Interpreting Middle East Economic News and Analyzing Market Trends

Archive for April, 2013

Arab governments to inject billions into regional development banks

Arab governments realizing the need to step up investment efforts in the Middle East after the Arab Spring are pledging to inject new capital into the five main development banks in the region.  They are;

 

1.  Arab Fund for Economic and Social Development

2.  Arab Monetary Fund

3.  Arab Bank for Economic Development in Africa

4.  Arab Authority for Agricultural Investments and Development

5.  Arab Investment and Export Credit Guarantee Corporation

 

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Dubai Group’s investment in Cypriot bank goes from €1.4 billion to zero in record time

There were not many winners in Cypriot banks recently, certainly not Dubai Group.  The death of the financial system in Cyprus was cheered by EU leaders who fought hard to have Cyprus close loopholes for wealthy Russians.  Many of the seized uninsured bank accounts were thought to be Russian own, but later word got out that a lot of Russians took their money out before the bank closures in Cyprus or during the closures via the banks’ international branches.

 

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Saudi Arabia steps-up foreign land purchases to sustain its growing food security needs

Middle East oil-producing nations have long sought to guarantee their food security.  In a land that is mainly unable to sustain agriculture, these countries have been aggressively looking for alternatives to ensure their food security.  Saudi Arabia has been one of the most active in this area due to its large and rapidly growing population. 

In the 1980s it resorted to converting vast amounts of desert into farming oases.  This proved to be more costly than it had expected.  It has now started moving away from this strategy by slowly removing water subsidies to farmers and promoting a different and more sustainable model going forward; vast purchases of farmland in fertile countries.

   

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Al-Azhar in power-grab with Brotherhood over Egypt’s proposed sukuk law

Egypt is the largest Arab and Muslim country in the Middle East, yet it never allowed for the establishment of Islamic banking rules and regulations.  Thank Mubarak for this.  One of the first item’s on newly elected President Muri’s agenda was the implementation of Islamic banking laws in Egypt.  It was especially critical to have these new laws in place in order for Egypt to tap the Islamic capital markets, which include the rapidly growing sukuk market (Islamic bond equivalent).

The country has been locked in a stalemate with the IMF over a proposed $4.8 billion loan, and it is currently locked out of international markets to finance in budget gap.  Being able to issue sukuk would alleviate some of this pressure since Egypt will have a better chance at finding investors in the region willing to invest in their sukuk.  Egypt’s upper house of parliament approved the new sukuk law only to come under fire by Al-Azhar University’s Senior Scholars Authority.  Al-Azhar is one of the oldest universities in the world dating back over 1,000 years, but has never been involved in state affairs until now.

 

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