US 2nd Quarter 2008 trade with GCC exceeds previous year by 60%

US reported total trade of $47.8bn with the GCC for the second quarter of 2008, or 60.1% higher than the value for the same period last year. By country, Saudi Arabia was the largest partner, with total trade valued at $32.2bn or 67.4% of the total trade with GCC, while trade with UAE was valued at $7.5bn or 15.7%. Trade with the other GCC-member countries was valued at $8bn, as trade with Kuwait was valued at $5bn, trade with Qatar reaching $1.2bn; Oman, $1.1bn; and Bahrain, $627m.

US import of petroleum and petroleum products from Saudi Arabia, valued at $26.4bn pushed total imports from the country to a total of $26.8bn, or 83.3% of total imports from GCC. Similarly, 95% of US imports from Kuwait were petroleum and petroleum products. On the other hand, imports of the same products from UAE constituted only 15%of US imports from UAE. Imports of Aluminum and of Pearls, precious and semi-precious stones/metals contributed 17.7% and 13%, respectively.

UAE was the largest export market of US in the GCC, absorbing 44% of US exports to the region. Major exports to UAE were transport equipment ($1.8bn) consisting predominantly of Aircraft and associated equipment, and Road vehicles - including air cushion vehicles - (valued at $888m). On the other hand, major exports to Saudi Arabia were Road vehicles ($1.1bn) and Power generating machinery and equipment, valued at $394m. The former consisted primarily of motor cars. Although at much lower values, these products likewise dominated US exports to the other GCC countries.

Large US imports of petroleum and petroleum products from Saudi Arabia and Kuwait resulted in trade deficits for US of $21.5bn and $2.6bn, respectively. On the other hand, US realized a surplus from Bahrain, Oman, Qatar, and UAE of $158m, $325m, $803m, and $6.2bn, respectively.

Saudi Arabia remains as US largest import market, but export pattern changes:
Saudi Arabia is US's biggest supplier of petroleum products in the GCC. With imports from the GCC dominated by the said products, Saudi Arabia continues to dictate the level and pattern of US imports from the GCC. This is clearly seen from the value of yearly imports from the GCC from 1992 to 2007. On the other hand, imports from UAE and the rest of the GCC remained relatively small, though slightly increasing in the recent years.

In the 1990's Saudi Arabia dominated export trade between US and GCC countries, while exports to UAE remained stable and almost equal to the combined exports to remaining GCC countries. Changes in the pattern started in the beginning of 2000 when exports of aircraft and associated equipment and parts to UAE accelerated. Thereafter, exports to Saudi Arabia started to decline, while exports to UAE and the other GCC countries grew. By 2005, UAE became the largest export market to US in the region.

Despite surges in US export to UAE in prior year, it was only in 2005 that annual value surged to an annual growth of more than 100%. During the year, US exports of transport equipment to the UAE reached $4.4bn, or 52% of the total value of the US exports to UAE.

In 1996, US imports of garments from UAE were valued at $206m, or 42% of the total. A decline had been noted in the succeeding year, with the value dropping $122m in 2007, representing only 9% of the total imports of US from UAE. On the other hand, US imports of nonferrous metals increased from barely $3m in 1996 to $318m in 2007, leading to corresponding growth in share of only 1% to 24%. US imports of petroleum and petroleum products likewise increased from only $38m to $287m over the same period.

Although value of trade with UAE represents but a drop in the bucket with respect to US total trade with the rest of the world, annual summary indicators of level and composition of trade for 2000 to 2007 show that both exports and imports of US to and from UAE are increasing.

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Sovereign wealth funds switch from Western investments

Sovereign wealth funds in the Gulf are switching their focus away from Western stock markets to shore up ailing economies in the Middle East and protect themselves from losses in the City and on Wall Street.

Investment funds in Kuwait, Qatar, Dubai and Abu Dhabi are understood to be changing their investment strategies after losing billions of dollars buying shares in Western companies. Several Gulf-based banks are being propped up with state investment. Local stock markets have collapsed and some funds are shifting their assets into local shares in an attempt to inject confidence.

The Kuwait Investment Authority (KIA) has shifted $4 billion (£2.6 billion) from Western markets into its own bourse and the Qatar Investment Authority has begun a bailout of local banks. Dubai International Capital (DIC) is concentrating on emerging markets and rumours have spread that the Abu Dhabi Investment Authority, a $700 billion oil fund, is retreating to local markets.

Sovereign wealth funds are among the few sources of liquid capital available worldwide and many companies have sought cash injections from the Middle East. However, investments in banks such as Citigroup and Merrill Lynch have cost the funds dearly and regional bankers are said to feel that they were lured into investing before the full extent of the crisis was known. The KIA, which has assets estimated at $250 billion, said two months ago that it had lost $270 million on a $3 billion investment in Citigroup, which was made at the beginning of this year. Citigroup's share price has fallen by two thirds since that announcement and now the bank is being supported by the US Government.

The ruling families of Qatar and Abu Dhabi agreed last month to inject £6 billion into Barclays, giving the Gulf-based investors a 30 per cent stake. However, this sort of bailout may become more difficult as funds are diverted to the Middle East.

A refocusing by the funds on local and emerging markets is worrying for Western politicians. Gordon Brown visited Saudi Arabia, Qatar and Abu Dhabi this month to encourage sovereign funds to invest in British businesses and also support international institutions such as the International Monetary Fund and World Bank in an attempt to limit the economic downturn.

Sameer al-Ansari, chief executive of DIC, said yesterday that he saw opportunities in Western markets in the next couple of years, but admitted he was unlikely to take any big bets soon.

“Timing is going to be absolutely crucial, but I am still not comfortable with the kind of big bets we have taken traditionally,” he said. “Given the crisis that we are in, the governments in the region have to use their money wisely. That means investing in infrastructure and long-term projects good for the region and also to look outside [the region] to diversify, acquire, to buy strategic assets.”

DIC, which owns the Travelodge chain of hotels, is thought to have suffered a fall in the value of its assets from a peak of $13 billion to between $10 billion and $12 billion.

DIC is the investment business of Dubai Holdings, a government-owned conglomerate that includes property companies, ports, banks and hotels. It has large stakes in Sony, EADS, HSBC and Daimler. The fund is said to have effectively ended private equity investments and has ruled out making another approach for Liverpool Football Club, having lost out to the American investors Tom Hicks and George Gillett last year.

Speaking at the Dubai International Financial Centre conference yesterday, Mr al-Ansari said that falling stock prices in the West could provide some Gulf countries with an opportunity to develop their own economies. Investing in technology and manufacturing companies would allow these states to encourage operations to be moved to the Gulf, which would provide jobs for the region's rapidly growing population. “To become the largest shareholders in the ten largest companies in the world would cost about $50 billion at present and that's actually not a lot of money,” he said. “Imagine the power and influence this region would have if we were the shareholders in the ten, twenty, thirty largest companies in the world.”

Author: David Robertson- http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5233278.ece

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Carlyle Group head says local firms will lead

DUBAI// Local private equity firms will take the lead in the Middle East and North Africa as the industry’s business model is forced to change due to the global financial crisis, says David Rubenstein, the managing director of The Carlyle Group.

“The world of private equity will change for many years as a result of the credit crisis and slowdown, and the entire industry will come under scrutiny over deals,” Mr Rubenstein told a conference in Dubai. “The Mena region will be affected by these changes in the United States and Europe, though the appeal of the MENA region is expected to increase. Some global players will enter the market, though local private equity firms will be most active.”

He added that private equity in the region would continue to be one of the most attractive market areas for global private equity despite a predicted slowdown in the industry in the next six to 12 months.

The Carlyle Group, a private equity giant, opened an office in the Dubai International Financial Center in Nov 2006 and also has regional operations in Cairo and Istanbul.

While Mr Rubenstein remained generally optimistic about the public’s perception of private equity during these distressed times, he said the most significant question to come out of the financial turmoil was whether or not the basic private equity business model would stay the same.

“It’s not clear whether the basic model we’ve had over the past 30 years, which uses much leverage, can be kept. It will be subject to much change and we’ll see changes in how general partners employ more equity, less debt and longer holding periods.”

The financial crisis has forced a number of hedge funds to collapse and brought down the traditional investment banking model; investors are left wondering if the private equity industry risks being next in line. Although experts surmise that the industry is strong enough to weather the crisis, most agree that the private equity industry will have to adapt.

“The financial world is being transformed in a stunning process; we can expect major consolidations in the financial sector, for one,” said Henry Kravis, a founding partner of Kohlberg Kravis Roberts.

Some firms are actively changing their business models to stay ahead of the curve.
“We are preparing to realign ourselves a little bit to capitalise more on opportunities that will arise as a result; it is definitely not business as usual,” said Zulfi Hydari, the managing director of HBG Holdings.

The opportunities for private equity in the Gulf, however, are becoming more lucrative compared to the US and Europe, and local and global players are confident about deal flow and fund launches over the next year, including Blackstone Group, the US-based private equity firm, which has plans in the pipeline to raise money from the region.

“There are so many wealthy people here and companies that are expanding rapidly and looking to put money in areas of the economy that are relatively small compared to the wealth here,” said Steve Schwarzman, the chief executive of Blackstone.

By Sara Hamdan
shamdan@thenational.ae

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Strong economy woos professionals from West to UAE

A shortage of skilled manpower in the GCC construction industry is attracting civil engineers and architects from countries where unemployment is growing due to the economic slowdown.

The arrival of skilled professionals from the US, UK, Canada and Australia represents a major turnaround as firms in the region were previously chasing too few candidates. 

Emirates Business spoke to industry experts who all felt that the economic slowdown of the global economy would stand to benefit the UAE's construction industry.

The problems faced by the US housing market is creating unemployment, with the construction industry releasing a higher percentage of employees than other sectors.

Between July and August large US construction firms including KB Home, Toll Brothers, Hovnanian and Lennar have axed 8,000 jobs.

"A year ago it was difficult to recruit good experienced engineers," said Stewart Corner, consultant Engineer working for Australian company Webb & Erbas UAE, which has formed a joint venture with an Abu Dhabi investor to expand in the region.

"More and better specialists are available in the market. The job market has changed and salary levels are coming down. An experienced Australian engineer can earn $100,000 (Dh367,319) a year in the UAE now, two-thirds of the salary he would have earned at home. Corner said the property developments in cities such as Abu Dhabi are sustainable because of good oil revenues and government support to big projects.

"We expect to grow by 50 per cent in the first year. Several Australian companies are entering the UAE and other Gulf countries now," he said.

According to Natasha Gangaramani, Director of Al Fara'a Properties the number of applications from UK and the US has increased over the last two weeks.

"It has been a challenge to recruit good staff but during the last two weeks we have been getting calls from good talent in the UK. If I am not mistaken, the trend will not just be limited to the construction and property market. Job applicants to all other sectors will increase and more people will be looking for opportunities here," said Gangaramani.

She said that global businesses will be looking towards the region and especially the UAE to do well. "People are expecting this region to do well and overcome the crisis. It is tax free and a launch pad for people who want to start fresh," said Gangaramani.

Carol Milne, a consultant at the Ontario Ministry of International Trade and Investment's GCC office, said several Canadian companies were looking for opportunities in the Middle East.

"Property prices are dropping in the US and in some parts of Canada," she said. "In Ontario, the market is stable but it is not growing as it did before. Our construction firms are very international in outlook and the province has cross-border trade and investment links with the US."

William Buck, International Director, Macdonald and Company, a recruitment consultancy, said: "In the past it was a challenge to recruit candidates from the US. But our recruitment agency has been receiving a lot of calls from the US ever since the economy started to slide."

According to Buck, there is still much demand for qualified and good development surveyors and project managers in the UAE. "There is a lot of scope for facility management professionals. Just about 12 to 18 months ago nobody had bothered much about facility management as it was not much in demand here," said Buck.

According to him, there is movement of labour within the UAE itself as more professionals are opting for Dubai compared to other emirates.

According to him because of the availability of all sorts of candidates coming in to the market, other GCC nations like Bahrain, Saudi and Kuwait have been able to attract candidates. It is good news all round for property and construction companies in the region."

Marc Palermo, Regional Sales Director working of US real estate company SHVO, said: "More and more professionals from the US are coming to the Gulf in search of jobs.

"US firms are releasing even experienced senior staff. Growing unemployment in the US and better living standards here are among the factors that are attracting construction professionals to the Gulf."

Khalid Said, a Palestinian architect had been living in Germany, said he has come to the UAE seeking new opportunities. "A number of German engineers and architects are leaving because there is an economic slowdown and only large firms that are capable of undertaking major turnkey projects can get work. "The Middle East is a good option for me because I can speak Arabic and German."

Thomas Brink, Vice-President of US-based engineering firm RTKL, said the company had stopped recruiting and was relocating staff to the Midle East.

"Due to the slowdown in the US, work on some of the anticipated projects there and in China did not start," he said. "Our company is based in Texas, which has a strong economy because of oil. However we have seen some senior US professionals seeking better prospects in the UAE."

But Phil Starr, Recruitment Director at RealHR Consultancy and Recruitment has warned that although well qualified, applicants from these particular regions would still lack the project experience required for the projects found in Dubai and Asia alike.

"We have seen a definite increase in the number of CVs coming from the UK and US. The most noticeable change will be at a supervisory level and below. It's likely we will start to see a shift towards the eastern European labour market due to the decline in the construction industry throughout the UK and the rest of Europe," said Starr.

Macdonald's Buck also noted that the new rush of employees into the UAE and GCC market looking to get hold of jobs at any cost would have an impact on salaries. 

Although salaries across the GCC, especially in the UAE, have been rising significantly over the last few years, the trend will not continue at the same level.

By Joseph George and VM Sathish  on Tuesday, October 14, 2008

Business24-7.ae

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The US-UAE Trade and Investment Relationship

Executive Summary

The United States and the United Arab Emirates (UAE) enjoy a robust trade and investment relationship, much of which now has little direct relationship to UAE oil exports. Moreover, this is one of the fastest growing U.S. economic partnerships, both globally and especially in the Gulf region. The trade surplus in goods with the UAE throughout this decade reflects strong U.S. competitiveness in a number of sectors. In addition, the volume of U.S. exports and foreign direct investment into the UAE in recent years has grown dramatically and is likely to continue to grow in the future. This growth reflects the increasingly diversified UAE economy as well as its leading role as a modernizing influence in the Arab world.

Highlights

U.S. goods exports to the UAE increased by 352 percent from ••$2.6 billion in 2001 to $11.9 billion in 2006. This is far greater than the 42 percent increase for overall U.S. exports around the world.

The UAE’s share in U.S. exports to the Gulf Cooperation ••Council (GCC), which consists of the UAE, Saudi Arabia, Qatar, Bahrain, Kuwait, and Oman, doubled from 25
percent in 2001 to 49 percent in 2006.

The UAE is the single largest export market for U.S. goods and services in the Middle East, and U.S. exports to the UAE have expanded nearly five-fold from 2000 to 2006.

In 2006, the UAE imported $2,571 of U.S. goods per capita, which exceeded that of many important U.S. trading partners including Kuwait ($821), Saudi Arabia ($330), Japan ($468), Germany ($501), Mexico ($1,287), and Israel ($1,558).

U.S. exports to the UAE originate from a wide variety of U.S. ••states. In 2006, the five largest sources were: Washington (33 percent), Texas (21 percent), California (8 percent),
New York (6 percent), and Tennessee (3 percent).

U.S. foreign direct investment in the UAE rose 445 percent from ••at least $834 million in 2001 to $4,547 million in 2006. This far exceeds a worldwide increase of 63 percent in the same period and an increase of only 22 percent in Saudi Arabia.

The pace of UAE investments in the United States have also ••quickened. Recent examples include a proposed 20 percent share in NASDAQ, a 7.5 percent share in the Carlyle Group, an 8.1 percent share in Advanced Micro Devices, and a 4.9 percent stake in Citigroup.

Cooperation extends beyond the private sector. U.S. non-••profit organizations are also expanding their activities in the UAE, including a Johns Hopkins University partnership in a new cancer treatment center and a New York University plan to establish a campus in Abu Dhabi by 2010.

This economic relationship will likely deepen further in coming years, given the UAE’s growing status as a regional business powerhouse, the high world price of petroleum and resulting high UAE growth rates, and the UAE’s continued political stability and sound economic policies.

by Michael Moore
Professor of Economics and International Affairs
Director, Institute for International Economic Policy
Elliott School of International Affairs
George Washington University

Download the full report .pdf

http://www.usuaebusiness.org/view/resources/uploaded/usuaewhitepaper.pdf

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