Exclusive outtakes from industry leaders
If there is a silver lining to the impact of the credit crisis in Kuwait, it could be highlighting the poor transparency – even by Gulf Arab standards – in the desert country.
Other Gulf countries such as the United Arab Emirates or Saudi Arabia have taken steps to crack down on corruption or boost transparency in a region where stock prices often move sharply before major company announcements. Most – but not Kuwait — have independent stock market regulators.
Once a regional leader in developing financial markets, Kuwait has fallen behind its neighbours. It would have been almost impossible for investors to discern problems at Kuwait’s Gulf Bank before its rescue last month, economists say.
Lack of transparency can often hide corruption, said Amani Bouresli, finance professor at Kuwait University.
“In terms of corruption, there is the perception of corruption index and every year we have a worse location than the year before,” she said.
The global crisis may add pressure on Kuwait to act, Bouresli said.
“When the index is red you see the government acting,” she said. “I hope if the index goes up again the government won’t stop acting.”
But more decisive measures on disclosure might be too bold a step to expect from Kuwait’s current government. Some have suggested that battles between the government and parliament in Kuwait, perhaps the most democratic of the Gulf Arab states, could hinder the type of action that would be necessary.
“The government knows there is a lot of corruption, but it is weak and unserious,” Kuwaiti economist Naser Alnafisi said.
A pair of speakers at the Reuters Middle East Investment Summit are less than impressed with the West’s requests that oil-rich Gulf Arab state’s pony up cash to help combat the effects of the global financial crisis. British Prime Minister Gordon Brown is the latest to do the rounds in Gulf capitals, after the French trade minister and U.S. Deputy Treasury Secretary Robert Kimmitt, who declared the U.S. open to sovereign fund investment last month.
Not so fast, say Gulf players.
“We are not happy with the demands of other states to help them when they cause problems,” Naser al-Nafisi, general manager at Al-Joman-Center for Economic Consultancy, said at the Reuters summit in Kuwait.
The Reuters Middle East Investment Summit team asks Majid Jafar, executive director of UAE’s Crescent Petroleum and board member of Dana Gas, what he thinks of the idea of an OPEC-style gas cartel? He says that it would definitely benefit the whole industry as OPEC does to its members.
But he warns the cost of transporting gas would be one of the challenges as opposed to oil, which is traded with ease as many tankers wander the waters of the world.
As airlines around the world cut capacity and ground planes, the tiny Gulf state of Kuwait is stepping boldly into the global aviation crisis with the launch of a third carrier.
Kuwait National Airways hasn’t even taken delivery of its first plane yet, but when it does, it will be fitted with Recaro luxury leather seats.
Kuwaiti executives will be offered the lowest seat density Airbus A320 in the world, enjoy in-seat entertainment, and be able to use their mobiles phones and Blackberrys on board – at least for data — the airline’s CEO George Cooper told a Reuters summit.
Cooper is betting that the world’s seventh-largest oil exporter will remain an island of prosperity in the midst of a global financial crisis.
“Creating this airline is something that will work in Kuwait,” he said. “I can’t think of many other places in the world where it would.”
With only a business plan, the airline raised nearly $200 million in a 2006 initial public offering. Cooper, a former pilot who worked for many years at British Airways, said it will focus on ferrying businessmen around the region, with the first flight expected sometime in January.
The carrier, which will operate under the brand name Wataniya, is benefiting from the plight of airlines around the world as fears of a global recession loom.
It can now snap up pilots from around the world and capitalise on a glut of fuel as planes are grounded in the United States and Europe, Cooper said.
And high fuel costs that have plagued the industry are finally coming down – but that may not be entirely good news for Wataniya.
“Kuwait is a petrodollar economy, so there is a minimal oil price we want to see,” Cooper said.
But as the fate of recently-rescued Kuwaiti lender Gulf Bank shows, the country of 3.2 million isn’t entirely immune from the global crisis.
But even as its economy slows next year and prices for its main export drop, flying around the Gulf in plush leather seats may be too much for some Kuwaitis to resist.
The Reuters Middle East Investment Summit kicks off on Monday 3 November. With the world facing its worst economic downturn since the 1930s, the summit is set to provide a view from the world’s largest oil producing nation. Events organisation is never easy and in such turbulent times, the region is proving just as difficult. Five speaker cancellations just 12 hours before the summit highlighted just how diifficult keeping appointments is in the region. Emergency board meetings, sudden trips overseas or in one case “yes we confirm in the morning” to “we are not sure by lunch time” to “no, no the chairman has other engagements by the evening.” Anybody doing business in the region is acutely aware that appointments are never rigid, but when the world needs stability and not chaos it might be time to keep to those appointments to reassure the investment community. As one public relations executive noted “As they say in these parts In Sha’ Allah (God Willing) next time.”
However, he thinks the market sell-off over the past two weeks has thrown up good value and said the Middle Eastern bank will look to raise up to $600 million for three Asia-focused funds next year. Kuwait Finance House is the Gulf third-largest lender.
Nasser al-Sheikh, chairman of the Dubai-based mortgage lender Amlak Finance, says he is aiming for a 70 percent rise in 2008 profit on increased lending at home and contributions from foreign operations.
Sheikh told Reuters Islamic Finance summit in Dubai that Amlak would be “more aggressive” in its core business.
Hussain al-Qemzi, Noor Islamic Bank chief executive, tells Reuters Islamic Finance summit that Islamic banks are now part and parcel of the global banking industry. Qemzi is seeking to expand his United Arab Emirates-based bank to become the world’s largest Islamic bank in five years.
Asif Mumtaz, regional head of HSBC’s Islamic finance arm HSBC Amanah, called for more innovation to move Islamic banking further towards the industry’s mainstream. Mumtaz told a Reuters Islamic Finance summit in Dubai that there remained plenty to do in the areas of regulation and human development.
When one of the leaders of General Electric’s real estate operations travels to scope out opportunities in the U.S. or elsewhere, he uses his plane’s landing as a chance to scan a city’s skyline for an overabundance of cranes.
Too much construction is often a bad sign, indicating excess supply and possibly disappointing prices, Alec Burger, head of GE Real Estate‘s North American lending division, told the Reuters Global Real Estate Summit. Of course, the parent company might not exit a crowded skyline emptyhanded — GE’s leasing arm helps builders obtain cranes worldwide.