LONDON: The Brent benchmark oil price held above $70 a barrel on Friday, broadly shrugging off a warning from the International Energy Agency that the spread of coronavirus variants is slowing oil demand growth.
Brent crude was down 18 cents, or 0.2 percent, at $71.13 a barrel by 1:32 p.m. GMT. US crude lost 14 cents, or 0.2 percent, to trade at $68.95. Over the week the benchmarks are up less than 1 percent.
The IEA this week highlighted that growth in demand for crude oil ground to a halt in July and is set to rise at a slower pace over the rest of 2021 because of surging infections from the Delta variant of the coronavirus.
Banks have also lowered their near-term demand forecasts. “We now see the global demand recovery stalling this month with oil demand only reaching 98.3 million barrels per day (bpd) in August and averaging 97.9 million bpd in September, on par with the nearly 98 million bpd average in July,” JPM Commodities Research said.
Similarly, Goldman Sachs has reduced its estimate for the global oil deficit to 1 million bpd from 2.3 million bpd in the short term, citing an expected decline in demand in August and September.
Looking beyond the near-term risks from the Delta variant, Goldman expects the demand recovery to continue alongside rising vaccination rates.
In sharp contrast, the Organization of the Petroleum Exporting Countries (OPEC) on Thursday stuck to its forecasts for a rebound in global oil demand this year and further growth in 2022, notwithstanding the rising concern over surges in COVID-19 infections.
But OPEC also raised its expectations for supplies next year from other producers, including US shale drillers, which could hamper efforts by the producer group and allies to achieve a balanced market.
“The IEA/OPEC duo are far from being unanimous when it comes to the oil demand front. However, one area in which they find common ground is the reducing demand for OPEC crude,” PVM analysts said in a note.
Oil holds above $70 despite forecasts for weaker demand growth
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Oil holds above $70 despite forecasts for weaker demand growth
- International Energy Agency warned that demand growth for crude and its products had slowed sharply
Egypt aims to attract Apple, pushing to solidify position as manufacturing hub
RIYADH: Egypt is making strides to become a manufacturing hub, with four of the top five mobile phone manufacturers — Samsung, Vivo, Oppo, and Xiaomi — agreeing to establish factories in the country.
Prime Minister Mostafa Madbouly emphasized these strategic initiatives during a tour of the 10th of Ramadan, the country’s largest industrial zone. The aim is to attract the fifth tech giant, Apple, to further bolster Egypt’s position in regional manufacturing.
Madbouly’s visit included several factories, including one specializing in producing sanitary devices at the highest standards for various international brands.
This stopover underscores the Egyptian government’s commitment, which President Abdel El-Sisi reinforced, to expanding and strengthening the industrial sector.
The prime minister noted the government’s efforts to attract significant global companies to Egypt, aiming to create high local value-added goods and foster a conducive environment for foreign investment.
He emphasized the state’s strategy to enhance communication with international investors and manufacturers, offering the necessary support to help them realize their expansion plans within the Egyptian market, particularly those targeting export activities.
This aggressive push to diversify Egypt’s industrial base and enhance its export potential is a key component of the nation’s broader economic strategy, aiming to secure a more prominent position in the global financial landscape.
The government is actively pursuing an increase in its investment attraction status as it aims to lower its import bill to reduce liquidity and foreign reserve pressures.
Earlier in May, global ratings agency Fitch revised Egypt’s outlook to positive from stable.
The agency affirmed Egypt’s rating at “B-,” citing reduced external financing risks and stronger foreign direct investment.
Since the country announced the International Monetary Fund loan program, foreign investors have poured billions of dollars into Egyptian treasury bills. After the investment in the country’s foreign portfolio and the support from the UAE, Egypt’s net foreign assets deficit shrank by $17.8 billion in March.
Fitch said that initial steps to contain off-budget spending should help to reduce public debt sustainability risks.
The country straddles North Africa and West Asia and has been grappling with an ongoing economic crisis linked to persistent foreign currency shortages. In the fourth quarter of 2023, its foreign debt climbed by $3.5 billion to $168.0 billion.
Meanwhile, Moody’s also revised its outlook on Egypt to “positive” in early March while affirming its ratings due to the high government debt ratio and weaker debt affordability compared to its peers.
Saudi delegation visits London to boost digital economy ties with UK
RIYADH: The digital economy ties between Saudi Arabia and the UK are poised to advance following the official visit of the Kingdom’s delegation to London.
Governor of the Digital Government Authority, Ahmed Al-Suwaiyan, engaged with leaders and officials from the UK’s public and private sectors, focusing on strengthening cooperation between nations in the digital economy and learning from shared global experiences.
During the visit, Al-Suwaiyan, also chairman of the executive committee of the Digital Cooperation Organization, took part in the Annual 21st Middle East and North Africa Conference. He delivered a keynote speech showcasing Saudi Arabia’s leading model in digital transformation, highlighting the country’s best practices and success stories in the digital government division, the Saudi Press Agency reported.
Al-Suwaiyan also met with key figures, including Alex Burghart, the parliamentary secretary for the British Cabinet Office; Julia Lopez, minister for data and digital infrastructure and Saqib Bhatti, minister for technology and the digital economy.
The meetings, attended by officials from governmental bodies and CEOs of major companies, focused on expanding the strategic partnership between the two countries in digital government.
Furthermore, the Saudi Ambassador to the UK, Prince Khalid bin Bandar bin Sultan, hosted Al-Suwaiyan and the accompanying delegation at the embassy. During the meeting, they reviewed DGA’s efforts in developing digital government services and discussed opportunities for enhancing cooperation.
Additionally, the governor met with Amal bint Jameel Fatani, a Saudi cultural attaché to the UK, the SPA added.
He also convened with a selected cohort of Saudi scholarship students at the Saudi Cultural Mission in London. During this interaction, he delved into key initiatives in digital transformation and outlined strategic directions for digital government.
Moreover, the DGA governor engaged with the students to understand their perspectives, addressing the specific challenges they encounter in navigating digital government services. This initiative aimed to enhance their digital experience, providing services aligned with their aspirations and ensuring their satisfaction.
The visit exemplifies the DGA’s commitment to fostering partnerships and strengthening its global presence. It underscores the organization’s proactive role in spearheading international initiatives aimed at achieving a sustainable digital economy. These efforts closely align with the objectives outlined in Saudi Vision 2030.
Fitch affirms Jordan’s BB- rating with stable outlook
RIYADH: Jordan’s macroeconomic stability has led to Fitch Ratings affirming its long-term foreign currency issuer default ratings at BB- with a stable outlook.
This confirmation highlights the country’s progress in fiscal and economic reforms, alongside resilient financing supported by its liquid banking sector, public pension fund, and international assistance, as outlined in a press release.
However, the country’s ratings are constrained by high government debt, weak growth, and risks in domestic and regional politics.
“Jordan has preserved economic and political stability despite significant external shocks, including social instability in the region (Arab Spring) and wars in neighboring countries (Iraq and Syria), but these shocks have led to lower growth and significant government debt build-up,” stated Fitch in the report.
It further noted: “A prolonged or expanded Gaza conflict, even if it does not involve Jordan directly, could weaken growth prospects and increase the challenges for debt reduction.”
The analysis also pointed out that current account deficits and net external debt higher than rating peers have negatively impacted Jordan’s position.
According to the US-based agency, a BB- rating signifies an elevated vulnerability to default risk, particularly in the event of adverse business or economic changes.
This rating also indicates that there is business or financial flexibility in the country that supports the servicing of financial commitments.
Fitch further noted that Jordan’s government maintains its commitment to advancing its three pillars: economic, public administration, and political reform agenda despite the external challenges.
The report added that Jordan’s economy expanded by 2.6 percent in 2023. However, the rate of growth is expected to contract to 2.3 percent this year, driven by lower tourism inflows, weaker external trade performance, and continued regional political uncertainty.
Fitch noted that if geopolitical risks ease, the country’s economy is expected to grow by 2.8 percent in 2025.
The credit rating agency also highlighted that Jordan’s general government deficit increased to 3 percent of gross domestic production in 2023. This reflects a wider central government deficit, which stood at 5.2 percent of GDP.
“We project that the deficit will ease to 2.6 percent and 2.4 percent in 2024 and 2025, respectively, as expenditure restraint will balance lower-than-budgeted revenue growth and higher interest payments,” added Fitch.
Saudi Arabia woos investors with lucrative business environment
- Vision 2030 aims to reduce the nation’s dependence on oil, diversify its economy, and build a vibrant society
RIYADH: With an average growth rate of 4 percent over the past seven years and an upward trajectory buoyed by a pro-business environment, Saudi Arabia has demonstrated remarkable resilience amid global economic challenges.
Given its strategic location, robust economy, and ambitious Vision 2030, it’s hardly surprising that the Kingdom stands as a beacon of progress and growth in the region.
A key to this has been attracting foreign direct investment, as well as working on agreements with neighboring countries to ensure Saudi Arabia is seen as being open for business.
Economist and policy adviser Mahmoud Khairy told Arab News that the Kingdom has “enhanced trade relations and reduced barriers” in this regard as it seeks to put its Vision 2030 strategy into action.
That plan aims to reduce the nation’s dependence on oil, diversify its economy, and build a vibrant society.
Khairy added: “The Kingdom has already started to take serious steps to capitalize on its exceptional location through the establishment of logistics and free trade zones, coupled with efforts to diversify the economy under Vision 2030, attracts foreign investment and fosters trade partnerships.”
Khairy emphasized that investments in digital infrastructure and e-commerce platforms have further modernized the Kingdom’s trade ecosystem, enhancing its connectivity with global markets.
Furthermore, he said, tremendous efforts have been made to advance the financial ecosystem, with new measures planned to improve the ease of doing business and develop the investment environment further.
Khairy’s analysis was echoed by Saudi-based economist Talat Hafiz, who told Arab News: “One of the main pillars of Saudi Vision 2030 is to create a business environment that supports economic growth in the Kingdom and attract FDI as well as diversify the Kingdom’s economy. The only way to reach such a goal is through facilitating doing business and trade.”
Gateway to global trade
Situated at the crossroads of Europe, Asia, and Africa, Saudi Arabia boasts a strategic geographical location that makes it a natural hub for international trade, giving it a unique advantage when it comes to Asia-Europe commerce channels and distributing goods through the Arabian Peninsula.
With access to over 424 million consumers within a three-hour flight radius, the nation serves as an efficient gateway to markets spanning three continents.
The Saudi freight and logistics industry, supported by state-led investments in infrastructure, is a vital component of the Kingdom’s economic landscape.
Saudi Arabia has undertaken extensive expansion and modernization efforts at its ports, such as the King Abdulaziz Port in Dammam and the King Abdullah Port in Jeddah, incorporating cutting-edge technology for efficient cargo handling.
Khairy said that the development of such modern ports “increases the country’s capacity to handle large volumes of cargo, thereby improving efficiency and reducing transit times for goods entering and leaving the region.”
When compared to many Western countries, Saudi Arabia’s corporate tax rates are notably lower, with certain industries and regions even benefiting from tax exemptions or reduced rates.
Mahmoud Khairy, Economist and policy adviser
Hafiz added: “With a combined total of 290 berths, Saudi Arabia’s ports comprise the Middle East’s largest seaport network that not only contributes a great deal to national growth but also showcases the Kingdom’s formidable regional and international standing.”
He went on to emphasize that the country’s ports are capable of accommodating any form of vessel, which is what drove the Saudi Port Authority, also known as Mawani, to provide specialized terminals for various types of loads.
Furthermore, substantial investments are being made in expanding rail and road networks to enhance connectivity and streamline the transportation of goods domestically.
According to Khairy, the expansion and improvement of transportation networks, including roads, railways, and airports, enhance connectivity both domestically and internationally.
“This seamless connectivity facilitates the movement of goods and people, supporting supply chain efficiency and enabling businesses to access global markets more effectively,” he added.
Saudi Arabia’s well-established logistics infrastructure offers unparalleled opportunities for logistics companies and manufacturers looking to capitalize on its strategic advantages.
Business-friendly environment
The Kingdom offers a business-friendly environment characterized by stable economic policies, government incentives, and a youthful, tech-savvy population.
Hafiz noted that Saudi Arabia “jumped significant places in the World Bank’s Ease of Doing Business index and IMD, making the Kingdom among the world’s top improvers.”
Ease of Doing Business index ranked economies from 1 to 190, with the Kingdom standing at number 62 in the final report issued in 2020.
Saudi Arabia ranked 30 in 2023’s IMD World Digital Competitiveness Ranking, which assesses the capacity and readiness of an economy to adopt and explore digital technologies as a key driver for economic transformation in business, government, and wider society.
The government, through Saudi Arabia’s General Investment Authority, also known as SAGIA, offers various incentives to attract foreign investors. These incentives comprise low corporate tax rates, streamlined business regulations, and robust infrastructure development.
“When compared to many Western countries, Saudi Arabia’s corporate tax rates are notably lower, with certain industries and regions even benefiting from tax exemptions or reduced rates,” Khairy pointed out.
He went on to say that “the digitalization of bureaucratic processes makes it easier for investors to navigate the business environment and set up operations in the country.”
The incentives play a significant role in investor decisions by enhancing the attractiveness of Saudi Arabia as an investment destination.
Businesses are drawn to markets with favorable tax regimes and simplified regulatory frameworks, as they contribute to higher profitability and operational efficiency, according to Khairy.
Hafiz added: “These developments, which are aligned with Saudi Arabia’s Vision 2030, will hopefully increase FDI’s contribution to the Kingdom’s gross domestic product from 3.8 percent in 2016 to 5.7 percent by 2030.”
With this, Saudi Arabia presents lucrative opportunities for foreign investors and entrepreneurs seeking to establish their presence in the region.
Furthermore, initiatives such as the establishment of special economic zones and the growth of the venture capital sector underscore the country’s commitment to fostering innovation and entrepreneurship.
The VC sector has over 80 active firms, with more entering the market, highlighting the commitment to nurturing innovative startups.
Adding to this, the continuous infrastructure development initiatives like NEOM and Red Sea Global underscore the dedication to establishing top-tier business environments and fostering opportunities across diverse industries.
Over 200 international firms, including Northern Trust, PepsiCo from the US, IHG Hotels and Resorts, PwC, and Deloitte from the UK, have opened their regional headquarters in Riyadh.
The Kingdom had previously announced that it would not award any deals to any foreign company or commercial entity with a Middle Eastern base outside Saudi Arabia starting from January 1, 2024.
Driving innovation through technology
Embracing the transformative power of artificial intelligence and machine learning, Saudi Arabia is spearheading initiatives to harness these technologies for economic growth.
Under the leadership of Crown Prince Mohammed bin Salman, the nation is investing in AI research, education, and infrastructure to propel its industries into the digital age.
According to Khairy, collaboration between academia, industry, and government can harness AI’s potential to enhance productivity and competitiveness across sectors.
AI adoption can lead to new products, services, and business models, optimizing operations and decision-making, he explained.
Generative AI, a cutting-edge technology, holds immense potential for revolutionizing supply chain and procurement operations in Saudi Arabia.
The National Strategy for Data and AI, initiated in 2019, outlines the country’s commitment to advancing AI capabilities and data-driven decision-making.
Generative AI, powered by large language models like OpenAI’s ChatGPT and Google’s BERT, stands out as a transformative technology with the potential to revolutionize supply chain and procurement operations.
Within the context of Vision 2030, generative AI aligns with goals of economic diversification, localization, and sustainability, positioning Saudi Arabia as a key player in international supply chain management.
“The new National Industrial Strategy of the Kingdom not only focuses on raising the number of factories in Saudi Arabia to 36,000 but also improves its technological capabilities,” according to Hafiz.
A visionary path forward
As Saudi Arabia continues its journey towards economic diversification and innovation, it remains poised to emerge as a global leader in business and technology.
“I believe that the sky is the limit when it comes to business opportunities in Saudi Arabia, especially in economic sectors that could add value to the Kingdom’s economy such as advanced technologies: AI, digital economy, internet of things and other sectors, especially advanced renewable energies,” Hafiz said.
Saudi Arabia’s youth population, combined with its dedication to education and technological advancement, positions it as a powerhouse of talent and innovation.
In the era of supply chain diversification, Saudi Arabia has emerged as a compelling rival in the global logistics market. The Kingdom presents an attractive proposition for businesses seeking to optimize their supply chains and expand their global footprint.
As Saudi Arabia continues on its path to becoming a global supply chain hub and a leader in AI and machine learning, it is prioritizing programs that equip its youth with the skills and knowledge required for these transformative job opportunities.
By all accounts, Saudi Arabia can leverage generative AI to not only enhance its supply chain and procurement processes but also empower its youth to thrive in the workforce of the future.
“The technology sector is experiencing rapid growth, driven by government initiatives and increasing investment in areas such as digital transformation and artificial intelligence,” Khairy said.
The rise of the Saudi perfume market
- Sector mirrors the Kingdom’s opulent lifestyle and its people’s historical connection to scents
RIYADH: Saudi Arabia, with its rich cultural heritage and burgeoning economy, presents a complex study of contrasts and traditions, particularly in its luxury perfume market.
This sector, deeply ingrained in Saudi society, mirrors the Kingdom’s opulent lifestyle and its people’s historical connection to scents.
With the market’s valuation at $1.8 billion in 2023 and anticipated growth to $2.6 billion by 2032, the Kingdom’s perfume industry is a testament to the cultural significance of fragrance.
According to data from the Ministry of Commerce, exports amounted to SR416 million ($110.9 million) for 10 months of 2023, compared to imports, mostly from European countries, amounting to SR1.1 billion during the same period.
The rise of locally produced Saudi perfumes poses an opportunity for investors no longer restricted to international brands.
The number of commercial registrations granted to practice the manufacturing and bottling of perfumes in Saudi Arabia further demonstrates the rising tendency of citizens to invest in the industry.
According to data from the ministry, the number of existing commercial records for perfume manufacturing activity in the Kingdom reached 1,263 by the end of 2023.
Moreover, the push for female empowerment and increased tourism are expected to buoy the market further, making it an appealing sector for investors and entrepreneurs.
An inclination toward luxury and tradition
In the heart of Saudi Arabia’s scent market lies a preference for luxury and tradition. Premium products dominate the scene, reflecting a societal penchant for high-quality ingredients and prestigious brand associations.
Chandra Mohan, the assistant vice president at research firm P&S Intelligence, told Arab News that the demand for premium fragrances is increasing due to rising personal disposable income and surging consumer awareness about the benefits of using extravagant perfumes.
Data gathered by his firm revealed that the luxury category held the larger share of the Kingdom’s scent market in 2022, accounting for almost the entirety of the sector at 90.9 percent.
“Premium perfumes are made up of high-quality ingredients, which differentiate them from other cheap products. These are also concentrated and long-lasting and are designed to evolve and offer more sophisticated and refined experience,” Mohan explained.
“Nowadays, people are also becoming more conscious about brands and shifting toward quality and premium products, as they have high spending power. Thus, the growing usage of premium products is contributing to the growth of the market in the country,” he added.
The inherent quality and luxury of the Saudi perfume market, driven by the cultural significance of scents such as oud and musk, have contributed to the industry’s success.
With their complex profiles and traditional ingredients, Arabic perfumes command a significant market share.
Their popularity is a nod to the region’s cultural heritage, where these fragrances are more than just scents: They are a bridge to the past and a celebration of Arab identity.
Demonstrating this, oriental perfumes accounted for the largest revenue share of the Saudi perfume market, accounting for 65.77 percent in 2022, according to a report by P&S Intelligence.
The report further noted that this category is expected to grow by 6 percent from 2023 to 2030.
FASTFACTS
• With the market’s valuation at $1.8 billion in 2023 and anticipated growth to $2.6 billion by 2032, the Kingdom’s perfume industry is a testament to the cultural significance of fragrance.
• The number of commercial registrations granted to practice the manufacturing and bottling of perfumes in Saudi Arabia further demonstrates the rising tendency of citizens to invest in the industry.
The craftsmanship behind these fragrances, often passed down through generations, adds layers of depth and sophistication, making them highly sought after locally and internationally.
The inclination toward premium fragrances connects back to deep-rooted cultural practices where perfumes served as an extension of personal identity and social standing, the owner of Saudi perfume brand “Nabdh,” Zaynah Al-Hamza, told Arab News.
The digital age and celebrity branding
The digital landscape has transformed how perfumes are marketed and sold in Saudi Arabia.
E-commerce, bolstered by the pandemic, has become a critical channel for reaching consumers, with many brands expanding their online presence.
“In recent times, developments in information and communication technologies, particularly social media, have revolutionized the way marketing activities take place. Social media has surfaced as a cost-effective and efficient information exchange platform for all,” Mohan said.
“Celebrities are also promoting several brands on social media and people are increasingly buying those products because of celebrity influence,” he added.
In March 2023, Portuguese influencer Georgina Rodriguez starred in social media adverts for Saudi fragrance brand Laverne, which later collaborated with global supermodel Taylor Hill.
Perfume companies partner with celebrities to increase brand awareness and drive website traffic and sales, the P&S global report said, adding that this tactic also aids in generating engagement, creating a community, and serving as a channel for customers.
This shift has made the Saudi luxury perfume market more accessible and has opened up new avenues for brands to engage with their audience through social media and online marketing.
The interplay between tradition and modernity and embracing digital methods sets the stage for a dynamic future in the Saudi fragrance industry.
The unisex phenomenon
Unisex fragrances, capturing the largest market share, indicate a progressive shift in consumer behavior. This trend underscores a growing acceptance of products that transcend traditional boundaries, with scents like oud, musk, and amber being used for scents that appeal to all customers.
“Another key trend observed in the market is the rising demand for unisex perfumes. This is because people have different tastes and a large number of individuals are looking for an aroma that is not only feminine but also masculine,” the P&S analyst said.
“Moreover, anyone can wear them, and it allows sharing and swapping collections among different genders. Furthermore, unisex perfumes are neutral in odor and millennial consumers are mostly choosing products with inimitable fragrances in order to build up their personality and individuality,” he added.
These preferences highlight the changing landscape of the Saudi market, which, despite its traditional foundations, is receptive to modern influences.
