18 November 2007

GCC states likely to abandon dollar peg

DUBAI — Economists are seeing that the UAE and other GCC states will move away from US dollar peg to a basket of currencies, although no "dramatic impact" is expected, as they are gearing towards a stronger economic integration.

"I don't see any choice but perhaps to move to a basket of currencies," said Mark Mobius, executive chairman of Templeton Asset Investments, at the opening of the one-week DIFC Economic Forum. "With its booming economies, the region is moving towards a basket of currencies."

Also yesterday, Nasser Saidi, chief economist of Dubai International Financial Centre Authority, stressed that the six member-states of the Gulf Cooperation Council (GCC) are moving towards robust economic integration, what with their increased multilateral trade, high GDP growth and increasing international reserves.

He said the GCC would have $365 billion in gross official reserves by end-2007, almost half of the $776.6-billion reserves forecast for the whole Middle East and North Africa (MENA). By next year the GCC would post $455 billion in reserves while the MENA region would have $967.5 billion.

"We're living in an 'economic renaissance' in the region," he said referring to MENA including the GCC states.

He added that MENA recorded an average real GDP growth of 6.2 per cent between 2003-07 as compared to 3.8 per cent in 1998-2002. He also stressed that the region, especially the GCC, has benefited so much from various projects resulting from public-private partnerships.

He said the value of oil wealth of the Middle East exporters has increased to $30 trillion from 1995 to 2007. He added that the GCC's oil reserves now stand at 484.3 billion barrels and natural gas reserves at 41.4 trillion cubic metres, or 40.3 per cent of the world's oil and 23 per cent of natural gas respectively.

The Gulf states, he said, should no longer be looked at as oil-based countries but rather as asset-based economies. He said the income from assets and net foreign asset of GCC states will exceed their income from oil.

He said the GCC can now better handle negative economic shocks from the rest of the world because it is more asset-based and has higher levels of liquidity than previous oil price booms.

He also said that there will be more derivatives, or financial instruments such as contracts whose value is derived from the value of something else, by next year. He added that big GCC countries such as Saudi Arabia would have to allow big investors to come to further regional growth.

The chief economist and head of economics and strategy at Gulf Investment Corporation, Soliman Demir, said the GCC must invest heavily to meet the world's future demand for oil.

He said that massive spending for construction projects especially in the Dubai is very much welcome since this benefits the tourism industry, the oil sector is more important with regard to the diversification of capital.

"We have to selectively think of diversification rather than focusing on the property market," he told participants in the forum, which runs until November 23, at the Gate Village, DIFC.

In his opening speech, DIFC Governor Omar bin Sulaiman challenged the speakers and financial experts to show how to convert various economic outlooks into action plans, or couple them with roadmaps for practical implementations.

Philip Khoury, head of research and member of the executive committee at investment banking firm and asset manager EFG-Hermes, said the region's currencies de-pegging from the dollar is a question of "when, not if".

"But we do not expect it to be dramatic; maybe by a few percentage points, but there will be no dramatic impact on the states," he said referring to the changes that would result in the currency value of Saudi Arabia, Bahrain, Qatar, the UAE and Oman.

Kuwait has abandoned the dollar-peg of its dinar for a basket of currencies since the third week of May, citing the greenback's slide against other currencies.

The chief economist of Gulf Finance House, Ala'a Al Yousuf, downplayed the debate on the dollar-peg saying that while the issue is important, the GCC countries have "more important" issues to deal with such as adopting a common currency, the strengthening of financial institutions and better statistical policies.

"We will have to take it and solve it [dollar-peg issue], then let's focus on more important things," he said expressing optimism that the issue will be resolved before or during the 28th GCC Summit, in Doha on December 3-4.

The leaders will deal with security, development and political and economic challenges facing the six GCC member states. They are expected to also talk about regional issues including the situation in Iraq and Iran's nuclear ambition and its occupation of the three islands of the UAE.

The founder and head of Lebanon's National Dialogue Party, Fouad Makhzoumi, said he doesn't expect any foreign invasion of Iran citing the counter-productivity of such in Afghanistan and Iraq.

Makhzoumi, who is also chairman of Future Pipe Industries Group, said that while Teheran has indeed shown interests in having a major role in controlling the global oil industry, it has likewise taken important steps to engage with the outside world such as making available to the Vienna-based International Atomic Energy Agency some information on its nuclear plan

Yousuf also expressed optimism that the Islamic financial sector will expand saying that Shariah-compliant products and services have been gaining significant growth.

Robert Shiller, Stanley B Resor Professor of Economics at Yale University, stressed that the extraordinary success of emerging markets, such as India, China, Brazil and the former Soviet republics, among others, have been driving the world economy.

Tetsuro Sugiura, senior managing executive officer and chief economist, Muzuho Research Institute, said that India is a more preferred market over China in terms of trade and investment because of its improved infrastructure, more transparent policies and democratic government.

Stephen Roach, Chairman of Morgan Stanley Asia, said emerging economies will be hurt by any slowdown in the US economy which is expected to happen by next year.

"If the US consumer spending slows in a material way, it is mathematically impossible for China and India to fill the void," he said. "The key question for the global outlook and for export-dependent countries in the fate of the US consumer."

He was arguing against the theory of a decoupling of emerging economies from those of the US and Europe.-(ktimes)

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Lebanon Time-Line

Introducing Lebanon

Coolly combining the ancient with the ultramodern, Lebanon is one of the most captivating countries in the Middle East. From the Phoenician findings of Tyre (Sour) and Roman Baalbek's tremendous temple to Beirut's BO18 and Bernard Khoury's modern movement, the span of Lebanon's history leaves many visitors spinning. Tripoli (Trablous) is considered to have the best souk in the country and is famous for its Mamluk architecture. It's well equipped with a taste of modernity as well; Jounieh, formerly a sleepy fishing village, is a town alive with nightclubs and glitz on summer weekends.

With all of the Middle East's best bits - warm and welcoming people, mind-blowing history and considerable culture, Lebanon is also the antithesis of many people's imaginings of the Middle East: mostly mountainous with skiing to boot, it's also laid-back, liberal and fun. While Beirut is fast becoming the region's party place, Lebanon is working hard to recapture its crown as the 'Paris of the Orient'.

The rejuvenation of the Beirut Central District is one of the largest, most ambitious urban redevelopment projects ever undertaken. Travellers will find the excitement surrounding this and other developments and designs palpable - and very infectious.

Finally, Lebanon's cuisine is considered the richest of the region. From hummus to hommard (lobster), you'll dine like a king. With legendary sights, hospitality, food and nightlife, what more could a traveller want?

Introducing Beirut

What Beirut is depends entirely on where you are. If you’re gazing at the beautifully reconstructed colonial relics and mosques of central Beirut’s Downtown, the city is a triumph of rejuvenation over disaster.

If you’re in the young, vibrant neighbourhoods of Gemmayzeh or Achrafiye, Beirut is about living for the moment: partying, eating and drinking as if there’s no tomorrow. If you’re standing in the shadow of buildings still peppered with bullet holes, or walking the Green Line with an elderly resident, it’s a city of bitter memories and a dark past. If you’re with Beirut’s Armenians, Beirut is about salvation; if you’re with its handful of Jews, it’s about hiding your true identity. Here you’ll find the freest gay scene in the Arab Middle East, yet homosexuality is still illegal. If you’re in one of Beirut’s southern refugee camps, Beirut is about sorrow and displacement; other southern districts are considered a base for paramilitary operations and south Beirut is home to infamous Hezbollah secretary general, Hassan Nasrallah. For some, it’s a city of fear; for others, freedom.

Throw in maniacal drivers, air pollution from old, smoking Mercedes taxis, world-class universities, bars to rival Soho and coffee thicker than mud, political demonstrations, and swimming pools awash with more silicone than Miami. Add people so friendly you’ll swear it can’t be true, a political situation existing on a knife-edge, internationally renowned museums and gallery openings that continue in the face of explosions, assassinations and power cuts, and you’ll find that you’ve never experienced a capital city quite so alive and kicking – despite its frequent volatility.