Kuwait economy diversifies with growth in non-oil sectors


Although Kuwait’s economy is dominated by hydrocarbons, it is non-oil activity, alongside the rebound in crude prices experienced since January 2016, that is driving growth forecasts. National Bank of Kuwait estimated overall real GDP growth of 3.6% in 2016, and forecast growth of 1.7% in 2017 and 2.7% in 2018, while in the non-oil sector it anticipated growth of 3.5-4% in 2017 and 2018, driven by strong investment. The IMF bases its calculations on the calendar year, rather than the fiscal year, and estimated non-oil GDP grew by 5%, 3.5% and 3.2% in 2014, 2015 and 2016, respectively, and predicts non-oil growth of 3.5% in both 2017 and 2018, expanding to 4% in 2021.

Sector Data

The most recent public data for Kuwait’s non-oil economy is for 2015, which showed the dominant sectors were: community, social and personal services; real estate; financial intermediation; and transport and communications, accounting for 35%, 14%, 14% and 10% of non-oil GDP, respectively. All four sectors grew by 1-4% in 2015. Manufacturing, including refining, was worth 9% of non-oil GDP and had shrunk by 10%. Expanding sectors included hotels and restaurants, and utilities, up 12% each, wholesale and retail, up 6% and construction up 5%.

After several years of limited progress on government mega-projects from 2010 to 2013, there was a noticeable shift in the pace of development in 2014 and 2015. In 2014 more than KD7.5bn ($24.8bn) in projects were awarded, but the real bumper year came in 2015 when KD12bn ($39.7bn) worth of development contracts were signed across a range of sectors. In 2016 the pace dipped a little with KD5.6bn ($18.5bn) worth of awards. In February 2015 Kuwait’s National Assembly signed off on KD34bn ($112.5bn) in development projects for the five-year period between FY 2015/16 and FY 2019/20. Of the 521 projects, 421 had originally been part of the previous development plan, with 92 new schemes also approved. By early 2017 a significant number of new contracts had been awarded, but many others had been deferred, leaving the potential for a significant uptick in project activity.


Against a backdrop of lower global oil prices, a significant proportion of the government contracts awarded in Kuwait in the three years from 2014 to 2016 were in the energy sector. Developments in the industry are driven by the desire to expand downstream refining capacity. Kuwait National Petroleum Company (KNPC), the downstream arm of state-owned Kuwait Petroleum Corporation (KPC), has billions of dinars worth of projects under construction. In 2015 KNPC awarded KD3.48bn ($11.5bn) in contracts for the country’s fourth refinery, Al Zour, which will have a capacity of 700,000-800,000 barrels per day (bpd), up from the 615,000 bpd originally planned, according to local press reports. One of the contracts, worth KD1.28bn ($4.2bn), was to develop the refinery’s industrial unit and was won by a consortium made up of Spain’s Tecnicas Reunidas, Hanwah Engineering and Construction Corporation of South Korea and China’s Sinopec. It was expected to take 45 months to complete.

In addition, two contracts worth KD1.75bn ($5.8bn) for infrastructure and support were awarded to Daewoo Engineering and Construction and Hyundai Industries Co, while a third package worth KD454m ($1.5bn) was given to a consortium including Saipem SpA and Hyundai Engineering. In March 2016 Hyundai also won the KD1.1bn ($3.6bn) contract to build the new liquefied natural gas (LNG) import and regasification terminal in the Al Zour area. Hyundai Engineering and Construction will build eight LNG storage tanks, while Hyundai Engineering will build the regasification terminal. Korea Gas Corporation will be responsible for commissioning and operational training for the clients. The project is expected to take 58 months and be complete by 2020. KNPC is also spending billions on its existing refineries, expanding Mina Abdullah and Mina Al Ahmadi and subsequently decommissioning Shuaiba. This mega-project is subdivided into a number of packages, with packages 1 and 2 for the Mina Abdullah refinery, as well as the deal for Mina Al Ahmadi refinery, awarded in 2014. In the final quarter of 2016 KD147m ($486.3m) in pipeline contracts were awarded for the new refinery at Al Zour. Kuwaiti firm Combined Group won the KD84m ($277.9m) contract for the oil pipeline, and the KD53m ($175.3m) contract for the gas pipeline also went to a local firm, Arabi Enertech. In early 2017 construction firms were waiting for the KD2.12bn ($7bn) contract to build an integrated olefins III plant for Petrochemical Industries Company, a KPC subsidiary. The plant would have the capacity to produce a 1m tonnes of polyethylene and 500,000 tonnes of polypropylene per year.


Kuwait is also making what has been described as the world’s biggest new cultural investment: a district devoted to the arts, museums and heritage. In October 2016 the Sheikh Jaber Al Ahmad Cultural Centre opened in Kuwait City. The $775m landmark facility includes a 2000-seat theatre, a music centre, libraries and a conference centre.

Adjacent to the centre, a new museum district is also being built over 13 ha. The Sheikh Abdullah Al Salem Cultural Centre will have museums devoted to science, natural history, space and Islamic history and is due to open in 2018. In June 2016 the Amiri Diwan announced that Bayan National Trading Company had been awarded a KD49m ($162.1m) contract to design and build Kuwait’s Motor Town, which is to include seven racing circuits on par with international standards, enabling Kuwait to host Formula One and MotoGP races.

Health Care

The Amiri Diwan has also led the development of new flagship medical facilities. The new Al Jahra Hospital, with 1171 beds and 20 operating theatres, is being built at a cost of KD390m ($1.3bn). Also, 40 km away, the 1168-bed Jaber Al Ahmad Al Jaber Al Sabah Hospital is being built concurrently. The KD304m ($1bn) project is planned for the Ministry of Health. In 2017 Italian firm Pizzarotti began work on t a new 600-bed maternity hospital at a cost of KD250m ($827.1m).

Airport Expansion

The need to expand Kuwait’s international airport is pressing, and the Amiri Diwan has taken control of the contract to build a passenger support terminal (PST). The contract was awarded in November 2016 so that 4.5m passengers annually can use the airport while the PST is being built. The KD52m ($172m) contract stipulates that the work must be completed in 450 days. In 2015 Turkish company Limak Holding was awarded the KD1.3bn ($4.3bn) contract to build the main terminal building at the Kuwait International Airport, tripling capacity by 2022.


A number of major road and bridge-building projects are also taking place in Kuwait, the most significant of which is the Sheikh Jaber Al Ahmad Al Sabah Causeway (SJSC), which spans Kuwait Bay from Kuwait City to the Subiyah area, where the Silk City development is to be built. In 2014 a KD147m ($486.3m) contract was awarded for the Doha link to the SJSC, which will cross Sulaibikhat Bay between Shuwaikh Port in Kuwait City and the Doha peninsula. New roads are also being built connecting the Saudi border to the sixth ring road (see Transport chapter).


The housing sector in Kuwait has also seen renewed impetus. In 2016 the Public Authority for Housing Welfare signed a KD288m ($952.7m) contract for an infrastructure works package for South Mutlaa City, which will be completed as a joint venture between Italy’s Salini and Turkey’s Kolin. When completed, the site will include 30,000 residential units. The Kuwait Projects Company also awarded its KD723m ($2.4bn) Hessah Al Mubarak mixed-use project to the Ahmadiah Contracting Trading Company in 2016. Then, in 2017 a contract was signed with korea Land and Housing Corporation to build South Saad Al Abdullah New City, a smart city, with construction set to get under way in 2019.

Power & Water

A significant milestone was reached in November 2016 when phase one of Kuwait’s KD2.4bn ($7.9bn) Al Zour North Independent Water and Power Plant was completed on time and on budget. This was the first construction project delivered by public-private partnership in the country and looks set to be replicated in the near future with similar schemes to be tendered, such as Al Zour North Two and Al Khiran (see analysis).


Saudi Arabia: Oil prices hit over-two-year high in November on strong fundamentals and mounting geopolitical risks

The rally in oil prices continued in November. On 7 November, prices hit their highest level since June 2015. Although the surge in oil prices reflects strong fundamentals, they have also been driven up due to increased political tensions in the Middle East. The OPEC oil basket traded at USD 61.6 per barrel on 24 November, a 10.9% increase from the same day in October. Oil prices were up 36.3% over the same day in 2016 and 15.6% from the start of the year, when oil traded at USD 53.3 per barrel.

Oil prices are currently in a sweet spot, buttressed by strong global demand and supply constraints. The global economy continued to expand healthily in recent months amid low unemployment rates, resilient global trade, improved fiscal support and loose financial conditions. Despite some headwinds, global growth is expected to remain resilient in the coming quarters, which will translate into higher demand for the black gold. OPEC and non-OPEC members participating in the oil cap deal continue to deliver; in September, they reached the highest conformity level ever, of 120% (August: 116%). At the 30 November OPEC meeting these key oil-producing countries will likely agree on an extension of the accord well into 2018, to tighten crude supply and support oil prices.

Oil prices were also propelled in November by rising uncertainty in Saudi Arabia, following the sweeping arrests of princes and ministers on corruption charges as Crown Prince Mohammad bin Salman cemented his grip on power. Moreover, the launch of a ballistic missile from Yemen to Riyadh airport by Houthi rebels—who are supported by Iran—led Saudi Arabia to accuse the Islamic Republic of “direct military aggression”, raising the stakes in an already tense standoff between the two regional rivals.

Meanwhile, output declined in October among OPEC members. According to the cartel’s latest Monthly Oil Report, combined oil output in OPEC countries fell slightly from 32.74 mbpd in September to 32.59 mbpd in October, because of lower output in Algeria, Iran, Iraq, Nigeria and Venezuela. Conversely, output increased markedly in Angola and Libya. Crude output in Saudi Arabia increased from 9.98 mbpd in September to 10.00 mbpd in October.

FocusEconomics Consensus Forecast panelists expect oil production in Saudi Arabia to average 9.96 mbpd in 2018. In 2019, our panel of analysts sees crude output rising to 10.23 mbpd.


Progress of Oman’s manufacturing sector in implementing Tanfeedh initiatives reviewed

Oman's manufacturing sector

Muscat: About 10 per cent of the Tanfeedh initiatives for the industrial sector have been completed, a review meeting was told on Wednesday.

The 3rd meeting of the steering committee to follow up the progress made in implementing the outcomes of Tanfeedh initiatives at the industrial sector was held yesterday at the Ministry of Commerce and Industry.

The meeting was patronised over by Dr. Ali bin Masood Al Sunaidy, Minister of Commerce and Industry in the presence of the Tanfeedh Support and Follow Up Unit and representatives of the public and private organisations.

During the meeting, it was announced that about 10 per cent of the industrial sector initiatives have been completed by providing solutions to some of the challenges as per the timetable developed at the manufacturing industries lab initiatives.

The meeting stressed the need to continue the logic works for one of the industrial projects and continue the import of materials through Sultan Qaboos Port until the import terminal is transferred to Sohar Port to ensure sustainability of the materials for new project on the long run.

The meeting also reviewed the executive stance for some of the initiatives associated with the aluminum and steel industries. 60 per cent of the work has been completed at some of these initiatives, as per the planned timetable at the Tanfeedh labs.

It also reviewed the budget allocated by the government for the industrial innovation project in Sohar and other projects as well.

It discussed the alternatives to provide 500 megawatt of electricity for the industrial projects including using coal at the Special

As for the scaffolding project, which is include the metallic minerals, the Committee said that the project is expected to be completed during the third quarter

of this year.

It also discussed signing a MoU among Oman National Investments Development Company ‘Tanmia’ and the Directorate General for the One Million Date Palm Tree and Industrial Innovation Centre on the innovative investment of the date palm trees in the Sultanate.


Oman’s SGRF to develop port, industrial zone in Tanzania

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A major integrated project to develop a port and an adjoining industrial zone in Tanzania by the Sultanate’s State General Reserve Fund (SGRF), along with its partner China Merchants Ports (CMPorts), has received approval from the Government of Tanzania.

The proposal included dredging of the navigational channel, construction of a port and logistics park, and the development of the portside industrial free zone. The whole project is called the Bagamoyo Special Economic Zone Project, said a press release.

This approval is a major milestone and will be followed by negotiations on legal agreements. Thereafter, activities will commence on environmental studies, tendering of engineering, procurement, as well as on the construction packages and construction works of the project.

Bagamoyo project is one of the largest strategic projects of the SGRF. It includes the construction of a maritime port having international standards, which will be developed in phases.

The first phase will include four marine berths, two of which will be allocated to containers — one for multiple uses and another for support services.
The first phase of the port will be developed parallel to the development of the supporting infrastructure, as well as the industrial zone associated with the port. An additional area of 700 hectares will be allocated for the future development of the port, which is expected to accommodate giant vessels.

“We would like to thank the Government of Tanzania for entrusting us with the development of this project, and we highly value this partnership, which comes in light of the deep-rooted historical relations with Tanzania and as a strong testimony to the successful relations with the China Merchant Group,” stated Abdulsalam Al Murshidi, Executive President of SGRF.

A free industrial zone will also be connected to the port, which will cover an area of 1,700 hectares. Some 70 per cent of the area will be allocated to factories, workshops, stores and warehouses, while 30 per cent will be used for transportation networks, landscaping, water, power, and gas and telecommunications networks.


Iraq, Saudi Arabia sign 18 energy memorandums in Basra

Iraq, Saudi Arabia

Baghdad (IraqiNews.com) Iraq and Saudi Arabia have signed 18 memorandums of understanding in the energy field during the kingdom’s participation in an energy exhibition in Iraq.

The signing of the 18 memorandums of understanding came after Saudi Energy Minister Khaled al-Faleh inaugurated the seventh edition of the Basra oil and gas exhibition, according to the Saudi Press Agency.

It quoted the minister saying that 22 Saudi companies took part in the exhibition which comes to reinforce the “strategic partnership” between the two countries.

He said enhanced relations and energy cooperation between both countries will help bring stability to the international oil market, with both being prominent OPEC members.

Relations between Sunni-ruled Saudi Arabia and the Shia-dominated Iraqi government have been tensional over the past few years due to Saudi Arabia’s opposition to the involvement of Iraqi Shia paramilitary forces in the fight against Islamic State. Saudi Arabia has always been irritated by the influence of Shia Iran, its arch regional enemy, over Iraqi politics.

But the past months have seen an obvious rapprochement between both countries, with top-level officials exchanging visits and expressing eagerness to boost political, security and economic cooperation.

In October, more than 60 Saudi companies attended the Baghdad International Exhibition.

In July, both countries established a joint coordination council to boost ties on all levels.


Russia agree oil cut extension to end of 2018

VIENNA, Nov 30 (Reuters) – OPEC and non-OPEC producers led by Russia agreed on Thursday to extend oil output cuts until the end of 2018 as they try to finish clearing a global glut of crude while signalling a possible early exit from the deal if the market overheats.

Russia, which this year reduced production significantly with OPEC for the first time, has been pushing for a clear message on how to exit the cuts so the market doesn’t flip into a deficit too soon, prices don’t rally too fast and rival U.S. shale firms don’t boost output further.

Russia needs much lower oil prices to balance its budget than OPEC’s leader Saudi Arabia, which is preparing a stock market listing for national energy champion Aramco next year and would hence benefit from pricier crude.

The producers’ current deal, under which they are cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost oil prices, expires in March.

Saudi Energy Minister Khalid al-Falih told reporters the Organization of the Petroleum Exporting Countries and non-OPEC allies had agreed to extend the cuts by nine months until the end of 2018, as largely anticipated by the market.

OPEC also decided to cap the combined output of Nigeria and Libya at 2017 levels below 2.8 million bpd. Both countries have been exempt from cuts due to unrest and lower-than-normal production.

Falih said it was premature to talk about exiting the cuts at least for a couple of quarters as the world was entering a season of low winter demand. He added that OPEC would examine progress at its next regular meeting in June.

“When we get to an exit, we are going to do it very gradually … to make sure we dont shock the market,” he said.

OPEC and Russia together produce over 40 percent of global oil. Moscow’s first real cooperation with OPEC, put together with the help of President Vladimir Putin, has been crucial in roughly halving an excess of global oil stocks since January.

With oil prices rising above $60, Russia has expressed concerns that an extension for the whole of 2018 could prompt a spike in crude production in the United States, which is not participating in the deal.

A joint OPEC and non-OPEC communique said the next meeting in June 2018 would present an opportunity to adjust the agreement based on market conditions.

The Iraqi, Iranian and Angolan oil ministers also said before Thursday’s meetings that a review of the deal was possible in June in case the market became too tight.

International benchmark Brent crude rose around 0.5 percent on Thursday to trade above $63 per barrel.


Just as OPEC gathered in Vienna, U.S. government data showed that U.S. oil production rose 3 percent in September to 9.48 million bpd. But Falih said OPEC “won’t be quick on the trigger” to react to short-term U.S. output spikes.

U.S. shale oil producers, which effectively triggered the global oil glut of recent years, have been adjusting their message over the past year, switching away from combative language with regard to OPEC actions.

“If producers in the U.S. increase their rig count over the next few months due to higher prices then I expect another price collapse by the end of 2018,” said Scott Sheffield, executive chairman of Pioneer Natural Resources Co, one of the largest producers in the Permian Basin of Texas and New Mexico, the largest U.S. oilfield.

“I hope that all U.S. shale companies will maintain their current rig counts and use all excess cash flow to increase dividends back to their shareholders,” he told Reuters.

Gary Ross, a veteran OPEC watcher and founder of Pira consultancy, said the market could surprise on the upside with Brent rising to $70 if there were a major supply disruption.

“Everywhere you look there is an ever-present risk to supply,” Ross said.

“In Iraq’s Kurdistan there is a major risk to oil exports because of tensions with Baghdad, in Libya militias are still fighting, in Nigeria the risks of disruptions are significant, Venezuela is on the verge of default, Iran could again face U.S. financial sanctions and even in Saudi Arabia political risk is on the rise,” Ross added.

The production cuts have been in place since the start of 2017 and helped halve an excess of global oil stocks although those remain at 140 million barrels above the five-year average, according to OPEC.

Russia has signalled it wants to understand better how producers will exit from the cuts as it needs to provide guidance to its private and state energy companies. On Thursday, Novak said all companies were on board with the latest limits.


Iran to Manufacture Tractors in Africa

Scion Industrial Engineering

A business delegation from Tabriz in northern Iran was expected in Namibia’s capital Windhoek on Wednesday to finalize a contract that in a year’s time could culminate in Iranian-designed tractors—for agricultural purposes–rolling off an assembly plant, either in Windhoek or Walvis Bay, and bolstering employment.

This was revealed in an interview by Namibian newspaper New Era in Windhoek by Vahid Karimi, the ambassador of Iran to Namibia, who affirmed the visit of Iran Tractor Manufacturing Company‘s CEO and his delegation as the outcome of a rendezvous some two months ago between the two countries.

“A delegation from Iran was here two months ago and they have seen the sites that could be allocated for that purpose. It could either be in Windhoek or Walvis Bay, but it all depends on the company to have the final decision. I think if everything goes well, within a year we could have the first production of tractors in Namibia,” he said.

“My job as ambassador is to connect the people—as for the details, they are going to work them out when they meet,” he said in response to a question on the number of jobs to be created and the magnitude of Iranian investment in the contemplated tractor assembly plant.

Karimi was very optimistic and said, “The planned tractor assembly plant will help create jobs and help in the transfer of knowledge and skills. In the agriculture area, I am sure it will create lots of jobs.”

The ambassador noted that Rouhani is keen to boost trade and diplomatic relations with the 54 African countries, and in this vein, he gave the assurance: “I’m trying to bring more Iranians here. As you might be aware, Iran’s immediate neighbor is Europe, and many Iranian business people used to go to Europe but now the priority of my present government is Africa, so they are coming to African countries in big numbers where they are engaged in business. I give you the example: last year, our trade with Kenya increased by more than 150%, and in some African countries, Iranian cars are produced and used as taxis.”

Iran’s Foreign Minister Mohammad Javad Zarif led a high-ranking politico-economic delegation to Africa last month.

According to Foreign Ministry’s Director General of Africa Department Mehdi Aqa-Jafari, the African tour–the third such visit in the last four years–indicates Iran’s determination to put promotion of wide-ranging ties with the continent on top of its agenda.

“To establish consistent political relations with Africa, it is essential to develop strong economic interactions and this has been seriously pursued on our part regarding Africa nations,” he has been quoted as saying.

The Iranian delegation visited South Africa, Uganda and Niger.

Iranian President Hassan Rouhani is planning to visit the African Continent by the end of the current Iranian year (March 20, 2018).

During the South African National Assembly Speaker Baleka Mbete’s visit to Tehran in September, she said her country is interested to see Iran join BRICS–an association of five major emerging economies: Brazil, Russia, India, China and South Africa.

Joining the bloc would help Iran to substantially increase its international ties, especially with African powerhouse South Africa.

Karimi was also quick to point out that youth unemployment affects both Namibia and Iran, as oil and gas in the latter accounts for 80% of public revenues and generated over $135 billion in foreign reserves as of last December.

The Iranian ambassador feels the tractor investment has numerous benefits and should not be seen from a one-dimensional viewpoint, as tractors are multi-purpose and could be used for fruit production, poultry production and other agricultural applications.

He recalled that Namibian President Hage Geingob believes that if a country is not “self-sufficient” in food production, it is not independent, and he was absolutely right.

“I am happy that I am doing my duty to do something good for Namibian food production. It is very important,” he said.

Another area of potential bilateral trade cooperation is the possibility of Iran importing beef from Namibia. He said the shorter distance from Namibia to Iran could make business sense to Iranian importers of Brazilian beef–a country that is located far away.

He also commended “the very delicious Namibian hake (a fish related to the Atlantic cod)” that he feels could be imported by Iran that has a population of 82 million, of whom 13.26 million live in Tehran, the capital city.

Iranian investors are also interested in setting up a pharmaceutical plant, while Namibia could reciprocate by importing bitumen and asphalt for highway and road construction.

One of the setbacks he singled out in bilateral ties is that Namibia has not yet established an embassy in Tehran and he jokingly said he is also the de facto Namibian ambassador to his own country.

> Iran’s Tractor Manufacturing Prowess

Iran is a prominent manufacturer of tractors and combine harvesters that are exported across the Middle East and East Asia.

Iran Tractor Manufacturing Company is the largest producer of tractors in Iran with an 80% share. The company produced 14,400 tractors and exported 2,000 units worth $235 million to neighboring countries in the last Iranian year (March 2016-17), mainly to Azerbaijan, Afghanistan, Pakistan and Iraq.

ITMCO Chairman Abolfat’eh Ebrahimi said the company plans to produce 18,000 tractors in the current Iranian year and plans for a 30% year-on-year increase.

“Iran Tractor Industrial Group will export up to 25% of its products this year,” he said.

The company produces a range of small and medium diesel-powered tractors with single and double differential gearboxes.

Many of the older models are based on Massey Ferguson designs from the 1970s, as part of a joint venture prior to the 1979 Islamic Revolution.

The company has a production capacity of 30,000 vehicles a year, according to its own estimates.

ITMCO is located on the outskirts of the industrial city of Tabriz in northwest Iran.

Domestic producers recently voiced concerns regarding the import of tractors.

Amir Hossein Shiravi, the director general of Machinery and Equipment Manufacturing Office with the Ministry of Industries, Mining and Trade, said that in the 18 months to Sept. 22, only 2,220 tractors, including 1,740 light- and medium-weight and 480 heavy tractors, were imported into the country, while over the same period, 22,400 tractors were produced by local manufacturers.

“Imports constituted less than 10% of our domestic production. Heavy tractors are imported since we cannot manufacture them inside the country and there is demand for them,” he said.

Shiravi noted that local companies have recently started the domestic production of heavy tractors.

A heavy tractor manufactured by Iran Tractor Manufacturing Company was unveiled on March 2015 during a ceremony attended by Agriculture Minister Mahmoud Hojjati. The company has yet to start mass production.

During the sixth session of Iran-Ghana Economic Commission held on Nov. 13-16 in Accra, Iran agreed to launch a tractor production line in the West African country.


Iran, Turkey, Qatar Sign Deal to Ease Doha Blockade

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Turkey, Iran and Qatar on Sunday signed a transportation pact for boosting trade among the three countries.

Turkey’s Economy Minister Nihat Zeybekci and his Qatari counterpart Ahmed bin Jassim bin Mohammed Al Thani were in the Iranian capital Tehran to sign the agreement with Iran’s Minister of Industries, Mining and Trade Mohammad Shariatmadari.

Under the agreement, Iran will be the transit country between Turkey and Qatar. The deal is expected to help accelerate commodity delivery and facilitate trilateral trade, Anadolu Agency reported.

The agreement will lead to the creation of a “joint working group to facilitate the transit of goods between the three countries”, IRIB News reported, adding that the three nations aim to tackle “obstacles to sending goods from Iran and Turkey to Qatar”.

“Iran is playing an important role in the transport of goods from Turkey and Azerbaijan to Qatar,” said the Qatari minister in a bilateral meeting with Shariatmadari.

Saudi Arabia, aided by Bahrain, the UAE and Egypt, cut ties with Qatar in June, accusing Doha of backing extremism, a charge that Qatar denies.

Since the crisis erupted, Iran and Turkey–whose relations have warmed considerably in recent months–have sought to help break Qatar’s isolation, including by increasing food exports to the emirate.

Turkey and Azerbaijan have been using Iran as a land route to export to Qatar, filling the gap in the market in the absence of Saudi Arabia and its allies since the Arab rift.

According to Mohammed bin Mahdi Al Ahbabi, a board member of Qatar Chamber of Commerce and Industry, the land route between Turkey and Qatar via Iran reduces the cost of goods transport by about 80% compared to air cargo.

Expansion of Cooperation

The role of cargo movement through the sea route has also increased in the country after the siege was imposed on Qatar.

“Most of the [Iranian] shipping lines have now switched their transport services to Qatar, instead of the UAE and Oman,” Adnan Musapour, a member of the Export Committee at Iran Chamber of Commerce, Industries, Mines and Agriculture, said.

Torang Darya Shipping Line, the biggest private shipping company in Iran, intends to expand its business in Qatar. The company expects trade between Qatar and Iran to increase in the near future, which will lead to an increase in its frequency from Qatar.

“Before the siege (imposed on Qatar), we did not have any desire (to expand ties) because Qatar was importing most of its requirement from some of its neighboring countries. But right now, we have the desire and the plan for import and export from Qatar. We want to extend our business in Qatar,” Amir Khani from TDS Line, who was in Qatar to participate in an industry exhibition, was quoted as saying by Qatar’s daily newspaper The Peninsula.

Valfajr Shipping Company (affiliated with the Islamic Republic of Iran Shipping Lines), Rah Abrisham Marine Shipping Agency and Pasargad Shipping Lines are among Iranian firms that have started services to Qatar.

Masoud Khayatzadeh, the head of Abadan Chamber of Commerce, said the chamber has been holding talks with major Qatari companies to establish an exclusive wharf in Qatar for Iranian goods to ease transportation to the neighboring state.

According to Iranian Minister of Roads and Urban Development Abbas Akhoundi, the two countries formed a joint committee to boost cooperation in air and marine transportation, during Qatari Minister of Transport Jassim Saif Al Sulaiti’s visit to Tehran in late October.

The Qatari government has facilitated business trips for Iranians by issuing six-month visas. The move has resulted in higher demand for business trips to Qatar in recent weeks.

Qatar Airways and Iran Air have recently increased the capacity of their flights to Doha, especially from the southern Iranian province of Fars where a large number of merchants reside.

Iran Aseman Airlines and other private airliners are also working to launch cargo and passenger flights from Shiraz to Doha.

Iran, Turkey Moving Toward Free Trade Deal

Zeybekci on Sunday also attended the closing ceremony of the 26th meeting of Iran-Turkey Economic Commission.

Stressing both countries’ strong economies, Zeybekci said a free trade deal between Ankara and Tehran could pave the way for hundreds of new companies.

Iran and Turkey are signatories to a preferential trade agreement since 2014. Currently, the two sides have 265 categories of goods under their PTA. Iran accounts for 140 and Turkey for 125 categories in the list.

In the most recent development regarding the PTA, the two sides announced plans to add 60 categories of goods each to the agreement.

“The lion’s share of what Iran is going to add to the agreement is petrochemical products,” the head of Iran-Turkey Studies Center and Secretary-General of the two countries’ commercial council, Jalal Ebrahimi, told Financial Tribune.

According to the official, Turkey has requested to add vehicle spare parts, electric and mechanical machinery and equipment, aluminum products, iron and cast iron products, steel, construction stones, apparel and textile and cellulose products like paper, cardboard and wooden products, among other things, to the list.

Iran intends to add 30 categories of petrochemical products, polyester, copper products like cables, aluminum, ferromolybdenum and other iron alloys, direct reduced iron, pellets, cold-rolled coil, steel bars, zinc and its artifacts, floorings and synthetic fibers in return.

During the Sunday commission meeting, the two countries also reportedly signed a bilateral deal in the engineering field that targets $10 billion in annual trade.

Iran’s Rising Trade With Turkey, Qatar

Latest statistics released by the Turkish Statistical Institute show trade between Iran and Turkey stood at $8.15 billion during nine months since the beginning of 2017. The figure indicates a 14.24% rise compared with the same period of the preceding year.

Iran’s exports during the period amounted to around $5.84 billion, 75.7% more year-on-year. In return, Turkey exported $2.31 billion worth of goods, compared with $3.81 billion in the corresponding period of last year, indicating a 65% decline.

A review of the past six years ending March 20, 2017, shows Iran’s trade with Turkey peaked in the last fiscal year (March 2016-17) at $5.92 billion.

Latest statistics released by the Islamic Republic of Iran Customs Administration show Iran exported $139 million worth of non-oil goods to Qatar during the seven months to Oct. 22, registering a remarkable 117.5% increase compared with the same period of last year. Notably, Iran’s exports to Qatar saw a significant growth during the month to Oct. 22. Iran exported about $50 million of non-oil products to Qatar during the one-month period, which shows a fivefold surge YOY.

While in Tehran, the Qatari economy minister met with Iran’s Foreign Minister Mohammad Javad Zarif on Sunday. The two sides emphasized the need to remove trade barriers and facilitate conditions for economic exchanges between Iran and Qatar, IRNA reported.

In a meeting with Shariatmadari, the Qatari minister said Doha is seeking to increase bilateral trade with Iran.

“Foodstuff and construction material have been Qatar’s main imported goods from Iran [in the last few months],” Mehr News Agency quoted him as saying.

Shariatmadari said since Qatar will be hosting the 2022 FIFA World Cup, Iran’s technical and engineering services can meet the needs of the Qatari market. He said the Qatari side has offered to increase bilateral trade with Iran to $5 billion per year.


Iran’s Exports to Syria on the Rise

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Iran’s exports to Syria have been on the rise since the 2014-15 fiscal year–the lowest ebb of $103.013 million over the last 10 years.

The highest level of exports during the period under review was registered in March 2010-11 when Iran exported $524.48 million worth of goods to Syria.

Latest statistics released by the Islamic Republic of Iran Customs Administration confirm that the rising trend in Iran’s exports to Syria is continuing, as 15,214 tons of commodities worth $156.75 million were exported during the seven months to Oct. 22, registering an increase of 11.82% and 16.31% in volume and value compared with last year’s corresponding period.

Iran mainly exports chemicals, pipes and profiles, electronic parts, pharmaceuticals, auto parts, baby formula, faucets and organic compounds to Syria.

Iran’s imports from Syria, on the other hand, are meager, standing at an average of $23 million per annum over the 10-year period under review.

Syria mainly exports olive, olive oil, herbs, apparel, yarn and fabrics and steam turbine parts to Iran.

In a telephone conversation with Syrian President Bashar Assad on Saturday, Iran’s President Hassan Rouhani said the Islamic Republic will continue to stand by the Syrian nation and government, and is ready to participle in the reconstruction projects of the war-torn country.

His comments came after armed forces in Syria and Iraq recently managed to flush IS militants out of their last strongholds in both countries. Backed by popular groups and Iranian military advisors, the two countries declared their full victory over the notorious and brutal terrorist group.

The recent recapture of the two cities of Abu Kamal in Syria and Rawa in Iraq marked the end of the IS reign of terror, which started in 2014 with the group making vast territorial gains in a lightning offensive and establishing its self-proclaimed “caliphate” in the Iraqi city of Mosul and the Syrian city of Raqqah.

The presidents of the three guarantors of Syria peace process, namely Iran, Russia and Turkey, met in the Russian city of Sochi last week, calling for a national dialogue in Syria for creating stability and security in the country.

Rouhani’s expression of readiness to help the reconstruction of Syria has been repeatedly echoed by other Iranian officials.

“Iranian organizations, firms and provincial commerce chambers are able to meet Syria’s business needs and help the country implement its reconstruction projects,” the deputy head of Iran’s Chamber of Commerce, Industries, Mines and Agriculture, Hossein Selahvarzi, said in a meeting with Syrian Minister of Economy and Foreign Trade Mohammad Samer al-Khalil in the Syrian capital Damascus back in August.

The Iranian trade official urged the Syrian minister to facilitate free trade between Iran and Syria, and appoint a representative to follow related affairs.

Iran and Syria signed an agreement in Damascus in May to enhance economic cooperation.

Earlier in January, Iran signed major economic contracts with Syria in what Tehran and Damascus hailed as “a new page” in economic ties.

Five memorandums of understanding were signed during a visit by Syrian Prime Minister Imad Khamis to Tehran, including for Iran to operate a mobile phone service in Syria and phosphate mining.

Tehran and Damascus also signed a memorandum of understanding to cooperate in a phosphate mine in Syria’s al-Sharqiya.

Syria is among the world’s largest exporters of rock phosphate, a raw material used in the production of phosphatic fertilizers, although the war has marred its ability to mine and market the commodity.

The country agreed to give Iran 5,000 hectares of land for farming and 1,000 hectares for setting up oil and gas terminals. A deal was also signed on providing lands for animal husbandry.

Syria is increasingly indebted to Iran financially: Tehran opened a $3.5 billion credit line in 2013 and extended it by $1 billion in 2015, which economists say has helped keep the Syrian economy remain afloat.

Tehran has already shown interest in helping Syria rebuild its roads, airports, power stations and ports.

Iranian firms are already involved in a series of electricity projects worth $660 million in Syria.

Iran aims to export electricity to Syria and create the biggest power network in the Muslim world by hooking up Iran’s national grid with those of Iraq and Lebanon.

Syria’s GDP contracted last year by just 4% year-on-year, compared with a 36.5% YOY decline in 2013.

Source: https://financialtribune.com/articles/economy-business-and-markets/76882/iran-s-exports-to-syria-on-the-rise

New Beginning for Iran’s Economy

The latest report published by London-based provider of strategic market research Euromonitor International titled “Economy, Finance and Trade: Iran” focuses on one of the Middle East’s largest and most promising economies, according to the group’s website.

Highlights from the report are presented below:

The intensification of international sanctions over Iran in 2012 and the fall in oil prices since mid-2014 took a toll on the Iranian economy. However, short-term relief from sanctions and the rise in private consumption provided some support for the economy in 2015. The country largely benefits from its abundant hydrocarbon reserves, rising household consumption and well-educated, tech-savvy populace.

The removal of international sanctions in January 2016 is projected to boost trade and investment in the economy. However, low productivity, high state intervention and accumulation of bad loans are key challenges for the economy.

Rise in Investment, Exports & Lower Costs of Financial Transactions

Iran has experienced double-digit inflation and in 2013 it reached the highest level since 1995, owing to the intensification of economic sanctions. During this period, the country had limited access to foreign exchange assets, which resulted in increased costs of trade and financial transactions. The removal of sanctions, coupled with gradual fiscal consolidation and prudent monetary policy, brought down inflation to single digits in 2016;

Iran’s car manufacturing industry is very large and has great potential as a regional export hub, owing to the availability of abundant raw materials such as zinc, copper, natural gas and crude oil. Numerous major car manufacturers are attempting to enter or reenter Iran’s automotive market. After the sanctions were lifted in January 2016, PSA Peugeot Citroen was the first company to acquire a license from the government to invest in the country’s largest car manufacturer, Iran Khodro Company. However, outdated technology will be a major drag on the automotive industry in Iran;

Prior to the intensification of the sanctions over Iran’s nuclear program, the European Union was one of Iran’s major trading partners but Iran’s trade relations with the bloc deteriorated. Between 2010 and 2015, Iran’s total goods exports to the EU declined by 93.0% and total goods imports from the EU declined by 72.8%, in US$ terms.

However, two-way trade bounced back in 2016. According to the European Commission, the EU exported over €8.2 billion worth of goods to Iran last year, up 27.8% year-on-year. During the same period, the European bloc imported about €5.5 billion worth of goods from Iran, up 344.8% YOY.

Uptrend in 2017

The uptrend intensified in 2017 as Iran exported €2.77 billion worth of goods to the European Union in the first quarter of 2017, registering a sixfold rise compared with the preceding year’s corresponding period, according to Eurostat.

The country imported €2.52 billion worth of commodities from the EU in Q1, recording a %56 rise YOY. Iran is expected to benefit from various new trade agreements with France, India, Australia, South Africa and Pakistan. On April 2016, South Africa and Iran signed eight agreements on various areas, including trade, under which they have agreed to boost non-oil trade. In March 2016, Iran, India and Afghanistan signed a three-party deal to turn Iran’s port of Chabahar into a transportation hub;

The intensification of international economic sanctions in 2012 coupled with the plunge in oil prices since mid-2014 and weakness in tax revenue has deteriorated Iran’s public finances. However, with the removal of sanctions, oil exports will increase and access to foreign assets will be restored. This should help ease government finances.

Gov’t Reforms Needed

The removal of international sanctions along with the government’s continued privatization drive will open new investment and trade opportunities for Iran, in both its oil and non-oil sectors, such as infrastructure, automotive and transportation.

Yet, the lifting of sanctions will not be enough to boost investment and economic activity in the long run. Major reforms are needed to improve Iran’s banking sector that has a buildup of bad loans and streamline its business environment.