“Natural” Market Cycle in Kuwait September 16, 2008
Posted by mylastresort in analysis, bahrain, qatar, rumors, saudi arabia, sovereign funds.Tags: gcc, Government Interfernce, Gulf Collapse, kuwait, Markets, Stock Exchange
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The significance of Lehman Brothers collapse is of extreme importance to the local region to understand the events that occurred leading to its bankruptcy. In the GCC the markets have enjoyed prosperity for so long that they have forgotten that markets do fall, and fall hard fast. Since the beginning of September the Gulf Markets have been tumbling to record levels. In a single session, Dubai fell an unprecedented 12% and Kuwait approached the bottom limit of a -587 points drop, among many other significant declines. (more…)
Gulf Countries Delay Currency Union June 10, 2008
Posted by mylastresort in analysis, bahrain, qatar, saudi arabia.Tags: Central Bank, Currency Union, gcc, Gulf, Gulf Cooperation Council, Single currency
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Central bank governors from the Gulf Cooperation Council (GCC) agreed to form the nucleus of a joint central bank by 2010 in a major step forward for monetary union but signalled that the new common currency would be delayed (as explained in previous posts) and not launched by the 2010 target.
Record-high inflation in all the countries in the GCC is threatening to derail the project. Central bank governors from the GCC laid out a roadmap leading toward common monetary institutions before 2010. It seems very optimistic that with all the economic dilemma’s we are facing the Gulf the central banks still believed that we could form the single currencyCurreny Union by 2010.
100% Tax on Luxury Goods June 4, 2008
Posted by mylastresort in analysis.Tags: analysis, bahrain, Doha, Dubai, gcc, Gulf Cooperation Council, kuwait, Markets, oman, qatar, saudi arabia, Tax, taxation, uae, Value added tax, VAT
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The Gulf Cooperation Council (GCC) is planning to introduce up to 100% tax on ‘harmful products’ & luxury goods likely to include cigarettes, luxury cars, private planes, & yachts, among others. A team has been commissioned to list items that could be liable to the new tax from 2012. The GCC team looking into the proposed taxes would next meet in October. The GCC has already set 2012 as the deadline for implementing a new value added tax system.
Each of the Gulf countries suffers from lack of productivity and sophisticated staff, including a very bureaucratic environment in the public sector. The GCC is just that multiplied by 6, therefore I doubt any decision will be made anytime in the next 20 years regarding taxation (if anything useful).
Some notes to consider:
The rich - are the powerful - therefore taxing their latest toys will not make them very happy buying in their own countries and will therefore register items across borders. A good example would be to buy the yacht and register it in Yemen, for instance, and then take it to Dubai marina. This is a simple way to avoid taxes. This will move the companies to areas where the wealthy will pay a more reasonable rate than the 100%.
There will be an increase of ‘wastas’ (quanxi) at the ports and customs to avoid paying the tax. We are already bombarded by having to payoff officials to get the latest DVD, book or game in to the country just imagine bribing one of them to bring in a Ferrari, this will take things to a new extreme.
The Governments DO NOT need any extra income. The future plans and growth in Dubai, Bahrain, and Qatar all involve a marketing plan that clearly states ‘a tax free’ incentive for company’s & employees to relocate. Although everyone knows the slow pace of government policies any threats such as this will deter future companys/individuals from relocating.
Gulf currencies collapse 40% April 8, 2008
Posted by mylastresort in analysis, bahrain, qatar, rumors, saudi arabia.Tags: AED, bahrain, BHD, Central Banks, Currencies, Dirham, Dollar, Dubai, gcc, Gulf, kuwait, KWD, oman, OMR, qatar, Revaluation, saudi arabia, Saudi Riyal, US
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Many have called for a revaluation of Gulf currencies from the historical dollar peg. The flood of liquidity and rapid inflation has been hailed as a warning to the falling interest rates, decline of the US Dollar, and record high oil. The loss in value of the Gulf currencies has been partially responsible in the rise of inflation. The inflationary pressures, which should govern an increase in rates by the central banks, have created markets so liquid that deposits are being quoted at negative rates. The list below shows the Gulf currencies depreciation, in value, due to the Dollars decline.
Fixing the Kuwaiti Dinar to the Dollar, again… April 8, 2008
Posted by mylastresort in analysis, saudi arabia.Tags: Again, Dinar, Dollar, Fix, gcc, kuwait, KWD, Peg, Single currency, Unified Currency, Union, USD
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In order to remain on track for the single Gulf currency, Kuwait, which revalued its currency in May 2007, must fix its currency back to the Dollar, to be inline with the rest of the Gulf countries. The formation of the single currency, (rumored to be called the ‘Dinar’), cannot be created without the valuable Kuwaiti economy. Kuwait, is considered to have the most advanced, and stable, economy in the Gulf. Since all the countries are fixed to the Dollar, once Kuwait decides to re-enter it will be forced to peg again, which will not be to beneficial to the local economy.
Single Currency: The biggest influence, Saudi Arabia April 7, 2008
Posted by mylastresort in analysis, saudi arabia.Tags: Dollar, economy, gcc, Gulf, Influence, Peg, Riyal, saudi arabia
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I view the Gulf countries as each dealing with their own dilemma regarding the unified currency, but on the forefront would be the Kingdom of Saudi Arabia, for the following reasons:
- Biggest, most influential country in the GCC
- Radical influence of Islam (preventing the country from flourishing)
- Uncontained inflation
- Non-existent political reform
- Fixed US Dollar peg, with no expectation of revaluation
- Weak economical agenda
The actions of the Saudi monarchy govern not only their peoples, but influence the entire Gulf. Any actions by the monarchy, or demands, will be more than likely be granted by the smaller Gulf neigbors. Basic commodity prices rose approximatley 20-25% this month in Saudi Arabia, regulations have remained poorly maintained, rather than resolving the problems, government interventions seem to be cycling the problems to other sectors in the economy.
Why the single Gulf currency will not happen… April 7, 2008
Posted by mylastresort in analysis, bahrain, qatar, saudi arabia.Tags: Arab Gulf, currency, Dinar, Doha, gcc, Gulf currency, Meeting, Single, Union
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Following the central bankers meeting in Doha this week its clear they are all enthusiastic and confident in the 2010 unified Gulf currency, known as the ‘Dinar’. The expected time frame for the single currency is on the extreme side of optimism, (also note, I am very skeptical that a single currency will be adopted in the first place). There are many obstacles that must be overcome before discussing a unified currency. The Gulf, although neighbors, do not share the same political veiws, economic reform or civil freedoms, among many other factors that will be of prime importance to the unification of the currencies.
Final day of Gulf Arab meetings April 7, 2008
Posted by mylastresort in analysis, bahrain, qatar, saudi arabia.Tags: Abdullah bin Saud al-Thani, Central Bank, currency, Dinar, Dirham, Doha, gcc, Governors, kuwait, Meeting, qatar, Riyal, saudi arabia, Single, uae, Union
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Since today is the last day of the highly anticipated meeting of the Gulf Arab states many rumors have risen as to the future of the currency union of 2010. The meeting will conclude today in the Qatari capital of Doha. A statement by Sheikh Abdullah bin Saud al-Thani reiterated the Gulf’s commitment to a single currency, the same optimism is shared with all the member countries.
“There are plans by all competent institutions in the GCC to achieve that goal by that date… We set 2010 for the monetary union and we are still sticking to this date.”
- Sultan Nasser al-Suweidi, The United Arab Emirates central bank governor
Rumors that the Qatari Riyal and the UAE Dirham would be revalued were obviously dismissed by the governors” at the meeting. Any slight indication of a revaluation from the governors will spark a mass speculative attack on the currency forcing the central banks to reform. (more…)
“We are fixed against the dollar” – Qatar March 18, 2008
Posted by mylastresort in qatar.Tags: Abdullah bin Saud al-Thani, Central Bank Governor, De-peg, De-pegging, gcc, inflation, Interest Rates, Pressure, qatar, Qatari, Revaluation, Riyal, Sheikh, speculation, subprime
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Inline with todays reports of the US lower interest rates Qatar’s Central Bank Governer has talked to the press regarding the heavy speculation on the Qatari Riyal.
“We are fixed against the dollar since 2001 and we will stick to this policy… We are sticking to the policy of no revaluation and sticking to the policy of no change against the dollar… In Qatar, there are a lot of things to fight inflation but the issue of inflation is about government expenditure in all countries, and also the growth which is happening in the GCC”
- Sheikh Abdullah bin Saud al-Thani, Qatari Central Bank Governor
When asked about how Qatar might react to a probable cut in U.S. interest rates on Tuesday, he said:
“At that time, we will look at the liquidity in the market and look at the state of the Qatari economy, and make the decision.”
