EconSource: Cheap Oil Weans Gulf State Firms Off Public Purse, Pushes Them to Market

Gulf state-linked firms are being forced to wean themselves off direct government funding and focus more on capital markets and private investment as they push ahead with projects in an era of cheap oil. Prior to the global drop in oil prices, building projects were funded entirely by the government. However, Gulf governments are scaling back nonessential plans and looking to markets to share the financial burden. “The future, as we see it, are projects that connect to private investment,” said United Arab Emirates’ Minister of Public Works Abdullah bin Mohammed al-Nuaim. This could be a boon for bankers, who have long wanted to play a bigger role in arranging financing packages for Gulf governments. So far, the shift is most evident in the smaller Gulf countries that lack huge cash reserves but have large projects in the pipeline, namely Oman and Bahrain. However, state firms are approaching alternative funding solutions at a time when the market is changing. As governments’ oil income shrinks, local banks are receiving fewer new deposits, which reduces the cash available for projects. Money markets reflect this trend as rates rise, which may drive borrowers towards bonds rather than loans. [Reuters, 10/25/2015]

Minister says UAE is open to imposing taxes
The United Arab Emirates (UAE) is open to imposing taxes, Economy Minister Sultan Bin Saeed al-Mansouri said on Saturday. He emphasized that any decision will be evaluated thoroughly by the government before being implemented. “Any decision on any issue, there is a process in the government. We will discuss it, evaluate it how it affects our competitiveness. We are part of the [Gulf Cooperation Council] and there should be a common policy. So in the future, if this serves the government and the people it, could open to taxes just as other nations have,” al-Mansouri said. He did not elaborate on what kind of taxes the government is considering or what the timeline for implementation could be. The UAE’s Ministry of Finance said it has conducted several feasibility studies on taxation and its social and economic implications. [Gulf News, 10/25/2015]

Egypt plans to rent third regasification unit by early 2017
Egypt is looking to rent a third floating storage and regasification unit (FSRU) late next year or early in 2017 as it works to plug acute energy shortages, EGAS head Khaled Abdel Badie said on Saturday. The FSRUs allow Egypt to import liquefied natural gas (LNG) and convert it to natural gas to feed its power grid, which is often affected by blackouts. More recently, the gas shortfall has led to rationing among energy-intensive industries, sometimes halting output. Badie said the third FSRU will be used to meet the natural gas needs of industry and boost electricity generation. Egypt received its first FSRU from Norway’s Hoegh in April and its second FSRU from Singapore-based Norwegian group BW Gas in September. Petroleum Minister Tarek al-Molla said that British Petroleum will begin production at its north Alexandria concession in early 2017 rather than mid-2017. He said that output could reach 1.2 billion cubic feet per day by the end of 2019. [Reuters, 10/24/2015]

Central Bank of Libya says budget deficit if half of last year’s level
A report issued last month by the Central Bank of Libya (CBL) suggests spending on wages and subsidies has fallen in the first three quarters of 2015. However, the country is still running a major budget deficit. The CBL said it continues to operate “responsibly and independently,” but that the country is facing a “grueling financial crisis” caused by a lack of security that has greatly reduced oil exports. The CBL said that the budget deficit so far in 2015 is about half of that in the same period of 2014. Still, the report warned that Libya’s financial situation will worsen if a political agreement is not reached. [Libya Monitor (subscription), 10/26/2015]

TAP holds roundtable meeting on draft finance law 2016
Tunis Afrique Presse (TAP) held a roundtable meeting on Saturday to discuss Tunisia’s draft 2016 finance bill. Representatives from the Tunisian General Labor Union (UGTT), the Tunisian Confederation for Industry, Trade and Handicrafts, the Tunisian Union of Agriculture and Fisheries (UTAP), and the Association of Chartered Accountants, among others, were present. UGTT representative Mongi Smaali said that while the finance bill contains “early signs of reform,” the Tunisian government lacks a clear vision. UTAP representative Sassi Azzouz criticized the bill for its lack of measures in support of the debt-burdened agricultural sector. Experts present at the meeting said that while the draft law contains “bold and reforming” measures, they are insufficient to meet the challenges of the Tunisian economy. The Finance Ministry’s Director of Studies and Tax Legislation Imed Zaier pushed back against criticism of the bill, calling it a milestone in Tunisia’s tax reform process. The Finance Committee at the House of People’s Representatives is scheduled to examine the bill on Monday before it is brought to the floor. [TAP, 10/24/2015]

Also of interest
UAE minister sees $80 per barrel as ideal oil price | Gulf News
UAE September bank lending growth slowest since February 2014 | Reuters
Gulf Investment Corp picks banks for benchmark dollar bond issue | Reuters
Saudi transport projects going ahead as scheduled | Reuters
75 percent of Iraq’s 2016 draft budget for operational expenditure | AMEinfo
Egypt’s Suez Canal revenue falls to $449 million in September | Reuters
CBE says Egyptian banks achieve profit of EGP 20.89 billion in June | DNE
Loan from AFDB to finance Egypt’s share in joint Egyptian-Emirati company | DNE
Tunis to host Global Entrepreneurship Week in November | TAP
Jordan hires Citigroup and JPMorgan for potential US dollar Eurobond | Reuters