KINGDOM OF BAHRAIN
BANKING ON BAHRAIN
Widely regarded as the best-regulated financial centre in the Middle East, Bahrain has been the region’s undisputed financial capital for more than 40 years. The Kingdom’s geographic position remains vital and more recently, it has been the education and skills of its citizens and the government’s desire to ensure diversification and growth of the national economy which have played a crucial role in the change of infrastructure.
Bahrain’s financial services sector is extremely strong, as over 400 licensed international financial institutions operate in Bahrain, both offshore and onshore making the financial sector currently the largest contributor to GDP at 27.6%.
The growth in the number of services offered, including one of the widest range of Islamic banking services as well as insurance and collective investment schemes, sets the Kingdom of Bahrain aside from other international financial centres.
FOCUS ON BANKING SECTOR
The financial sector is supervised by the Central Bank of Bahrain, which since 2002 has functioned as the single regulator for the entire financial system. This enables businesses in Bahrain to operate throughout the Kingdom with no ‘free zone’ restrictions.
Banking assets rose by 33.5 % in 2006, and by more than 18% in the first half of 2007. Opportunities for growth remain in mutual funds, fund administration, project finance, private banking and asset management. To enable institutions to take advantage of these opportunities, the Central Bank of Bahrain has created a license specifically for investment businesses.
The Bahrain-based international Banking and insurance groups enjoy a trusted regulatory environment with effective and transparent legislation.
Additionally, Bahrain plays a host to a number of organisations central to the development of Islamic finance. Bahrain has made a concerted effort to become the leading Islamic finance centre in the Arab world, standardising regulations of the Islamic banking industry. It currently has 32 Islamic commercial, investment and leasing banks as well as Islamic insurance (takaful) companies - the largest concentration of Islamic financial institutions in the Middle East.
Economic Growth
Bahrain has the most flexible economy in the Middle East, ranking 19th worldwide, ahead of France and Germany.
Over the last four decades, Bahrain has undergone a steady and controlled growth in its economy as it diversifies away from oil. Businesses enjoy the protection of the Kingdom’s legal system, with its established track record and global best-practice standards.
In addition to being part of the Arab Free Trade Zone, the Kingdom has bilateral trade and economic agreements with 43 countries, including China, France, India, Singapore, the UK and recently, the United States. All this enables businesses located in Bahrain to exploit the benefits of Middle East markets with added capability of a global business model.
Petroleum production and refining account for over 60% of Bahrain’s export receipts, over 70% of government revenues, and 11% of GDP (exclusive of allied industries), underpinning Bahrain’s strong economic growth in recent years. Aluminium is Bahrain’s second major export after oil. Other major segments of Bahrain’s economy are the financial and construction sectors.
Bahrain is actively pursuing the diversification and privatization of its economy to reduce the country’s dependence on oil. Continued strong growth hinges on Bahrain’s ability to acquire new natural gas supplies as feedstock to support its expanding petrochemical and aluminium industries.
Bahrain being one of the first Gulf States to discover oil, the reserves are expected to run out in 10-15 years. Accordingly, Bahrain has worked to diversify its economy over the past decade and has stabilized its oil production at about 40,000 barrels per day (b/d).
Ongoing economic and legal reforms will ensure that Bahrain continues to maximise the potential success of both Bahraini and foreign businesses.
With a further positive development in Bahrain’s infrastructure, the new Qatar causeway due to open in 2012 will provide a direct link to Qatar, part of the trans-Gulf highway connecting the key markets of Saudi Arabia, Kuwait, UAE, Qatar and Oman, with Bahrain at the hub.
STATE OF KUWAIT
LEADING IN INDUSTRIAL
DIVERSIFICATION
Kuwait, the prototypical oil-rich state, has more than ten percent of the world’s estimated oil reserves, and is a leading exporter of petroleum. Tourists, who look forward to a relaxed entry into the Muslim world, can enter Kuwait, and wander around souks, mosques and other sandy traces of ancient Bedouin days. But, behind the extravagant richness, lies the traditional values and warm Arabian hospitality.
Oil-rich Kuwait was a founding member (1961) of the Organization of Petroleum Exporting Countries (OPEC). The country>s oil revenues have been used to provide financial aid to other Arab countries, and the nation became a supporter of Palestinian causes. Although Kuwait has maintained strong ties with Western nations, it also established diplomatic relations with the Soviet Union in 1963, the first of the Arabian Gulf states to do so. In 1981, Kuwait became a founding member of the Gulf Cooperation Council (GCC).
ECONOMY
Kuwait economy in the 18th and 19th century was based on trade due to the natural harbour of Kuwait that first drew the Bani Utub settlers to the place. In 1938, oil was discovered in Kuwait and ever since the commencing of oil exports in the post World War II era, the Kuwait economy has only changed for the better.
The Kuwait oil reserves are estimated at 101.5 billion barrels that was supposed to be about 10% of the total reserves in the world. Oil exports count for almost 60% of the GDP, 95% of export revenues, and 80-90% of government income.
The wealth of Kuwait is based primarily on oil and capital reserves, and the Iraqi occupation severely damaged both, although both have been restored as reconstruction has proceeded and world oil prices have risen.
Kuwait’s current production capacity is estimated to be 2.5 million bpd. Kuwait plans to increase its capacity to 3.5 million bpd by 2015 and 4.0 million bpd by 2020.The Kuwait economy is still continuing to look upwards as negotiations continue for the opening of many more oil wells to the north of the country. The economy is controlled by the government who controls the oil industry.
Kuwait’s traditional exports were pearls and hides, but since 1946 it has become major petroleum producer and oil now dominate the economy.
Kuwait has the third largest oil reserves in the world after Saudi Arabia and Iraq. The main concession for oil exploitation was held by a joint British-American firm until 1974, when Kuwait took control of most of the operations; it had previously retained a large part of the oil profits. Much of the profits have been devoted to the modernization of living conditions and education in the country. The petroleum industry accounts for over 90% of Kuwait>s export revenues; however, huge amounts of natural gas complement Kuwait’s oil production.
Kuwait Petroleum Company (KPC), an integrated, state-owned oil company, is also the parent company of the government’s operating companies in the petroleum sector also participates in a number of successful joint ventures with Dow Chemical within Kuwait and abroad; and Kuwait Petroleum International manages refining and retail operations in Europe and East Asia.
According to official OPEC figures, Kuwait has about 101.5 billion barrels of proven oil reserves, including the Kuwaiti share of proven reserves in the Divided Zone.
To provide against the possible future exhaustion of the oil reserves, in the 1960s, the government launched a programme of industrial diversification and overseas investment. Present industries include food processing, desalinization, construction, and the manufacture of electronics, cement, textiles, and fertilizers. Food, construction materials, vehicles, and clothing are the principal imports. Kuwait’s major trading partners are the United States, Japan, European Union countries, and Singapore.
SULTANATE OF OMAN
MOVING IN THE RIGHT DIRECTION
Historically Omanis are seafarers and traders who dominated regional commodity trading in the Indian Ocean, East Africa, and the Arabian Gulf. There was therefore a succession of migrations which saw the growth of settlements along some parts of the East African coast. Prior to the coming on stream of oil in 1964, the country was dependent on the agricultural sector and on fishing activities.
Head of State His Majesty Sultan Qaboos bin Said (since 1970) has strived to modernize Oman and oil revenues have given him the opportunity to develop a modern infrastructure of roads, ports and airports, as well as telecommunications and broadcasting systems. However, it is believed oil reserves will be exhausted one day and country is therefore diversifying its economy, especially in the field of tourism.
ECONOMY
Today, oil and gas fuel Oman’s economy, and revenues from petroleum products have enabled the country’s dramatic development over the past 36 years. Oil was first discovered in the interior near Fahud in the western desert in 1964. Petroleum Development (Oman) Ltd. (PDO) began production in August 1967. The Omani Government owns 60% of PDO, and foreign interests own 40% (Royal Dutch Shell owns 34%; the remaining 6% is owned by Compagnie Francaise des Petroles [Total] and Partex). In 1976, Oman’s oil production rose to 366,000 barrels per day (b/d) but declined gradually to about 285,000 b/d in late 1980 due to the depletion of recoverable reserves.
PDO which produces around 89% of the Sultanate’s crude and oil condensates and the other oil companies are moving ahead with their plans and efforts to increase oil production capacity and offset the relative decline in productivity the country has bgeen witnessing since 2002. In 2005 average daily production totaled 774,800 barrels, including 66,300 barrels of oil condensates. Production has increased modestly since Occidental began producing from the Mukhaiznah field in September 2005.
Around 718,100 barrels of oil per day were exported in 2005. Most of it (32.2%) went to China, while the remainder was exported to Thailand (16.8%), Japan (16.4%) and South Korea (15%). The Oman Oil Refinery Company received around 86,000 barrels per day to be refined for local consumption, while the surplus was exported. The Sultanate has crude oil and oil condensates reserves totaling over 4,803 million barrels, with PDO’s reserves accounting for over 92% of this figure.
Agriculture and fishing are the traditional way of life in Oman. Dates, grown extensively make up most of the country’s agricultural exports. Coconut palms, wheat, and bananas also are grown, and cattle are raised in Dhofar. Other areas grow cereals and forage crops. Poultry production is steadily rising. Fish and shellfish exports totaled $104.7 million in 2006.
The government is undertaking many development projects to modernize the economy, improve the standard of living, and become a more active player in the global marketplace. Oman became a member of the World Trade Organization in October 2000, and continues to amend its financial and commercial practices to conform to international standards. Oman signed a Free Trade Agreement with the United States in January 2006, and continues to pursue, through the Gulf Cooperation Council, free trade agreements with a number of other key trading partners, including the EU and India.
The Omani Government embarked on its seventh 5-year plan in 2006. In its efforts to reduce its dependence on oil and expatriate labour, the government projects significant increases in spending on industrial and tourism-related projects to foster income diversification, job creation for Omanis in the private sector, and development of Oman’s interior. The government is giving greater emphasis to «Omanization» of the labour force, particularly in banking, hotels, and municipally sponsored shops benefiting from government subsidies. Currently, efforts are underway to liberalise investment opportunities in order to attract foreign capital.
STATE OF QATAR
A STUNNING ECONOMIC GROWTH
Economic growth
The size of the Qatari economy, which has been growing at a rapid rate over the past several years, is projected to touch the $100bn-mark by 2013, according to Qatar Financial Centre (QFC).
In its recent economic review of the country for 2007, the QFC quoted the International Monetary Fund (IMF) as putting the current gross domestic product (GDP) at $66bn and the economic growth rate at an impressive 25 percent. IMF also calculated that Qatar’s GDP leaped 25 percent (in nominal terms) to almost $66bn, while government projections estimate that by the year 2013, Qatar’s GDP would have touched $100bn.
On the economic front, Qatar’s success is enviable by any standards. In a few years this small Gulf Cooperation Council (GCC) country of approximately 743,000 people (only about a third of who are Qataris) may well become the richest country in the world in terms of GDP per capita. From the GDP of $8 billion in 1995, it is forecasted to reach $62 billion by 2011. Qatar>s GDP per capita is estimated at $61,540 in 2006, placing the country among the world’s highest income nations.
Oil formed the cornerstone of Qatar’s economy well into the 1990s and still accounts for about 62% of total government revenue. Oil production is currently around 835,000 barrels a day (bpd), and is expected to reach 1.1 million bpd by 2009.
Moreover, Qatar sits on the third largest gas reserves in the world, and holds proven oil reserves of 13.2 billion barrels. When in 1996 the country’s natural resources were harnessed by astute fiscal policies adopted by HH Sheikh Hamad bin Khalifa Al-Thani, opportunities for the generation of wealth became almost boundless, with massive international investment in its energy sector. More than $30 billion in new contracts were signed in 2003 alone. The country has almost no unemployment and is experiencing rapidly rising prosperity.
Oil and gas account for more than 55% of GDP, roughly 85% of export earnings, and 70% of government revenues. Oil and gas have given Qatar a per capita GDP about 80% of that of the leading West European industrial countries.
Qatar has launched an impressive domestic investment programme aimed at developing its non-hydrocarbon sectors, such as manufacturing, trade, transport, financial services and tourism. An estimated $142bn worth of projects are planned over the next six years to continue this diversification strategy.
To sum up Qatar’s economy, it stands currently (GDP 2007est.) at $68.87 billion; per capita $75,900 with real growth rate at 7.8%. Qatar’s industries include crude oil production and refining, ammonia, fertilizers, petrochemicals, steel reinforcing bars, cement and commercial ship-repair. Natural resources are petroleum, natural gas and fish.
Qatar’s exports include $33.28 billion f.o.b (2007est); liquefied natural gas (LNG), petroleum products, fertilizers and steel. The State’s imports include $15.32 billion f.o.b. (2007est.): machinery and transport equipment, food, chemicals. Qatar’s major trading partners are Japan, France, the United States, Saudi Arabia, Germany and the UK.
The country’s economic growth has been stunning. Qatar’s nominal GDP, currently around$52.7 billion, has grown an average of 15% over the past five years. Qatar’s per capita GDP is more than $60,000 and projected to soon be the highest in the world. The Qatari Government’s strategy is to utilize its wealth to generate more wealth by diversifying the economic base of the country beyond hydrocarbons.
Banking sector
The Qatar Financial Centre (QFC) which opened on May 1, 2005, is the backbone of the banking sector in Qatar. It has attracted many large international financial institutions and multi-national companies to set up businesses in Qatar’s growing economy.
The QFC lies at the heart of Qatar’s dynamic economic growth and investment strategy. One of its tasks is to license firms and create new and genuine revenue streams, real businesses based on real opportunities with a vision for the QFC to be the financial centre of choice in the Middle East. There are 14 commercial banks operating in the State of Qatar.
KINGDOM OF SAUDI ARABIA
IMPRESSIVE PROGRESS
Saudi oil reserves are the largest in the world, and Saudi Arabia is the world’s leading oil producer and exporter. Oil accounts for more than 90% of the country’s exports and nearly 75% of government revenues. Proven reserves are estimated to be 263 billion barrels, about one-quarter of world oil reserves.
More than 95% of all Saudi oil is produced on behalf of the Saudi Government by the giant Saudi ARAMCO. In June 1993, Saudi ARAMCO absorbed the state marketing and refining company (SAMAREC), becoming the worlds largest fully integrated Oil Company.
Oil wealth has made possible rapid economic development, which began in earnest in the 1960s and accelerated spectacularly in the 1970s, transforming the kingdom.
Due to a sharp rise in petroleum revenues in 1974, Saudi Arabia became one of the fastest-growing economies in the world.
Saudi Arabia was a key player in coordinating the successful 1999 campaign of OPEC and other oil-producing countries to raise the price of oil since the Gulf War by managing production and supply of petroleum. That same year, Saudi Arabia established the Supreme Economic Council to formulate and better coordinate economic development policies in order to accelerate institutional and industrial reform.
In response to increasing international demand for oil, Saudi ARAMCO is engaged in an expansion of its oil production capacity, and plans to raise its capacity from the current 11 million barrels/day (mb/d) to 12 mb/d by 2009. Saudi ARAMCO is also increasing production of associated and non-associated natural gas to feed the expanding petrochemical sector.
Saudi Arabia continues to pursue rapid industrial expansion, led by the petrochemical sector. The Saudi Basic Industries Corporation (SABIC), a petrochemical company, is now one of the world’s leading petrochemical producers, and the government promotes private sector involvement in petrochemicals. The government also plans new investments in the mining sector and in refining.
Through 5-year development plans, the government has sought to allocate its petroleum income to transform its relatively undeveloped, oil-based economy into that of a modern industrial state while maintaining the kingdom’s traditional Islamic values and customs. Although economic planners have not achieved all their goals, the economy has progressed rapidly. Heavy dependence on petroleum revenue continues, but industry and agriculture now account for a larger share of economic activity.
Saudi Arabia’s first two development plans, covering the 1970s, emphasised infrastructure with impressive results - the total length of paved highways tripled, power generation increased by a multiple of 28, and the capacity of the seaports grew tenfold. For the third plan (1980-85), the emphasis was markedly on education, health, and social services.
In the fourth plan (1985-90), private enterprise was encouraged and foreign investment in the form of joint ventures with Saudi public. The private sector became more important, rising to 70% of non-oil GDP by 1987. While still concentrated in trade and commerce, private investment increased in industry, agriculture, banking, and construction companies.
The fifth plan (1990-95) emphasised consolidation of the country’s defenses; improved and more efficient government social services; and most importantly, creating greater private-sector employment opportunities for Saudis by reducing the number of foreign workers.
The sixth plan (1996-2000) aimed at lowering the cost of government services and sought to expand educational training programmes.
The seventh plan (2000-2004) focused on a greater role of the private sector in the Saudi economy. For the period 2000-04, the Saudi Government has aimed at an average GDP growth rate of 3.16% each year, with projected growths of 5.04% for the private sector and 4.01% for the non-oil sector.
The eighth plan (2005-2010) focuses on economic diversification and inclusion of women in society. The plan calls for establishing new universities and new colleges with technical specializations and emphasis for a knowledge-based economy and tourism that will help in the goal of economic diversification.
UNITED ARAB EMIRATES
A DIVERSE ECONOMY
UAE is primarily known as a petroleum producing economy that has achieved tremendous economic and social development in the last two decades. The country firmly believes in investing in its infrastructure, industry, trade and tourism, which are expected to lead to the economic expansion in future.
The UAE has a well-developed infrastructure. The capital city of Abu Dhabi and the city of Dubai are very modern. Most of the UAE’s petroleum reserves are located in Abu Dhabi. While the petroleum sector dominates economic development in the UAE, attempts are being made to diversify into other sectors. Although the country is a federation, member emirates largely pursue their own policies. Dubai, the commercial hub and second largest emirate in the UAE, in particular is positioning itself as a regional trade centre, and is rapidly developing into a major tourist destination.
Since the rise of oil prices in 1973, petroleum has dominated the economy, accounting for most of its export earnings and providing significant opportunities for investment. The U.A.E. has huge proven oil reserves, estimated at 98.8 billion barrels in 2003, with gas reserves estimated (at 212 trillion cubic feet); at present production rates, these supplies would last well over 150 years. In 2006, the U.A.E. produced about 2.8 million barrels of oil per day.
More than 6,000 companies from more than 120 countries operate at the Jebel Ali complex in Dubai, which includes a deep-water port and a free trade zone for manufacturing and distribution in which all goods for re-export or transshipment enjoy a 100% duty exemption.
Except in the free trade zone, the U.A.E. requires at least 51% local citizen ownership in all businesses operating in the country as part of its attempt to place Emiratis into leadership positions.
ECONOMIC & BUSINESS ENVIRONMENT
Some of the features that provide an economic and business environment in UAE include; a coordinated infrastructure that provides all essential utilities to the major centres; excellent communications systems; a virtual absence of taxation; customs duty-free for most imports and exports; a well-structured financial sector with virtually no exchange control regulations; free trade zones that ensure ease of registration and efficient operating facilities; international fairs and exhibitions; an attractive social environment including educational, medical and recreational facilities.
GOVERNMENT AND BUSINESS
The government has traditionally played a key role in the planning and development of the economy. In addition, the government is involved significantly in the ownership of key sectors of the economy, including oil and gas production and refining, the petrochemical industry, large-scale manufacturing, energy and water production, telecommunications and transportation.
FREE TRADE ZONES
To attract foreign businesses, free trade zones have been established in Dubai’s port city of Jebel Ali, Sharjah, Umm Al Quwain and Fujairah. Currently, there are ten free-trade zones in the UAE. Since UAE tariffs are low and not levied against certain imports, the main attraction of these free trade zones is the waiver of the requirement for majority local ownership.
IMPORTS AND EXPORTS
Imports estimated at $37.3 billion: consumer goods, capital goods. Main import partners are Japan, UK, USA, Italy, Germany and South Korea.
Exports estimated at $45.9 billion are dominated by oil and gas. Over 60 % of oil and gas exports go to Japan. Other prominent export markets are India, Singapore and South Korea.
BANKING & FINANCE
The Central Bank Law establishes five principal categories of institutions in the UAE – commercial banks, investment banks, financial establishments, financial intermediaries, and monetary intermediaries, all of which must be licensed by both the Central Bank and the local licensing authorities. The well-structured network of local banks and branches of foreign bank provides a full range of commercial banking services.
The U.A.E. is also a member of the following international organisations: UN and its specialised agencies (ICAO, ILO, UPU, WHO, WIPO); World Bank, International Monetary Fund (IMF), Arab League, Organisation of the Islamic Conference, Organisation of Petroleum Exporting Countries, and the Non-Aligned Movement.
