Revamp of Bahrain’s Sheikh Zayed Highway progressing well, officials say

Scion Industrial Engineering

Revamp of Bahrain’s Sheikh Zayed Highway progressing well, officials say

Construction work on Bahrain’s $62 million Sheikh Zayed Highway Development Project is progressing as planned, according to the state-run Bahrain News Agency (BNA).

Huda Abdulla Fakhro, the undersecretary for roads at Bahrain’s Ministry of Works, Municipalities Affairs and Urban Planning, said that the expansion of the highway is an important addition to the kingdom’s roads network, with its capacity expected to rise from 53,000 vehicles per day to 100,000 by 2030.

As part of the project’s first phase, the highway will be expanded to three lanes in both directions, with four roundabouts converted into intersections with traffic lights.

The project also includes lighting work, roadblocks, traffic signs, a revamp of the asphalt layers and landscaping, as well as water drainage.

At the moment, 2,800 vehicles use the highway during morning peak hours, 3,500 in the afternoon peak hours and 3,200 in the evening peak hours. By 2030, 5,400 vehicles are expected during the morning peak hours, 6,700 in the afternoon and 6,100 during evening peak hours.

The key project will also contribute to reducing traffic congestion in a number of areas, according to Bahraini officials.


Dubai’s DP World set to invest $500m in Jeddah port upgrade

Scion Industrial Engineering pvt. ltd.

Dubai-based DP World has been awarded a 30-year concession by the Saudi Ports Authority (Mawani) for the management and development of the Jeddah South Container Terminal at Jeddah Islamic Port.

Under the build-operate-transfer (BOT) agreement, DP World will invest up to $500 million to modernise the port, including major infrastructure development to enable it to serve the ultra-large container carriers (ULCCs).

Jeddah Islamic Port is on the Red Sea and the largest port in Saudi Arabia with annual volumes of over 6 million TEUs.

Developing Jeddah Islamic Port will contribute to achieving Saudi Vision 2030. The concession will also be instrumental in facilitating the movement of cargo and greater access to local and international markets.

DP World has operated the South Container Terminal on a lease agreement for more than 20 years.

The new terminal will also have an upgraded capacity of 3.6 million TEU up from 2.4 million TEU, to meet the expected growth demands of the future, and will provide 1,400 jobs.

Sultan Ahmed Bin Sulayem, DP World group chairman and CEO, said: “DP World is honoured to support the kingdom’s 2030 growth vision through this new concession to transform the country into a global logistics hub. We have committed to investing significantly to modernise the Jeddah South Container terminal, which will not only result in greater direct and indirect job creation but also deliver best-in-class efficiency and productivity to the Port’s operations.”

He added: “Beyond the terminal, our ambition is to develop inland connectivity across the Arabian Peninsula between Jeddah and Jebel Ali Port in Dubai, as well as to Saudi Arabia’s cities through smart technology-led logistics, which should support further growth in this strategic hub that connects East-to-West.”


Dubai Duty Free sells more than $57m worth of goods over three-day anniversary event

Dubai Duty free sales totalled AED209.48 million ($57.39m) during a three-day sale last week to mark its 36th anniversary, the company said on Monday.

The sale – which saw 25 percent discounts on a wide range of merchandise – began on midnight on December 18 and continued until Friday, December 20.

The 72-hour event generated sales of $13.65m on December 18, $13.5m on December 19, and $30.59m on December 20.

According to Dubai Duty Free, cosmetics was the highest selling category, with sales of $15.02m over the three days. Additionally, $10.29m worth of perfumes was sold, as well as $9.14m worth of watches.

“The anniversary celebrations spread over three days were fantastic and received positive results across all the concourses,” said Dubai Duty Free executive vice chairman and CEO Colm McLoughlin. “I would like to thank everyone, in particular thanks to our customers and our staff who did a great job in serving the high number of passengers.”

During the sale period, Dubai Duty Free’s distribution centre issued 2,532 pallets of merchandise and conducted 240 trips from the warehouse to the airport. The highest number of pallets was issued on December 19, with 931 delivered in 88 trips.

The three-day period saw cash registers record a total of 358,523 sales transactions, with 190,208 transactions alone recorded on December 20.

The event also saw a number of events held at the airports, in addition to AED85,000 in cash prizes for staff members.

Dubai Duty Free also announced that of the original 100 staff who joined Dubai Duty Free in December 1983, 25 remain in active service and are referred to as the ‘pioneers’.


Saudi gifts retailer secures $5.6m funding for expansion

Scion Industrial Engineering

Dokkan Afkar, a Saudi-based e-commerce marketplace dedicated to selling homegrown and innovative gadgets, gizmos and gifts, has closed a SR19 million ($5.6m) Series B funding round, led by the Business Incubators and Accelerators Company (BIAC).

The Series B funding round was joined by existing investors – Riyad TAQNIA Fund, the Saudi Venture Capital Company (SVC) – along with a number of local investors, including Mishal Ali Reda, who has invested in the start-up’s third consecutive funding round.

Dokkan Afkar said it plans to use the new capital to continue its growth and expansion throughout the Middle East, focusing on increasing its products and product inventory with the vision of attracting a larger and more diverse customer base.

The company added in a statement that it will also add new creative talent and suppliers to support its various department categories, as well as offer several employment opportunities for Saudi youth.

“We have learned a lot over the past six years, and have been progressing and moving from one success to another,” said Dokkan Afkar co-founder and CEO, Ammar Waganah.

“We now look forward to moving towards our next phase of the business, which is expanding into the rest of the Arab region, followed by entering into a number of international markets. We’re immensely proud that Dokkan Afkar is one of Saudi Arabia’s leading start-ups dedicated to promoting a vibrant e-commerce ecosystem that is in line with the kingdom’s Vision 2030 plan,” he added.

Nawaf Al Sahhaf, CEO of the Business Incubators and Accelerators Company, added that the success of the latest funding round is a result of Dokkan Afkar’s exemplary growth over the past few years, which has strengthened the position of the brand in the region’s growing e-commerce sector.

Established in 2013, Dokkan Afkar – which translates into Shop of Ideas – is an online retail service with a strong focus on promoting local homegrown creative talent and suppliers.


Saudi Aramco completes $1.2bn deal for Hyundai Oilbank stake

Saudi Arabian Oil Company, better known as Saudi Aramco, has completed the acquisition of 17 percent of Hyundai Oilbank from Hyundai Heavy Industries Holdings, for about $1.2 billion.

The completion of the deal, through its subsidiary Aramco Overseas Company, follows receipt of all necessary regulatory consents and approvals.

According to a statement, the investment in South Korea’s Hyundai Oilbank supports Aramco’s downstream growth strategy of expanding its global footprint in key markets in profitable integrated refining, chemicals and marketing businesses.

Hyundai Oilbank is a private oil refining company established in 1964.

The Daesan Complex, where Hyundai Oilbank’s major facilities are located, is a fully integrated refining plant with a processing capacity of 650,000 barrels per day.

The business portfolio of Hyundai Oilbank and its five subsidiaries includes oil refining, base oil, petrochemicals and a network of gas stations.


DAFZA Company Setup Regulations

scion Industrial Engineering

As detailed on the free zone’s website, DAFZA company setup regulations are as follows:

“The laws applicable to Dubai Airport Free Zone are set out in Dubai Law No 25 of 2009 (Concerning Dubai International Airport Free Zone). These rules and regulations state that every business in Dubai must have a legitimate formation and be registered, have a minimum share capital, a name ending with FZE, details of ownership, and an owner’s declaration.

Also, it must have a registered office, a sign-name plate, business letters, shares, proof of share transfer, directors and a secretary in place. In addition, it should carry out directors’ meetings, have objects, a seal, contracts, sufficient accounting records, clear distribution channels and sufficient funds. We keep these rules and regulations in check to help you while registering a business in Dubai. Moreover, we will appoint an investigating power to monitor services. We also have the power to revoke the registration of any company.”

Understanding DAFZA Company Setup Costs

There are several components to the DAFZA company formation cost. The number of visas you require, the type of premises you need, your license type and many other factors will have a bearing on the total price.

For example, a service or industrial license is likely to cost in the region of AED 15,000 per year while a general trading license could cost in excess of AED 50,000 per year. On top of this, you will also be required to make a one-off registration payment in the region of AED 7,000.

For a more detailed breakdown of the costs, it’s best to talk to a company formation expert who can build a tailored quote for you.

Starting Your DAFZA Business

Wherever you choose to set up, getting the right guidance beforehand is key. That’s why it’s always advisable to undertake the steps with the assistance of a registered company formations agent to eliminate any potential hassles that might arise.

With more than 15 years of experience in company incorporation, Worldwide Formations can help you get your business up and running within a matter of weeks. We’ll manage the entire process on your behalf and correspond with all relevant authorities for you. All you need to do is wait for the green light to start doing business.


Saudi Arabia set to begin issuing instant work visas

scion Industrial engineering

Saudi Arabia is to launch an instant work-visa service from next month, according to the Saudi Press Agency (SPA).

The service will be available through the country’s Qiwa platform, which is designed specifically to help small businesses.

Ahmed Al-Rajhi made the announcement during a meeting with entrepreneurs from Hail Chamber of Commerce and Industry, where he reiterated the commitment of the government to provide help to small businesses in the kingdom, along with a framework to assist with the push for Saudisation.

He said: “It will enable young Saudis to launch start-up projects, open small businesses, boost economic growth and accelerate business expansion plans, which will have a positive impact on national development.”

Al-Rajhi revealed that extensive research had been carried out to establish the requirements of small businesses for migrant workers, so that the new visa service meets their needs.

He added: “This will help to maintain the stability and continuity of the business during its early days.”

The Ministry of Labour and Social Development has also launched a visa service for established businesses which are in the process of expanding.


Saudi Arabia, UAE silent over plan to deepen OPEC+ cuts

SCION Industrial Engineering

Saudi Arabia and the UAE remained silent over Iraq’s proposal to deepen OPEC+ production cuts, leaving the market to speculate about the group’s plans before crucial talks in Vienna this week.

Iraq, which has the worst record among major producers of implementing the group’s current supply deal, is nevertheless pushing for steeper cutbacks. Oil Minister Thamir Ghadhban said the group should remove another 400,000 barrels a day from the market, taking the total reduction to 1.6 million.

Upon arrival in the Austrian capital late on Tuesday, he told reporters that he believed Saudi Arabia, OPEC’s defacto leader, also supported the move. The kingdom’s Energy Minister Prince Abdulaziz bin Salman declined to answer specific questions when he arrived in the city on Wednesday, saying simply that the market outlook was “sunny” like the weather.

Contrary signals had emerged from Tuesday’s meeting of the group’s Joint Technical Committee, which advises ministers but doesn’t make final decisions. Officials present at the talks didn’t discuss steeper cutbacks, said delegates, who asked not to be named because the talks were private.

The group’s main aim is to agree an extension of the existing deal beyond March, for which there is a consensus among the Gulf Arab members, Oman’s Oil Minister Mohammed Al Rumhi said in Dubai on Wednesday. UAE Energy Minister Suhail Al Mazrouei wouldn’t confirm which proposals will be discussed on December 5 to 6, while Kuwait’s Oil Minister Khaled Al-Fadhel said he hadn’t heard a suggestion for an additional cut of 400,000 barrels a day.

“Iraq is the main OPEC country missing its compliance target,” Olivier Jakob, managing director of consultant Petromatrix, said in a note to clients. “Yet it is continuously repeating that OPEC could consider an increase in the size of the cut.”

An alliance between the Organisation of Petroleum Exporting Countries and several non-members including Russia and Kazakhstan has been restraining output since the start of 2017 in order to eliminate a surplus and bolster crude prices. The agreement expires at the end of March and ministers must decide what to do next. The vast majority of analysts and traders surveyed by Bloomberg considered an extension to be the most likely outcome of ministerial talks.

In 2020 the group faces slowing demand growth and another huge expansion in rival production, which together could create another oversupply that drives international prices back down toward $50 a barrel. That’s too low for most OPEC members to balance their budgets, and would make an unfortunate epilogue for the record-breaking initial public offering of Saudi Arabia’s state oil company, Aramco.

“It has been calculated that the 1.2 million has proved not enough so an additional cut is required” because demand growth is slowing, Ghadhban said. “This is not yet final, it’s very much subject to the member countries.”

In reality, OPEC+ has already gone deeper than the pledged 1.2 million cut due to a combination of voluntary and involuntary measures. The JTC concluded that the group exceeded that target by about 40 percent in October, meaning the additional cuts Iraq is proposing are actually in place, albeit unofficially.

Saudi Arabia, wishing to lead by example, has pumped well below its quota for the duration of the agreement. Other nations including Angola, Venezuela and Mexico have simply been unable to sustain their production due to industry mismanagement or years of under-investment.

“Saudi Arabia could easily reduce its official production allowance by 300,000 barrels a day without affecting its actual production,” said Jakob of Petromatrix, which is based in Zug, Switzerland. “A cosmetic cut might feed some automated buying on headlines but that would be a rally hard to sustain.”

The kingdom’s extra efforts have offset lax implementation of output reductions by several other nations. On average this year, Russia has implemented just 72 percent of its pledged cuts, while Nigeria and Iraq have actually increased output, according to data from the International Energy Agency.

Ghadhban said Iraq is striving to fulfill its part of the OPEC+ agreement and emphasized that every country should share the burden. Yet the production figure he gave for his country of 4.6 million barrels a day showed that 11 months into the deal he’s implemented barely a third of his agreed cuts.


Aramco IPO: from Saudi Arabia to the world

Scion Industrial ENgineering

Does the Saudi Aramco IPO in Riyadh suggest a future international listing?

Saudi Aramco’s domestic IPO may still serve as a bridge towards an international listing despite what some analysts term a “mid-decline” oil market, according to experts.

Aramco has said there are no plans for an international listing, suggesting that the long-stated aim of a second offering on a foreign bourse had been shelved. The company had previously been expected to sell 2 percent on the Saudi bourse and another 3 percent overseas.

Salah Shamma, the head of MENA investment at Franklin Templeton Emerging Markets Equity, said that his firm believes that the IPO could still serve as a “bridge” towards an international listing and hopes that it will happen at a later date.

“As an international investor, we want to see a successful local IPO of Saudi Aramco,” Shamma said. “Saudi Aramco’s $12bn bond issue earlier this year was one of the most oversubscribed in history and allowed it to borrow at a lower yield than its sovereign parent. This demand bodes well for its IPO.”

According to Shamma, the Aramco IPO “could offer investors exposure to a truly unique asset” with more than 257 billion barrels and producing more than 13.5 million barrels per day of oil equivalent.

“We believe the company is in a class of its own when it comes to profitability and cash flow generation,” Shamma said. “The recent attack on the company’s facilities does not put into question the strength of the company’s fundamentals, but it should elevate its risk premium, at least for international investors.”

Pricing and market outlook

Although the Saudi government and Crown Prince Mohammed Bin Salman had hoped for a valuation as high as $2 to $2.3 trillion – which reportedly caused the IPO to be delayed several times due to dissatisfaction with the valuation of the firm – most analysts expect the Saudis to settle on a valuation of $1.6 to $1.7 trillion.

In Shamma’s view, even with a lower valuation of $1.5 trillion, Aramco “will still be the most valuable company in the world… and with $111bn in net income in 2018, it also ranks as the most profitable company.”

Colin Croft, emerging markets fund manager at Jupiter Asset Management, told Arabian Business that the Aramco IPO must be seen within the context of long-term challenges for the oil industry, which he said was showing signs of “mid-term” decline.

“The only question is how many decades are left before climate concerns and cost competitive force the transition toward more sustainable transport systems,” he said.

“Although Aramco’s low cost base and vast reserves ought to give it far more longevity than other oil companies, I would not be keen to pay too much of a premium for it given the uncertainty regarding how much of these reserves will have to be left in the ground.”

Russian comparison
Additionally, Croft said that the company can best be compared to Russian state-owned oil companies, which also have considerable reserves and low costs, but benefit from a freely floating local currency and reputation in the market.

“These [firms] currently offer dividend yields of closer to 6.5 percent,” he explained. “If Aramco were to trade on a similar level, then its valuation would be closer to $1.2 trillion than to $2.3 trillion.”

However, Croft said that a valuation of between $1.6 and $1.8 trillion is likely still achievable, given the small proposed size of the free float and likely composition of its investor base.

“Saudi Aramco is no different from other oil companies in that its appeal would lie in its ability to supply regular dividend payouts to shareholder,” he added. “Without an attractive dividend policy, it would be impossible for the firm to achieve a valuation anywhere near the current level.”

Changes coming?
In the short-term, according to Emirates NBD commodity analyst Edward Bell, no changes are expected from Saudi Arabia in response to the IPO, with the kingdom’s commitment to the OPEC+ production cuts remaining in place.

“However, there is a risk that the oil market will need to find a new anchor dynamic once the Aramco IPO is finished,” Bell added.

When the impact of the IPO on the global stage and the Saudi government is settled in the long-run, Bell says the fundamentals of the market will once again be the most influential factor on the market and pricing.

Bell added that the market, for its part, will “fixate” over the Aramco news over the coming weeks.

“[This includes] the publication of the company’s prospectus which may shed more light on production costs and outlook, dividend strategies and how the company plans to adapt in a world on the verge of a substantial energy transition away from oil and gas.”


Bahrain’s bankruptcy law one year on: an untested revolution

Scion Industrial Engineering

The Kingdom of Bahrain enacted a new bankruptcy law in December 2018, sweeping away its previous legislation and replacing it with a thoroughly modern toolkit. The law is a revolutionary improvement compared to what existed before, said lawyers polled by Debtwire.
The financial crisis of a decade ago pushed various GCC countries to reconsider their insolvency and bankruptcy regimes, as existing laws failed to adequately govern and encourage modern restructuring practices. One by one, authorities started renewing their laws, including Saudi Arabia and Dubai.

With the push toward establishing a digital economy and the desire to attract large scale private sector investment, there was a need to decriminalise failure – providing new businesses, startups and entrepreneurs breathing space to innovate and allowing creative industries to flourish in the region, according to Buthaina Amin, director at the Bahrain Economic Development Board.

Alongside hopes of establishing a regional FinTech hub, efforts to secure an upgrade of Bahrain’s credit ratings also spurred the change, said Natalia Kumar and Siddharth Goud, lawyers at the Bahrain-based law firm Al Tamimi & Co.

The new law was praised for its modernism by all the sources polled, who commended its similarities to Chapter 11 of the US Bankruptcy Code and compliance with UNCITRAL Model Law. The law encourages debt restructuring in favour of liquidation and does not prevent debtors continuing in the ordinary course of business while going through a court-supervised restructuring process.

The new law utilises restructuring concepts such as a moratorium on enforcement proceedings, the ability to sell assets out of the bankrupt estate free from security, obtaining financing on super-priority terms and implementation of a reorganisation plan, noted Nick Green, partner at Trowers & Hamlins.

These are ‘debtor-friendly’ tools and are familiar to, and popular with, international companies and investors. They follow, to a large extent, the Chapter 11 proceedings in the US, he said.

Banks out of scope

The new law is applicable to any commercial company not licensed by the Central Bank of Bahrain (CBB), noted Kumar and Goud. CBB-licensed companies, such as banks, fall instead under the scope of the CBB and Financial Institutions Law of 2006.

“Those provisions [for CBB-licensed companies] now look out of date and it would be good to see a harmonised insolvency regime across all Bahraini entities under the new law, with additional restrictions and obligations on CBB-licensees as deemed necessary,” said Green.

The law is also applicable to ‘natural person traders’ who do business and have their head office in Bahrain, as defined under Bahrain’s Law of Commerce, noted Kumar and Goud.

There is no law in Bahrain that specifically deals with personal bankruptcy. Therefore, the provisions of the new law shall not apply to individuals, Kumar and Goud continued. The new law is also not applicable to financial derivative contracts under the Netting Regulations of Bahrain, which was a grey area before enactment, they said.

New system

The new law foresees two main proceedings for a struggling company: restructuring or liquidation. The scope of any restructuring proceeding can be extended to debtors’ assets located outside Bahrain, as well as those domestically located. Concepts such as an insolvency trustee and a moratorium – initially for a 120-day period – are included.

On first reading, the law may seem to offer generous concessions to insolvent debtors, at the expense of the creditors and other interested parties, said Green.

Article 11 generally empowers the court to sanction continued operation of the debtor’s business transactions after the debtor has petitioned the court, while Article 51 empowers the court to impose a multi-faceted moratorium which keeps the creditors at bay while the debtor’s business is continued as usual, added Green. Unlike US Chapter 11 proceedings, however, this moratorium is not automatic.

However, it is easy to argue that the new law also benefits creditors, by preserving the value of a debtor’s assets, Green continued. By including rehabilitation procedures for the institution or individual concerned, the law maximises creditor recoveries, he said.

Under the new law, an entity does not have to wait until it actually ceases to pay its debts for it to be become insolvent or to commence insolvency proceedings, said Green.

“The mere likelihood of an entity failing to do so is sufficient, and we can see how that might be particularly attractive to a debtor and is intended as part of a mature rescue culture,” he added.

However, the court has wide-ranging powers to scrutinise any application for bankruptcy protection and can impose various penalties when an application is believed to be simply an attempt to gain undue advantage over creditors, Green added.

Enforcement of foreign judgments

The law introduces a cross-border insolvency mechanism. The adoption of UNCITRAL Model Law for the enforcement of foreign judgments in Bahrain, while positive, is still untested, noted David Billington, partner at Cleary Gottlieb Steen & Hamilton LLP.

There is also the priority system which allows for a fair, transparent, and comprehensive framework when dealing with priority of claims, noted Amin. Representatives and creditors of foreign bankruptcy proceedings have a right of access to the courts and the right to seek relief, he added.

A foreign judgment or award would be enforced in Bahrain through the execution courts after an application is filed to recover the secured debt or enforce a judgment, said Kumar and Goud.

There are, however, certain criteria, with a reciprocal treaty between countries required, they said, adding that Bahrain is a signatory to the 1958 New York Convention under which the Bahraini Courts will be entitled to refuse to enforce a foreign arbitration award only on certain narrowly defined grounds.

The new law in Bahrain, by contrast to the newly enacted bankruptcy law of Saudi Arabia, benefits from its simplicity of choice and ultra-modern approach, noted Green. There are a number of different procedures available under the Saudi law – for example, the financial reorganisation procedure, the preventative composition procedure, the administrative liquidation procedure and the liquidation procedure – and the approach taken in each of these cases differs from each other.

Room for improvement

One possible development in the future will be the incorporation of a timeline within the law for lenders to foresee how long the procedures will take, said Kumar and Goud.

Another improvement would be to make the moratorium automatic on application, as is the case under US Chapter 11, rather than subject to a court decision, according to Green. The increased workload for the non-specialised courts in Bahrain and related infrastructure may also pose challenges, he said.

“There is no doubt that the creation of a specialised institution to support the courts and the public prosecutor’s office in, for example, monitoring the parties’ compliance with disclosure requirements and other obligations would, significantly improve the practical implementation of the law,” said Green.

Time will tell

In Bahrain, court judgments are not published apart from in the Court of Cassation, so the decisions are not publicly available like in the United Kingdom, noted Kumar and Goud.

For this reason, the market must get comfortable with procedures through experience. There has been one well-known instance, Garmco, where an application has been made under the new law, Kumar and Goud added.

Broadly speaking, unofficial out-of-court restructurings were much more widely used prior to the implementation of the new law, given the punitive nature of the previous statute, said Green.

This meant unofficial agreement with creditors, quite often lending institutions, without any real transparency for any other creditors involved. However, given the radical overhaul, taking in best practice from modern insolvency procedures, many more debtors may apply, he added.

“It will be a slow-burn process, people need to be encouraged and need to see the companies go through the process, steering the wheel,” noted Billington.

The legal toolkit is very sophisticated, but requires various other elements to work in practice, said Billington. This includes experienced bankruptcy judges and a deep DIP financing market, which will only come with time.

Bahrain is in the early stages of developing these things, but changing the legislation in a culture where bankruptcy has historically had significant stigma attached to it – and could even be a crime – to introducing rehabilitation proceedings is a big step, he said.