Diversification strategies paying off for GCC economies

Diversification strategies paying off for GCC economies
‘Business hubs such as Abu Dhabi Global Market have now been operating for a while and are on the radar screen of every entrepreneur as a potential destination where businesses can be established.’ (Reuters)
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Updated 09 March 2024
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Diversification strategies paying off for GCC economies

Diversification strategies paying off for GCC economies
  • Focus on non-oil trade is helping countries display resilience in the face of global disruptions: experts

RIYADH: Transport, tourism and logistics are set to help the Gulf Cooperation Council region secure gross domestic product growth far above the lobal average, economists have told Arab News.

Experts believe that a focus on non-oil trade by GCC governments is helping countries display economic resilience in the face of global disruptions, such as the conflict in Gaza.

At the end of 2023, a report commissioned by the Institute of Chartered Accountants of England and Wales and compiled by Oxford Economics, forecast 3.2 percent GDP growth for GCC countries in 2024, compared to the 2.1 percent predicted across the world.

Since that report was published, the Israel-Hamas war has continued, as have attacks by Houthi rebels on ships in the Red Sea.

This prompted the OECD to strike a warning in February that while it believes global GDP growth will hit 3 percent in 2025 — with Saudi Arabia forecast to see an expansion of 4.2 percent — there are still choppy economic waters ahead.

“Further upside surprises in inflation could trigger sharp corrections in financial asset prices as markets price in that policy rates may be higher for longer periods of time,” said the report.

Despite these concerns, the wave of economic diversification activities that have swept across the GCC in recent years has placed the region on a stable footing.

The most recent Riyad Bank Saudi Arabia Purchasing Managers’ Index report by S&P Global showed the Kingdom’s non-oil economy is exhibiting improved growth, with business activity accelerating at the fastest rate in five months.

The PMI rose to 57.2 in February — well above the 50-point neutral mark that separates expansion from contraction — marking a notable improvement from a two-year low in January.

This signaled a significant improvement in the operating conditions of the non-oil private sector. 

The Gulf is benefiting from investments that have been made over time.

Nasser Saidi, former Lebanese economy minister and founder of Nasser Saidi & Associates

Speaking before the latest PMI report, Nasser Saidi, former Lebanese economy and trade minister and founder of Nasser Saidi & Associates told Arab News: “The Gulf is benefiting from investments that have been made over time.”

He said: “I think one of the critical sectors is transport and logistics,” further stating how “many countries don’t have the airports, transport and facilities that the Gulf has developed, particularly the UAE, Qatar, and increasingly now Saudi Arabia and to a lesser extent Oman.”

Saidi continued: “As a result of it, tourism has developed very rapidly, and when you also open up the economy to tourist visas, facilities to establish businesses, and particularly you deal with COVID-19 very effectively, and you open up when the rest of the world was closed — the combination of these factors delivers the growth that we are witnessing now.”

The economist believes that one of the undervalued aspects that contributed to non-oil growth is the fact that GCC health systems performed very well during COVID-19.

Adel Afiouni, Lebanon’s former investments and technology minister and now a partner and head of Europe and Middle East at finance platform Exos, echoed Saidi’s belief that tourism is driving economic diversification in the region.

Describing the sector as offering a “huge opportunity” for growth, he told Arab News that Abu Dhabi and Saudi Arabia can become global destinations akin to Dubai.

“The increasing diversity of the offering, the quality of the hospitality industry and the natural beauty in so many places are turning previously untapped touristic destinations into a destination of choice, and I believe the potential for growth in this sector is tremendous,” he said. 

Another area identified by Afiouni as propelling GCC economies forward is financial services, thanks to “the large pool of capital available in the region within sovereign entities and with private investors and the fact that the region remains one of the largest exporters of capital to the world and a strategic focus for all global institutions.”

Afiouni highlighted the fast growth of wealth in the GCC “especially among entrepreneurs and businessmen in the region, and the development of active regional capital and private markets.”

Additionally, financial services are being bolstered by the large number of ambitious projects planned for the next several decades. 

“These will require substantial investments and therefore more needs for FDIs (foreign direct investments) and global capital markets,” he said.

Technology is also an area of expansion, with the political and business leadership across the GCC countries exerting a great deal of effort and capital to attract talent and develop entrepreneurship, alongside creating hubs for technology, innovation and for start-ups and business-friendly ecosystems.

“Business hubs such as DIFC (Dubai International Financial Centre) and Abu Dhabi Global Market have now been operating for a while and are on the radar screen of every entrepreneur as a potential destination where businesses can be established and can thrive and progressive policies and incentives across the region are building a tech ecosystem that can compete with every major global hub,” he adds.

Saidi believes that the other big story for non-oil sector growth is the investment in renewable energy in the region.

“Despite the odds, these are the countries that are investing the most and the fastest in renewable energy because they have the advantage of solar power,” he told Arab News, adding: “They’re looking at this as a new opportunity of being able to go green and particularly (with) renewable energy, things like district cooling, things like a whole number of climate tech industries.”

The economist said: “Desalination is a perfect one. The combination of these factors in addition to the further opening of the economies with free trade agreements are fostering growth.”


OPEC countries extend 2.2m bpd voluntary production cut until end of December

OPEC countries extend 2.2m bpd voluntary production cut until end of December
Updated 03 November 2024
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OPEC countries extend 2.2m bpd voluntary production cut until end of December

OPEC countries extend 2.2m bpd voluntary production cut until end of December
  • Originally implemented in April and November 2023, these additional reductions aim to stabilize the global oil market

LONDON: The Organization of the Petroleum Exporting Countries announced on Sunday that eight key OPEC+ member nations have agreed to extend their voluntary production cuts of 2.2 million barrels per day through December 2024.

The countries are Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman.

Originally implemented in April and November 2023, these additional reductions aim to stabilize the global oil market, according to a statement from the OPEC Secretariat.

The countries emphasized their commitment to full adherence to the Declaration of Cooperation, which includes monitoring the production adjustments to ensure compliance.

The 53rd meeting of the Joint Ministerial Monitoring Committee, held on April 3, underscored this dedication, establishing a timeline for the eight nations to fully offset any overproduction by September 2025.

Both Iraq and the Russia-Kazakhstan alliance recently reiterated their strong support for the agreement, pledging to uphold their compensation schedules.


Number of hotel rooms in Saudi Arabia surges 107% in Q3

Number of hotel rooms in Saudi Arabia surges 107% in Q3
Updated 03 November 2024
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Number of hotel rooms in Saudi Arabia surges 107% in Q3

Number of hotel rooms in Saudi Arabia surges 107% in Q3
  • Room licenses doubled to over 3,950, as opposed to 2,000 permits in the third quarter of last year
  • Kingdom aims to create over 1 million tourism-related jobs, driving economic growth and increasing its global travel footprint

RIYADH: Saudi Arabia’s tourism sector experienced a 107 percent increase in hotel rooms year-on-year in the third quarter of the year, according to official data. 

The Kingdom’s hospitality industry saw room numbers increase from 214,600 in the third quarter of last year to 443,200 during the same period in 2024. 

Room licenses also doubled to over 3,950, as opposed to 2,000 permits in the third quarter of last year. 

Saudi Arabia has ambitious tourism objectives, aiming to attract 150 million visitors annually by the end of the decade as part of its Vision 2030 plan. 

The initiative is key to diversifying the country’s economy beyond oil, with tourism expected to become a necessary pillar of the Kingdom’s gross domestic product. 

The nation has plans for investments exceeding $1 trillion for new attractions and infrastructure, including the Red Sea initiative and NEOM, a $500 billion mega-city. 

An accessible e-visa program has also been introduced to facilitate international travel. 

By focusing on heritage sites, luxury resorts, and cultural experiences, the Kingdom aims to create over 1 million tourism-related jobs, driving economic growth and increasing its global travel footprint. 

In February, Saudi Arabia’s Minister of Tourism Ahmed Al-Khateeb announced plans to add 250,000 hotel rooms by 2030, with 75,000 to be developed through private sector contracts. 

During a ministerial panel session at the Private Sector Forum in Riyadh, Al-Khateeb said the total number of hotel rooms in the Kingdom had reached 280,000 by the end of 2023. 

He also said that the target for 2030 is approximately 550,000 hotel rooms, emphasizing the high quality of current and upcoming projects, which will position Saudi Arabia among the top global destinations. 

The minister added that the tourism sector had reached a 10 percent contribution to GDP and a 7 percent contribution to non-oil GDP. 

Al-Khateeb said that the Kingdom has surpassed its original target of attracting 100 million tourists by 2030, reporting 100 million visitors so far, including 77 million domestic and 27 million international travelers. 


Closing Bell: Saudi indices close in green at 12,048

Closing Bell: Saudi indices close in green at 12,048
Updated 03 November 2024
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Closing Bell: Saudi indices close in green at 12,048

Closing Bell: Saudi indices close in green at 12,048
  • MSCI Tadawul Index increased by 5.51 points, or 0.37%, closing at 1,512.82
  • Parallel market Nomu gained 72.27 points, or 0.27%, to close at 27,297.45

RIYADH: Saudi Arabia’s Tadawul All Share Index started the week in green, gaining 26.15 points, or 0.22 percent, to close at 12,048.26. 

The total trading value of the benchmark index was SR4.2 billion ($1.1 billion), with 82 listed stocks advancing, while 147 retreated. 

The MSCI Tadawul Index also increased by 5.51 points, or 0.37 percent, closing at 1,512.82. 

The Kingdom’s parallel market Nomu gained 72.27 points, or 0.27 percent, to close at 27,297.45, with 38 stocks advancing and 35 retreating. 

The best-performing stock of the day was Riyadh Cables Group Co., whose share price surged by 9.98 percent to SR112.40. 

Other top performers included MBC Group Co., which saw a rise of 9.98 percent to SR45.75. 

Anaam International Holding Group and Al-Baha Investment and Development Co. also recorded gains of 8 percent and 7.69 percent, closing at SR1.35 and SR0.28, respectively. 

Rabigh Refining and Petrochemical Co. was also among the top performers with SR8.61, recording a 5.51 percent increase. 

Quara Finance Co. announced its nine-month financial results, seeing SR147.1 million in revenue, a 2.3 percent year-on-year increase. 

Despite the company’s gains in sales, net profit saw a 28.1 percent yearly decline, recording SR34.5 million in net income. 

Quara attributed the revenue increase to a growth in yield of the retail portfolio, while the decrease in profits was due to an increase in write-offs and decrease in write-off recoveries. 

Quara closed Sunday’s trading at SR16, a 0.49 percent increase. 

Elm Co. also released its financial results for the nine months of the year recording SR5.2 billion in revenue, a 25.2 percent year-on-year increase. 

The company’s net profit also saw an increase to reach SR1.3 billion, a 29.1 percent growth. 

Elm attributed the revenue growth to a 25.66 percent increase in digital business revenue and a 29.02 percent rise in business process outsourcing revenue, partially offset by a 19.13 percent decline in professional services revenue. 

Elm closed Sunday’s trading at SR1,072.20, a 4.85 percent increase. 

Tanmiah Food Co. reported a revenue increase of 23.8 percent year on year for the first nine months, reaching SR1.8 billion. 

Net profits also increase by 39.3 percent to reach SR69.1 million by the end of the period, driven mainly by fresh poultry. 

Tanmiah Food closed Sunday’s trading at SR143, a 4.99 percent increase. 

Dr. Sulaiman Al Habib Medical Services Group’s revenue also increased by 14.9 percent in the first nine months of the year compared to the same period last year, to reach SR8 billion. 

Net profits grew to reach SR1.7 billion, an 11.8 percent year-on-year increase. 

The revenue increase was primarily driven by growth in the hospital and pharmacy segments, fueled by a rise in the number of patients in the hospital sector. The rise in net profits was largely attributed to this revenue growth. 

Dr. Sulaiman Al Habib Medical Services Group closed Sunday’s trading at SR288.40, a 0.77 percent increase. 

Fragrance company Al Majed Oud Co. reported revenue of SR683.7 million for the first nine months of the year, marking a 25.5 percent increase compared to the same period last year. 

Net profits rose to SR141.9 million, a 23.3 percent year-over-year increase. The company attributed the growth in profits and sales to the strong performance of branches opened in 2023, which significantly boosted sales in the current period. 

Al Majed Oud Co. closed trading at SR150.60, a 1.05 percent decrease.


Saudi road maintenance time down 40% thanks to modern technology, transport minister says

Saudi road maintenance time down 40% thanks to modern technology, transport minister says
Updated 03 November 2024
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Saudi road maintenance time down 40% thanks to modern technology, transport minister says

Saudi road maintenance time down 40% thanks to modern technology, transport minister says
  • Saleh Al-Jasser said cutting-edge innovations have helped reduce carbon emissions
  • Several road networks were surveyed to identify shortcomings and execute safety initiatives, minister said

RIYADH: Saudi road maintenance time has been slashed by 40 percent thanks to modern technologies, according to the Kingdom’s Minister of Transport and Logistics Services. 

During a speech on the first day of the Road Safety and Sustainability Conference taking place in Riyadh from Nov. 3—4, Saleh Al-Jasser said the cutting-edge innovations have also helped reduce carbon emissions.

This falls in line with Saudi Arabia’s Roads General Authority’s vision of enhancing the safety and sustainability of the road sector through national competencies. It also aligns with the body’s keenness to improve the quality of road networks and user experience, as well as foster innovation. 

It is also in line with the authority’s objective to reduce the number of road deaths to less than five cases per 100,000 people.

“Modern technologies have helped reduce road maintenance time by up to 40 percent while reducing carbon emissions,” Al-Jasser said. 

He added: “The Kingdom has implemented many scientific innovations such as road cooling and rubber roads and has advanced in the road quality index to fourth place among the G20 countries.”

The minister highlighted how this confirms its leadership in achieving the highest safety and quality standards on roads. 

“The Kingdom’s vision has given great attention to quality of life and road safety,” Al-Jasser said.

“The Kingdom’s road network is the world’s first in terms of connectivity, and enhances sustainable development for individuals and goods according to the highest standards of security and safety,” he also said. 

The minister went on to say a large number of road networks were surveyed to identify shortcomings and execute safety initiatives. Several measures have been implemented following the reviews. 

Speaking at the same event, the Vice Minister of Transport and Logistics Services for Road Affairs and Acting CEO of RGA, Badr Abdullah Al-Dulami, shared findings from the world’s largest road survey, which confirmed that 77 percent of the Kingdom’s roads meet safety standards. He also highlighted that protection measures in traffic diversions have risen to 95 percent.

“Expanding an advanced research study that the authority is working on to use the products of building demolition in asphalt mixtures, which contributes to preserving the environment and investing in natural resources,” Al-Dulami said. 

“Launching the Saudi Road Code, which contributes to raising the level of safety, preserving the environment, and preparing the infrastructure for self-driving vehicles,” he added. 

Chairman of the International Road Federation, Abdullah bin Abdulrahman Al-Muqbil, was also present during the event. 

“To make roads safer for travel, we have harnessed modern technologies to sustain them and raise their efficiency,” Al-Muqbil said. 

The chairman said the federation has established effective partnerships with member states, including the Kingdom, which has led to enhanced safety and sustainability in the road sector and the adoption of modern technologies.


IMF to begin delayed review of Egypt loan program: PM

IMF to begin delayed review of Egypt loan program: PM
Updated 03 November 2024
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IMF to begin delayed review of Egypt loan program: PM

IMF to begin delayed review of Egypt loan program: PM
  • Review is fourth under Egypt’s latest 46-month IMF loan program approved in 2022
  • Egypt had requested financing under the RSF since 2022, with hopes it could unlock up to an additional $1 billion

CAIRO: The International Monetary Fund will this week begin its delayed fourth review of Egypt’s 46-month loan program, Prime Minister Mostafa Madbouly said on Sunday.
The review had originally been scheduled for the end of September.
It comes under an agreement Cairo signed with the IMF in April, expanding an original loan from $3 billion to $8 billion to help Egypt manage its economic challenges.
The fourth review will unlock $1.2 billion in new financing.
At a Cairo joint news conference with IMF’s managing director Kristalina Georgieva, Madbouly said the IMF team would start work on the review on Tuesday “with Egypt’s central bank and relevant ministries.”
Georgieva praised “the commitment and the strength of the actions Egypt has already taken.”
She cited moving to “a flexible exchange rate regime,” boosting “the role of the private sector as a source of growth and jobs” and consolidating “social protection by moving away from untargeted subsidies.”
The IMF chief acknowledged the challenges faced by the country’s economy amid regional conflicts.
She said “conditions have become more difficult for no fault of your own, but because of the conflict in your neighborhood.”
Earlier on Sunday, Georgieva met President Abdel Fattah El-Sisi.
A statement from the presidency quoted El-Sisi as saying Egypt “would prioritize easing the burden of inflation on citizens,” focusing on curbing rising prices, attracting investments and empowering the private sector.
The government raised fuel prices last month by up to 17 percent after inflation hit 26.4 percent in September.
Last month, El-Sisi said his government might reconsider the loan program if it creates “unsustainable public pressure.”
He cited challenges from ongoing regional instability, particularly the prolonged conflict in the Gaza Strip.
Despite the rising cost of living, Georgieva said Sunday Egyptians “will see the benefits of these reforms in a more dynamic, more prosperous Egyptian economy.”
She said she expected inflation to slide to 16-17 percent by the end of this fiscal year (to June 2025) after peaking at 37 percent.
Jihad Azour, the IMF’s Middle East and Central Asia director, last week also acknowledged challenges faced by Egypt’s economy.
In addition to the Gaza, Lebanon and Sudan conflicts, he cited a significant decline in Suez Canal revenue.
“The reduction in trade volume going through the Suez Canal has affected revenues by more than 60 to 70 percent on average, which would represent $4.5 to $5 billion in revenues,” Azour said.
In May, the IMF said traffic through the canal dropped by 66 percent the previous month as ships avoided Red Sea shipping lanes to avoid attacks by the Iran-backed Houthi militia in Yemen.