CCBLA - Arab-Belgium-Luxemburg Chamber of Commerce - ABLCC

Economic News

Expanded economic cooperation between the EU and the GCC

The European Union and the Gulf Cooperation Council (GCC) have signed an agreement to organise every year an “economic dialogue” in order to expand economic and trade relations between the two regional blocs.

The first Economic Dialogue between the EU and the GCC was held in 2003 and the recent decision comes on the back of a most positive development in the economic relations during the past years, turning the GCC into a major partner for the EU.

The second EU-GCC Economic Dialogue is to be considered as a follow-up to the Action Plan which was adopted by the EU-GCC ministerial meeting in Luxembourg on June 14th.

Healthcare business in the MENA region

The Middle East healthcare business could possibly reach a value of some $60 billion by 2025 on the back of a constant increase in services and facilities. The healthcare sector of the MENA region is the fastest growing in the world and creates numerous opportunities for construction and consulting firms, banking and private equity sectors, medical equipment suppliers and the pharmaceutical sector.

Saudi Arabia remains the major market, with newcomers such as Libya planning to launch important tenders as well. The focus is on treatment of cardio-vascular problems, diabetes and long term medical care. Another major growth sector is the management of hospital waste, which calls for significant investments and modern technology.

Wellness tourism is also a flourishing sector, particularly in the United Arab Emirates, Lebanon, Jordan and Egypt. Substantial resources are being invested into state-of-the-art facilities to exploit these opportunities and to upgrade services within the private sector.

Middle East carriers growing fast

Middle Eastern airline companies recorded the fastest growth in international passenger traffic, thanks to strong regional development and the capacity to attract long-haul traffic.

According to the International Air Transport Association (IATA), international passenger demand grew by 11.9% in June 2010, but Middle Eastern carriers recorded a growth of 18%. Growth is unequally spread over the various continents : Europe registered a passenger growth of 7.8%, against a 15.5% increase in the Asia-Pacific region (China being the region’s growth engine) and North American carriers registering an increase of 10.8%. All regions outside Europe indeed report double-digit growth in passenger traffic and airliners remain confident on the future outlook.

Freight traffic showed a 26.5% increase, as the industry recovers from the impact of the global financial crisis. The increase of freight reached 29.8% in Asia-Pacific, 39.6% in the Middle East, 44.9% in Latin America and 54% in Africa.

Record deals at Farnborough

Aircraft, engines and maintenance, repair and overhaul (MRO) deals from Middle East airliners amounted to almost $20 billion at the Farnborough Air Show this year, demonstrating the region’s increasingly dominant position in the global aviation industry.

The single largest aircraft deal at the show was Emirates Airline’s order for 30 Boeing 777-300ER planes, worth approximately $9.1 billion. The region’s largest carrier also signed a $4.8 billion deal with Engine Alliance to power its previously ordered 32 Airbus A380s, while Etihad Airways placed a $1.8 billion order with General Electric to power its 35 Boeing 787s it ordered last year.

Other important contracts were signed by Air Arabia, the first regional low-fare carrier, for engines to power its 44 Airbus aircraft ordered in 2007, and Qatar Airways, purchasing Bombardier aircraft for its corporate jet subsidiary and two Boeing 777-200LR aircraft.

During the Farnborough Show, a joint venture was signed between Mubadala Aerospace, a unit of Mubadala Development Company, and Goodrich to perform MRO work on aircraft landing gear, coming closer to Abu Dhabi’s goal of developing a regional centre for aerospace expertise. In another deal, Abu Dhabi Aircraft Technologies and Sikorsky Aerospace Services agreed to form a MRO joint venture to provide military aviation services.

Jordan joins regional FTZ

Jordan, Lebanon, Syria and Turkey agreed to set up a free trade zone (FTZ), complete with a visa-free travel regime for their nationals. The four countries will establish a cooperation council to develop a long-term strategic partnership and create a zone of free movements of goods and persons.

The agreement was reached by the foreign ministers of the 4 counties on the sidelines of a Turkey-Arab Cooperation Forum in Istanbul, in June. The free trade zone will be based on existing bilateral agreements and practices on free trade and visa exemption.

Lebanon and Turkey are required to complete such a bilateral arrangement before the four-way process could go ahead.

Tourism development in Qatar

A staggering $20 billion has been allocated to build world-class tourism facilities in Qatar and to turn the country into a world tourism destination by 2013. According to the Qatar Tourism Authority (QTA), the plans include building permanent entertainment cities in different parts of the country and more particularly in the southern and northern regions.

All hotels are at present concentrated in the capital Doha, although the south is particular popular for desert tourism experiences and the north for its historical sites. Hotel capacity stands at 15,000 and is expected to double to 30,000 within 3 years.

QTA expects tourism arrivals to be between 3 and 4 million by 2013, many times the current capacity of the country, while transit traffic at the new Doha International Airport is projected to reach 2.5 million passengers. Currently 95% of the tourist arrivals in Qatar are business travellers, a majority of them coming to participate in seminars, conferences and exhibitions.

Development spending in Saudi Arabia

The Government of Saudi Arabia approved an impressive series of 1,420 contracts worth SR71.5 billion in the first half of the year. The trend is part of the five-year spending plan adopted in 2009 and aimed to develop infrastructure and oil facilities.

The contracts included over 1,000 construction projects worth SR60 billion, water and sewage projects (SR6 billion) and village and town development (SR5.6 billion). The country has drawn on its reserves to maintain the five-year development programme on track and to fund a record budget, needed to offset the effects of the global crisis.

In 2009, spending on projects was SR180 billion, an increase by 37% in comparison with the previous year.

The UAE to become an aerospace hub

The UAE capital Abu Dhabi is bound to become a part of the global aerospace industry as Mubadala Aerospace will start making aircraft components at a new facility by the end of this year. The Strata facility will manufacture composites aero structures with Airbus as its first recipient. Mubadala plans to invest $500 million until 2015 for the three phases of development of Strata, which will manufacture components and eventually develop primary aircraft structures. So far, Mubadala has signed work packages in the range of $2 billion and is in talks for additional deals, aiming to reach a target of $5 billion by 2020. Strata’s first phase cover contracts with Airbus, Finmeccanina’s Alenia Aeronautica and FACC. Mubadala also inked an agreement with Boeing to cooperate in engineering, research and development, training and maintenance. The second phase of Strata is to include work for Boeing after work packages materialise.

A joint venture between Mubadala and Sikorsky will pave the way for setting up a military MRO capability in the emirate. The MRO sector in the Middle East is expected to grow from $2.1 billion at present to at least $4.4 billion by 2019, and Mubadala is eyeing deals to catch an important part of this market. The firm furthermore signed an agreement with Goodrich to perform MRO work on landing gears on commercial aircraft with the target of having the Middle East’s first dedicated landing gear facility by 2012. The facility will be based in the city of Al Ain and is to focus initially on customers in the MENA region.