Nahed Taher Lecture
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Transcript of Nahed Taher Lecture
DR. NAHED TAHER
FOUNDER & CEO
GULF ONE INVESTMENT BANK
GCC MACROECONOMIC PERFORMANCE, PROSPECTS, PROBLEMS AND POLICY PRIORITIES
1(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
Lancaster University, 17 May 2011
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AGENDA
Review of Global Macroeconomic Outlook
Economic Performance, Prospects and Problems in the
GCC Region
Policy Priorities for addressing key risks & challenges facing
the Gulf Region
The Role of Gulf One Investment Bank in supporting
economic growth in the Middle East
Conclusion
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
Global Macroeconomics
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
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Global Economic Recovery Still in a Two-Speed Mode Between Developed & Emerging Economies
4(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
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Real GDP Growth Rate (%)
Source: IMF (WEO, April 2011), Gulf One Bank
Emerging and Developing Economies
Advanced Economies
A closer look at the two-speed recovery: BRICS would continue to be the main drivers of global growth ....
5(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
-8.00-7.00-6.00-5.00-4.00-3.00-2.00-1.000.001.002.003.004.005.006.007.008.009.00
10.0011.00
Real GDP Growth Rate in Selected Countries/Regions (%)
2009 2010
2011f 2012f
Source: IMF (WEO, April 2011); Gulf One Bank
World Economic Outlook – Growth Rates of Real GDP (%)
2009 2010e 2011f 2012f 2013f 2014f
World output -0.52 5.01 4.40 4.51 4.54 4.63Advanced economies -3.36 2.97 2.38 2.58 2.50 2.47
United States -2.63 2.83 2.76 2.87 2.72 2.73
Euro area -4.08 1.74 1.63 1.77 1.83 1.85
Germany -4.67 3.50 2.54 2.09 1.88 1.77
France -2.55 1.49 1.65 1.78 2.00 2.07
Italy -5.22 1.30 1.05 1.30 1.36 1.38
Spain -3.72 -0.15 0.83 1.61 1.77 1.93
Greece -2.04 -4.53 -3.04 1.08 2.11 2.13
Japan -6.28 3.94 1.40 2.07 1.69 1.51
United Kingdom -4.87 1.25 1.66 2.33 2.49 2.49
Emerging and developing economies 2.72 7.25 6.54 6.48 6.54 6.66
Brazil -0.64 7.49 4.46 4.13 4.12 4.16
Russia -7.80 3.95 4.83 4.51 4.34 4.24
China 9.20 10.30 9.59 9.52 9.47 9.52
India 6.75 10.36 8.24 7.82 8.16 8.14
Middle East 1.78 3.76 4.06 4.22 4.33 4.90Source: IMF, WEO, April 2011
... and despite pockets of downside risks, global economic outlook remains encouraging
6(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
Economic Outlook & Challenges in the GCC
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 7
Economic growth gathers momentum
• Favourable oil price boosts production and growth; improves fiscal & external positions
• Fiscal space is allowing continued execution of infrastructure programmes
• Private sector activity has started to pick up after a brief lull
Risks & medium term challenges
• Inflation remains a key concern
• High unemployment, especially among youth, poses real challenge
• Low human capital endowment is bane to productivity growth
• Deepening & strengthening the financial sector is a real headache
• Diversifying the economy away from hydrocarbon remains illusive
Summary of Key Issues
Favourable Economic Fundamentals in the GCC
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 8
RISING OIL PRICES TO IMPROVE ECONOMIC FUNDAMENTALS IN GCC COUNTRIES
9(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
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World Oil Price (US$/Barrel)
Source: Thomson Reuters, and G1 Bank
The boom end 2007-beginning 2008
The global financial crisis
Ideal path
Social political unrest in MENA & natural catastrophes
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c). 10
GCC economies have recovered from the downturn of 2009 and economic growth outlook is promising
Source: IMF (WEO, April 2011); Gulf One Bank
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GCC Bahrain Kuwait Oman Saudi Arabia UAE
Real GDP Growth Rates in GCC Countries (%)
2009 2010e 2011f 2012f
All GCC countries would continue to enjoy favourable external account positions ....
11(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
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Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Current Account Balances in GCC Countries (% of GDP)
2009 2010 2011f 2012f Source: IMF (WEO, April 2011); Gulf One Bank
... and despite recent ‘extra-budgetary’ spending fiscal balances would remain healthy as rising oil prices exceed break-even levels used in the budgets
12(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
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Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Fiscal Balances in GCC Countries (% of GDP)
2009 2010 2011f 2012f
Source: IMF (WEO, April 2011); Gulf One Bank
Sovereign Ratings of GCC countries remain sound & stable….
13(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
Entity Domestic Rating Foreign Rating T&C Assessment
International:Brazil BBB+ BBB- BBB+ China A+ A+ A+ France AAA AAA AAA Germany AAA AAA AAA India BBB- BBB- BBB+ Japan AA AA AAA United Kingdom AAA AAA AAA United States AAA AAA A AA
GCC:Abu Dhabi AA AA AA+ Bahrain A A AA-Ras Al Khaimah A A AA+ Kuwait AA- AA- AA+ Oman A A AA-Qatar AA AA AA+ Saudi Arabia AA- AA- AA+ Source: Standard and Poor’s
RISKS AND MEDIUM TERM CHALLENGES
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 14
Inflation poses a key risk to growth although prices are likely to be contained below pre-financial crisis levels
15(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
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Inflation Rates in GCC Countries (%)
2009 2010 2011f 2012f
Source: IMF (WEO, April 2011); G1 Bank
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c).
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Source: Reuters; G1 Bank
Inflation Inflationary Gap
But the region’s inflation is underestimated as the high Inflationary Gap figures suggest …
Inflation & Inflation Gap in Saudi Arabia
High youth unemployment is a real problem
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You
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Total Unemployment (%)
Source: IMF, ILO, Gulf One Bank*: Egypt, Jordan, Lebanon, Morocco, Syria and Tunisia
MENA6*
Saudi
Sub-Saharan Africa
SE Asia &Pac.
Developed Economies
World
East Asia
South Asia
Unemployment Rate in MENA Region
Unemployment of resources lead to a huge Output Gap (Potential GDP exceeds Actual GDP)
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 18
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Sources: Thomson Reuters, Gulf One Bank
Saudi Arabia: Actual GDP versus Potential GDP
Potential GDP
Observed GDP
Expon. (Potential GDP)
Expon. (Observed GDP)
Low Public Sector Labour Productivity is a Real Concern
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Saudi Arabia: Labour productivity in the private & public sectors
Private Sector Public Sector Linear ( Private Sector )Source: Reuters and Gulf One Bank
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
ENVIRONMENTAL CONCERNS
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 20
Another challenge to economic growth comes from rising CO2 Emissions
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 21
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Source: World Resources Institute
CO2 emissions from industrial processes in the GCC countries
Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates
Cost of Environmental Wastage in KSA has risen by more than three-fold since 1980 ...
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 22
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Saudi Arabia: Environmental Emission Costs (1980-2009)
Value of Environment Emissions (Billion Riyals) Environment Emission Cost (% GDP)Source: Gulf One Bank
Biggest CO2 Emissions in KSA come from Electricity Generation!
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 23
FINANCING CHALLENGES
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 24
Global Infrastructure Financing Gap Is Huge
25(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
Total infrastructure required inGCC infrastructure by 2020 = US$1,500 billion
Equity required =
30% of total investment
Current regional infrastructure equity funds = < 5% of total equity required
US$450 billion
US$22 billion
GCC INFRASTRUCTURE EQUITY FUNDS GROSSLY INADEQUATE
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
...Despite Attractiveness of Infrastructure Asset Class
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 27
POLICY PRIORITIES
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 28
Policy priorities
(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 29
Education and Market
Development
Labour market flexibility
Diversification And Competitiveness
Managing International
Financial linkages
Jobs and Sustainable
Growth
A knowledge-based investment bank for financing infrastructure in the GCC and MENA Regions
Mission: To mobilise local & global capital to execute infrastructure projects via innovative financial solutions
Strategy:a catalyst for unleashing the GCC's potential to achieve
sustainable economic growth and social prosperity by building on region’s resource strength and competitive advantagestructuring and investing in infrastructure projects and
energy-related mega-initiatives, by building of strategic partnerships and alliances with local and international investors and institutions in our core businessesProviding advisory and debt arranging services to
infrastructure, PPP/BOT sector(C) Copyrights 2010. Gulf One Investment Bank B.S.C. (c). 31
GULF ONE INVESTMENT BANK
SECTOR FOCUS KEY FOR ECONOMIC GROWTH AND DEVELOPMENT
SAUDI ARABIA INCOME MULTIPLIER
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Sector Income multiplier (GDP / loans)
Crude oil -
Non-crude oil industries 4.3
Transport and communication 4.5
Water, gas and electricity 3.1
Finance 1.8
Construction 1.6
Commerce and tourism 1.2
Source: Gulf One analysis from official data
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
ONGOING INVESTMENTS
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Fund / Deal Sector Market
Moya Holding Company B.S.C.
(c)Water sector MENA / India
Gulf One SME Opportunities
Fund SMEs GCC
Gulf One Buchanan Industrial
Technologies Fund I L.P.Industrial Technologies
Germany, Austria,
Switzerland
Montajat Veterinary
Pharmaceuticals Co.Pharma Saudi Arabia
Jao Investment Fund Aviation GCC
Z Aljazira Power Saudi Arabia
SCC & SCC–MENA Environment GLOBAL & GCC
Source: Gulf One Bank
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
Jeddah Hajj Terminal: Islamic Deal of the Year 2007 – Euromoney PF
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Advisory:A 20-year BTO concession for the Hajj Terminal at King AbdulazizInternational Airport, Jeddah
Our Projects
Source: Gulf One Bank
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
Moya Holding Company
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Our Projects
Source: Gulf One Bank
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
Investment:
A PE Company in partnership with the Bushnak Group investing inwater projects (desalination, wastewater treatment, distributionetc.) principally in the MENA region and the Indian Subcontinent
JAO Investment Fund
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Our Projects
Jao Investment Fund
Source: Gulf One Bank
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
Investment:
A MENA focused private equity fund investing in attractiveopportunities within the aviation sector
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Our ProjectsGulf One Buchanan Industrial Technologies Fund: DACH Fund
GULF ONE BUCHANAN
INDUSTRIAL TECHNOLOGIES
FUND I LP
Source: Gulf One Bank
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
Investment:A private equity fund developed in partnership with BIT, investing inattractive companies in the industrial technologies sectors withinthe DACH Mittelstand – a conduit for industrial technology transferto the GCC
Our Projects
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Investment:An exclusive MENA joint venture operating company forthe carbon abatement, Clean Development Mechanismand alternative energy business in the MENA region
(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
SCC MENA
Despite ongoing unrest in the Middle East, economic fundamentals in the GCC region are encouraging
But economic growth in the region will remain below potential unless appropriate policy measures are put in place to address key challenges –high unemployment, inflation, imbalances in the education system, labour market rigidity, shallow financial markets, difficult business climate, environmental & diversification concerns
Policy priorities should focus on job creation and sustainable economic growth through sustained policy reforms that could tackle the risks and challenges and unleash growth potentials
GULF ONE’s strategic positioning to finance key infrastructure projects will help to support sustainable economic growth in the region
39(C) Copyrights 2011. Gulf One Investment Bank B.S.C. (c).
CONCLUSION
Gulf One Investment Bank
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Thank you