World Bank - Africa Needs U.S. $93 Billion For Infrastructure

Abuja — The World Bank said yesterday that the amount needed to fix infrastructure in Africa is twice what was previously estimated. It put the new figure at $93 billion half of which, it noted, should go into boosting power supply.

A joint study just released by the bank from Washington cited examples of infrastructural challenges in the continent. African consumers pay twice as much for basic services as people elsewhere in the world.

A monthly basket of prepaid mobile telephone services costs $12 in Africa but only $2 in South Asia.

Resource-rich countries like Nigeria and Zambia can manage funding gap of four percent of GDP. For much of the rest of the continent, the task ahead is daunting.

The poor state of infrastructure in Sub-Saharan Africa cuts back national economic growth by two percentage points every year. Bank study team which assessed the state of infrastructure in 24 countries across the continent also discovered that poor electricity, water, roads and information and communications technology (ICT) reduces productivity by as much as 40 percent.

A separate statement from the bank in Midrand, South Africa, said the study, is "one of the most detailed ever undertaken on the African continent." It was jointly conducted by the African Union Commission, African Development Bank, Development Bank of Southern Africa, Infrastructure Consortium for Africa, the New Partnership for Africa's Development, and the World Bank. Besides relevant ministries, the study surveyed 16 rail operators, 20 road entities, 30 power utilities, 30 ports, 60 airports, 80 water utilities, and over 100 ICT operators, as well as the relevant ministries in 24 countries.

Results were derived from detailed analysis of spending needs and fiscal costs as well as sector performance benchmarks.

In other words, the study relied on based on country-level microeconomic models and covered operational and financial aspects as well as the country's institutional framework.

"Modern infrastructure is the backbone of an economy and the lack of it inhibits economic growth," says Obiageli Ezekwesili, World Bank

Vice President for the Africa Region and former Nigerian minister, who spoke from South Africa. "This report shows that investing more funds without tackling inefficiencies would be like pouring water into a leaking bucket. Africa can plug those leaks through reforms and policy improvements which will serve as a signal to investors that Africa is ready for business."

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How do you spend $2-trillion

China's massive foreign currency reserves place it in an enviable position compared with other debt-ridden, import-dependent economies. But China's economy has slowed, it is worried about a depreciating U.S. dollar, and its trading partners are irritated that the country is keeping its own currency, the yuan, undervalued. So China is starting to move its $2-trillion in currency reserve savings – of which around two-thirds are denominated in U.S. dollars – into the real economy.

That's easier said than done. And it's not always in China's interests to do so.

China Investment Corp.'s (CIC) purchase of a 17.2-per-cent stake in Teck Resources Ltd. for $1.74-billion (Canadian) is just one in a series of recent investments by Chinese-run companies in foreign commodity producers. The deal comes just a week after Sinopec, China's largest oil refiner, agreed to buy Toronto-listed Addax Petroleum Corp. for $7.24-billion.

CIC manages only about one-10th of China's foreign assets. The biggest player is the People's Bank of China, the country's central bank.

China's holdings are so large – the next largest holder of foreign currency reserves, Japan, has around $1-trillion (U.S.) – that any moves it makes will have an impact on global markets. That's why, as much as it may want to diversify, it can't afford to do it quickly.

“It's a sort of financial Catch-22. They want to sell their U.S. dollars, but doing so reduces its value,” said Randall Morck of the University of Alberta.

Zhou Xiaochuan, head of China's central bank, wrote last week that the country is looking for a new global “reserve” currency that is more stable in the long term than the U.S. dollar. That would increase the bank's confidence that it can start safely shedding some of its foreign reserve holdings like U.S. Treasury bills with minuscule yields.

“There is an increasing suggestion from the government and Chinese think tanks to diversify [reserves] into equity investments. They want safety, but they also want a reasonable rate of return,” said Kenny Zhang of the Asia-Pacific Foundation, a think tank based in Vancouver.It's hard for the central bank to invest directly in companies. It can increase Chinese investment abroad and decrease reserves by facilitating lending to its major commercial banks and cutting interest rates.

There's also a way to unlock money by spending it at home. The Chinese savings rate has been very high of late – standing at 54.4 per cent of gross domestic product in 2006. The government has introduced a $586-billion stimulus package to spur the domestic economy. This inward focus can increase the appetite for foreign acquisitions.

“The Chinese are concerned about the future availability of various minerals and oil for their economy. They are attempting to lock in secure supplies by buying stakes in resource companies everywhere,” Prof. Morck said.

The country is diversifying, but slowly. The U.S. government reported in April that despite a record trade surplus for China of $114.3-billion in the fourth quarter of last year, China's foreign reserves grew by only $40.4-billion – suggesting that it was deploying some of its excess reserves abroad.

But it would take a lot of $1.7-billion deals, even if that's large to recipients like Teck, to make a major dent in China's stash of greenbacks.

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Foreign Investment Cushions Downturn in Africa

CAPE TOWN, South Africa -- Foreign investment from China and the Persian Gulf nations is helping Africa weather the global downturn, but some say the funds come at a high cost.

Jiang Jianqing, chairman of the state-run Industrial & Commercial Bank of China Ltd., told African leaders here this month at the World Economic Forum on Africa that Chinese investment in Africa is growing and becoming more diversified, even as the global downturn curbs investment by other countries.

China, which has been an African investor for more than a decade, plans to step up activities and work on its reputation in Sub-Saharan Africa as an employer and business partner.

This month, ICBC and Standard Bank Group Ltd., of South Africa, finalized a deal to expand Botswana's main coal-fired power station. China National Electric Equipment Corporation, a top ICBC client, was awarded the $970 million contract to supply and expand the station to ramp up the diamond-rich nation's energy supply.

ICBC is pursuing 65 multimillion-dollar projects across the continent through its partnership with Standard Bank, in which it bought a 20% stake in 2007, Mr. Jiang said.

Chinese investment, initially focused on shoring up access to raw materials as its economy grew, is moving into sectors beyond infrastructure and mining.

Persian Gulf investors, too, although hammered by the downturn, say they are sticking with African projects. Soud Ba'alawy, executive chairman of Dubai Group, the state-owned investment group, said Dubai is pursuing opportunities in the continent. Falling oil prices and a plummeting real-estate market forced many big Dubai investors to retrench and rethink projects, particularly ones far from home. But as oil prices rebound and local stock markets rise, Persian Gulf investors are combing Africa for opportunities.

Foreign-investment flows could be a critical lifeline for some Sub-Saharan African economies. The region's income has been hit by falling commodity prices and dwindling government revenue. Remittances have declined as Africans abroad have been laid off. This year, foreign inflows to developing countries are expected to drop 82%, the Institute of International Finance says.

The increased interest from China and Gulf countries, as well as India, has helped to embolden some African governments to demand more favorable terms or to create a more competitive business environment. Officials in a number of African governments say the Chinese and Arab governments, compared with their Western counterparts, attach relatively few conditions to aid or investment projects.

In African countries where China has invested, many local people complain that the Chinese companies import everything -- including bottled water and toilet paper -- from home, bypassing the domestic economy. In mineral-rich countries such as Zambia and the Democratic Republic of Congo, some Chinese companies have a reputation for exploiting workers.

China's government has said it believes its investments in Africa benefit both sides, and that its involvement there is welcomed by most Africans.

In 2005, 46 Zambians were killed in an explosion at a copper mine owned by China's state metals conglomerate. A government inquiry showed the company had cut corners on safety and banned union organizing.

The Chinese company paid compensation to the victims' families and allowed a union to be formed. The following year, Chinese security guards at the mine opened fire on Zambian workers who were protesting the company's failure to improve working conditions and to deliver back pay promised in a new union deal.

In 2007, a representative said the company was complying with Zambian law and had given a full report on the matter to the Zambian government. The incidents remain a sensitive subject for local miners and politicians in Zambia's Copperbelt, the country's industrial base.

"Bringing the Chinese into our industry is like importing poverty and exporting wealth," said Chishimba Kambwili, the member of parliament from Luanshya, in the Copperbelt, in an interview this year. "They pay very low salaries, and they deplete our resources without our country getting value."

In Congo, the International Monetary Fund has criticized a multi-million-dollar infrastructure deal China made last year in exchange for metals.

Mr. Jiang acknowledged that there have been problems in the past and said the Chinese government is working to improve relations.

By SARAH CHILDRESS - Printed in The Wall Street Journal, page A8

http://online.wsj.com/article/SB124607031091264351.html

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Mubadala buys into US property company

Mubadala Development Company, the Government-controlled fund, has acquired 24.9 per cent of the US property company John Buck, officials said on Thursday. The amount paid was “below US$50 million” (Dh183.7m) according to a source close to the company.

“This investment provides us with access to the US real estate market in multiple product types and it complements the existing joint venture we have together,” said Waleed al Mokarrab al Muhairi, chief operating officer of Mubadala. “Our investment will allow us to co-invest with them in future opportunities and supports our objective of achieving world-class returns through partnerships with industry-leading companies.”

The acquisition is part of the growth of Mubadala’s property and hospitality division, which was officially announced at Cityscape Abu Dhabi in May. The division is developing strategic property developments in Abu Dhabi, particularly boutique hotels, high-end office space and lifestyle-driven residential communities.

In March it created a joint venture with John Buck, called John Buck International, that is developing a new central business district on Sowwah Island. It also set up a venture with CapitaLand of Singapore, called Capitala, to build 140-hectare residential project called Arzanah at Zayed Sports City. In September, Mubadala announced it had acquired 50 per cent of California-based Kor Hotel Group, which has two boutique hotel brands that will open outposts in Abu Dhabi and the Middle East.

Mubadala also owns a 17 per cent stake in Aldar Properties, the Emirate’s largest developer, and is an investor in a major Malaysian property development.

The investment comes at a difficult time for major property developers in the US, who are confronted with falling prices. A recent report from the property consultancy Jones Lang Lasalle said downtown Chicago office vacancies could increase by 50 per cent over the next two years. Commercial office construction is a major source of John Buck’s revenue.

bhope@thenational.ae

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Dubai International Capital

Dubai International Capital, the investment arm of government affiliated Dubai Holding, will focus on the region rather than abroad over the next year, according to the firm’s chairman and chief executive.

“I don’t want to invest now [outside the region]; globally, we are heading into a deep recession… which could last for one to two years and makes me want to be conservative,” said Sameer al Ansari, at a conference in Dubai today.

He added that the only deals completed by DIC this year were in emerging markets, where he believed better opportunities exist.

“Perhaps in the next 12 to 18 months, more lucrative opportunities will arise in the US and Europe; but for now, the focus should be on the region,” he said.

When asked about Dubai’s rising debt as an obstacle to encouraging investments in the region, Mr Ansari countered that the emirate’s debt levels were manageable, particularly in a region with an abundance of oil.

DIC, established in 2004, has a diverse, international portfolio consisting of stakes in aircraft manufacturer EADS in the Netherlands, electronics manufacturer Sony in Japan and HSBC bank in the UK.

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Dubai World Approval for MGM Investment in Las Vegas

Nevada gambling regulators have given preliminary approval for Dubai World to invest more than $6 billion in casino giant MGM Mirage Inc.

The state Gaming Control Board gave its OK on Wednesday for several subsidiaries of the investment arm of the Gulf state to proceed to Nevada Gaming Commission consideration later this month.

Dubai World controls 9.4 percent of MGM Mirage's stock and owns 50 percent of the under-construction $9.1 billion CityCenter development on the Las Vegas Strip.

Dubai World and MGM Mirage will have to be licensed for CityCenter sometime next year.

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UAE sees good investment opportunity in US

UAE. The United Arab Emirates is eager to boost investment in the United States and sees good opportunities as the global financial crisis has cut the price of many companies, a senior UAE official said on Friday.

"A lot of these are great companies. There's nothing wrong with these companies....They have good returns," UAE Foreign Trade Minister Lubna al-Qassimi said in an interview.

"There would be no better time than now to actually take stock of some great investment opportunities and acquisitions of companies at a fraction of what they were worth months back," Qassimi said.

"Sometimes, people look at these like they are hard times. But for some people it's an opportunity."

She was echoing comments that Sultan Ahmed bin Sulayem, Chairman of the Dubai government-owned investor Dubai World, made on Thursday. Dubai is one of the seven emirates that comprises the UAE.

"Today there are things in the market worth a fraction of what they should be worth," Sulayem said.

Dubai World's assets include Dubai Ports World, which was at the centre of a political firestorm two years ago when U.S. lawmakers discovered the Arab company had acquired US port operations as part of its purchase of British company P&O.

To calm the furore, DPW sold the port assets to American International Group, the insurance giant which went to the brink of collapse this year and is now nearly 80% US-government owned.

The US Federal Reserve stepped in last month to rescue the insurer with a US$85 billion credit facility and subsequently provided an additional US$37.8 billion.

So, who now actually owns the port operations in New York, New Jersey, Philadelphia, Baltimore, New Orleans and Miami? Send me an e-mail when you know," Qassimi said with a smile. The UAE has no hard feelings over the controversy, which at least "made us famous," she said.

"For us, it was a business deal that went wrong because of the political climate at the time," Qassimi said. "We like to think we've learned from that."

Since then, UAE investment in the United States has grown and the government has taken care to try to address potential concerns before they arise, she said.

Last year, the Abu Dhabi Investment Authority purchased a 4.9% stake in Citigroup for US$7.5 billion.

"We may not have a lot of exports here, but we have exported capital. For us, it's the investment that really is the forte for us and that's where the balance comes in" trade relations with the United States, Qassimi said.

The wealthy UAE, which possesses 9% of the world's proven oil reserves and the fifth largest proven natural gas reserves, is the largest export market for the United States in the Middle East.

Last year, the United States enjoyed a US$10.3 billion trade surplus with the UAE, as exports to that country reached US$11.6 billion and imports from the UAE were US$1.3 billion.

Many of the goods UAE buys from the United are re-exported to markets in the Middle East, India and China, Qassimi said.

"The market for us is nearly 2 billion population because of the excellence of logistics that we have," she said.

There are now around 750 US companies with operations in the UAE, including many that have made the Emirates their regional headquarters.

"I think the number one reason is because it's a high-tolerant society," Qassimi said.

Source: http://www.bi-me.com/main.php?c=3&cg=4&t=1&id=26732

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