Interpreting Middle East Economic News and Analyzing Market Trends

Category: Saudi Arabia

Bailouts of bad debts do more harm than good

Kuwait’s dysfunctional parliament recently approved bailouts of bad consumer loans dating back as early as 2002.  The UAE and Saudi Arabia have both came up with similar solutions to bailout their citizens of their piles of bad debts, but is this good?  Who really benefits from bailouts and what is likely to happen down the road?  We’ve reported on this topic several times over the past few months, here, here, here and here.  Now it seems that a major ratings agency has come out against these bailouts due to their longer term effects on the economy.

 

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Abu Dhabi set to become largest foreign investor in Malaysia

Gulf countries have invested billions of dollars in Malaysia over the past decade.  Kuwait and Saudi Arabia were the earliest to invest, followed by Dubai.  The two most recent investors in Malaysia have been Qatar and Abu Dhabi. Up until now, Qatar was expected to be the largest foreign investor in the country, but now it looks as if Abu Dhabi might take that title.

 

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Earthquakes in Iran shake Gulf country leaders into discussing nuclear safety

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Source: BBC News

  

Two earthquakes one week apart near Iran’s Bushehr nuclear power plant not only shook buildings across the Gulf, but also shook the leaders of Gulf countries.  They are now rushing to take a close look at nuclear safety.  The Bushehr power plant sits right across the Gulf from Kuwait and Saudi Arabia’s main oil export terminals.  Any Fukushima-type event in Bushehr will affect millions of people in the region and will surely hit world markets as the Gulf’s main oil export routes are only a short distance away.

 

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Egypt & Jordan: Taking away subsidies is proving more challenging than expected

Governments in the Middle East, regardless whether they have oil wealth or not, are being forced to rethink the subsidies they give to their citizens either to shore up their finances or to move along a more sustainable path.  We’ve discussed issues with subsidies in previous posts, here, here, here and here.  

 

Government’s in the region put themselves in the predicament they are in decades ago as a way to keep their citizens happy and give them a sense that their governments are doing something for them.  However, decades later and millions of people later, these governments are facing a financial crisis and no longer have a choice but to reduce subsidies.  In doing so, they are putting their survivability at risk as is the case with Egypt and Jordan (see below).

 

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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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