Interview with Al Arabiya (Arabic) on UAE's liberalisation & stimulus measures, 10 June 2018
Published on:   2018-06-12 06:53:57The UAE's Abu Dhabi introduced an AED 50bn stimulus package, which includes the establishment of Ghadan, to identify new technologies and investments, as well as issuance of licenses that will exempt the requirement of having an office or work space for two years. Businesses are likely to benefit: cost-cutting reviews are expected later this year, and plans are underway to allow dual licences for companies in Abu Dhabi free zones. Separately, Dubai also announced a series of initiatives including freezing private school fees for the 2018-19 academic year, waiving the 4% late-payment fine for property registrations for 60 days, reducing the “market fee” imposed by Dubai Municipality by half to 2.5%; the government will also scrap 19 fees related to the aviation industry. In this interview, Dr. Nasser Saidi touches upon these measures and its impact on businesses and the economy. The interview (in Arabic), telecast on 10th June 2018, can be viewed below and here. View all Articles!
Comments in Qatar Today's article on the latest developments in the energy market, Jun/Jul 2018 issue
Published on:   2018-07-05 12:07:04The below quotes from Dr. Nasser Saidi appeared in the cover story titled "Oil Price Hike: Shot in the Arm for GCC", in Qatar Today's Jun/July 2018 edition. The full article can be downloaded here. Dr Nasser Saidi, President of the Dubai-based Nasser Saidi & Associates, too says the latest developments [in the energy markets] will definitely ease the fiscal pains in the GCC which have in the recent past seen removal of subsidies in a phased manner as well as the introduction of VAT and excise taxes. While higher oil prices and thereby higher oil revenues will help soften the effects of fiscal austerity, it still remains lower than breakeven prices projected for most GCC nations. It therefore remains critical that further structural reforms be undertaken for greater economic diversification. There have been some positive reforms in the labour market, announcements of residency (in the UAE, Qatar and Bahrain) as well as opening up sectors for 100% foreign ownership. There will be spillover effects into the non-oil sector also, alongside improvements in business and consumer confidence (already visible with the uptick in indicators like PMIs, GCC projects, slow pickup in credit growth, etc). The UAE government recently also announced several measures to reduce business costs, which will also have a positive impact on non-oil growth, says Dr Saidi. Dr Nasser Saidi, President of the Dubai-based Nasser Saidi & Associates, says that though the markets for crude oil and gasoline are closely linked, it was not automatic as the prices of both products moved in tandem till 2008, and there has been some divergence ever since. He says that oil continued to remain a global commodity versus the dominance of natural gas in regional pockets (which is influenced by factors like infrastructure, storage, inventories, etc). The natural gas price shocks post-2008 were attributed to commodity-specific events (e.g., weather-related events like hurricanes) or bottlenecks at refineries, while oil price changes are affected by geo-political changes and global tensions. “For Qatar, which supplies almost 25% of the world’s LNG demands, there remains a strong demand from Asian economies (especially China) and Europe. Qatar has already announced expansion plans to increase its LNG export capacity to 100 million MTPA by 2024 as against the present output of 77 MTPA,” says Dr Saidi, who was former Minister of Economy and Trade and Minister of Industry of Lebanon. Saidi believes that oil prices will settle around the $55-$65 per barrel mark in the medium term and there are various supply and demand-side factors that affect the oil prices, including factors like production of shale oil, competitive renewable energy, energy efficiency policies, meeting commitments of COP 21 and beyond, etc.View all Articles!
Does it pay to host the World Cup? Article in The National, 14 July 2018
Published on:   2018-07-15 12:37:36
The 2018 World Cup is steaming to a close, with a global build-up of excitement and anticipation. Over a 1.5 billion people are expected to watch the final. World Cup frenzy takes over homes, businesses (with a consequent drop of productivity) and even trading rooms, where volumes decline and sick leave shoots up. Even conservative economists get excited. But economists can also be spoilsports. Despite the euphoria, they ask: does it make sense to host mega events like the World Cup, Olympics or World Expos? Do host countries benefit and do they recoup the investments made?
The arguments for undertaking mega projects and events focus primarily on the direct economic impact. This is the increase in activity and employment in the engineering, procurement and construction sector related to infrastructure spending, along with increased employment and spending in the tourism sector resulting from the inflow of tourists into the country (though this might displace non-event tourism because of congestion costs), as well as an increase in consumer spending during the event.
Research by Vanquis Bank reveals that England fans travelling to Russia for the World Cup and attending all matches would have spent £5,090 (Dh24,643) or 22 per cent of the average UK annual salary if England had reached the final. FIFA estimates close to 2.6 million fans would have watched the games in Russia by the time it wraps up on Sunday, but this is less than 0.1 per cent of the more than 3.5 billion fans expected to tune in on TV and online streaming.
In addition, there are “intangible benefits”: mega-event hosting nations use the opportunity to demonstrate their ability to undertake complex projects, and build and/or promote their “brand name”. In turn the higher value brand name could attract foreign investment and increased international trade and tourism.
The other immediate benefit in hosting the World Cup is that the host nation automatically qualifies for the tournament (and Russia had a good run reaching the quarter finals), but it also has to include massive tax exemptions for the Fifa association and its corporate partners. Germany, for example, offered Fifa an estimated $272 million in tax exemptions when it hosted the 2006 World Cup.
Indeed, the biggest winner from the World Cup is not the host country or the winning team (which takes home the 18-carat gold trophy whose current market value is about $150,000, and $3m along with prestige and honour), but Fifa. Fifa has become “big business”: broadcasting rights for this year is expected to generate $3bn in revenue – a 25 per cent uptick compared to 2014’s $2.4bn. In addition, corporate sponsorships (mostly from Russia itself, China, and Qatar which is hosting the next World Cup) likely brought in a further $1.6bn in revenue, according to KPMG.
Hosting international mega-events like a World Cup or a World Expo, such as the UAE’s Expo 2020, involve large capital outlays: stadiums, sports facilities have to be built, modernised or upgraded along with hotels and lodging for visitors and participants. Investments have to be made in transport and logistics to move millions of people: roads, trains, stations and airports have to be built or expanded to absorb the high intensity of use due to the influx of millions over short periods.
In addition, there are the increasing and non-recapturable security costs. Russia’s World Cup 2018 declared bill of $14.2bn, is one of the highest spend so far (somewhat lower than Brazil’s $15bn) with most of the money invested in infrastructure ($6.1bn), stadium construction ($3.4bn) and transport ($680m) - and compares to a spending of $10bn or more by nations that hosted the previous editions of the event.
The Oxford Olympics Study 2016 found that direct sports-related costs for the summer games since 1960 are on average $5.2bn and for the winter games $3.1bnn. But these costs exclude the wider infrastructure costs like roads, urban rail and airports, which often cost as much or more than the sports-related costs.
The most expensive summer Olympics was Beijing at $40-44bn and the massively expensive winter games of Sochi 2014 at $51bn. As of 2016, costs per participating athlete are on average $599,000 for the summer games and $1.3m for the winter event, which are higher given the smaller number of events and participating athletes. For London 2012, cost per athlete was $1.4m; for Sochi 2014, $7.9m.
The common characteristic of mega international events is that the investments are designed for a specific purpose and for a “limited duration” - running from several weeks for the World Cup or Olympics to six months in the case of World Expos. Historical evidence points towards large budget overruns: over the past 50 plus years, Olympic Games have gone over-budget by 179 per cent on average.
The bottom line is that the short-term benefits from the host country’s share of the event, tourism revenues and increased consumption are far outweighed by the heavy costs of event-related investments. In addition, there is an opportunity cost: mega-project investments are likely to crowd out spending towards health, education, social development, and in some cases, basic infrastructure (India’s embarrassing experience with the 2010 commonwealth Games comes to mind). Unless the economics change and there is revenue sharing from media and related property rights, it typically does not pay to host a mega-event, despite prestige and the higher value brand name.
What are the lessons from experience for countries and cities planning to host a World Cup or other mega-event? One, use and upgrade existing facilities. Two, focus on the legacy: what will become of the new facilities post-event? How will they be used to avoid white camels? Three, focus on and build lasting economic linkages between the event and the domestic economy. Four, sport is increasingly digital. Negotiate a share of the global media (TV and online) and IP rights with the organisers.