One of the most attractive investment centres of the UAE, Ajman Free Zone Centre (AFZ) inaugurated a representative office in the Russian capital on November 28. Opening the event, the AFZ Director General Sheik Mahmoud Khalil al-Hashimi and the accompanying delegation visited the office of Midland Consult in the Moscow city centre.
Sheik Mahmoud al-Hashimi pointed out that Ajman Free Zone is ready to provide all facilities and financial tools that guarantee the provision of the best products and services to the potential investors through the new office. Ajman Free Zone is one of the fastest growing free zones in the region and, as Sheik al-Hashimi underlined it will continue the efforts to ensure the sustainability of this growth and expansion.
In the presentation of the FZA project at the Moscow Lotte hotel the delegation from Ajman met with businessmen and officials working in the sphere of investments and communications to discuss joint opportunities for the establishment of trade and investment ties between the two countries, and the importance of the expansion and further development of economic relations for the mutual progress and prosperity.
Those present at the event learnt about the benefits of the FZA and the highest level services offered by Adjman. The Director General of the FZA also gave a press conference, telling journalists about the aims and objectives of the FZA’s office in Moscow, which is now available with a range of services for potential investors. In a video presentation, Sheik Mahmoud al-Hashimi gave detailed explanations on what specific investment opportunities are available in the emirate of Ajman, pointing out their advantages and future prospects.
During the promotional presentation which was held today in Lotti Hotel, The AFZ delegation met a number of business leaders and officials of the investment and media in order to discuss a common ground to establish trade and investment partnerships between the two countries and the importance of expanding and developing economic relations between them to achieve development and prosperity.
Ajman Free Zone delegation included Mr. Nader ElDesoki, Deputy Director-General, Mr. Rishi Somaiya, Director of Sales Department and Mrs. Leila Sakhabeva, Sales Executive at Dubai office.
The victory of the Republican Donald Trump at the US presidential election will have no long-term negative consequences for the Russian economy: as the Russian authorities and the expert community believe certain risks, albeit indirect, exist only in the energy sector.
For the second time this year, financial markets undergo something least expected. The memory of Brexit is still fresh for the equity markets, while the new shock to the system is brought by Trump’s victory.
Financial consultants in Russia reckon that, much like as in the case of Brexit, results of the US presidential election will not have a major impact on the domestic market. World markets shaken by the results of the US elections should recover just as quickly as they did after Brexit, while Trump’s victory will provide more opportunities for global growth and reduce geopolitical confrontation.
The head of the Russian Finance Ministry Anton Siluanov reckons that no major impact on the Russian economy and the Rouble would result from Trump’s victory. «Russian financial markets, we saw, had a reserved reaction to the event. This is encouraging as the current fiscal and monetary policy is aiming to stabilize and reduce dependence on the external factors», the Finance minister told reporters. «We do not expect any changes in the behaviour of foreign investors towards Russia. We even observe their attention to Russia grow (a fact illustrated by the recent Eurobonds issue), and we expect the interest to further increase», Siluanov added.
The former Economic Development Minister Alexei Ulyukayev commented saying that one should not rush to conclusions about the US—Russia relations following the election. Russia would do everything possible to repair relations with the United States, including the economy and trade domains. According to Ulyukayev, Russia is ready to take certain steps forward. «We act openly and expect to see the same on the part of our American partners», he concluded.
In 2015, the trade turnover between Russia and the United States, according to the data provided by the Russian customs, amounted to USD 20.96 billion while dropping by 28% compared to the previous year.
This includes USD 9.51 billion in exports (10.2% decrease), and 11.45 billion in imports (down by 38.1%). The leading Russian economists believe that no significant changes should be expected following Trump’s victory at the US presidential election. The Russian Chamber of Commerce President S. Katyrin is certain that the United States are not lifting sanctions against Russia anytime soon since they now serve as a strong element of the US foreign policy.
At the same time, the head of VTB Bank A. Kostin said that Trump’s victory opens doors for relaunching the Russia—US relations and for lifting the sanctions.
Previously, Trump promised to strengthen dramatically the domestic energy sector by deregulation and to organise an ’energy revolution’ that would «make the US great again». In particular, he proposes to reduce the corporate income tax to a capped rate of 15% and introduce a moratorium on new forms of regulation in the energy and other sectors. Quoting Trump, this would add up to USD 100 billion to the GDP, while allowing to create 500,000 new jobs every year. In the decades to come, Trump expects to earn up to USD 6 trillion with lower taxes and their increased collection.
The time scale for Brexit was made clear by the British PM who called March 2017 as the date Britain would leave the EU. This means London is not waiting for the election results in Germany, as previously suggested. The degree to which the European geopolitical order would change is still a mystery to both British and European elites. However, certain interests are already clearly defined.
The UK will launch the procedure to leave the EU by the end of March 2017, Prime Minister Theresa May declared, adding that «we must do everything we can to help British companies remain competitive in the global market space.» May confirmed the dates for application of the Article 50 of Lisbon Treaty, which will trigger a two-year process on the way out. The Article 50 of the Lisbon Treaty stipulates that any State may decide to withdraw from the European Union.
In accordance with this document, the British authorities intend to formally notify their EU partners that the country is leaving the bloc. Earlier in November, May announced the abolition of the 1972 European Communities Act, which provided for the EU legislation to come into force in the UK. «The power of EU law in the UK is over», said the prime minister. Britain is therefore not going to wait for the German parliamentary election results to be held in September 2017 (as previously expected) in order to begin the process of a formal exit from the EU.
It is still not clear how exactly trade, financial and other ties of the Great Britain to the EU will be modified, or, perhaps, left untouched. Will Britain manage to keep its privileges or minimize its losses from Brexit? In fact, the UK leaving the EU might change the entire set up of the European order, — or pass unnoticed. The end result is still unknown today to both the EU and the UK authorities. Up ahead is a long process of negotiations of many nuances in many fields: from social and political to economic and financial.
Some believe that the main beneficiary of the EU transformation will be the United States. A simple reason being that, given the instability in Europe, cash flow will have nowhere else to run but the US. The global economy has only a few strong financial anchors: it is the US dollar, the Euro zone and the pound Sterling. Another robust anchor is the yen, albeit burdened by certain issues and baring constraints for global investors. When the EU and the UK are in trouble, it is only logical to have the USA as an alternate landing strip.
The only currency able to compete for a global cash flow is perhaps the Chinese yuan, which is officially recognised as of 1 October 2016 as a major reserve currency. Beijing, however, may not be able to intervene in this fight, since the yuan only makes its first steps to the conquest of the global market. Additionally, as financial instruments in China are focused primarily on the domestic market, there remains much to be done in order to conquer the global market space.
So far the economic consequences for the country are not as dire as many believed prior to Brexit. Moreover, the second quarter of 2016 revealed some positively surprising results. UK GDP grew in annual terms by 2.2%, or quarterly by 0.6%. However, the recent data portend imminent slowdown following the referendum on leaving the EU, IMF experts are quoted saying.
No doubt, United Kingdom, certainly wants to retain the status of a great trading nation. The British currency export exceeds 500 billion pounds Sterling annually. Although, year 2000 onwards UK significantly increased its exports to China (up to seven times) and to the United States (double growth), the European Union remains the major consumer of the British goods and services. Over half of exports goes to the EU. In 2015, some 300 billion pounds worth of British goods and services were exported outside the EU. The most successful British export items are financial services (3.5% of GDP in 2015), machinery (3,3% of the GDP), cars (2.4% of the GDP) and pharmaceuticals (1.3% of GDP).
Would the UK retain after Brexit its existing commercial privileges with the EU is a complex issue that boils down to a long and complex political endeavour. Brussels is not ready to bear any losses. As the head of the European Council Donald Tusk warned, Britain would not retain the full access to the single European market after leaving the EU if it does not comply with the EU four principles for the freedom of movement of goods, services, capital and labour force.
Britain is facing another challenge: what would become of the global financial centre once the country leaves the EU? Would the City lose its financial power? Today, the Asian markets such as Hong Kong and Singapore work closely in the City’s footsteps, with their positions as global financial OTC trading centres already well strengthened, given the weakening position of the usual players. During the last three years the share of the City of London on the global FX market started to shrink rapidly. According to the Bank for International Settlements (BIS), the share of the UK dropped from 41% in 2013 to 37% in 2016. This happened before the choice of the British voters on the referendum for the EU withdrawal.
Today, the Asian markets benefit from a more favourable economic environment as compared to Europe or the United States. British elites positively would not want for London to lose its reputation as a financial centre because of Brexit. The UK economic set-up includes a major annual current account deficit of USD 140–170 billion, which is evened out solely by the nett international investment. In other words, London is highly dependent on the favour from the international investors. Should London lose this giant capital inflow, the British economy might start sinking.
This means that the British elite will seek to avoid dramatic turns in relations with the EU. How that pans out, time will show.
Meanwhile, it was after the referendum that the Bank of England lowered its base rate, re-launching the bonds buyout plan to pump the economy with cash and stimulate its growth. However, in November, the Bank of England eased its monetary policy. The government, meanwhile, is preparing to announce the new tax measures in response to Brexit.
Due to the economic risks Sterling continues to decline against the dollar. The pound is headed for a fifth consecutive quarterly drop. This is the longest period of decline for the British currency since 1984. The Sterling shows the weakest results among the 16 major world currencies this year. The British currency is too vulnerable given the news about the UK’s future, while the volatility might increase as the negotiations with the EU advance. In addition, according to the Bank of England, after a significant economic shock caused by Brexit there will be a need for a significant devaluation. These statements certainly do not encourage stability.
Cyprus based «Melco—Hard Rock Resorts» consortium won the last round of the public tender for the right to build the first casino resort on the island.
The tender results were officially announced in October by the Ministry of Energy, Commerce, Industry and Tourism of Cyprus on the day of the deadline for submitting final offers by the potential participants.
It is now clear, that the consortium plans to build a casino near Limassol. The issued license gives the company the right to build and manage a casino in Cyprus for the next 30 years under terms of monopoly during the first 15 years. There is also a plan to build a smaller casino and three gambling parlours with the slot machines elsewhere on the island.
The short-list of participating candidates during the final stage of the Cyprus casino construction and management tender also included Bloomberry from Philippines and Naga from Cambodia. Later, however, they gave up any further struggle for the license, leaving the tender a few days before the end date. According to the media reports, these companies were interested in building casinos in Paphos and Larnaca.
According to the tender requirements, investment in the project should be no less than 500 million euros. Construction of the casino is deemed to create thousands of new jobs and attract more tourists to the island.
According to the International Monetary Fund, global non-financial sector debt reached USD 152 trillion, having doubled in the past 100 years. And it keeps growing: while the debt stood at 200% of the global GDP in 2002, by 2015 it increased to 225%. While no measure exists to estimate the potential dangers of growth of this indicator, the IMF keeps warning governments worldwide of the need to reduce the debt amount.
Following the 2008-2009 global financial crisis, many central banks worldwide introduced historically low base rates, rapidly adapted by many companies to expand their loan portfolio; as a consequence, the burden of the corporate debt increased significantly. The global financial practice of the low interest rates suppressed corporate desire to pay back the debt, even when it would not present a problem at a given moment. Thus many financial institutions delay settling debt in anticipation of higher inflation.
The IMF warns that deflation often becomes the cause of an increased debt burden, which in turn leads to a deterioration of the economic growth and a continued deflation. Evoking potentially the most problematic issues, IMF indicates that the private debt is not only high in the advanced economies, but also among several large countries of emerging economy, namely Brazil and China. Although the sovereign debts account for only about one third of the global debt figure, the report also mentions a significant increase in its after 2010 when the markets started recovering from the financial crisis.
The Russian Ministry of Economic Development (RMED) published three scenarios of the socio-economic development of Russia until 2035. The optimistic one assumes an average annual economic surplus of 2%, while a conservative forecast shows 1.8% growth. According to the target assumption, the growth should exceed 4% already in the year 2019, although the economy would have to shift to the investment model.
The RMED came up with three scenarios of the national economic development until 2035, which were then sent to the Ministry of Finance. One of the cases suggests that the Russian economy would not be able to overcome the stagnation in the next 20 years, Russian media report. This option (the so-called basic+) presumes a slow growth in oil prices up to USD 57 per barrel by 2020, USD 70 by 2030 and USD 76.7 by 2035. Under this scenario Russia’s GDP should grow by 1.5 times in 20 years, the RMED affirms. On average, the Russian economy would grow by 2% (between 1.7% and 2.6%) a year in the next 20 years, which is about 1.5 times below the average global rates, the media observe.
The capital outflow is projected to be reduced almost to zero. Export and import figures would grow by about 2% and 4% per year respectively, while the trade balance would gradually decline and the current account slowly shrink. The number of employed by the Russian economy, according to the ’basic+’ scenario, would remain almost unchanged for the next 20 years (with 68.4 million in 2016, and 68.1 million in 2035).
A conservative (’basic’) scenario was calculated by the RMED under assumption that the oil prices would remain stable at USD 40 per barrel during the forecast period. That is in today’s prices, while in nominal terms oil would grow by about USD 1 annually, up to USD 55 per barrel in 2035. According to this scenario, GDP would grow by an average of 1.8%, while the number of employed in the economy would decrease gradually throughout the years down to 64.4 million by 2035. At the same time, the RMED believes such forecast (with a maintained level of oil prices) as unrealistic, even for the coming three years, the media observe.
The third scenario is based on the same forecast for the oil price growth and nearly the same demographic parameters as the ’basic+’. However, as one RMED expert explained, a growth above the global average would be achieved due to a transition to the investment-based economic model, presuming also an improved business environment, support of non-oil exports, corporate measures for cutting costs and increased revenues. According to this target scenario, by 2019 the economic growth would exceed 4% per year, while the median during the 2016–2035 period would be at 3.6% of annual growth.
Capital flight from Russia amounted to only USD 9.6 billion between January and September 2016. This signals that the period of the economic adjustment is over, the deputy Finance Minister of Russia, Maxim Oreshkin, affirmed at a conference held at the Russian Academy of Sciences.
«There is a significant progress in the situation with the capital flight: following an outflow of USD 150 billion in 2014 and USD 50 billion in 2015, this year, in the first 9 months, we saw only USD 9.6 billion [leaving the country]», Oreshkin commented. The vice-minister of finance also confirmed that the inflation seriously slowed down. «In September [the annual inflation] was 6.4%. By the end of the year we expect 5.7–5.8%», said Oreshkin. Most importantly, he said, the adjustment period is over without a serious increase of unemployment figures.
On top off this, the public and corporate expectations for inflation have stabilised, while the necessary conditions for the revival of business activity, now promise a resumed economic growth, Oreshkin summed up.
Other analysts of the Ministry of Finance project a zero-rate capital flight from Russia in 2016. By November this year, the net capital outflow from Russia was curbed five-fold since the beginning of the year.
In 2014-2015, on average gold showed an negative price dynamics, as the US Federal Reserve policy introduced after the 2008-2009 global financial crisis was aimed at making the loans in US dollars cheaper.
Encouraged by the low cost of borrowing, the investors started by pumping funds not in the Main Street development (i. e. the real sector of the US economy), but rather in the equity market and the Wall Street funds. A seeming stability of those years turned into a forced growth of the US public debt and a drop in the investor interest to gold. Things started to change in late 2015, as the US Fed began to tighten the ’dollar tap’ by raising the base rate in order to avoid, among other issues, a bigger void in the national pension funding. As a result, since the beginning of the year, gold ounce went up by more than 20%.
What happens in the US economy is crucial for the whole world: the US dollar still acts as a key global currency, used in over half of all the global commercial transactions. Although this is not about to change in the foreseeable future, the world’s largest developing economies, such as Russia and China, start to pace up their investment in gold: should another financial turmoil occur, similar to the one back in 2008-2009, many investors would look for an ’escape’ model via gold. Besides, the level of the US sovereign debt and the recurring financial bubbles in the real estate sector and at the stock market, cause concerns about the US dollar which might soon show very strong undulation patterns.
In this situation, gold might become a more reliable asset for storing reserves than any other foreign currency: several currencies, once stable, keep losing this quality in front of our eyes, so why wouldn’t the same happen to the US dollar? The Swedish krona, for instance, today fell to its lowest in 7.5 years against the US currency. The British pound Sterling lost over 20% of its value since the beginning of the year.
Investors are worried about this high volatility of a number of global currencies. Everyone keeps in mind that the modern banknotes are not supported by a fixed exchange rate into some other reliable asset. The fluctuations in the price of gold, observed in 2014–2015, confirmed once again that whatever was going wrong it wasn’t about the precious metal itself, but rather about the US dollar, which globally determines the price of an ounce today. Well, it does so far.