Thread: Archive News - Iraqi Dinar Think Tank - 06/05/09 - 04/09/09

Contacts between Iraq and the United Nations out of the money item VII

The Foreign Relations Committee in the House of Representatives of Iraq's contacts with the United Nations out of the money item VII. The Committee discussed at a meeting yesterday with the Lubaid Abbawi, however, and the Undersecretary of the Ministry of Foreign Affairs, Mohammed Abdullah, Chairman of the Legal Service Humaidi Security Council resolution No. 487 and the case of compensation with the State of Kuwait and the demarcation of the border with Iran and the Iraqi community in Denmark and the agreement with Britain.

According to a statement he was "already in the Foreign Relations Committee that a number of questions submitted to the Ministry of Foreign Affairs, some of which relate to developments in the relationship with the State of Kuwait has been the study questions at the Foreign Ministry."

The Commission called the meeting to remove the ambiguity in the case and a closer relationship with Kuwait during the visits of parliamentary and activation of parliamentary friendship committee between the two countries and the visit of the Minister of Foreign Affairs and some Iraqi officials to Kuwait. "

The statement quoted by "Al-Sabah," a copy of, the Chairperson of the Commission, Sheikh Hamam Hammoudi, confirmed in a press statement after the meeting: "The presence of serious efforts by the Government and the Committee on Foreign Relations to drive Iraq out of Chapter VII need to send clear messages reassuring the direction that Iraq is seeking to meet its obligations so that the Secretary-General to issue a statement which asserted that Iraq no longer poses a threat to international security. "

He went on: the move to block this issue will hinder all efforts, especially as there was a move to keep the Kuwaiti parliamentary Iraq under Chapter VII and will have a presence in the United Nations to push in this direction that Iraq meet its obligations and perform its obligations to Kuwait. "

The crisis erupted between the two statements following the movements of the civilian adviser to the Kuwaiti Amiri Diwan Mohammad Abdullah Abul-Hassan to the members of the Security Council to prevent the lifting of international sanctions on Iraq, which is unacceptable, several deputies, asking to pay compensation to Kuwait due to Iraq's past policies and the confiscation of tens of kilometers of the territory of the country, while the Republic and called on President Jalal Talabani and Minister Nuri al-Maliki, to resolve the outstanding issues with Kuwait through bilateral dialogue, the latter refused to do so.

Hammoudi revealed several contacts between Iraq and UN Secretary-General to confirm Iraq's commitment to international resolutions as a prelude to taking the country out of Chapter VII, "explaining that the drive Iraq out of Chapter VII requires the movement of the two levels of the international Security Council and at this level there is a political decision to form a joint committee of high chairmanship of Minister of Foreign Affairs of the parties, and internal, as the responsibility of the parliament in its role in support of the Government of the diplomatic and the compressor towards the highest interests of Iraq, thus contributing to achieving this goal.

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Iraq to pay during the past 19 years about 25 billion dollars in compensation to Kuwait, and Iraq is taken 5 to 8 dollars in oil revenues of Kuwait
According to a report by Al-Hayat that the payment of Iraq over the past 19 years about 25 billion dollars in compensation for the loss of the invasion of Kuwait, some compensation for psychological damage, or legal, not physical,

The Iraqi government says in this regard it is submitted dozens of requests in the form directly to Kuwait and the United Nations and through the American side, too, is not to press for the abolition of the Compensation of Kuwait, but only to reduce the percentage deducted from Iraq's oil revenues, a 5 percent. In a flurry of high oil prices, Kuwait, according to an Iraqi official added approximately 5 to 8 dollars per barrel of oil by Iraq, meaning that the amounts deducted

Increase with higher oil prices

Iraq also provided all the information and assistance required to reach the results in the case of the missing Kuwaitis during the war, which is the second outstanding issue between the two countries. The Kuwaiti parliamentarians and journalists on the tone of escalation, the Iraqi position of Kuwait that Iraq would emerge from Chapter VII arrangements «confrontational» in veiled threats on the border. And the severance of relations and requested compensation for the «occupation of Iraq», with parliamentarians, journalists found that the Iraqi-Kuwaiti hardline position toward Iraq finally features a «revenge» rather than a political or legal.

Left the Iraqi government for the first time to the wave of accusations of Kuwait into a range, and were aware in advance that's ambiguous political situation between the two countries need to be calculated to illustrate the shock positions. Iraqi and Kuwaiti governments committed themselves to exercise restraint during the crisis and announced that a search of the controversial issues will not be through the escalation of media outlets, but through diplomacy alone, and this attitude may have helped to contain the crisis and prevent the expansion of mutual accusations of war, which started from both sides as had been waiting for over the past years, an indication of the explosion. After the official position of the Iraqi most obvious facts that the Iraqi people, as well as the political center, who opposed the Iraqi invasion of Kuwait in 1990 does not assume responsibility for such an adventure of Saddam Hussein.

Beyond that, the payment of Iraq over the past 19 years about 25 billion dollars in compensation for the loss of the invasion of Kuwait, some compensation for psychological damage, or legal, not physical and that Iraq provided all the information and assistance required to reach the results in the case of the missing Kuwaitis during the war, a second file outstanding between the two countries.

The vision of Iraq, Recalling also that the Iraqi government was quick with the start of 2004 to the formal recognition of Kuwait, a move which would happen in Baghdad since the beginning of last century, as Iraq formally recognized the common border and the remainder of the files can be resolved within the framework of bilateral relations and not under the international umbrella. It does not seem far from the position of Kuwait in recognition of the steps before the application of Iraq to its obligations under relevant international laws invasion of Kuwait, but the Kuwaitis who have been subjected to the shock of the invasion and the attendant crimes wish also recalls that the application of the official positions of Iraq is fully legal obligations and that there is something that is caught in All common and requires the survival of the relationship between the two countries under the guise of the United Nations.

Reading «responsible» for the reactions of Iraqi parliamentarians to seek Kuwait to keep Iraq under Chapter VII of the season as the Iraqis appropriate arrangements for the disposal of the international sanctions long disastrous results for the Iraqi people should be pointing to specific situations:

Been escalating Iraqi positions from all Iraqi political blocs, without exception, even those that emphasize the Iraqi government they prey on Zladtha or politicize the issues of Iraq to suit the propaganda campaigns, and this is what I have attempted some analysis say about the relationship between the crisis and the will of regional or American. Those positions have been issued in a difficult economic transition of the Iraqi budget led to the suspension of a large number of reconstruction projects that have become standard for the success or failure of the electoral rhetoric of political parties in Iraq.

Some reactions to the Iraq used the same threatening tone used by the former Iraqi regime, but some said that Iraq sought compensation of up to 400 billion dollars from Kuwait, the facilities provided by the U.S. invasion in spite of this invasion is the political classes to carry the current to the parliament and the government. In spite of the religious attitudes tend to calm the situation, the reactions of the Iraqi media were significant and unexpected, but that the older the book the Iraqis involved in the campaign to denounce the attitudes of Kuwait, which he said some of it was seen as «the spirit of revenge against the Iraqi people».

The Iraqi government does not hide the resentment of the implicit assignment of the successive governments of Kuwait since the 2003 issue, the relationship with Iraq to the Kuwaiti Parliament in the form of lasting peace in the regional environment where governments claim to comply parliaments like Pennektp political slang. According to one of the politicians close to the Iraqi issue - that the Kuwaiti diplomatic bilateral dialogues have been completed in the form of frequent inter «case, however, the Kuwaiti Parliament», and the only political show significant signs of exclamation. It seems that the Iraqi government has become more sophisticated in the management of this file through the use of paper and pressure themselves, with formal confirmation to the fact that the parliamentary and do not reflect the Government's point of view that necessarily, it seems another sentence in the dialogue Traded Iraqi - Kuwait.

The Iraqi government says in this regard it is submitted dozens of requests in the form directly to Kuwait and the United Nations and through the American side, too, is not to press for the abolition of the Compensation of Kuwait, but only to reduce the percentage deducted from Iraq's oil revenues, a 5 percent. In a flurry of high oil prices, Kuwait, according to an Iraqi official added approximately 5 to 8 dollars per barrel of oil by Iraq, meaning that the amounts being higher with higher oil prices. In spite of what is the emotional overlap with what is political in the recent crisis, the real political considerations call for a reconsideration of the dossier of the relations, Iraq - Kuwait to establish a balanced relationship in the long run and that seems to feature the official discourse on Iraq in spite of all the intersections, which believes that Kuwait is seeking to relations more than an attempt to troubled investment variables to ensure that the Iraqi unloading cargo between the two hostile neighbors of the content.

Iraqi Interior Minister Jawad Bolani was touched with the «life» to the essential point is missing from the flurry of recent conflicts in attitudes. The Bolani «Kuwait and the reality is that most countries in the region committed to the security of Iraq, whether at the level of border control and prosecution of hackers or the issue of joint security cooperation».

On the other economic reports suggest the Iraqi Kuwaiti companies that have had the lead in investing in Iraq, Kuwaiti investors have grounds for major economic projects in most provinces of Iraq, but the company «Zine» Kuwait Telecom won half of the Iraqi telecommunications market, although the Iraqi government Aqubtha recently estimated at 25 million dollars because of bad service.

Many of the media in Iraq takes on the continuation of the Kuwaiti media in the tone of hostility to Iraq, according to a book it needs the brakes had exceeded its limits. Spend some of the Iraqi Journalists consistent with the theory of government to say that press freedom «unrestricted» not available except when talking about Iraq and the Iraqis, then the available insults and humiliations of the people of the whole!

Of course, tax the occupation of Kuwait, a serious crime that are not condoned by the Iraqi regime of Saddam Hussein, had been paid in various forms is also a need to re-evaluate its collapse and prevent its conversion to a permanent thorn in bilateral relations. The good news two weeks after the restoration of the painful memories that the governments of the two fraternal peoples, just as aware that the sound bilateral relationship based on mutual respect, cooperation and integration in the regional environment is volatile as a strategic rather than political choice only.

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Maliki after his authority: Iraq on the verge of significant developments

Prime Minister Nuri al-Maliki, the full authority of Imam Ali al-Sistani (long live) in his office in Najaf on Sunday afternoon.

Maliki held a press conference after the visit, confirming that Iraq is on the verge of significant developments over the next few days, where will the withdrawal of foreign forces from the cities, villages and towns recognize the meaning of the Iraqi security forces take full responsibility.

Maliki said, "This is the first step in the application of the agreement signed between Iraq withdrawal and the United States, and this calls for class cohesion and solidarity among national security agencies and non-citizens to make way for those who want to confuse the security situation."

And the new coalition and the opinion of His Eminence, the supreme leader said: "We dealt with it with Mr. Sistani, and listened to the directives in order to build a coalition, or any other name, and that Mr. Sistani, so we know it always calls for a national unity for all Iraqis and the coalition went in, and work it will be a national coalition scale.

In another question, and responded to the visit with solutions to political differences between the conservative "There are not any differences would not allow it and we go to politicians in the province," that any differences take the benefit of the political process and the sons of the portfolio is to have that put differences aside and go for the provision of services to the citizen chosen by a representative today.

On the budget cuts, Maliki said that "to reduce the budget significantly affected the start of reconstruction and the situation is improving, but an increase in oil prices and increased production.

The prime minister had arrived in the province and went to the provincial council building, where he met with the Chairman and members of the Council, as well as the governor of the city.

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Rafidain Bank in the city: the work next month, the smart card for pensioners

The director of the Bank of Dhi Qar in Iraq next month that will work smart cards for retirees and beneficiaries of social protection network.

Sajid Ubaid al-Asadi explained Nassiriya News Network "The two branches Rafidain Orr, Shatrah covered to complete the necessary requirements for the work and the smart card for payment of staff salaries."

He added: "There is great concern of public administration for the completion of the project as soon as possible, with most of the provision of essential supplies," he said.

The month of July, he will next direct "to open accounts and the granting of smart cards for pensioners and the social safety net."

Asadi said the move will "on the fraud can be found in the current retiree or the owner of smart card payment of the amount needed in the account from any place in Iraq where the service is available."

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Iraq April Inflation Slows To 3.7%, 3-Decade Low - Central Bank

Iraq's rate of inflation fell in April to the lowest level in the past three decades on lower prices of food, energy and other commodities worldwide and an improvement in the security situation in Iraq, the country's central bank said.

"The year-on-year inflation in April was 3.7%, compared with a rate of 33% at the end of 2007," Central Bank of Iraq governor Sinan al-Shibibi said in an interview with Dow Jones Newswires late Sunday in Amman, Jordan.

The governor said the central bank had adopted a strong monetary policy over the last three years to curb core inflation which was as high as 70% during the former Iraqi leader Saddam Hussein's regime.

Shibibi said that the bank had adopted a policy to boost Iraq's currency, the dinar. "The bank was successful in bringing back the dinar's value against the dollar to around IQD 1,170 a dollar from around IQD 1,200 a dollar it reached last month due to "speculators".

The dinar has risen over the last two years to a record high against the dollar, thanks to trading by the central bank at its daily auction. Before the war, the Iraqi dinar was trading at around 2,000 to 2,500 per dollar. The central bank sells an average of $40 million to $50 million every working day in Baghdad to private and state-run banks.

Shibibi also said the war-hit Iraqi economy grew 6%-7% during the first five months of this year, but didn't say what the growth rate was last year.

Economic growth, excluding the Iraqi oil sector, grew 3%-4%, he added.
The central bank has recently reduced interest rates to 9% -it was 20% at the beginning of 2007 -as part of its policy to reduce inflation.
Most of the money the Iraqi government earns it gets in U.S. dollars because oil exports are the main source of its income.

Baghdad has to cut its national budget to $58.9 billion this year from a projected budget of $80 billion because of falling oil prices. Oil prices fell to as low as $35 a barrel earlier this year from a record high of $147 a barrel in July last year.

Iraq will benefit from the current improvement in oil prices which are hovering between $65 and $70 a barrel. The country had earned some $12.5 billion over the first five months of this year from oil sales.

Iraq's foreign exchange reserves stood at $43 billion compared with a little more than $20 billion in early 2008, the governor said on the sidelines of a meeting with the International Monetary Fund, held in Amman.

Shibibi earlier this month, expressed his opposition to calls from Iraqi officials to dip into the country's foreign reserves to address a budget deficit.

"What everyone must know" is that the reserves are a guarantee for exchange rate stability to maintain the value of the dinar," Shibibi said in a statement to the press.

http://www.zawya.com/story.cfm/sidZW20090615000147

Investments in Iraq: Opportunities Risks VS rewards

The Iraqi British Business& Investment Council was formed in 2004. As the founder and chairman of the council I am proud of the contribution we have made in helping to rebuild Iraq.

In November 2004 the IBBIC hosted a rebuilding Iraq conference in Amman Jordan , in which the Iraqi British Business Women Forum was formed.

Over the years the IBBIC and IBBWF have played pivotal roles at a number of rebuilding Iraq conferences, trade fairs, events and meetings in Amman, Dubai, Bahrain, Sharjah and London.

With renewed vigour and effort the IBBIC and IBBWF have set clear and challenging targets to help in the development of varying economic sectors in Iraq through foreign investment and initiatives.

The IBBIC will also provide information about the key sectors for foreign direct investment and seek to generate partnerships between UK, international and Iraqi businesses

I have the utmost confidence that events such as today will provide a stepping stone to a journey of success. It is intended that an event of this type will be held on a quarterly basis.

As an Iraqi professional it is my privilege to advise you that one of the best assets Iraq has is it’s human resource coupled with the zeal and enthusiasm to rebuild the country that has been described as the cradle of civilisation.

- 2008 was viewed amongst many as the year of improving security and imposing law in Iraq. This led to a rise in economic activity and oil production.
- 2009 promises to be a year of opportunities for foreign investors and continued prosperity for Iraq.

The economic future of Iraq looks bright due to the ingredients of success it has in its strategic position, human and material wealth.

The Banking and financial sector

The economic progress achieved recently, included strengthening the role of the Central Bank and the restructuring of two state-owned banks, as well as reducing the annual rate of inflation in Iraq.

Iraqi banks made advancements in using modern techniques and sophisticated regulations in banking services to prepare for the construction and development programmes . The banking sector is also seeking to apply international standards.

Unemployment has decreased from approximately 75 % of the work force in 2003 to an estimated 19 % in 2008 that may sound like a high level, but is a considerable improvement on what it was.

The Iraqi and British authorities stressed the need to develop economic relations between the two countries. Iraq expects progress through a number of planned initiatives and Organisations such the Iraqi Investment Promotion Agency ( IIPA) – the (IBBIC), and the (IBBWF).

The Iraqi authorities program aimed to allocate resources towards investment, including the oil sector, and to improve the provision of public services, while containing current government spending, notably on the wage and pension bill. The program, which envisages an increase in economic growth, a further reduction in inflation, and an increase in net international reserves, will also encompass priority structural reforms, including actions to strengthen administrative capacity and governance and to support efforts to fight Corruption .

Oil & Gas Sector

In Iraq the oil sector is by far the largest output sector followed by agriculture.

The oil and gas industry has played a significant role in Iraq’s economy throughout its modern history and it will continue to do so in the foreseeable future as the Iraqi economy stabilises and grows.

The Oil and Gas sector will eventually need more than 45 Billion US Dollars worth of investment over the next 6 years.

Considerable opportunities can be expected for the next few years particularly in the area of exploration.

Iraq has the world’s second largest proven oil reserves at 112.5 million barrels, but actual reserves could be more than double the amount.

A revised assessments indicated that Iraq has the worlds largest proven oil reserves, with as much as 350 Billion barrels. This figure exceeds that of Saudi Arabia’s estimated 264 Billion barrels of Oil. Whatever the estimates, it is clear the potential for reserve additions and sustained production growth is exceptional. Large areas of Iraq remain relatively under- explored.

Iraq’s proven natural gas reserves are estimated to 112 trillion cubic feet, the country’s potential could be much higher”.Here I recommend you to read Dr. Carole Nakhle important study ( Iraqs Oil future: Finding the right Framework)) .

I reiterate that the long term prospects for the Iraqi oil industry are excellent given the huge oil reserves and generally low production costs, Iraq is on track to become one of the worlds top oil producers with in the next few years.

Hydrocarbon Law

An amended copy of a draft of the Iraq hydrocarbon law sets out a new model for production sharing agreement (PSA) with western companies

The new draft law recommends the Iraqi government sign Development and Production Contracts (DPC), along with service or risk production contracts with foreign companies to upgrade the country’s war ravaged oil industry. Iraq’s hydrocarbon law is crucial as a basis for international oil companies to begin discussions on investing in the country’s under invested and run-down oil sector, and to generate much needed reconstruction revenues.

There are strong expectations that the Iraqi Parliament will approve the Iraqi Oil Law this year, which has been approved by the Iraqi Government. This will increase investment opportunities to improve the Iraqi oil sector

Commercial Law

Iraq’s commercial law framework is comprehensive and sophisticated. Laws cover such issues as company formation, registration and dissolution, contracts, dispute resolution, banking and charging of interest, as well as governing the establishment of representative offices and the appointment of agents by foreign companies. The majority of these laws are still in force.

The Investment Law
Sustainable economic growth and creation of new jobs for Iraqis depends on reintegration in the global economy and the implementation of policies to win investor confidence.

Under Iraqi investment law, Iraqi and foreign investors will have the same ownership rights except in owning land.

The Iraq investment promotion Agency (IIPA)
IIPA was launched to encourage domestic and international investment in the Iraqi economy.
The IIPA will play a leading role in Job creation and economic development.

The Business Visa
Iraq has announced plans to speed up its visa process for foreign investors and tourists.
The procedure will take only one day and be straightforward.
The applicant, if he is an investor can obtain a visa for 3 months, which will be renewable.

IMF World Bank

The World Bank, the IMF and other global partners are working in partnership with the Iraqi authorities.

The International Monetary Fund praised Iraq for its success in promoting economic stability, particularly in stabilising exchange rates. The IMF expected Iraq’s GDP to grow by 7 or 8% in 2009.

Representatives of the World Bank Group’s board and senior management visited Iraq recently and discussed the country’s investment potential and undersline the group commitment to assisting in Iraq’s sustainable economic recovery.

WTO

Iraq was granted observer status in the World Trade Organisation in 2004. The Iraqi government expressed its desire to strengthen its cooperation with the WTO . Iraq has opened negotiations for accession to the WTO.

The Iraqi Budget

Almost 95 percent of Iraq's revenues come from oil exports. The Iraqi government has said that it will have to reduce its 2009 budget to $67 billion from an earlier forecast of $80 billion because of slipping crude prices.
The remaining unspent 2008 budgets will be available as supplementary expenditure for this year.

Iraq's finance minister, said spending would have to be reduced by more than 16 percent, leading to a drop in the money available for rebuilding infrastructure. The minister added that the country figured that it needed almost $400 billion to rebuild and upgrade its infrastructure.
"We must seriously activate foreign investment in Iraq," he said.
Valid Questions:
Doubts range from basic issues about payment and control, to how safe it is for companies to send staff into the country after years of violence.
With spending budgets constrained by the slump in oil prices, the risks involved in Iraq and the lack of clarity on contract terms have got ****utives worried.

- Now With the recent positive changes in Iraq, including improvements in security, that have opened the prospect of doing business. With a market of 28 million people, considerable wealth, abundant natural resources and decades of under-investment, Iraq provides huge potential for international trade and investment.
The message that I would like to convey to you and your companies is that you should work towards entering the Iraqi economy and utilising the Iraqi expertise in order to take part in rebuilding Iraq and share the risks and rewards.

Also I would like to draw attention to the role Iraqi Women have in rebuilding their country. To emphases this point there has been a surge of activity from
various councils and organisations that have put Iraqi Women at the forefront with their male colleagues attempting to pull the country towards success. As an Iraqi I am both proud and privileged that my Iraqi women are working equally in rebuilding the country.
Later one of my colleagues will talk about our efforts to support Iraqi women.

Thank you for your time, before I vacate this stage I would like to share with you a famous Iraqi saying “If there will be two barrels of Oil left in the World, one of them will be Iraqi”.

The article is an extract from Dr. Al Bazergan’s Speech At the Iraqi British Business & Investment Council (IBBIC), Seminar On the 21st May 20.

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GCC Currency Union Pact Signed By Remaining Participants

The remaining four Gulf countries working to create a currency union signed a pact on 7 June, indicating that the new currency would be pegged to the dollar. The four are Saudi Arabia, Kuwait, Bahrain and Qatar, after UAE pulled out recently citing the decision to base a GCC central bank in Saudi capital Riyadh (MEES , 25 May), and Oman opted out in 2006. With the exception of Kuwait, which abandoned its dollar peg in favor of a dollar-weighted basket of currencies, all the other GCC countries (including those that left the monetary union) have their currencies pegged to the dollar. UAE Minister of State for Foreign Affairs Anwar Muhammad Gargash reiterated that the UAE stands by its decision to withdraw, after Foreign Minister Shaikh Abd Allah bin Zayed Al-Nahayan had suggested last month that the door was not closed. Meanwhile, poorer neighbor Yemen wants to integrate its economy with the GCC and the country’s Foreign Minister, Abu-Bakr al-Qirbi, has asked for the drawing up of a roadmap to accomplish this aim. He concedes that preparation will take time, but notes that EU accession has also been a lengthy process for some European countries.

GCC Pressured, But Well Placed To Ride Out Turbulence, Says S&P

The outlook for all GCC sovereigns is currently stable, but significant challenges this year include managing the impact of the downturn in the global economy and the fall in crude oil prices, upon which most GCC economies are highly dependent (see story below), said S&P in its fourth annual Gulf Cooperation Council Credit Survey dated June 2009. The reduction in global liquidity has reduced the ability of GCC entities to raise financing in international capital markets, particularly for corporates and banks and a similar pattern is evident in borrowing by GCC entities from international banks (see chart). Both forms of financing dipped towards the end of 2008 and in 2009 will remain at lower levels because risk appetite will stay subdued, notwithstanding recent successful Abu Dhabi and Qatar sovereign bond issuances, said S&P.

Debt Issuance By GCC Governments, Corporates And Banks

Source: Bank of International Settlements (BIS).

Almost three-quarters of the issuance in the chart and one-half of the bank borrowing was done by UAE-based entities and the UAE, and particularly Dubai, has experienced the most severe reversal in domestic liquidity conditions since mid-2008. While the credit crunch has hit the liabilities side of countries’ balance sheets, the fall in global asset valuations, including in domestic GCC capital and real estate markets, has had a significant and detrimental effect on the value of their assets, resulting in lower net asset positions and higher contingent liabilities for GCC sovereigns. Given the combination of low oil prices and a decline in production as a result of OPEC’s quota reductions, S&P expects that the average government account balance will barely be positive in 2009, compared with a GCC surplus of around 23% in the previous three years. S&P predicts that Saudi Arabia will fare the worst, with a deficit of 7% of GDP. For the GCC, average inflation is expected to come down from 10% in 2008 to 5% in 2009-11, forecasts S&P.

However, the weakening fiscal position is not necessarily a harbinger of deteriorating creditworthiness, said S&P, noting that in most cases GCC countries have opted for an expansionary fiscal policy in order to counter the impact of the global economic downturn. GCC governments have exceptional fiscal space to implement such policies, with S&P estimating that Abu Dhabi and Kuwait could sustain a 10% GDP fiscal deficit for just over 30 years, Saudi Arabia could manage it for over 25 years, Qatar around seven years, Oman five years, and Bahrain just under five years. For Qatar this belies the sovereign strength, given that previous surpluses have been re-invested in productive infrastructure, particularly LNG expansion. In conclusion, S&P considers that GCC countries are well placed to ride out the turbulence thanks primarily to their exceptional fiscal capacity to pursue counter-cyclical expansionary policy. The non-oil economy, an important engine for future employment growth and diversification, remains a key priority for most, and robust government expenditure will ensure that it is in large part shielded from the global economic downturn, predicts S&P.

http://www.zawya.com/story.cfm/sidv52n24-3NC14

GCC states advised to sign free trade pact with China

Urgent talks should be held to help reach a free trade agreement (FTA) between GCC member states and China, said a new study.

Such a move would enable the Gulf countries to benefit from the rapid growth of the Asian giant's economy, which has become the second largest in the world.

There is a particular need for a GCC-China FTA because of the suspension of talks about setting up such a deal with the European Union, said the study. The negotiations with Europe had lasted 20 years and while they were going on, GCC members had missed out on economic opportunities in number of developing countries, including India and other Arab states. Talks on reaching an FTA with China began in 2005 but stalled because of China's refusal to lift import restrictions on a number of GCC commodities.

The study, entitled Economic Relations Between GCC Member States and the People's Republic of China, was compiled by Najib Abdullah Al Shamsi, Director of the Studies and Research Department at the General Secretariat of the GCC.

He said the GCC members wish to overcome obstacles and integrate themselves in the world economy.

"Almost complete reliance on Western European countries and the US has made GCC countries endeavour to consolidate economic relations with partners that bring economic and financial stability," it said. "Such partners are available in China, India and other Asian countries, which enjoy economic stability and are scoring high growth levels."

The desirability of reaching an FTA is not based solely on China's strategic need for the GCC oil and gas and the existence of a large market for Chinese goods in the Gulf.

Chinese companies are hoping to benefit from the $500 billion-plus (Dh1.84 trillion) of funds allocated by GCC members for the development of their infrastructure, education, health and IT needs.

The study said the future of economic and trade relations looks promising and stresses the importance of recent visits made by GCC leaders and businessmen to China.

"Globalisation and free market requirements impose on GCC member states and China a host of challenges they have to face to with more economic and trade cooperation," said Al Shamsi. "These challenges represent investment opportunities that could help both sides to achieve their strategic goals."

He called on China to help GCC members to achieve their strategic development goals by sharing its experience of reform, as Japan did with China and China did with India.

He said: "Although the trade exchange between the GCC and China has grown quality and quantity-wise over the past few years, the growth has been modest in comparison with the two economies' potential."

The study identifies a number of obstacles to achieving a higher volume of trade:
The absence of a database on the volume and types of investment and trade opportunities available to Chinese companies and the GCC private sector.

Disparity between economic ideologies as the Chinese economy was a closed one for a long time, while GCC members pursued an open-door policy and adopted free economies.

Failure by Chinese companies which export products to the GCC to abide by standard specifications and quality levels.

A rise in the cost of Chinese commodities in recent years which prompted Gulf consumers to obtain commodities and goods from Southeast Asia.

The absence or limited availability of airlines and shipping firms to carry goods from China on a regular basis.

The closure of Chinese markets to Gulf commodities and goods, especially petrochemicals.

The failure of Chinese firms to expand their investment activities into GCC.

And the study said the following measures must be taken to ensure the development of trade and economic relations between the GCC and China:
Customs obstacles must be overcome to open up the Chinese market to exports and investment from GCC members. The quality of Chinese commodities and goods should be improved, customs tariffs imposed on GCC exports should be reduced and better transport, shipping and storage companies facilities should be developed.

Specialised companies should be set up to study and market opportunities to businessmen and investors.

The private sector should assume an active role in boosting the economic and trade partnership through chambers of trade and industry to develop. In addition, businessmen and women from both sides should intensify visits, and specialised marketing exhibitions should be held. Also trade forums and conferences should be held and a joint Gulf-Chinese chamber be set up.

Both sides should benefit from investment opportunities where Chinese expertise and technology and Gulf capital are combined to establish major companies in China. The potential of Chinese companies potential could be useful in various Gulf projects involving infrastructure, power generation, transport, railways and electricity generation.

China's relations with the countries that now make up the GCC date back to ancient times when the sea route known as the "second silk road", which links China with the Arabian peninsula, was opened.

Recommendations for talks with economic groups
The GCC Ministerial Council in March 1996 set out the following recommendations that negotiation teams should take into account during talks with countries and international economic groups:

Negotiations between GCC states and international economic groups should be restricted to economic frameworks.

Priority should be given to talks with the US, European Union, Japan, Asean countries, China, Singapore, Australia, India and Pakistan.

There should be a concentration on the encouragement and protection of foreign investment.

Agreement should be reached to prevent dual taxation. Priority should be given to increasing GCC exports.

The recommendations confirmed that where commercial agreements were reached between GCC states and any international economic group there should be a focus on the following points:

Allowing the GCC states to impose charges to protect their emerging industries.

The protection of emerging industries should continue for a fixed period of time.

China's economic situation
China has recorded the world's highest growth rates over recent years and has attracted a huge influx of international investment into the country.

Since 1978, the economy's rate of growth has increased from six per cent to 13 per cent.

The Chinese cabinet's development and research centre expects the economy to grow by eight per cent over the next five years.

It expects that China's gross domestic product will reach $2.6 trillion (Dh9.54trn) by 2010, equal to $1,900 per head of population compared with $1,400 in 2005.

China is the world's third-largest commercial state and comes second in the world after Japan in terms of monetary reserves.

Trade between GCC and China
Commercial exchange between the GCC states and China was weak in the 1950s because of the difference over economic ideologies.

However, the 1980s and 1990s witnessed development in economic relations and accelerating trade growth. The trade exchange rose from $1.5 billion (Dh5.5bn) in 1991 to $11.6bn in 2002, $15.4bn in 2003, $24.1bn in 2004 and $33.8 billion in 2005.

The trade balance registered a deficit in the interest of China in the 1990s, but the new millennium saw a qualitative development in the trade balance in the interest of GCC states. Oil, gas and petrochemicals are the GCC's most important exports to China, while the GCC states imports clothes, textiles, leathers, computers, telecom equipment and toys from China.

http://www.zawya.com/story.cfm/sidZAWYA20090615040107

Iraqi Oil Minister Interrogated by the Parliament

The Iraqi parliamentary oil committee decided to interrogate Oil Minister Hussein Al-Shahrestani on the following charges: the ministry’s failure to increase production capacity, mismanagement and rampant corruption in the oil sector.

The time has indeed come for a public interrogation centred on the performance of the Iraqi oil sector since the 2003 occupation of the country. While the constitutional responsibility lies with the parliamentary oil committee, conducting the interrogation at this particular time seems to be more of a process of settling political accounts than it is a professional attempt to improve the status of the oil sector.

This begets the following questions: Why didn’t the Ministry of Oil increase production capacity with the recent spike in prices, which would have allowed it to cash more revenues? Why didn’t the ministry increase production capacity even when prices dropped to offset diminishing oil revenues, especially that Iraq is not bound by OPEC’s production-related decisions in light of the special circumstances prevailing in the country?

Apparently, officials give priority to increasing spending regardless of future commitments, as if oil is the magic wand that can cover the mistakes in drafting the budget.

The truth of the matter is that obligations strained the state’s budget when oil prices were high, only to end in a huge deficit when prices dropped. Of course, the oil sector is not the one to be blamed. The responsibility lies here with the Council of Ministers. It expected oil prices to remain at their high levels overlooking their potential fluctuation and drop – as was the case in the summer of 2008 when prices rose to $147 and the winter of 2009, when prices fell to $35.

Iraq has failed to increase its productive capacity. Indeed, production rate still stands at 2.50 million barrels per day, with the oil production capacity of the South dropping by 200 thousand barrels a day to 1.73 million barrels a day in the spring of 2009.

But why this drop in the first place? First, there are the non-stop wars, then the embargo, occupation, terrorism and sabotage that have rocked the country since 1980. There is also the exodus of Iraqi oil experts and the shortage of qualified cadres. For the oil sector to recover, these experts must return to Iraq, where any classification based on ethnicity, religion, and confession must be ruled out so that the experts can lead, along with their families, a safe and decent life. This tragedy goes beyond the Iraqi Oil Ministry to encompass all other economic sectors as well.

There is also the problem of rampant corruption unprecedented in Iraq’s modern history. As proof, numerous multi-billion scandals surfaced at the ministries of defence, electricity and trade. As far as we know, no direct charge was levelled at the minister; there is only talk of corruption in the oil sector in general. In addition, there are the smuggling operations which earned the smuggling gangs millions of dollars. The members of these gangs are not ordinary smugglers, but are the followers of major political parties which provide them with protection, not to mention the gangs linked to terrorist groups.

Al-Shahrestani is also criticized because he was not as quick as the Kurdistan government in signing agreements with international oil companies. Kurdish leaders criticized his position, along with the government’s, over the powers of the Kurdistan government in negotiating and signing agreements with international oil companies. This begets the following question: What kind of agreements was the minister supposed to reach and sign? Production-sharing agreements like those implemented in Kurdistan? Why did these agreements cover discovered, even productive fields, for at least a quarter of a century, without any talk of geological risk?

As a matter of fact, the minister is negotiating technical service contracts, in the sense that international companies would operate as contractors under the oil ministry and not as its partner.

Of course, the international companies are not satisfied with this position and do not prefer this type of contracts. But their interest is not as crucial as Iraq’s.

Moreover, another criticism directed at the oil minister has to do with the bureaucratic and impractical relationship between the ministry and the national oil companies. This is true. But unfortunately, this is governed by the nature of the inherited Iraqi regulations, which provide for a strong effective centralized government, rather than a barely functioning one. In the absence of a new oil law (the draft new law is still shelved in parliament since February 2007; its ratification does not apparently suit the influential political blocs), it is difficult to attract international oil companies to operate in Iraq, despite the country’s vast oil reserves. It is also difficult to institute a new system for coordination between the ministry and the national oil company, no matter how lucrative Iraq’s oil reserves are for these companies.

What’s really required is political stability, a new social contract, clear ideas for a new policy and a transparent system for the reconstruction of a modern oil sector, following the dismantling of the country's institutions. These are the foundations of a modern oil sector. The minister staying in office is but a temporary matter subject likely to change at any moment.

http://www.daralhayat.com/portalarticlendah/27907

CBI dollar sales increase on Monday

Demand for the dollar increased in the Central Bank of Iraq’s (CBI) auction on Monday, hitting $158.400 million at a stable exchange rate of 1,170 Iraqi dinars (ID) per dollar, compared to $95.090 million in the previous session.

“The demand hit $43.245 million in cash covered by the bank at an exchange rate of ID 1,176, while foreign transfers outside the country registered $115.150 million, covered at an exchange rate of ID 1,173,” according to a CBI news bulletin received by Aswat al-Iraq news agency.

None of the 15 banks that participated in today’s session offered to sell dollars.

http://en.aswataliraq.info/?p=114644