S&P Hopes GCC Aid Package Can Be Enlarged

Standard and Poor’s (S&P) announced yesterday that the $20 billion package pledged to the embattled countries of Bahrain and Oman by the GCC (Gulf Cooperation Council) may need to be augmented in order to achieve the desired result.

Creating Jobs Can Relieve the Tension

The aid package, which was promised earlier this month, will be distributed evenly between the two nations and will be used to create new infrastructure and develop housing projects, which will in turn create jobs and help bolster the economy, with the result ultimately being to calm the tensions these two countries are experiencing at the moment.

The concern of S&P is that the demonstrations and unrest will lead to a depression in the progress of the economies of those two countries.

“Protests and political instability are in our view likely to negatively affect economic performance and depress future growth prospects, particularly for Bahrain, in its role as an important financial center,” S&P said. “Oman will also likely be affected in this way. At this point, there remain questions as to whether or not GCC economic aid will be able to offset these political and reputational risks.”

Despite their doubts, S&P, which rates the credit risk of investments, still believes that the aid can improve those countries’ credit rating over the long haul.

Bahrain Risk Rating Reduced

Bahrain was already downgraded by three notches since the mass protests began there during February. Oman, which has had a less disruptive time, has not yet been downgraded, but S&P has Oman on watch. This is in line with the other major ratings agencies, Moody’s Investors Service and Fitch Ratings.

“We are of the view that the economic aid package, which we understand will be comprised of donations by GCC members, will not immediately affect Bahrain’s and Oman’s ratings or ratings outlooks,” S&P added.

“That said, we believe the package could contribute positively to the sovereigns’ creditworthiness over the medium to longer term.”

Gulf States Regaining Stability, At Least for Now

Sultan Qaboos bin Said

This past Sunday was the first trading day throughout the Persian Gulf region since the announcement by Gulf State foreign ministers that they were pledging $20 billion in financial aid to assist fellow Gulf States Oman and Bahrain, who have been facing civil unrest and anti-government demonstrations for the past several weeks. This boost has proved to be welcome medicine for the region, prompting a strong showing on the Gulf’s major markets. Dubai’s main market was the leader in gains with an increase of 4.3% up to 1,513 points.

Saudi Arabia Quells Mass Protest with Mass Show of Force

Another factor contributing to the improved market performance was the averted major protests which had been feared were going to appear in Saudi Arabia. But the Saudi main financial index increased by 1.5% to trade at 6,693 points. The much feared anti-government protests in Saudi Arabia were thwarted by a huge show of power and force by the Saudi security forces, thus, at least for the time being, quelling the national fervor to protest.

Oman Grants More Handouts

Helping to improve the optimistic market mood was the announcement that Oman’s ruler, Sultan Qaboos bin Said would be doubling the welfare payments to his citizens while also increasing pension payments. This is just the newest in a series of rulers offering improved financial entitlements to citizens as a result of the regional unrest which has been taking the Arab world by storm in the last few months.

More Power to the People?

The sultan has also agreed to grant lawmaking powers to the Oman council. This is a huge concession on the part of the sultan who has led Oman as a dictator for the past 40 years, with only himself and his cabinet able to create legislation. The Oman Council, until now, was only able to advice the sultan. Consisting of two parts, the elected Shura Council and the State Council, which consists of members who the sultan has himself appointed, giving legislative power to the council is a decision which came on the heels of shocking protests in Oman which left one person dead.

The concessions were met with mixed reactions on the part of the protestors, who continue to hold a vigil outside the Shura Council, some were skeptical while others were hopeful.

“It does not mean much at the moment. We will celebrate when the Shura Council is granted real powers in the running of the government,” protester Hadi Suleiman said.

Faiz al-Ashour, another protester, said: “It looks good and it shows that the protests are beginning to bear results toward meaning political reforms.”

Queen Beatrix in Oman to Plead for Captured Crew

Queen Beatrix of the Netherlands

The Queen Beatrix of the Netherlands decided to proceed with her previously scheduled trip to Oman despite the fact that three Dutch military personnel are being held hostage in Libya. However, the status of the state visit was reduced to a private dinner on Tuesday night, not only because of the hostage situation, but also because of the unrest which is also taking place on Oman itself.

Queen Beatrix Persuading Oman to Pressure Libya

Diplomats have told journalists that the hope for this royal visit is that Queen Beatrix can persuade Oman to put pressure on Libya to release the Dutch helicopter crew which was captured by Libyan forces during their attempt to evacuate foreign citizens from the embattled nation. The Dutch Prime Minister Mark Rutte has been negotiating for their release since their capture on March 3rd. Two others whom the crew was trying to evacuate were also captured at that time, but they have since been released and are out of Libya.

The Prime Minister stated that, “It is terrible for the crew of the Lynx helicopter. Everything is being done to make sure the crew gets home.”

Dangerous Mission Near Gaddafi Stronghold of Sirtre

The crew was captured near the town of Sirtre, a main stronghold of Gaddafi in the center of the country as the revolt there continues to escalate. A military historian, Christ Klep, maintains that the rescue mission was a surprise because of the extreme danger of landing a helicopter near Sirte.

“It seems to suggest it may have been a diplomat, for instance, or somebody of special importance anyway,” he told Radio Netherlands Worldwide.

“I would have thought you would want to avoid stirring things up in Libya and not attract attention to yourself.

“There must have been a reason they were prepared to take this extra risk and it was a real risk because it’s essentially impossible to defend one of those Lynx helicopters.”

Crew Treated Well

Canceling the Queen’s visit to Oman was not considered, as one diplomat explained, ‘Canceling the visit would have been the most stupid thing we could have done.’

Hans Hillen, the Dutch defense minister told MPs that the crew is being treated properly and all are in good health. This information was transmitted to him by the Dutch ambassador to Libya who was allowed to visit the hostages who are being held in Tripoli. Mr. Hillen continued to say that the crew’s good treatment is a positive sign that there is every reason to hope for a satisfactory solution to the situation.

Oman Air Employees Join National Unrest Movement

This past Sunday employees of one of Oman’s major companies took to the streets outside the headquarters of Oman Air in Muscat, not far from the Gulf state’s international airport in Oman’s capital city. This latest protest comes on the heels of several days of demonstrations in Oman demanding political reforms. Oman, together with Bahrain, the small island state in the Persian Gulf, have been the locales for the largest and most enduring outbursts of unrest in the Gulf states which is part of the general unrest transpiring in the Arab world since January 25th’s explosion in Tunisia and then in Egypt.

No Disruption in Flights

According to several witnesses about 100 employees at Oman Air joined together in the late morning hours to call for better working conditions. The national air carrier’s chief officer for corporate affairs, Philippe Georgiou stated that no flights were disrupted by the demonstration and that the airline is ready and willing to discuss issues with the protesters. Mr. Georgiou told the Associated Press that the demonstrators represented several corporate departments and they have a wide range of demands, one of which being higher compensation.

Mr. Georgiou said of the timing of the protest that, “The general environment is of people expressing their views … in the region.”

Watchful Eye on Oman

The other Gulf nations, especially Saudi Arabia, are keeping a wary watch on the unrest in their fellow regional states, especially Oman. Oman, along with Iran, shares the responsibility of controlling the crucial waterway through which 40% of the world’s oil tanker traffic passes, the Strait of Hormuz.
Oman Air services 41 destinations, mostly in the Middle East and India, with a few routes to Europe and Southeast Asia as well.

Government Shakeup

Protesters have come out to demonstrate throughout Oman, staging sit-ins and similar events, to call on the government to reform the economy and hold investigations into who is responsible for attacks on protesters. In response to the unrest, on Saturday Sultan Qaboos bin Said, the ruler of Oman, fired three key government officials in what was the second installment of government shakeups in the same number of weeks.

GCC Planning Aid Package for Oman and Bahrain to Quell Discontent

The Kuwaiti newspaper Al-Qabas reports today that the six-nation Gulf Cooperation Council are holding discussions about sending financial aid to two of its members who have been hit by demonstrations and protests, Bahrain and Oman, as the Middle East continues to show signs of instability and violence.

The other four members of the GCC, Kuwait, Saudi Arabia, Qatar and the United Arab Emirates are considering sending an aid package to help improve the economic and social conditions of their less prosperous neighbors. Together the wealthiest of the six GCC states are said to have about $1.35 trillion in surplus assets, gathered just in the past several years of high oil prices. The aid would be designed to help pay for housing for the needy, create jobs and improve public services in Oman and Kuwait.

Protests in Bahrain have been focused largely on demands for political and economic reforms, while the demonstrators in Oman are more concerned with political corruption and lack of jobs.

Some analysts are comparing this proposed aid package plan of the GCC with the famous Marshall Plan of the United States, which helped rebuild and support Europe in the aftermath of the devastation of World War II. The plan was named after the creator of the plan, the United States Secretary of State at the time, George Marshall.

One Wounded in Oman as Government Attempts to Disperse Crowds

Tuesday marked the fourth day of protests in the northern port city of Sohar in Oman. According to witnesses, about 200 to 300 people were on the road demanding jobs and political reforms when the army began shooting in the air. “Many people ran,” said one protester who asked not to be mentioned by name. “The man who was shot came to calm down the army.”

The shots fired caused the crowd to begin to disperse, but they soon reformed at a traffic circle near the port, and the troops pulled back.

On Monday the demonstrators successfully blocked the entrance to Sohar port, disrupting the export of the country’s life blood, oil. On average Oman sends 160,000 barrels a day out of the country.

Protests also spread to the capital city of Muscat on Monday. The demonstrations are a rare event in what is usually considered a ‘sleepy sultanate.’ Sultan Qaboos bin Said has ruled the country for over 40 years, and is surprised by the fervor he is witnessing in what is otherwise a stable society.

The sultan is acting to calm the tensions in his country, which erupted on the general wave of protests which are sweeping through the Middle East. On Sunday the sultan offered to create 50,000 jobs and offered unemployment benefits to workers out of jobs of 239 pounds/month. He has also said that he will investigate ways to give more power to the quasi-parliamentary advisory council.

Predicting the Economic Future of Construction in Egypt

As Egypt is going through the turmoil of reinventing itself, there is no doubt that this, at least for the short term, will adversely affect the economic marketplace there. It seems universally true that political instability leads to economic instability, and for now that is what can be expected in Egypt. However, the real question of importance is what to expect from Egypt, and the entire MENA (Middle East and North African) region in terms of long term economic development.

For the past several months, until the unprecedented events which took place in Egypt which caused the downfall of Hosni Mubarak, prospects for great economic development in Egypt looked good, especially in the construction sector. Many analysts are saying that these trends should continue, with the revolution being just a speed bump on the road to greater economic prosperity.

Since macroeconomic shifts are extraordinarily hard to predict, it is all we can but to wait and see which way the tide turns in the economic fortunes of Egypt and the rest of the MENA.

Libyan Unrest Threatening Oil Supply

As Libya tumbles into the unstable chasm of unrest, protests and violent demonstrations, the fear and uncertainty of such chaos is being felt in the cost of Brent crude oil, which climbed by $1 per barrel on Monday. Libya is a member of OPEC, and was the world’s 12th leading supplier of oil in 2009, and has the largest amount of oil reserves in Africa; according to the US Energy Information Agency there are 44 billion barrels of proven oil reserves there as of January 2010.

The protests are focused on ousting the leader of Libya, Muammar Gaddafi. Protests have spread to Tripoli, Libya’s capital city, where Gadhafi’s son promised to fight against the protestors until “the last man is standing.” His remarks were made in the wake of violent clashes which left scores of protesters dead in Benghazi.

Commenting on what the world can expect from the coming days as far as oil supply is concerned, Tony Nunan, a risk-manager for the Tokyo company Mitsubishi Corp said, "In the short-term there would be a negative impact. There will be chaos and a real concern that supply could be disrupted in Libya. The bigger issue is if it spreads to Saudi Arabia."

Stock Market Stalled as Bahrain Protests Continue

Not only do regimes topple and heads of state crumble in response to massive demonstrations in the Middle East, but so too does the equities market. As protests continue in Bahrain, political uncertainty is causing investors to step back and wait before taking risks on the purchase of stocks.

The Bourses will be open on Thursday in both Bahrain and Qatar but in other Gulf States the markets are scheduled to be closed either for the weekend or for a religious holiday.

Managing Partner of Dubai-based asset management company Frontlane Capital, Hashem Montasser commented on the poor reaction to the Egyptian crisis in the Gulf Region.

“Revolution in Egypt was shrugged off too easily by Gulf markets," he said. "Markets were mispriced in the sense that risk premiums have gone up, but equities prices didn't reflect that. Bahrain has become the catalyst to now re-price Gulf equities."

Calling the attack of an overnight encampment of protesters in a central square in Manama “real terrorism,” the leader of the main Shiite opposition bloc in Bahrain expressed his outrage, and also described seeing at least 50 armored cars traveling in the direction of Pearl Square in Manama.

Montasser added that, as far as investing is concerned, Bahrain has heightened risk for at least the next couple of months."

KSU Expanding into the Knowledge Economy

Saudi Arabia is taking major steps to establish an advanced research and educational center at King Saud University in Riyadh. Contracts have been signed to build two major research institutes at KSU which will be able to compete with other world-class research facilities.

In addition to the building plan a five year letter of understanding was signed with the world renowned textbook publisher Macmillan of the UK. Macmillan has agreed to provide KSU and its 55,000 students with a host of services which will include training for high-quality scientific editing; workshops on writing; and how to publish research papers for globally read journals.

KSU is committed to taking a leadership role in developing Saudi Arabia’s knowledge economy,” said Dr. Khaled Al-Rasheed, director of KSU’s Scientific Fellowship Program.