Saudi, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in OPEC supply,” Bank of America Merrill Lynch said.
The bank said it expects a drop of 2.5 million bpd in OPEC supply in the fourth quarter of 2019 from a year earlier.
However, the global supply picture remains uncertain.
US oil production is on the rise, while the seizure of Libya’s main oilfield by Eastern armed forces this week could soon lead to its reopening.
But US sanctions on Venezuela and Iran have have helped to tighten global supply and security threats could threaten Nigerian production after general elections this weekend.
“Looking ahead, the prognosis for Venezuela and Iran remains skewed to the downside. As such, they should continue to act as important pillars of price support. The same, however, can’t be said for Libya,” said Stephen Brennock, of oil broker PVM.
“This risks throwing a spanner in the works for OPEC’s rebalancing ambitions and, therefore, the price recovery.”
Faltering global economic growth is also a concern, with signs of a slowdown now abundant in Europe, Asia and the US, which could lead to slowing growth in fuel demand.
BEIRUT: Several months after promising reform at his ministry, Iraq Oil Minister Thamer Al-Ghadhban on Friday reshuffled several key deputies.
Fayadh Nema was named deputy minister for upstream affairs. He had previously been deputy minister for refining operations. That position will now be occupied by Hamed Younis Saleh, formerly the deputy minister of gas affairs.
Mutasim Akram was also named the new deputy minister of gas affairs. He was previously deputy minister for distribution affairs and will be replaced in that post by Karim Hattab Jafar.
Al-Ghadhban, who was nominated by Prime Minister Adel Abdul Mahdi and confirmed by a parliamentary vote last October, replaced Jabar Al-Luaibi as minister. Al-Luaibi has since become head of the new National Oil Company.
Al-Ghadhban helped resuscitate a flagging oil industry after the US-led invasion that toppled Saddam Hussein in 2003. He was interim oil minister from 2004-5 and a former energy adviser to former premier Haider Al-Abadi.
Days after being confirmed in a parliamentary vote last October, he said he would look at ways to reform the oil ministry.
DOHA/DUBAI: Qatar’s Doha Tower, a spike-tipped cylinder that glows orange at night, won an award when finished in 2012 amid a Gulf-wide real estate boom, but today about half of its 46 floors are empty.
The office tower, now a familiar part of the capital’s high-rise skyline, has run foul of what real estate brokers, bankers and analysts say is an oversupplied Qatar property market ahead of the 2022 World Cup that mirrors a real estate downturn in the wider Gulf region after a drop in oil prices.
Qatar has the added challenge of a diplomatic, trade and transport boycott imposed on the Gulf Arab state by Saudi Arabia, the UAE, Bahrain and Egypt over allegations that Doha supports extremist militants, a charge Qatar denies.
The protracted row has made it tough to lure would-be foreign buyers of residential or commercial space.
Residential prices are down about 10 percent from June 2017, when the boycott began, and office prices have fallen by a similar rate, according to analysts and economists. Rents are down 20 percent from three years ago, they say.
“Qatar’s property sector has been one of the main casualties from the blockade that was imposed in mid-2017,” Jason Tuvey, an economist at Capital Economics, said.
The property downturn has so far not translated into bad loans, as bankers say borrowers holding sluggish real estate assets tend to be among the country’s wealthiest.
“They have capacity to withstand the market ... I don’t see a major threat,” Doha Bank CEO Raghavan Setharaman said, when asked about his view of the real estate market.
A banker at Al-Khalij Commercial Bank said banks like his have been restructuring many property loans in recent months, extending them to 20-year payment periods from 10 in some cases, to keep business moving for developers hit by slow demand.
But with the World Cup edging closer, real estate experts say long-planned projects are now set to flood the market, even as buildings in prime locations, like Doha Tower, sit idle.
“It’ll be interesting to see what happens when they (real estate prices) are really put under pressure in a year’s time, when a lot of new supply hits the market,” Johnny Archer, Associate Director of DTZ, a Doha-based real estate firm, said.
Tiny but wealthy Qatar plans to increase residential space by about 50 percent and office space by 40 percent in the next three years, partly on expected demand from the World Cup, according to a report published last week by real estate company DTZ.
The lion’s share of construction underway is for high-end residential towers, white-collar office space, and luxury hotels and shopping malls.
FIFA requires Qatar have at least 60,000 hotel rooms in place for the month-long World Cup tournament, which Qatar estimates will draw about 1.5 million fans — more than half of its roughly 2.6 million population.
Qatar has about 26,500 rooms and will add another 15,000 by 2022, DTZ’s report estimated. The rest will be met by rooms aboard cruise ships and in desert camps, according to the local World Cup organizing committee. These camps are expected to be bedouin-style accommodation to give visitors a taste of desert life.
Much of the building is in an entirely new city, Lusail, a 38-square kilometer stretch just north of Doha dotted by commercial towers, hotels, and shopping centers at various stages of construction.
Lusail is being developed by state-controlled Qatari Diar Real Estate Company, which envisions it hosting 200,000 residents and 170,000 employees. It is anchored by Qatar’s largest World Cup stadium, an 80,000 seat venue that will host the opening and closing matches.
Colliers International, whose office was an early entrant to Lusail, says getting companies to fill a rush of towers coming online ahead of 2022 will be a daunting task.
“There’s going to be massive structural oversupply for office infrastructure for the foreseeable future,” said Colliers’ Qatar country director Adrian Camps.
In a bid to spur activity, Qatar last month ratified an investment law allowing foreigners full ownership of companies, and for years Qatar has designated certain high-end areas like Lusail open to foreigners, but brokers say demand remains low.
Shopping malls, lacking the Saudi or Emirati shoppers who once flocked to them before the boycott, are among the most visibly affected, with some having to shutter shops in recent months.
New malls are being built anyway.
Total retail space has doubled in three years and will grow 50 percent more by 2021 with nine new malls, according to DTZ.
Beyond 2022, Qatar real estate faces an uncertain outlook. Aside from soccer stadiums, Qatar has not specified legacy plans for what happens to infrastructure developed for the World Cup after the tournament.
“There’s too much uncertainty as to where that demand specifically is going to come from,” Richard Rayner, who surveys property for DTZ said.
HYDERABAD, India: Swedish giant Ikea is tackling the $40 billion Indian market for home furnishings, taking on local furniture makers in places like Hyderabad’s bustling Nampally market.
Ikea hopes to win over India’s growing consumer class with its clean, air-conditioned stores and unique offerings. It says India is a test case for whether to keep shifting resources toward emerging economies, including Latin America and China, given the saturation of markets in Europe and the United States — and the possibility of another global recession.
Six months after its first store opened in Hyderabad, Ikea’s 400,000-square-foot cornucopia of furniture, kitchenware and other goodies is drawing between 10,000 and 30,000 visitors.
But it’s unclear if all that foot traffic translates to big sales. So far the best sellers are priced below 300 rupees ($4.20).
NEW YORK: Amazon abruptly dropped plans Thursday for a big new headquarters in New York that would have brought 25,000 jobs to the city, reversing course after politicians and activists objected to the nearly $3 billion in tax breaks promised to what is already one of the world’s richest, most powerful companies.
“We are disappointed to have reached this conclusion — we love New York,” the online giant from Seattle said in a blog post announcing its withdrawal.
The stunning move was a serious blow to Gov. Andrew Cuomo and Mayor Bill de Blasio, who had lobbied intensely to land the project, competing against more than 200 other metropolitan areas across the continent that were practically tripping over each other to offer incentives to Amazon in a bidding war the company stoked.
Cuomo lashed out at fellow New York politicians over Amazon’s change of heart, saying the project would have helped diversify the city’s economy, cement its status as an emerging tech hub and generate money for schools, housing and transit.
“A small group (of politicians put their own narrow political interests above their community,” he said.
But Democratic Rep. Alexandria Ocasio-Cortez, New York City’s new liberal firebrand, exulted over Amazon’s pullout.
“Today was the day a group of dedicated, everyday New Yorkers and their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world,” she tweeted, referring to Amazon CEO Jeff Bezos.
The swift unraveling of the project reflected growing antipathy toward large technology companies among liberals and populists who accuse big business of holding down wages and wielding too much political clout, analysts said.
“This all of a sudden became a perfect test case for all those arguments,” said Joe Parilla, a fellow at the Brookings Institution’s Metropolitan Policy Program.
Amazon ultimately decided it did not want to be drawn into that battle.
Amazon announced in November that it had chosen the Long Island City section of Queens for one of two new headquarters, with the other in Arlington, Virginia. Both would get 25,000 jobs. A third site in Nashville, Tennessee, would get 5,000.
The company planned to spend $2.5 billion building the New York office, choosing the area in part because of its large pool of tech talent. The governor and the mayor had argued that the project would spur economic growth that would pay for the $2.8 billion in state and city incentives many times over.
After Amazon backed out, De Blasio, who according to his press secretary learned of the decision an hour before it was announced, criticized the company for not doing more to try to win over New Yorkers, saying: “You have to be tough to make it in New York City.”
In pulling out, Amazon said it isn’t looking for a replacement location “at this time.” It said it plans to spread the technology jobs that were slated for New York to other offices around the US and Canada, including Chicago, Toronto and Austin, Texas. It will also expand its existing New York offices, which already have about 5,000 employees.
Amazon faced fierce opposition over the tax breaks, with critics complaining that the project was an extravagant giveaway — or worse, a shakedown — and that it wouldn’t provide much direct benefit to most New Yorkers.
The list of grievances against the project grew as the months wore on, with critics complaining about Amazon’s stance on unions and some Long Island City residents fretting that the company’s arrival would drive up rents and other costs.
Opposition to the deal was led in the Democrat-controlled state Senate by Michael Gianaris, the chamber’s No. 2 lawmaker, whose district includes Long Island City. Initially among the politicians who supported bringing an Amazon headquarters to the city, Gianaris did an about-face after the deal was announced, criticizing the secrecy surrounding the negotiations and the generous incentives.
Earlier this month, Gianaris was appointed to a little-known state panel that could have ultimately been asked to approve the subsidies.
The City Council probably would have had to file a lawsuit to scuttle the deal, which was structured to avoid the land use review process that most projects undergo.
In recent weeks, City Council members held hearings at which they grilled Amazon officials about such things as the company’s contract with Immigration and Customs Enforcement to provide facial recognition technology.
One City Council leader tried to get Amazon officials to agree to remain neutral in the face of any potential union drive. But an Amazon executive would not give such a commitment.
A Quinnipiac University poll released in December found New York City voters supported having an Amazon headquarters 57 percent to 26 percent. But they were divided over the incentives: 46 percent in favor, 44 percent against.
Construction industry groups and some local business leaders had urged the public and officials to get behind the plan.
Eric Benaim, a realty executive who gets most of his sales and rentals in Long Island City, had led a petition in support of Amazon, drawing 4,000 signatures.
“I woke up this morning and I had no clue this would happen. Zero. This news is a shock, and I’m devastated,” he said.
Andrew Ousley, a business owner who lives near the proposed site, said he had been considering moving out before Amazon moved in.
“Now that they’re not coming, I’m more likely to stay and see how the neighborhood continues to grow and evolve in a more organic fashion,” he said.
DUBAI: Air Arabia suffered a 609.5 million dirham ($166 million) loss in 2018 as it took impairments on its exposure to collapsed private equity firm Abraaj, knocking its shares on Thursday as analysts said its dividend could be hit.
The Dubai-based carrier, whose stock fell by more than 7 percent on the results, had posted a net profit of 630.6 million dirhams in the same period a year ago.
Air Arabia said it faced impairment charges of 1.13 billon dirhams, mainly due to exposure to Abraaj-related investments.
“While Air Arabia’s liquidity status and profitable operations remain intact, this step aims to serve the best interests of the company and its investors,” it said.
Dubai-based Abraaj was the largest buyout fund in the Middle East and North Africa until it collapsed last year in the aftermath of a row with investors, including the Gates Foundation, over a $1 billion health care fund.
“While we expected this to happen, this will affect Air Arabia’s ability to pay dividends,” said Nishit Lakhotia, head of research at Bahrain-based SICO.
“Further, this has affected its balance sheet and possibly will imply a higher rate for airline purchase or leasing.”
Air Arabia added 26 new routes to its global network in 2018 from its operating hubs in the United Arab Emirates, Morocco and Egypt, it said in a statement on its website.
The carrier took delivery of three new aircraft and ended the year with a fleet of 53 Airbus A320 aircraft operating to over 155 routes across the Middle East, Africa, Asia and Europe.
Abraaj’s liquidators are in the process of determining the value its assets to settle liabilities, said Air Arabia, which last month revealed that it has begun legal proceedings against Abraaj founder Arif Naqvi in Sharjah.
DUBAI: Dubai-based construction giant Emaar Properties said on Thursday its net profits for the fourth quarter and the whole of last year increased despite falling real estate prices.
The company, which owns the world’s tallest tower, Burj Khalifa, said it saw a 27-percent surge in fourth quarter net profit to $488 million, up from $384.5 million in the same period of 2017.
Emaar, the largest construction firm in the Middle East, posted a net profit of $1.66 billion for all of 2018, up 10 percent on the previous year’s $1.51 billion, it said in a statement.
The increase in net income came despite falling prices in the key real estate market of Dubai which has the most diversified economy in the region.
Emaar, the largest listed firm on the Dubai Financial Market, is also involved in the entertainment, hotel and malls businesses.
“Our strategy for 2018 was to launch and build premium real estate assets that gained strong investor response from regional and international markets,” Emaar chairman Mohamed Alabbar said.
Real estate prices in Dubai have been on the decline since 2014 because of oversupply by builders who are anticipating a pick up in sales ahead of the international trade fair Expo 2020.
LONDON: Saudi Aramco and Total on Thursday agreed to invest $1 billion in the Kingdom’s retail fuel market in a move that is expected to create thousands of new jobs.
The investment will be made over a six-year period, the pair said in a joint statement.
“Total is proud to be the first international oil major to invest in Saudi Arabia’s fuel retail network. This joint venture agreement is in line with our global strategy to expand in fast-growing markets worldwide.” said Momar Nguer, executive committee member at Total, “This new agreement is also reaffirming our long-term partnership with Saudi Aramco.”
The two companies have also signed an agreement with the owners of Tas’helat Marketing Company (TMC) and Sahel Transport Company (STC) to acquire TMC and STC.
It means that the Aramco-Total joint venture will take control of an existing network of 270 service stations together with their tanker fleet.
“We aim to enhance the quality of services, as well as create thousands of jobs and additional investment opportunities in the Kingdom, said Abdulaziz Al-Judaimi, Saudi Aramco senior vice president of downstream.”
“This project will also help optimize the total value of our hydrocarbon resources.”
Total CEO Patrick Pouyanne teased Thursday’s announcement last month during a panel at the World Economic Forum in Davos.
LONDON: Saudi Central Bank Governor Ahmed Al-Kholifey does not expect the EU’s decision to add his country to a list of “high risk” countries to have any impact for now, Al-Arabiya TV reported on Thursday.
The EU this week added Saudi Arabia, Panama and four US territories on Wednesday to a blacklist of nations deemed to be posing a threat to the bloc because of poor controls against terrorism financing and money laundering.
Earlier Saudi Arabia expressed its regret about the decision by the European Commission to place the Kingdom on a blacklist of 23 non-EU countries and territories accused of posing a high risk of money laundering and financing terrorism.
In response, Saudi authorities highlighted the efforts being made by the Kingdom to combat such crimes.
“The Kingdom finds it it regrettable that it was included in the proposed list of ‘high-risk’ countries for money laundering and terrorist financing that was issued by the European Commission on Feb. 13, 2019,” Saudi authorities said in a statement released by the Saudi Press Association.
“This comes despite the Kingdom’s ratification of many laws and procedures relating to combating money laundering and terrorist financing, to reduce the risks associated with such crimes.”
It added that the Kingdom reaffirms its strong commitment to the joint global efforts to combat money-laundering and the financing of terrorism, as part of which it works with international partners and allies.
“Saudi Arabia, who is a key partner in the international coalition against Daesh, has been leading a group, along with the US and Italy, to fight the financing of the group,” the statement continued.
“The Saudi Mutual Evaluation Report, published by Financial Action Task Force (FATF) in September 2018, praised Saudi Arabia’s commitment to the group’s recommendations. The FATF report stated that the Kingdom’s preventive measures against money laundering and terrorist financing are strong and robust.”
JERUSALEM: Torn between China and the United States, which have been in a trade war for the paEbola outbreak in violence-plagued DRC a worst-case scenariost year, Israel is performing a tough balancing act between its two main economic partners.
Washington has raised concerns over China’s increased role in infrastructure and sensitive sectors such as technology of its close ally Israel, with which it shares close intelligence and military cooperation.
These have reportedly been aired during visits to Jerusalem since January by both US Assistant Secretary of Energy Dan Brouillette and National Security Adviser John Bolton.
The latter’s talks focused on the northern Israeli commercial and naval port of Haifa, according to Israeli media.
Hong Kong-based Shanghai International Port Group won a tender four years ago to manage a new wharf at the port complex where US warships regularly dock.
Former Israeli ambassador to China Matan Vilnai has said it was “madness” to entrust China with the management of such a “national security asset.”
Nadav Argaman, head of Shin Bet, the domestic Israeli security service responsible for counterintelligence, has reportedly warned against Chinese investments that could facilitate espionage activities.
A former chief of the Mossad spy agency, Ephraim Halevy, has delivered similar warnings.
Danny Catarivas, a foreign trade expert at the Manufacturers Association of Israel, says Washington is putting pressure on Israel for tighter controls.
“The United States is now pushing and insisting that Israel follow its example and create a foreign strategic investment control agency,” he told AFP.
He said Israel’s security cabinet has decided to set up a committee — including representatives of the intelligence services — to oversee any foreign investment considered “strategic.”
Asked by AFP, several official spokespersons refused to comment, with one saying that relations with China were “hyper-sensitive.”
A transport ministry official, speaking on condition of anonymity, said the Haifa contract was awarded to the Chinese group “on purely professional criteria.”
Uzi Rabi, a Middle East expert at Tel Aviv University, told AFP that Israel must examine contracts with China “not only from an economic point of view, but also diplomatically and geo-strategically.”
Chinese companies are making spectacular advances in Israel.
They have won contracts for the construction of a new port in the southern city of Ashdod and tunnels for new light railway lines in Tel Aviv.
According to experts, the Chinese make a third of their Israeli investments in the key hi-tech sector.
Chinese firms are also interested in building a fast railway connecting Tel Aviv to the Red Sea resort of Eilat and constructing a desalination plant, according to economic media reports.
China has become Israel’s leading partner for infrastructure, roads, tunnels and ports
Trade between China and Israel exceeded $12 billion in 2018, nearly 200 times the level in 1992 when the two countries established diplomatic relations, data from Israel’s Central Bureau of Statistics shows.
China has become Israel’s second largest trading partner overall after the United States, and Prime Minister Benjamin Netanyahu in October proposed a free trade agreement between the two countries.
Trade expert Catarivas, however, said: “Transparency is not the strong point of Chinese investment.
“You never know if the money comes from private companies and persons, or from the state and the Communist Party.”
He said Israel could not cut off China, “a market in full expansion,” but the priority was to avoid damaging relations with the US.
Israeli companies active in China or under the partial or total control of Chinese investors may one day be excluded from the US market if relations between the two superpowers deteriorate further, he said.
In the key defense sector, US pressure has already had an impact on Israel, which receives nearly $4 billion in annual US military aid.
The Jewish state has pledged not to sell weapons or dual-use civilian and military technologies to China.
Israel had its fingers burned in 2000 when the US vetoed the sale to China of an airborne command and control system equipped in part with US components.
Israel was obliged as a result to pay several hundred millions of dollars in compensation to China for breach of contract.
LONDON: The Abu Dhabi-based Tawazun Economic Council has launched a $680 million fund to invest in the country’s defense sector.
Plans for the the Defense and Security Development Fund were announced ahead of IDEX 2019, the vast biennial military convention hosted in the UAE’s capital.
Gulf states, including the UAE and Saudi Arabia, are investing heavily in developing their military industries as part of wide-ranging economic reforms aimed at reducing reliance on oil.
Tawazun Economic Council CEO Tareq Abdul Raheem Al-Hosani said that the fund was established to encourage the private sector to invest in the defense and security sectors.
It is also in line with government plans to develop public-private partnerships in the defense sector.
It will focus on technological investment, and safeguarding local intellectual property, innovation and industry.