Strike grounds Air India flights
Rehn: Europe faces economic stagnation
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Bernanke warns of risk to bank independence
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Thursday, May 27, 2010
www.kuwaittimes.net
Ramallah in the grips of real estate boom RAMALLAH: New buildings, fancy coffee shops and upscale restaurants that dot Ramallah lend the West Bank political capital an air of prosperity that stands out in the fragile Palestinian economy. The bustling city of 40,000 is in the grips of a real estate boom and has become an ideal showcase for Prime Minister Salam Fayyad's plan to create a viable Palestinian state by 2011. But experts warn that Ramallah's new-found wealth does not in any way reflect the state of the economy in the occupied West Bank or the impoverished Gaza Strip. Economic growth in the West Bank did reach 8.5 percent last year but much of that was the result of generous international aid, according to the International Monetary Fund. "If for some reason foreign aid should suddenly stop or diminish, government spending would slump and the economy would simply go back to zero," says Nasser Abdelkarim of Bir Zeit university's economics department. In 2009 international donors provided some 1.35 billion dollars in budgetary support, accounting for 22 percent of the Palestinian gross domestic product (GDP), and an additional 400 million dollars for development projects. "There is no significant improvement of private investment, particularly in sectors that can contribute to the infrastructure of an independent state, such as agriculture and industry," says Abdelkarim. Israeli restrictions on movement and access severely hobble internal economic activity and foreign trade, the IMF wrote in a recent report. The Israeli army has announced it will soon make some "goodwill gestures" in the West Bank, including the removal of some of the hundreds of roadblocks that restrict movement across the Palestinian territory. "Smoke and mirrors," says Mahdi Al-Masri, who heads the Federation of Palestinian Industries. "Even the lowest ranking soldier in the Israeli army can interfere with the movement of goods worth millions of dollars." Masri is convinced the only way a solid economy can be built is if the Palestinian Authority is given control over the whole of the West Bank. Only about 40 percent of the West Bank is under Palestinian administrative jurisdiction, with the remainder, known as area C, under full Israeli control. "Israel has kept the keys and can change the situation at any time, for example by putting back a roadblock," says Abdelkarim. And the situation in the Gaza Strip, an overcrowded enclave crippled by an Israeli and Egyptian blockade, is putting the brakes on economic growth. Masri estimates that 35 to 40 percent of the Palestinian economy is blocked because of the blockade on Gaza, where about 80 percent of the 1.5 million population rely on foreign aid and unemployment levels have reached 40 percent. Just a few kilometers from Ramallah, particularly in Area C, the economic boom seems like a distant mirage. In the small town of Bir Nabala, about half way between Ramallah and Jerusalem, shopkeepers sit in the dusty streets waiting for business and many stores are shuttered. "It's stagnation," says Mahmud Naim, an employee at a ceramic tile store. He blames the barrierwhich Israel says is crucial to its security and Palestinians call an Apartheid Wall-for turning this once bustling town into a virtual ghost town. "Before the wall, we'd work alot with Jerusalem. Today, nothing." Pointing to the street outside, he lists the stores that have shut down, the grocery, the bakery, the laundry ..." — AFP
Boom belies fragility of Palestinian economy
Investment Dar, Blom battle adds sharia risk DUBAI: A legal wrangle between Kuwait's Investment Dar and Lebanon's Blom Bank has raised sharia risk in the Islamic finance industry, ratings firm Moody's said in a research note yesterday. Blom Bank sued Dar for $10.7 million in a British court last year, seeking the principal it invested plus a 5 percent return, as was structured in an Islamic deal it concluded with the company in 2007. Dar said it would not pay as the fixed return constituted interest which it said was not sharia-compliant and broke the company's own charter. A judge ruled that while Dar should repay the principal, it had an arguable defense regarding the extra profit. While the case has not yet concluded, legal experts and Islamic bankers have been debating its significance for the industry. Moody's senior credit officer Khalid Howladar said that the ratings firm will closely watch the case as the final outcome may set a precedent. "Such precedent when coupled with legal opinions will likely form part of our rating analysis of such instruments and institutions," Howladar wrote in the note. He added that the case highlights the need for the industry to improve its due diligence when structuring such Islamic transactions. He said that Moody's may require clear documentation demonstrating that sharia risk has been addressed before it rates sukuks and Islamic institutions in the future. Documentation may include disclosure of approvals from company sharia boards and a signed waiver in the contract disallowing a sharia-related defense. — Reuters
OECD raises global growth forecasts
RAMALLAH: A general view shows the minaret of a mosque next to modern residential buildings in the West Bank city of Ramallah. Ramallah, the seat of the Palestinian Authority, is witnessing a construction boom which makes it an exception in the Palestinian territories which generally have a fragile economy. — AFP
Nigerian business delegates meet Kuwaiti counterparts By Chidi Emmanuel KUWAIT: A 46-member business delegation from Nigeria met with their Kuwait counterparts on Tuesday, May 25 and concluded their investment conference at the Kuwait Chamber of Commerce and Industry. The Kuwait-Nigeria Investment Conference (KNIC) intended to promote business opportunities in both oil-rich countries as they sought ways to tap into each other's markets. The delegates discussed issues of mutual interest and signed five memoranda of understanding. There were high level delegates from Nigeria including; the Governor of Katsina State Ibrahim Shehu Shema, the Deputy Governor of the state of Zamfara Muktar Mohammed, Kano State Commissioner of Commerce and Industry Ahmed Yakasia, Eric U Ani from the Presidency, General Suleiman Yekini of the Defense Headquarters Abuja and HRH the Amir of the state of Maradum Zamfara among others. Muneera Al-Hassawi, Vice President of the Deep Impact Company, said the conference was designed to strengthen trade and economic relations between Nigeria and Kuwait. Al-Hassawi urged investors to explore the opportunities of Nigeria's oil, banking, real estate, communication, aviation and the agricultural sectors. She commended the Nigerian government for its business incentives. "There are lots of business incentives and opportunities in Nigeria. Incentives like tax exemptions as well as owning and managing real estate properties are too good to remain unnoticed," she said.
5 memoranda of understanding inked
KUWAIT: The Governor of Katsina State Ibrahim Shehu Shema (second left) presents his speech during the Kuwait-Nigeria Investment Conference (KNIC) at the Kuwait Chamber of Commerce and Industry. (Inset) Muneera Al-Hassawi, Vice President of the Deep Impact Company. On his part, the Chief Investment Officer and representative from the Presidency, Eric Ani, praised the efforts of both governments to promote mutual ties and urged investors to make use of huge incentives and business opportunities. "Nigeria and Kuwait have a lot of things in common. It is time to expand our ties. There is a wide range of opportunities for Nigerians and Kuwaitis", Ani said. Regarding the economy, the Nigerian ambassador to Kuwait, Ahmed Gusau Bala said that the Nigerian government embarked on reform programs to set the economy on a path of growth and development. He added that Nigeria has opened the doors for agriculture and tourism and urged businessmen to make use of the investment opportunities
in solid minerals, tourism, telecommunication, agricultural, oil and the gas sectors. "With a population of 150 million people, Nigeria offers great opportunities," the ambassador said. Commending the program, the Amir of the state of Maradum Zamfara, HRH Garba Mohammed Tambari, lauded the efforts of both governments to boost economic ties. The Amir urged Nigerians in Kuwait to act as good ambassadors for their country. He called for active participation from stake holders in a bid to promote business initiatives. "We need to strive for continuous improvement to boost our ties and set targets", he said. The seminar was organized by the Association of Nigerians Residents in the Arabian Gulf and the Deep Impact Company.
KUWAIT: The commissioner for justice Katsina State, Nigeria chat with a Kuwait investor during the Kuwait-Nigeria Investment Conference (KNIC) at the Kuwait Chamber of Commerce and Industry.
PARIS: The global economy is recovering faster than expected from recession with Asia leading the way, but it is at risk from huge debts in developed countries and possible overheating in countries such as China, the OECD said yesterday. In a twiceyearly report, the Paris-based Organization for Economic Cooperation and Development raised its forecast for global growth to 4.6 percent in 2010 and 4.5 percent in 2011. Last November it predicted growth of 3.4 percent this year and 3.7 percent in 2011, after a 0.9 percent contraction in 2009. It was also far more optimistic about job markets globally, saying unemployment in its 31 member countries may have peaked at around 8.5 percent-much lower than its previous prediction of almost 10 percent. The new forecasts are higher than the average annual rate of growth in the decade before the financial crisis that spilled out of the United States in 2007 -- an average of 3.7 percent per annum over 1997-2006, according to OECD figures-but the OECD said the bounce was uneven and risk-prone. The developed economies where the 2009 recession exacted the biggest toll were getting a lift from resurgent international trade, propelled primarily by export demand from rising economies in Asia, the OECD said. It raised its forecast for US growth this year and next to 3.2 percent each time, from 2.5 and 2.8 percent in its forecasts of last November. It predicted Japanese growth of 3.0 percent in 2010 and 2.0 in 2011, up from 1.8 and 2.0 percent previously, and forecast the euro zone to lag with growth of 1.2 percent and 1.8 percent this year and next, still marginally more than forecasts of 0.9 and 1.7 percent last November. The biggest challenge the advanced economies faced right now was cutting post-recession debts and containing financial market instability that had spread recently from Europe. Fiscal consolidation is imperative for many countries. It is also to lay the groundwork for sustained growth in the longer term," OECD Secretary General Angel Gurria said. "Getting the timing and sequencing right will prove enormously challenging everywhere." That challenge is about juggling austerity measures that may be vital but are also likely to hurt growth, while keeping sight of the need to wean economies off rock-bottom interest rates and government support put in place when many believed the downturn could degenerate into a second Great Depression. After a debt crisis that spread from Greece to spark broader financial market turmoil over perceived debt default risks, the euro zone is accelerating aus-
terity plans such as cuts in public wages and spending. Recent weakening of the euro currency should offset some of the growth hit from austerity by lifting exports and the region should avoid a relapse into recession, OECD chief economist Pier Carlo Padoan said in an interview with Reuters. BOOM-BUST The OECD highlighted a very different threat to the emerging market economies such as China and India, saying: "A boom-bust scenario cannot be ruled out, requiring a much stronger tightening of monetary policy in some non-OECD countries, including China and India, to counter inflationary pressures and reduce the risk of asset-price bubbles." In China, the OECD forecast economic growth of 11.1 percent this year and 9.7 percent in 2011, saying that there was a danger that measures to cool property markets and curb land prices would not see off the risk of overheating. Back in November, the OECD was forecasting Chinese growth of 10.2 percent in 2010 and 9.3 percent in 2011. The report said it expected world trade to grow 10.6 percent in 2010 and 8.4 percent in 2011, after an 11 percent plunge in 2009 that was largely concentrated in the months following the demise of Wall Street banking giant Lehman Brothers. "Strong growth in emergingmarket economies is contributing significantly," said the OECD, whose 31 member countries are mostly developed economies. "The spillover from growth in non-OECD Asia could be stronger than expected, especially in the United States and Japan. From this point of view, the overall environment is relatively auspicious." the Paris-based organization said. The forecasts are marginally higher than the International Monetary Fund's predictions of 4.2 percent and 4.3 percent expansions in global gross domestic product this year and next. DOLE QUEUES The OECD said another 16 million people had lost their jobs across its 31 members in the two years to the end of the first quarter of 2010. Bad as that was, it appeared to be less severe than initially expected and the OECD-wide jobless rate may have peaked as just over 8.5 percent, it said. The OECD said back in September it feared the jobless rate might run as high as 9.9 percent before any turnaround. Debt and debt market instability was the most immediate of the two risks highlighted by the OECD, and European governments were being forced to "respond by the minute" with policies to calm market fears that things could spin out of control. "It's not just a European story," said Padoan.— Reuters