tv Best Of Bloomberg Markets Middle East Bloomberg April 28, 2017 7:00pm-8:01pm EDT
♪ >> welcome to the "best of bloomberg markets: middle east." i am tracy alloway. , the saudiurse arabian king scaling back on us stayingrogram for allowances for employees long accustomed to government handouts. a takeover swelling to 400 airplanes worth $14 billion. we hear from the ceo. we also spoke with qatari
finance ministers about the investment strategy in the face of loyal oil prices -- facebook of lower oil prices. first, he was critical of the eu saying turkey was tired of being treated like a wayward student and calling for greater honesty on thei. provide financial support for over 3 million refugees in turkey and the visa waiver, these have been left in limbo. there was supposed to be a support of 3 billion euros. the amount sent is 790 million. it whereen a year or is 3 billion euros. the visa waiver was going to build implemented at the end of june last year. there's nothing to be seen.
that is also not going to happen. in addition to all of this, we see finger-pointing at turkey with instructions to do this and not to do that, as if they are the teachers and turkey is their student. that kind of thing will not be accepted by this nation. the interest for the eu and turkey. we think this has been intentional. they cannot say they don't really want us in the union. they are trying to distance us with these actions. we have not entered and are not in a position to exit it. >> are you interested in continuing to push for membership, or are you changing your mind and want to go with different path? what is your ideal solution?
>> we invite the european union to honesty on the issue of membership, first of all. they shall determine their vision of the future first. will they continue to walk with turkey or not? we will see their decision and determine our own path. there are elections in some members of the eu now. the rhetoric is very different. we will see of those different types of rhetoric will continue after the elections are not. -- or not. it is clear what some members of the eu did before the referendum . therefore, the eu should determine a future vision for itself before these things can proceed on a healthy path. it should put forth what kind of path and wants to walk on with turkey, or won't.
this nation needs to find out what goes on in their heads. do they see europe as a union of religion? they need to put it forth earnestly. if they have the idea that a non-christian country has no place in this union, otherwise there no point in both sides wasting time. tracy: we hear from the finance abouter of qatar consolidating 2 sovereign wealth funds and consolidating a giant. this is bloomberg. ♪
qatar's successful projects in the u.s.. >> in 2015, there was no discussion of the investment and infrastructure. we like what we see in the u.s., infrastructure, and we will look forward to doing more things. >> when you think about investments, do you think of it is a typical portfolio manager, or the way governments would foreign aid? to wield influence in a certain region? , itf you look at what we do is truly commercially-driven we go where we think we will have value. it also goes with asset diversification, currencies, we like what we see here. we have performed well in the last two years. hopefully, we can continue that same strategy the u.s. >> in the market we have today
that is risk on and risk off, how do you find diversification? 2008-2009, what we did in europe and other parts of the world, most investment is long-term strategy and holding. that is how we would like to look at it in the u.s. we have seen the markets rally in the last three or four months . we are happy with it, and will continue investing here. work, do youney to look for some of the large venture capital firms in silicon asley to partner with them they go through startups and joint ventures? >> most of our ventures here are through partnerships with people. i just came from washington, d.c. we have a real estate investment there. when we started this, it was a difficult project on paper. we moved in.
best it is one of the projects we have in the states. this is the way we would like to see more investment in the u.s. if we can't find the right partner. financial times is reporting it is a deal for lower oil prices, you are rolling in safer assets to diversify. can you confirm that? standyou look at where we enjoyingices, we are $52, this is average. we are comfortable with oil prices. others manage much lower oil prices. we are comfortable with where we see the oil prices. for our budget, we are expecting a minimum deficit. if oil prices remained in this range, we are close to our
breakeven point. is making financial changes. it looks to bring its economy in line with conditions to a loan from the imf. -- poke with >> we are rebranding egypt, improving the business environment, making sure more investment comes from the u.s. and other countries. we are putting forward investment loans. mainly to remove the bureaucracy which investors have had concerns about. >> there has been concern about the rule of law for foreign investors coming in. what is the timetable for those reforms? >> we are moving very fast.
we know it is time sensitive. they are discussing the beentment, it has finalized in the assembly. the other is in the pipeline. we're looking at the legal framework. it is not only the investment, it is others that are in the debt inclusion. three days ago we amended the that weatherow dress many concerns regarding minority shareholders rights, for example. allowing new financial products to allow for diversification and financial inclusion. that is one problem the private sector has faced in the last decade. a egypt has been given guarantee on the loan from the imf. do you have an estimated time on when the third will be released? >> we have been working closely with the world bank on the
program that supports major economic reforms, unprecedented reforms, that have been labeled as the most ambitious in the region. we have 2 trenches based on a program that is homegrown prepared not only by the government, but in consultation with people. stakeholders, the private sector, and discussed extensively. , i met with the managing director of the vice president. we were there finalizing the package that focuses on improving the business climate and government. that is one area that political leadership is dedicated to accomplish. ,> if you are going to predict is it weeks or months for the third tranche?
>> another four months to finalize. we just released the second tranche. the operation process of the bank is there is a time tranches.een the .> we are joined by the founder it is great to have you back on the program. we just heard some of the realities when it comes to foreign investments in egyptian equities. you can see in terms of net flows, inflows into egyptian equities, one side of a recovery story. is the country doing enough to make its case to the global investment community that this is a place that is stable, where you can find yield all your capital? >> the inflows follow the
depreciation of the ejection pound. everyone anticipated a big depreciation. outflows, now you have inflows coming in accompanied by broad reform. taxation, capital markets law, investment law. there is a broad reform agenda. it is encouraging to get a professional, an economist by formation. it is good to have a woman in charge, i might add. what do you see is the egyptian economy responding to these measures. they are hard measures. there is a cut offer subsidies. j-curve.l be a read the beginning of a turning point. curve. j-
the imf said you might have to look at monetary policy tools to curb the inflation levels. 13.9% year-over-year in march. is the central bank going to step in? ofthere has been a buildup reserves. this comes as a result of the depreciation. there is a beginning of a return in confidence. the financialnd institutions and the countries of the gulf sea egypt does a country that is too big to fail. next, more acquisitions in the pipeline. this is bloomberg. ♪
returned to capital and are embarking on a path of acquisitions. the chairman told us about the company's plans. >> the main issue in the past has been the portfolio. we focused on streamlining the has beenrtfolio that improved tremendously. it has been the largest contribution or stick q1. -- contributors to q1. we made the company more efficient. all of this is a positive. q1 is just the start, hopefully. >> up more than 100% over 12 months. it is difficult to aggregate that a better financial performance from some of the acquisition rumors around the company. can you tell us if you are thinking about doing something with gfh?
if not gfh, what do you have in mind? >> part of the global strategy is to grow through m&a. that has been announced as part of the new strategy. we considered a merger with gfh. we always look at opportunities for acquisitions that will be beneficial to shareholders. this is something we look at. i expect in the next weeks or months we will hear something regarding acquisition. >> great to have you on the program. in terms of gfh, what are the talks looking like? what is included? we have had a few discussions in the past. we have stopped discussions at the moment. we are focusing on other aspects of the group.
a lot of conservations and acquisitions in the pipeline for gfh. we might revisit talks of they merger between shauaa and gfh, but there is nothing certain at the moment. at 2017 and going forward, given the geopolitical risks in terms of rising restrictions,rade travel restrictions, where are you prioritizing asset allocation? past two years, since the start of the decline of the oil price, we have seen an opportunity of asset repricing. is the focus currently. i believe over the next 24 months we see a lot of opportunity. , compared to
anywhere else globally, is the best at the moment. >> do you expect more brokerage activity? ideas to move into asset management since you are as bullish as you are as a company, when it comes to saudi arabia and egypt? has been in financial services and investment banking, asset management. our strategy is to revive that. is something we are considering for saudi arabia and egypt for shauaa. will terms of what rekindle more transactions in this part of the world, what will be the next catalyst? domino effect a in the gcc and africa as well? 2017.are optimistic for i believe q2, q3, and q4 will be
more active. theme will be mergers and consolidations. this is important. it started last year, and we will see more this year, and next year hopefully. this will be the catalyst for future activity in the region. >> chairman, there is one more big thing in the markets, the capital,o foreign especially in saudi arabia. even in abu dhabi we have seen efforts to attract foreign liquidity. has that been successful? if not, what more can be done? it is the most country that in the gcc.
similar steps have been taken by gcc countries. in my opinion, this will work out well. the region is attractive for foreign investment. inot of change is happening frameworks to be more amenable. >> with this opening to more foreign capital and your own turnaround at shauaa, who do you see as your main competitors in the region? >> a very good question. i don't inc. we have competition in the region. that is why we have taken over shauaa, because there is a huge gap in the market. there is no serious player. we will be the first serious player. we're waiting for competition, which is something positive if it happens. put it aside for
second, and if you could run me through your priorities outside of the middle east investment spectrum. what is interesting when you story, the brexit continental europe, the story in turkey? u.k. and know, the london, specifically, is an important focus. cheaperthere is a dollar, which is interesting for investors from countries like the gcc. we are focusing on real estate developments in london. this is something we will continue. it is something we like and is working well for us. you will see more focus in the u.k. >> does that mean additional acquisitions are on the table, additional expansions? >> absolutely. we have been looking at opportunities for the u.k.,
specifically london real estate. we are actively in discussions and seeking to consolidate and expand in the u.k.. andow much can you go out chase expansion plans? how many millions of dollars are ready to deploy? say it is not about the amount that we set aside. it is the opportunities that present themselves. the opportunities there. we will be going after them. for specifica set acquisitions to be made every period. as opportunities arise, we will go after them. this is what we will continue to be doing. a few years ago
♪ tracy: welcome back. i'm tracy alloway. as agent tries to come out of years of turmoil, toryism could be crucial to their success. 12% ofustry has employed the working population and contributed $12 billion to the economy every year. we spoke with egypt's tourism minister, mohamed rashed. mohamed: we have to look at it in the right perspective. generalns terrorism in is a global threat, is not actually, you know toward egypt only. we saw what happened in paris last week, what happened on and on and all these different
capitals of the world. i think with the efforts that the egyptian government has put together to offset all of the trials that have been in place, i think we have done a good job. i think doing a good job means we really are prepared to cut them off and make sure that people are comfortable coming to egypt. yousef: we have specifics in the numbers, you have an ambitious plan and the chart tells us where we are. where do you want to go, where do you want better to be in a year or two years? mohamed: the last quarter of 2016 has moved up comparatively. first-quarter seems to be very optimistic, you know, in terms of the number of tourists, it is growing in the right way.
tourism in coming is growing as well and therefore the market sources we are relying on now is well diversified to catch up with the desired growth that we have in place. rashaad: minister, when we look at these numbers, let's go back to 2003. have a look at that, i have a chart that goes back. the levels since 2004, the point is how do you make egypt attractive again for people to visit? toryism, weterms of all know this -- tourism, we all know this, number one we need to make sure that people understand where we position egypt in general. it has been well positioned for the people to return back the traffic in the right way. positiveeen a lot of
media as well and quite a lot of celebrities coming to egypt. all of this has helped the public image of egypt. one must say that we need to grow all the different aspects of the economy, but tourism is element on important the egyptian economy. rishaad: it is one of the cradles of civilization, the magnificent monuments across egypt -- going beyond that, there were a lot of russian tourists, are they coming back now after the referendum, shooting on the aircraft by militants? mohamed: one must understand we would love to see russians coming back very soon, but we are also depending on other markets. what we need to know is, you
need to grow the different markets to upset any of the markets that actually have gone down. yousef: what about interest you see in the country? how is toryism spread out -- tourism spread out? tourism, or the beach tourism keeping the numbers afloat? mohamed: i think it is the culture of tourism. the ability to grow. cairo, we areses, seeing this growing and we saw it in the last quarter of 2016 and the first quarter of 2017, and this is an indication that people are coming back to that trend. there is also indication that people see the threat of security as a global threat. yousef: in the past five years, the beach tourism was oil is
performing slightly better than the cultural tourism because of the security issues. do you expect that to continue? mohamed: you need to understand it as i diversified product, a product that basically depends on seasonality, and eight has its own clientele. therefore when you talk about diversity of market source, we need to consider where we can build up the volume again to where we want to see it growing. and it is important to understand our ambition is not limited to the target goals, our ambition is to grow more and more the business into the different markets. yousef: in terms of source markets, egypt has been popular it wasssia and the u.k., a destination for these countries. are you opening up to new ideas and strategies to make it more
budget oriented or maybe upper-class and luxury? mohamed: we have certainly seen a change in that direction. we see for instance cairo is luxurious a much more destination than it was before. growingeeing that -- is in that direction. in the tourism business, you need to build it one step at a time. we are seeing that growth, that basically we cannot depend on the resources only, we need to depend on the culture. we need to diversify. we are looking at me gult -- at the gulf, echo toryism, medical -- eco-tourism, medical tourism. you will see, they will produce little by little. rishaad: we just had a bit of
information come up saying that 2010 annual income from toryism was about 12 billion u.s. dollars, down to about $6 billion now. how much of that is currency effect? in terms of egyptian pounds, are you at the same level, because of the fall of the local pound? mohamed: you are right on this analysis. however, the 6 billion was just short of the number of tourists coming to egypt. once you see this number growing again, basically you are going to build back the tourism revenue. we certainly estimate that we will be able to catch up in 2017, slowly to bring back the income to where it used to be. with all therally, attractions in egypt, when they are in egypt do get them to
spend as much as possible? are you looking at the high end tourists more than the sun seeker? mohamed: we see this and cairo. we are seeing this -- in the egyptian products, the luxurious products in the north, that nows that our people they're interested in building this type of product and selling it as well. so egypt will see a recovery as well as increase in spinning. tracy: coming up, saudi arabia loosened the austerity built restoring businesses -- bonuses for government employees. we are live for that. this is bloomberg. ♪
royal decree restoring bonuses and allowances for state employees that were cut. he announced changes to several government offices. we were live in riyadh for the reaction. john: it is a bold move, but also a smart move. smart economic policy takes into account politics and consumers are going to be happy. saudis areat 65% of in the public sector, 3.5 million who will benefit from these additional benefits. that will translate into higher gdp growth, especially for the economy. i expect 0.5% percentage points benefiting because of these extra payments. yousef: the question is what this does to the macroeconomic growth figures. we put it on a chart to get a
better perspective and a sense of where the economic growth was and where it is today and we crossed it with a reference for crude oil, you can see the downside pressure and the imf revising the forecast downward. i look at what is being said with the moody outlook. so where does the economy go and how quickly can the policy change have an impact? john: in terms of the economy, it is an adjustment year and i think it was a little bit too harsh for society to digest. so they stepped a little bit back. but this is inbuilt of terms. in 2016, they saved about 80 billion reals. recently, the minister of finance announced he will be saving about 17 billion riyals this year. so this money could be put to better use, meaning it will be demand inquidity and
an economy that has been more difficult this year and last year in terms of consumption and demand. alloway ins tracy dubai. i wanted to ask you, what do you think has happened to the goal of reducing the budget shortfall, because it was not clear whether or not the decision to reinstate bonuses would actually conflict with the aim to reduce the budget ?hortfall by 30% this year john: a great question. i think the government will continue to have its goals on the balanced budget by 2020. remember next year we will have the -- coming into force, revenues will increase, additional fees, all of this must be adjusted with the demand factor and the economy must get a boost.
i think this is a boost and it will be positive for confidence, because what the economy was lacking was confidence and people were wondering, i am being charged more but what am i getting back? this is the gift back. reform policy, fiscal adjustment must take time and it is good to push back and readjust. tracy: i love that you brought up confidence, because confidence plays a huge role in the economy. take a look at this chart, another confidence based indicator. it shows a centrally saudi arabia's bank asset claims on the private sector, ie loans, and credit has been struggling over the past year, potentially because people were uncertain of what would happen to the economy in the face of low oil prices. now that we have these measures coming in, how do you expect that to affect bank lending in particular, a key part of
confidence in the economy? john: again, it is a great question. liquidity has been an issue, more like a year ago than today. banks have more money but they are not willing to lend as much as they did before. clearly, as there is demand pickup, and we will see this over the next six months, that is going to impact positively banks and corporate. however, there is a lag effect, it takes time for the banks to kickstart lending operations. it is all about confidence and i think we are going to be looking forward for the second half of the year, especially as we come close to ramadan, as more positive. i think demand on the consumption side, because it is about 40% of the economy coming from consumption, it is going to be positive and it will start again -- this confidence building measures that were
lucky for a year. yousef: what about the credit rating of saudi arabia? i am looking here and 11 months ago they pointed out that a renewed slump in prices would be loosening fiscal policy leading to a rapid drawdown and government assets having a negative impact on saudi arabia's profile. it enoughnough -- is for the agencies to look at this again? john: if saudi arabia has a fiscal deficit this year that is above the 17% that we saw last year, that will create alarms throughout the world and the rating agencies in particular. i am not so worried right now because we have enough debt go intoand they will the international market to raise about $15 billion in additional funding. i am happy because as they reduce the fiscal deficit, the
foreign reserves will not be declining as fast. that is a key issue because saudi arabia's currency is attached to the dollar. if they go to the international market, their 50% of debt in gdp to raise in funding, that is $110 billion of additional money that they can depend on in the coming years. dubai coming up, aerospace ubuys out a rival. meet the ceo, next. this is bloomberg.
firoz: this is a huge deal. we go from a company with 50 aircraftto over 400 by the end of next year. we expect to be in a different league in this business, in a business that allows us to build on a terrific platform we are getting with this incumbent, one that will allow us to become even more competitive in the future. and as you think about our business, there are 50 plus competitors in our business, so we can consolidation is a natural offshoot of what we are likely to see, because rationalization is better not just for us but for customers as well. yousef: in terms of financing were you able to do that with proceeds from standard aero and can you talk about the valuations. not discussing the value. for $2 standard aero
billion. some of that will be used for this. there will be a pairing up with committed debt financing that we have lined up. yousef: would you say you got a good deal? firoz: we think we have a price that is one of those rare combinations where we are happy and i think the seller is happy as well. it is a private equity seller that owned it for 10 years, which is a little bit longer than the typical -- hold. i think they are happy the business is in good hands with a long-term strategic owner, and we are happy we get the platform. yousef: give me a sense of this energy that could be involved -- synergies that could be involved. this is an opportunity for cost as well. firoz: we approached it from a consumer perspective. they have an amazing group of 100 people. we have a very dedicated group
of about 40 people. if you look at the business together, we will need every single one of them to make sure that our platform is growing and keeps growing in the future. what it does allow us is at this new scale we can price products better and we can offer a broader range of products to competitors and as we do that we withurselves more embedded customers and ultimately it means a better market position for us, a better market share. that is the real play more than the cost elements. cost, you pay twice for the same thing, you save it. but that is not what drives us. yousef: fair enough. let's tie it down more in terms of new aircraft customers and new airline types, what could we be looking at? firoz: combine the company will have 110 plus airline customers in about 55 countries. that is huge compared to where we are.
as we think about then how to put our combined strong capital position to work, you will see us extending capital and to all of the new products coming into the market. products from on productsareas, buying from those people. and you will see us concentrate on that and keep our discipline, but because of capital we will be able to do kind of bigger, stronger transactions which will mean more choices and flexibility for our clients. yousef: how much debt did you have to raise? firoz: we are not disclosing the separation, but whatever we need that did not come from internal resources, that is what we go to the market for. tracy: that is all for this episode of "best of bloomberg markets: middle east." a busy week ahead of us in the region. we will be here for the start of the trading week on sunday
♪ michael: coming up on "bloomberg best," the stories that shaped the weekend business around the world. on forf in france, risk investors. >> dare i say it, the political risk around the election. >> ecb keeping rates on hold. and getting an earful from shareholders. canada and the u.s. tangle on tariffs. >> this is the beginning stage of what is expected to be a long and brutal slog. >> with all the action, we have high profile reaction. >>