Geopolitical risks to hit Abu Dhabi’s rating
By Matt Smith on Tuesday, February 12 , 2008
Geopolitical risks will prevent Abu Dhabi from increasing its credit rating in the immediate future, a senior analyst from global rating agency Standard & Poor’s (S&P) has warned.
Abu Dhabi is currently rated AA by S&P, which is two levels below the highest possible rating.
“We are already incorporating all Abu Dhabi’s strengths, particularly its fundamental wealth and asset positions,” said Farouk Soussa, Standard & Poor’s team leader of Middle East ratings.
“Abu Dhabi would have to address the current constraints to increase its rating and these are mainly geopolitical risks in the region, as well the relative lack of diversity in its economy.
“If pressures with Iran and tensions in Iraq ease, then we could see the ratings improving.” Soussa was speaking at the official opening of S&P’s Middle East headquarters at the Dubai International Finance Centre.
The US analysts currently provide ratings on 100 public and private sector entities across six Gulf countries, including the emirates of Abu Dhabi and Ras Al Khaimah. The latter was assigned an ‘A’ long-term and ‘A-1’ short-term foreign and local currency rating in January.
Global sukuk sales are likely to top $100 billion (Dh367bn) by the end of 2009, according to Jan Plantagie, S&P regional manager for the Middle East.
He said a “huge pipeline” of sukuks – Shariah-complaint bonds – will be launched either in the second half of this year or early in 2009.
International credit agencies such as S&P and Moody’s have been criticised for their role in the ongoing US sub-prime crisis, with many analysts saying they waited too long to cut the ratings of mortgage-backed bonds, and that they failed to adequately evaluate the risks inherent in sub-prime debt.
In response, S&P has announced 27 directives to increase transparency and improve information disclosure to investors.
S&P is part of a growing band of sceptics doubting whether a GCC monetary union can be achieved by the official 2010 deadline.
“This date looks very ambitious and we think it will be later than that. Kuwait has dropped its dollar peg, which makes it more complicated, while there are technical and political issues to be solved,” said Soussa.
Real estate has been a prime driver of Dubai’s economic boom, with property prices enjoying mega growth, but Soussa admits the bubble could yet burst.
He said: “A concern would be if the global slowdown results in a decrease in economic activity and so the number of expats relocating to the GCC, which is currently the main driver of demand, declines.
“But the construction boom of the GCC is very different from any experienced in the West.”
GCC sovereign wealth funds (SWFs) are refocusing their investments on their native region because opportunities in Western markets are diminishing. Soussa said: “Pursuing the best return means looking inside the GCC as well. The second reason is there’s now a greater capacity to absorb funds [in the GCC] and therefore more opportunities for development and so SWFs are looking inward as well.”
Soussa refused to comment on whether S&P will be rating Dubai in the near future. However, he praised the transparency of the region’s governments in supplying information on which to base its ratings, but admitted the quality of data was sometimes lacking.
Soussa added: “There’s room for improvement in terms of quality and breadth of information. This doesn’t affect our ability to complete our ratings, which are driven first by the government’s financial position and there is ample data on that.”
Net borrowing to reach $23bn
Net borrowing by Middle Eastern and African rated sovereigns may reach as much as $23 billion (Dh84.41bn) in 2008, a sharp increase from $7bn last year, according to Standard & Poor’s.
The hike is “due to a reduction in debt repayments and a rise in sovereign borrowing requirements”, S&P said in its fourth annual regional sovereign issuance survey. Despite the increase in borrowing, total new debt accounts for just 1.1 per cent of the combined GDP of the rated sovereigns.
The ratings agency “expects rated Middle Eastern and African sovereigns’ commercial medium and long-term borrowing to be $77.6bn in 2008, up from the $57bn borrowed in 2007. Of this, the vast majority, $54.2b, is required to refinance existing maturing debt, with the remaining $23.4bn reflecting new debt”.
Wednesday, February 20, 2008
Saudi to discuss riyal revaluation, combating inflation
Author: BI-ME staff
Source: BI-ME and agencies
Published: 17 February 2008
SAUDI ARABIA. The 150-member Shoura Council that advises the king, will discuss on Sunday the revaluation of the Saudi riyal against the US dollar, rising inflation and the GCC common currency.
Finance Minister Dr. Ibrahim Al-Assaf, Dr. Osama Abu Gharara, deputy chairman of the Financial Committee at the Shoura Council and Hamad Saud Al Sayyari, governor of the Saudi Arabian Monetary Agency will be present at the meeting.
“So far we have not seen any solution to control inflation,” Abu Gharara told Al-Eqtisadiah business daily. Inflation in the Kingdom surged to a record high of 6.5% last December.
Inflation is partly driven by a rise in global commodity prices and the weak US currency.
“We’ll also discuss the possibility of revaluing the riyal against the dollar in tune with its devaluation against other international currencies,” the Shoura member said. He emphasized the need for reviewing the riyal’s exchange rate with the falling American dollar.
"Revaluing the currency is a possible way to face inflation and it will be one of the solutions the council will present today," Abu Gharara was quoted as saying in the pan-Arab daily Asharq Al-Awsat.
The Shura Council can review draft legislation and make recommendations, but these are not binding on the government.
Saudi Arabia has been trying offset the impact of price rises on its 25 million people through measures including a plan announced last month to raise wages, welfare payments and subsidies.
Like most of its neighbours in the world's biggest oil-exporting region, Saudi Arabia's dollar peg means it is forced to track US monetary policy at a time when the Federal Reserve is cutting interest rates to help ward off recession.
Inflation has overtaken official borrowing costs in the largest Arab economy, where the central bank raised bank reserve requirements twice in two months to force lenders to keep more money in their vaults in a bid to slow down credit growth.
Saudi policymakers have repeatedly said the largest Arab economy would not sever its dollar link.
"I don't think that dropping the peg is a magical solution to curb inflation as there are neighbouring countries that changed the peg and their inflation reached record highs," Abu Gharara said, in reference to Kuwait.
The Saudi riyal hit a two-month high of 3.73 against the dollar last week.
Source: BI-ME and agencies
Published: 17 February 2008
SAUDI ARABIA. The 150-member Shoura Council that advises the king, will discuss on Sunday the revaluation of the Saudi riyal against the US dollar, rising inflation and the GCC common currency.
Finance Minister Dr. Ibrahim Al-Assaf, Dr. Osama Abu Gharara, deputy chairman of the Financial Committee at the Shoura Council and Hamad Saud Al Sayyari, governor of the Saudi Arabian Monetary Agency will be present at the meeting.
“So far we have not seen any solution to control inflation,” Abu Gharara told Al-Eqtisadiah business daily. Inflation in the Kingdom surged to a record high of 6.5% last December.
Inflation is partly driven by a rise in global commodity prices and the weak US currency.
“We’ll also discuss the possibility of revaluing the riyal against the dollar in tune with its devaluation against other international currencies,” the Shoura member said. He emphasized the need for reviewing the riyal’s exchange rate with the falling American dollar.
"Revaluing the currency is a possible way to face inflation and it will be one of the solutions the council will present today," Abu Gharara was quoted as saying in the pan-Arab daily Asharq Al-Awsat.
The Shura Council can review draft legislation and make recommendations, but these are not binding on the government.
Saudi Arabia has been trying offset the impact of price rises on its 25 million people through measures including a plan announced last month to raise wages, welfare payments and subsidies.
Like most of its neighbours in the world's biggest oil-exporting region, Saudi Arabia's dollar peg means it is forced to track US monetary policy at a time when the Federal Reserve is cutting interest rates to help ward off recession.
Inflation has overtaken official borrowing costs in the largest Arab economy, where the central bank raised bank reserve requirements twice in two months to force lenders to keep more money in their vaults in a bid to slow down credit growth.
Saudi policymakers have repeatedly said the largest Arab economy would not sever its dollar link.
"I don't think that dropping the peg is a magical solution to curb inflation as there are neighbouring countries that changed the peg and their inflation reached record highs," Abu Gharara said, in reference to Kuwait.
The Saudi riyal hit a two-month high of 3.73 against the dollar last week.
Sunday, February 17, 2008
Gulf States close in on currency revaluation
AME info, Sunday, February 17 - 2008 at 10:16
International banks in Dubai have slashed interest rates on dirham deposits to around one per cent, a sure sign that revaluation is not far off and that the banks do not want to be left holding dirham deposits. Today, the delayed Saudi Shura meeting of the king, finance minister and central bank governor is to discuss GCC-wide revaluation.
At the same time the Middle East Economic Digest reported that the UAE is about to split central bank responsibilities between a new financial services regulator and monetary policy.
Incumbent UAE Central Bank Governor Sultan bin Nasser Al Suwaidi could be replaced in a cabinet reshuffle on February 26; his present mandate expired on December 18.
This action would likely be a part of a wide ranging reform of UAE monetary policy. The GCC States, with the exception of Oman, committed themselves to a monetary union by 2010 at a meeting of heads of state last December.
Revaluation would be a logical step towards establishing a single GCC currency valued against a basket of global currencies and not just the US dollar, something like the successful Singapore dollar.
Controlling inflation
Meanwhile, a coordinated revaluation in advance of the single currency is also a logical move to head-off spiraling local inflation rates in the Gulf, and delivering a one-off relief to long suffering residents who are puzzled why the economic success of the region has resulted in this 'tax' on their salaries.
In order to make a real impact the Gulf States could choose a high, one-off revaluation of 10-15 per cent with the strong proviso that this was not going to be repeated before the 2010 common currency deadline.
From the perspective of the UAE there is a historical precedent to follow. Before independence in 1971 the dirham was a part of the sterling area, which then revalued and later moved to the fixed dollar peg.
Economists see the main benefit of an independent currency regime as being the ability to set interest rates in line with local economic conditions to avoid a boom-to-slump cycle. For the danger of having interest rates set by the US - whose economy is slumping and not booming - is very obvious.
Overheating
Overheating local economies with high inflation rates are unhealthy for long-term economic welfare, and action by the Gulf States will not be too late to make a difference.
The risk of not taking a decision is higher than taking the initiative and going for revaluation. US interest rates are set to go much lower this year and the situation can only deteriorate further.
Moreover, the recent rally in the US dollar due to the contraction of global liquidity amid the ongoing equity slump gives a golden opportunity to act on revaluation, without causing a negative impact on global dollar exchange rates.
Wise counsel and commonsense are likely to prevail in monetary policy, and the international banks in the UAE have sensed this and do not want to be left holding dirhams that might soon be converted into dollars at a new rate of exchange.
International banks in Dubai have slashed interest rates on dirham deposits to around one per cent, a sure sign that revaluation is not far off and that the banks do not want to be left holding dirham deposits. Today, the delayed Saudi Shura meeting of the king, finance minister and central bank governor is to discuss GCC-wide revaluation.
At the same time the Middle East Economic Digest reported that the UAE is about to split central bank responsibilities between a new financial services regulator and monetary policy.
Incumbent UAE Central Bank Governor Sultan bin Nasser Al Suwaidi could be replaced in a cabinet reshuffle on February 26; his present mandate expired on December 18.
This action would likely be a part of a wide ranging reform of UAE monetary policy. The GCC States, with the exception of Oman, committed themselves to a monetary union by 2010 at a meeting of heads of state last December.
Revaluation would be a logical step towards establishing a single GCC currency valued against a basket of global currencies and not just the US dollar, something like the successful Singapore dollar.
Controlling inflation
Meanwhile, a coordinated revaluation in advance of the single currency is also a logical move to head-off spiraling local inflation rates in the Gulf, and delivering a one-off relief to long suffering residents who are puzzled why the economic success of the region has resulted in this 'tax' on their salaries.
In order to make a real impact the Gulf States could choose a high, one-off revaluation of 10-15 per cent with the strong proviso that this was not going to be repeated before the 2010 common currency deadline.
From the perspective of the UAE there is a historical precedent to follow. Before independence in 1971 the dirham was a part of the sterling area, which then revalued and later moved to the fixed dollar peg.
Economists see the main benefit of an independent currency regime as being the ability to set interest rates in line with local economic conditions to avoid a boom-to-slump cycle. For the danger of having interest rates set by the US - whose economy is slumping and not booming - is very obvious.
Overheating
Overheating local economies with high inflation rates are unhealthy for long-term economic welfare, and action by the Gulf States will not be too late to make a difference.
The risk of not taking a decision is higher than taking the initiative and going for revaluation. US interest rates are set to go much lower this year and the situation can only deteriorate further.
Moreover, the recent rally in the US dollar due to the contraction of global liquidity amid the ongoing equity slump gives a golden opportunity to act on revaluation, without causing a negative impact on global dollar exchange rates.
Wise counsel and commonsense are likely to prevail in monetary policy, and the international banks in the UAE have sensed this and do not want to be left holding dirhams that might soon be converted into dollars at a new rate of exchange.
Monday, February 11, 2008
Common Market More Important than Common Currency
11 December, 2007, Gulf Research Center
Eckart Woertz
Program Manager, Economics
With Kuwait’s decision to peg its currency to a currency basket instead of the dollar exclusively and the withdrawal of Oman, the planned GCC currency union saw two major setbacks this year. Still, its scheduled implementation by 2010 was reconfirmed at the GCC summit in December 2007, despite widespread doubts among experts who deem this unrealistic under present circumstances. The planned GCC common market has received less attention in the media, although it is arguably more important than the proposed currency union. A currency union by itself does not increase trade numbers if it cannot build on an already existing common market, and monetary policies of the GCC countries already show some synchronization anyway – provided common currency pegs persist, be it to the US dollar or some kind of currency basket.
The launch of a GCC common market by January 1, 2008 will mark an important step in GCC economic integration. It will move beyond the free movement of goods and services that has been agreed upon in the GCC customs union to include labor and capital flows as well. To this end, various markets have to be opened up and regulations harmonized, ranging from labor laws to pension schemes and social security entitlements. The list in article 3 of the GCC Unified Economic Agreement is long and includes access to universities and other education, as well as the right to buy and sell property, and to invest without restrictions.
On the eve of the start of the GCC customs union in January 2003, a timeline for the GCC common market was agreed upon: By the end of 2007, the GCC should harmonize its legal requirements and legal codes and the member states should enable them on the respective national level. The necessary third step would then be the actual implementation by the respective administrative institutions and their bureaucracies. Although the GCC has already achieved consensus on a vast number of laws, their actual implementation on the national levels still lags behind and detailed specifications and unified regulatory frameworks are absent in many cases. Cars are one of the few examples where such detailed specification has been achieved, but otherwise all too often the free flow of goods is hampered by red tape and confusion about applicable procedures. In this context, an episode that comes to mind is the UAE customs’ refusal to let in Saudi dates in retaliation for an earlier Saudi refusal to allow re-export goods from the UAE. Thus, the GCC customs union as a necessary precondition of a common market has not been fully implemented in 2007 as envisaged, and Saudi Arabia has asked for extra time of one year.
The implementation of the common market will go beyond the realm of goods and services and will complicate things further. It would not be possible to keep laws of workforce nationalization (Saudization, Emiratization etc.) in their current form and labor laws would need to be applied to all GCC nationals equally. The same is true for the sponsorship systems, and the respective stock markets would need to offer equal access for all GCC citizens. But so far considerable restrictions persist. For example, the Haj tourism industry is, and most likely will remain, a closed Saudi market, and all GCC stock markets, except for Bahrain, have limited the percentage of shares that other GCC nationals can hold in a publicly listed company. Despite some liberalization like Saudi Arabia opening up its banking sector to other GCC investors, this state of limbo is going to persist for some time: “As far as we are concerned there is nothing changing as from January 1, 2008,” announced the chairman of Dubai Financial Market, Eisa Al Kazim. No doubt, next year will mark the beginning of a long process, and not the start of a full fledged common market.
A currency union by itself does not increase trade numbers if it cannot build on an already existing common market, and monetary policies of the GCC countries already show some synchronization anyway - provided common currency pegs persist .
Provided consensus on the GCC level will have been achieved in respect to laws and regulations and provided the national governments will have implemented these laws in the respective countries, the ultimate litmus test for the common market will come in the real world of institutions and bureaucracies as they need to guarantee the accurate realization of the proposed policies. The requirements for training can be imagined. More importantly, public awareness about the possibilities of the common market would need to increase. Besides specific media campaigns, the website of the GCC and other information outlets could be improved, and cooperation with non-governmental bodies like chambers of commerce strengthened. Only with well-oiled feedback loops, will the GCC be able to monitor the grade of actual implementation. It will, of course, also require the capability to enforce it if need be. Here, a major empowerment of centralized GCC institutions is warranted. It is not enough to meet once or twice a year to decide important issues, the establishment of a common market needs day-to-day decision making by administrations with corresponding institutional capabilities. The EU has the European Commission, the Council of the EU, the European Parliament and the court of justice to deal with such matters; in the GCC, no such institution exists thus far.
Another important caveat has to be given in comparison to the EU, which is often quoted as a role model for the nascent GCC common market. GCC economies are not as diverse as the industrialized countries of Europe, which have had a longer history of development and integration. Before establishing a common market, about two thirds of all EU trade was conducted within the union itself, while GCC countries are still heavily oil dependent, with an overall export share of up to 90 percent depending on the country and intra-GCC trade comprising only about 7 percent of total GCC trade. Thus, besides liberalization, increased trade will require further diversification of the GCC economies in the first place.
The large numbers of expatriate workers in the GCC are an important factor as well. Even in population-rich Saudi Arabia, they constitute 65 percent of the overall labor force with figures in other countries much higher; for example, expatriates constitute over 80 percent of the UAE population. Especially in private sector employment, the dominance of expatriates is nearly absolute while employment of GCC nationals is still concentrated in the public sector, with a tendency towards lifetime adherence to one institution and traditionally low labor mobility. This means that labor mobility in the GCC will not increase very much in the wake of a successful establishment of a common market, simply because its regulation will only apply to a minority of the GCC labor force.
Thus, the issue of expatriates, and possibly a new social contract with them, would need to be part and parcel of the moves for successful establishment of a GCC common market, besides the three steps mentioned above: Once the necessary laws and regulatory frameworks are devised at the GCC level, and once they have been enabled at the national level and their proper implementation supervised, the common market will indeed make more of a difference in the lives of GCC residents than a possible GCC currency. Necessary prerequisites for such successful implementation will include empowered, centralized GCC institutions and increased public awareness about the common market and the entitlements that come with it.
http://www.grc.ae/?frm_action=view_newsletter_web&sec_code=grccommentary&frm_module=contents&show_web_list_link=1&int_content_id=42922&PHPSESSID=66090205577764f043b5dd22a32e2e33
Eckart Woertz
Program Manager, Economics
With Kuwait’s decision to peg its currency to a currency basket instead of the dollar exclusively and the withdrawal of Oman, the planned GCC currency union saw two major setbacks this year. Still, its scheduled implementation by 2010 was reconfirmed at the GCC summit in December 2007, despite widespread doubts among experts who deem this unrealistic under present circumstances. The planned GCC common market has received less attention in the media, although it is arguably more important than the proposed currency union. A currency union by itself does not increase trade numbers if it cannot build on an already existing common market, and monetary policies of the GCC countries already show some synchronization anyway – provided common currency pegs persist, be it to the US dollar or some kind of currency basket.
The launch of a GCC common market by January 1, 2008 will mark an important step in GCC economic integration. It will move beyond the free movement of goods and services that has been agreed upon in the GCC customs union to include labor and capital flows as well. To this end, various markets have to be opened up and regulations harmonized, ranging from labor laws to pension schemes and social security entitlements. The list in article 3 of the GCC Unified Economic Agreement is long and includes access to universities and other education, as well as the right to buy and sell property, and to invest without restrictions.
On the eve of the start of the GCC customs union in January 2003, a timeline for the GCC common market was agreed upon: By the end of 2007, the GCC should harmonize its legal requirements and legal codes and the member states should enable them on the respective national level. The necessary third step would then be the actual implementation by the respective administrative institutions and their bureaucracies. Although the GCC has already achieved consensus on a vast number of laws, their actual implementation on the national levels still lags behind and detailed specifications and unified regulatory frameworks are absent in many cases. Cars are one of the few examples where such detailed specification has been achieved, but otherwise all too often the free flow of goods is hampered by red tape and confusion about applicable procedures. In this context, an episode that comes to mind is the UAE customs’ refusal to let in Saudi dates in retaliation for an earlier Saudi refusal to allow re-export goods from the UAE. Thus, the GCC customs union as a necessary precondition of a common market has not been fully implemented in 2007 as envisaged, and Saudi Arabia has asked for extra time of one year.
The implementation of the common market will go beyond the realm of goods and services and will complicate things further. It would not be possible to keep laws of workforce nationalization (Saudization, Emiratization etc.) in their current form and labor laws would need to be applied to all GCC nationals equally. The same is true for the sponsorship systems, and the respective stock markets would need to offer equal access for all GCC citizens. But so far considerable restrictions persist. For example, the Haj tourism industry is, and most likely will remain, a closed Saudi market, and all GCC stock markets, except for Bahrain, have limited the percentage of shares that other GCC nationals can hold in a publicly listed company. Despite some liberalization like Saudi Arabia opening up its banking sector to other GCC investors, this state of limbo is going to persist for some time: “As far as we are concerned there is nothing changing as from January 1, 2008,” announced the chairman of Dubai Financial Market, Eisa Al Kazim. No doubt, next year will mark the beginning of a long process, and not the start of a full fledged common market.
A currency union by itself does not increase trade numbers if it cannot build on an already existing common market, and monetary policies of the GCC countries already show some synchronization anyway - provided common currency pegs persist .
Provided consensus on the GCC level will have been achieved in respect to laws and regulations and provided the national governments will have implemented these laws in the respective countries, the ultimate litmus test for the common market will come in the real world of institutions and bureaucracies as they need to guarantee the accurate realization of the proposed policies. The requirements for training can be imagined. More importantly, public awareness about the possibilities of the common market would need to increase. Besides specific media campaigns, the website of the GCC and other information outlets could be improved, and cooperation with non-governmental bodies like chambers of commerce strengthened. Only with well-oiled feedback loops, will the GCC be able to monitor the grade of actual implementation. It will, of course, also require the capability to enforce it if need be. Here, a major empowerment of centralized GCC institutions is warranted. It is not enough to meet once or twice a year to decide important issues, the establishment of a common market needs day-to-day decision making by administrations with corresponding institutional capabilities. The EU has the European Commission, the Council of the EU, the European Parliament and the court of justice to deal with such matters; in the GCC, no such institution exists thus far.
Another important caveat has to be given in comparison to the EU, which is often quoted as a role model for the nascent GCC common market. GCC economies are not as diverse as the industrialized countries of Europe, which have had a longer history of development and integration. Before establishing a common market, about two thirds of all EU trade was conducted within the union itself, while GCC countries are still heavily oil dependent, with an overall export share of up to 90 percent depending on the country and intra-GCC trade comprising only about 7 percent of total GCC trade. Thus, besides liberalization, increased trade will require further diversification of the GCC economies in the first place.
The large numbers of expatriate workers in the GCC are an important factor as well. Even in population-rich Saudi Arabia, they constitute 65 percent of the overall labor force with figures in other countries much higher; for example, expatriates constitute over 80 percent of the UAE population. Especially in private sector employment, the dominance of expatriates is nearly absolute while employment of GCC nationals is still concentrated in the public sector, with a tendency towards lifetime adherence to one institution and traditionally low labor mobility. This means that labor mobility in the GCC will not increase very much in the wake of a successful establishment of a common market, simply because its regulation will only apply to a minority of the GCC labor force.
Thus, the issue of expatriates, and possibly a new social contract with them, would need to be part and parcel of the moves for successful establishment of a GCC common market, besides the three steps mentioned above: Once the necessary laws and regulatory frameworks are devised at the GCC level, and once they have been enabled at the national level and their proper implementation supervised, the common market will indeed make more of a difference in the lives of GCC residents than a possible GCC currency. Necessary prerequisites for such successful implementation will include empowered, centralized GCC institutions and increased public awareness about the common market and the entitlements that come with it.
http://www.grc.ae/?frm_action=view_newsletter_web&sec_code=grccommentary&frm_module=contents&show_web_list_link=1&int_content_id=42922&PHPSESSID=66090205577764f043b5dd22a32e2e33
MU delay seen to prompt one-off GCC revaluations
BY ISSAC JOHN (Deputy Business Editor)
11 February 2008
DUBAI — A longer delay in GCC monetary union (MU) will prompt some member countries to contemplate one-off revaluations, while still maintaining the dollar pegs, leading currency analysts warned.
Since the planned monetary union of the GCC in 2010 looks to be an increasingly ambitious goal, there is a rising risk that it will either be delayed or that a few, but not all, of the six GCC member countries will start this union on time, and others will join when they are ready, said Stephen Jen, an analyst at Morgan Stanley, a global financial services firm.
"Modest step revaluations, while retaining dollar pegs, are indeed a possibility, particularly if the Fed continues to ease while oil prices don’t correct significantly. The probability rises the longer the monetary union is postponed," he said.
"A postponement of the launch of the monetary union could complicate the exchange rate policies of the GCC countries. Specifically, the longer the delay, the more tempting/likely it will be for some small open economies in the GCC to contemplate one-off revaluations," Jen said in a report co-authored with Luca Bindelli and Charles St-Arnaud.
Stressing the need for an independent monetary policy with a managed float exchange rate regime for the GCC members, they argued that it would, in theory, be better for the GCC to introduce major changes to their exchange rate and monetary regime after they have introduced a monetary union.
"At the GCC Heads of State Summit in December 2007, the issue of whether to postpone the establishment of the monetary union was tabled for discussion, but no verdict was rendered. Our best guess at this point is that the project will either have to be postponed to 2015 or that only a small subset of the six GCC members will form the initial common currency area, with the others joining in the future, when they are ready. What this means is that the individual countries may have more leeway in devising their own policy paths in the meantime, i.e., it will no longer be essential that the GCC members move in sync and in a coordinated manner," they pointed out.
According to the analysts, the total GDP of the six GCC countries is rather modest. At $790 billion in 2007, the GCC is a little more than half the size of Canada. The total population of the GCC is 36 million, with Saudi Arabia accounting for 24 million of this total.
"While the GCC members have more natural (economic, social, language, historical and cultural) commonalities than the countries in the Euroland, there is relatively less convergence on economic measures." The main concern, they pointed out, is different endowments of natural resources. Second, fiscal convergence will be difficult. With exports of energy being so dominant, swings in oil prices have had, and will continue to have, a major impact on the fiscal positions of these countries.
There is also no more monetary convergence. "The GCC members now need to think hard about their price competitiveness as they enter the monetary union. The longer it takes to form a monetary union, the wider the window for policy interventions to adjust these glide paths."
Another concern is low quality of macro data and a lack of transparency. For example, CPI inflation is available with a six-month lag in Kuwait, while Bahrain and UAE only have annual numbers. In addition, the measures themselves are likely to be understatements of the reality.
Low degree of labour mobility within the region for the expatriate workers is another concern. Though there is effective free movement of the nationals within the GCC, mobility is much lower for the expatriate workers.
"One of the key requirements of an optimal currency area is free mobility of capital and labour, and the GCC has not satisfied this requirement yet," they pointed out.
11 February 2008
DUBAI — A longer delay in GCC monetary union (MU) will prompt some member countries to contemplate one-off revaluations, while still maintaining the dollar pegs, leading currency analysts warned.
Since the planned monetary union of the GCC in 2010 looks to be an increasingly ambitious goal, there is a rising risk that it will either be delayed or that a few, but not all, of the six GCC member countries will start this union on time, and others will join when they are ready, said Stephen Jen, an analyst at Morgan Stanley, a global financial services firm.
"Modest step revaluations, while retaining dollar pegs, are indeed a possibility, particularly if the Fed continues to ease while oil prices don’t correct significantly. The probability rises the longer the monetary union is postponed," he said.
"A postponement of the launch of the monetary union could complicate the exchange rate policies of the GCC countries. Specifically, the longer the delay, the more tempting/likely it will be for some small open economies in the GCC to contemplate one-off revaluations," Jen said in a report co-authored with Luca Bindelli and Charles St-Arnaud.
Stressing the need for an independent monetary policy with a managed float exchange rate regime for the GCC members, they argued that it would, in theory, be better for the GCC to introduce major changes to their exchange rate and monetary regime after they have introduced a monetary union.
"At the GCC Heads of State Summit in December 2007, the issue of whether to postpone the establishment of the monetary union was tabled for discussion, but no verdict was rendered. Our best guess at this point is that the project will either have to be postponed to 2015 or that only a small subset of the six GCC members will form the initial common currency area, with the others joining in the future, when they are ready. What this means is that the individual countries may have more leeway in devising their own policy paths in the meantime, i.e., it will no longer be essential that the GCC members move in sync and in a coordinated manner," they pointed out.
According to the analysts, the total GDP of the six GCC countries is rather modest. At $790 billion in 2007, the GCC is a little more than half the size of Canada. The total population of the GCC is 36 million, with Saudi Arabia accounting for 24 million of this total.
"While the GCC members have more natural (economic, social, language, historical and cultural) commonalities than the countries in the Euroland, there is relatively less convergence on economic measures." The main concern, they pointed out, is different endowments of natural resources. Second, fiscal convergence will be difficult. With exports of energy being so dominant, swings in oil prices have had, and will continue to have, a major impact on the fiscal positions of these countries.
There is also no more monetary convergence. "The GCC members now need to think hard about their price competitiveness as they enter the monetary union. The longer it takes to form a monetary union, the wider the window for policy interventions to adjust these glide paths."
Another concern is low quality of macro data and a lack of transparency. For example, CPI inflation is available with a six-month lag in Kuwait, while Bahrain and UAE only have annual numbers. In addition, the measures themselves are likely to be understatements of the reality.
Low degree of labour mobility within the region for the expatriate workers is another concern. Though there is effective free movement of the nationals within the GCC, mobility is much lower for the expatriate workers.
"One of the key requirements of an optimal currency area is free mobility of capital and labour, and the GCC has not satisfied this requirement yet," they pointed out.
Saturday, February 9, 2008
Wealth of opportunities
by Tamara Walid on Friday, 08 February 2008
Kevin Lecocq, CIO of Barclays Wealth, talks to Tamara Walid about where he thinks the weakening dollar is heading, the pros and cons of depegging, and the unique challenges of wealth management in the Middle East.
A lot has changed since 1971 when the strength of the US dollar allowed people like John Connally, Treasury Secretary in those days, to say: "It may be our currency, but it's your problem".
Connally's remark was uttered just as the US broke free from the gold standard, consequently laying down a fresh set of rules for international business.
Kevin Lecocq, chief investment officer and head of the Investment and Product Office at Barclays Wealth, recalls the secretary's comment, as we sit on the 15th floor at the DIFC's The Gate, where the bank's Middle East office is located.
And although times have changed, Lecocq believes, some things remain the same - and as the CIO of a wealth asset management company with over US$217bn in assets, he should know.
As from way back, the US runs its monetary policy exclusively on domestic concerns. One is the inflation rate and the other is the unemployment rate. And it doesn't really take other linked currencies much into account in making its monetary policies," he says.
This isn't very surprising. After all, the GDP of the US is around US$13 trillion, whereas Saudi Arabia's is less than US$570bn, even with oil being at US$100 a barrel.
This means that even a 20% plus or minus in the Saudi riyal has barely any effect on the US so when it comes to countries such as Oman and the UAE, the effect is even more negligible. This US attitude, Lecocq believes, is still present today, to some degree.
"Much of East Asia has defector pegs or, as in the case of Hong Kong and until recently Malaysia, hard pegs to the US dollar.
Of course Latin America has had one and that's depegged and of course the Gulf region with the exception of Kuwait is part-pegged," says Lecocq, continuing: "What has happened is that the US is responding to its own domestic problems and subprime crisis, by cutting rates pretty dramatically, and this is not necessarily optimal monetary policy for the GCC, which is experiencing inflation and extraordinary robust growth.
This calls for a balancing act by the monetary policy authorities in the region, stresses Lecocq. On one hand there's the option to remove the peg and run an independent and domestically-focused monetary policy, he says. On the other hand, there are benefits to the peg in that it eliminates the exchange rate risk.
The benefit of the peg on linked currencies is, among themselves, there's really no exchange rate risk.
Exchange rate risk with the US is zero and so there are benefits with cost and so, in doing that, in our own belief, the benefits partly outweigh the costs in terms of trade and capital, in terms of how the monetary policies are engineered," says Lecocq.
A minute later, however, Lecocq is back in reality, recalling that whatever market-watchers thought, what really mattered was the opinion of decision-makers.
"It doesn't actually matter what we think, but what we think policy people think," says Lecocq, who doesn't see any signs of a move from Gulf countries to depeg from the dollar, even after talks in Qatar last November.
Despite being a very difficult shift to predict, Lecocq's experience tells him that the dollar will start to rally this year.
"In fact the euro has run out of steam and the pound is starting to sink a bit.
The current account in the United States is starting to shrink and the bad news is that the US and its cycle is the first one to slow down. Europe will start to slow down a bit later, and perhaps other parts of the world later on, but there's a cyclical element to it.
The dollar's probably pretty close to bottoming out and if the euro sells off into the 1.30s or 1.20s then there'll be even less pressure on countries in the GCC," predicts Lecocq.
The issue of inflation remains, and Lecocq believes that, if nothing else changes policy-makers' minds, inflation will. His gut feeling, tells him, however, "they're not ready to make the move yet". Hypothetically, if Gulf nations were to depeg tomorrow, Lecocq cites a number of advantages, but believes it is not entirely clear whether the man on the street would be better off.
There'd be a real appreciation in currency and so the ability to purchase foreign manufactured goods would go up, so the price of a flat screen TV will go down or stop rising. What may also happen is that interest rates may rise, so mortgages on houses might go up," he says.
As is the case with most economic shifts, lower classes would be affected the most. For example, if a depeg occurs, for a temporary Indian or South Asian worker in the region, the cost of living is bound to go up in rupee terms.
People with US$500m are obviously going to have a very different demand-set than people with US$5bn.A reasonable step would be a common currency, stresses Lecocq, which he thinks will bring numerous benefits to the region as with Europe's example. That "experiment" has turned out pretty well, he says. Booming inter-regional trade and the region's dynamics at the moment are all factors that make the move possible.
Story continues below ↓
advertisement
"The fact that GCC countries are currently, with the exception of Kuwait, pegged to the dollar, makes the exchange rate risk minimal but it's more of a transaction cost and that transaction cost would be eliminated by having a common currency. The common currency then could float against the dollar," says Lecocq.
He adds that, in a sense, there is no need for small countries to have their own currency. Countries with less than several million people are most likely better off having a linked currency.
While the future of the dollar peg remains unknown, the present state of the region's stock markets seems to be rather bright, or so thinks Khurram Jafree, director of the Investment and Product Office at Barclays Wealth.
"Overall they're in pretty good shape. What is beginning to happen is that you have an accommodative stance on monetary policy; you have a very powerful backdrop in the region, high oil and gas prices filtering through the entire MENA region, and you have booming trade," he says.
Jafree believes that the combination of all those factors creates "very powerful runners" that are "up there". Valuation remaining "very reasonable" has also been a plus, he says.
When it comes to giving advice in the right direction for wealthy people looking to invest their money, the experts at Barclays Wealth have a process in place. Jafree explains what goes into that system.
"The first principle we work on is that we run multi-asset class portfolios," he says.
This starts with understanding the client's goal, as the nature of a portfolio differs for a client who requires income to that of capital growth. Then comes measuring the extent of risk clients are prepared to take, followed by diversification.
"What we have seen in the last three to four months is that diversification has really played out. For example, if you had your assets in fixed income, certainly the high quality fixed income and equities, portions of equity markets will whack the fixed income.
If you had commodities, commodity markets have done very well," says Jafree, adding that there are several different places to make money at the moment in a risk adjusted manner, with diversification playing an extremely important role.
Does this mean it is "safe" to invest in the region? Not exactly. As Jafree says, the term is relative. Both Jafree and Lecocq, however, admit to loving the economic success stories.
"I might think of it this way," says Lecocq. "We are recommending people outside of the Gulf to invest here very strongly. Then again, whether people here should put all their eggs in one basket is a different story.
While the two financial experts can't help but find the region highly appealing from a macro and business perspective and a very attractive place to invest, where diversification is concerned, it all boils down to the status of the client.
"Some of the clients already have large real estate holdings; commercial, residential or industrial, and to add more geographic risk onto that may not make much sense from a diversification point of view," explains Lecocq.
"In other cases," he continues, "clients have a clear benchmark for their wealth creation. Some benchmark themselves against their equally wealthy peers. If their friends are not expanding outside the region, and if Barclays decides to put them into a global and more diversified portfolio, while regional markets continue to do expectedly well, clients may not be satisfied," explains Lecocq.
"So what we do is we spend a lot of time with our clients trying to understand their benchmark and their mentality and attitude about diversification," he adds.
And after several decades in the region, the people at Barclays must have formed a pretty good idea, especially given the "phenomenal" growth the bank has experienced in the last year and half.
"What we do here is cater to high net worth individuals, which roughly means people with investments and assets of US$1m and more and we've got a variety of bankers. Some of them concentrate on people with US$1m to US$20m, while others concentrate on US$500m and billionaires," says Lecocq.
Among the bank's clients, women make up a high percentage, says Lecocq. In his mind, Barclays Wealth is a friendly open place for women in the region to stop by, talk finance and get advice. One of the main aspects that differentiate Barclays from any other bank, according to Lecocq, is its highly personalised service.
Story continues below ↓
advertisement
"We have a team of specialists who work with clients as opposed to banks where you get sold a product. What we do is tailor portfolios around individuals. People with US$500m are obviously going to have a very different demand-set than people with US$5bn," he says.
Whatever it is the Barclays team is doing in the region, it is working. In the past year, the bank has expanded its regional staff-base by over 150% and Lecocq expects growth north of 10-12% in the year 2008.
One of the biggest contributors to the company's regional development is what Lecocq calls the "breadth of wealth creation" the region is currently experiencing.
It's one thing when a very tiny fraction of society gets rich, often from extracted industries like oil and gas, and quite another when you have an incredibly powerful and growing upper middle class of entrepreneurs, property developers, big shop owners, manufacturing and software companies, human resource, and consulting," he explains.
Lecocq believes that the amount of "breadth of society" in the region is "incredibly powerful". People with millions of dollars, reaped from building a business over the last six years, and who have very specific demands from a bank for personal attentiveness and service, make up the core client base of Barclays Wealth in the Middle East and the GCC specifically.
"That's why we are growing here quite rapidly ourselves, as are other banks," he says. At present, Dubai is the most rapidly-growing market for Barclays Wealth in terms of staff. Where assets are concerned, Abu Dhabi is the hottest spot at the moment, according to Lecocq.
The way to success, however, wasn't obstacle-free. Lecocq recalls many challenges, and a number are still present.
"The first challenge, which is also an opportunity, is that it's not yet a mature market. You go to Switzerland and you know who the clients and the bankers are.
"It's not that dynamic but it's pretty easy to find your way around. Here, because people got so wealthy so quickly, you don't actually know who all the clients are," he says.
Moreover, it's difficult to land an expert banker in the region, Lecocq complains. This, he thinks, is due to the fact that it's a wealth creation environment, which makes it hard to find best practice overall.
Tremendous growth in the region resulted in demand from banks exceeding the supply of experienced bankers.
Barclays deals with it by finding the best bankers and bringing them into the business, explains Lecocq.
"Partly, it's by bringing people who have language or banking skills from places like Europe into the region, and we're populating our team. Right now, both the challenges and opportunities are almost the same.
"It's a quite far from being a mature market," he says. The markets still have a long way to go in order to mature, but the process is accelerating, believes Lecocq. He sees his client-base expanding and plenty of room to grow and attract more customers.
"What's happened, which is good, is that clients have a very strong and well-defined sense of what they want out of their bank, whereas a couple of years ago it was less defined," he says.
This all paves the way to further regional growth for Barclays Wealth. The trick is to maintain quality control, Lecocq points out. Getting the right bankers, investment specialists and technical people into the business is essential.
Additionally, with an office in Dubai, Abu Dhabi, and Qatar as well as bankers in London and Geneva covering the Middle East region, Lecocq seems to have found the formula for success.
Kevin Lecocq, CIO of Barclays Wealth, talks to Tamara Walid about where he thinks the weakening dollar is heading, the pros and cons of depegging, and the unique challenges of wealth management in the Middle East.
A lot has changed since 1971 when the strength of the US dollar allowed people like John Connally, Treasury Secretary in those days, to say: "It may be our currency, but it's your problem".
Connally's remark was uttered just as the US broke free from the gold standard, consequently laying down a fresh set of rules for international business.
Kevin Lecocq, chief investment officer and head of the Investment and Product Office at Barclays Wealth, recalls the secretary's comment, as we sit on the 15th floor at the DIFC's The Gate, where the bank's Middle East office is located.
And although times have changed, Lecocq believes, some things remain the same - and as the CIO of a wealth asset management company with over US$217bn in assets, he should know.
As from way back, the US runs its monetary policy exclusively on domestic concerns. One is the inflation rate and the other is the unemployment rate. And it doesn't really take other linked currencies much into account in making its monetary policies," he says.
This isn't very surprising. After all, the GDP of the US is around US$13 trillion, whereas Saudi Arabia's is less than US$570bn, even with oil being at US$100 a barrel.
This means that even a 20% plus or minus in the Saudi riyal has barely any effect on the US so when it comes to countries such as Oman and the UAE, the effect is even more negligible. This US attitude, Lecocq believes, is still present today, to some degree.
"Much of East Asia has defector pegs or, as in the case of Hong Kong and until recently Malaysia, hard pegs to the US dollar.
Of course Latin America has had one and that's depegged and of course the Gulf region with the exception of Kuwait is part-pegged," says Lecocq, continuing: "What has happened is that the US is responding to its own domestic problems and subprime crisis, by cutting rates pretty dramatically, and this is not necessarily optimal monetary policy for the GCC, which is experiencing inflation and extraordinary robust growth.
This calls for a balancing act by the monetary policy authorities in the region, stresses Lecocq. On one hand there's the option to remove the peg and run an independent and domestically-focused monetary policy, he says. On the other hand, there are benefits to the peg in that it eliminates the exchange rate risk.
The benefit of the peg on linked currencies is, among themselves, there's really no exchange rate risk.
Exchange rate risk with the US is zero and so there are benefits with cost and so, in doing that, in our own belief, the benefits partly outweigh the costs in terms of trade and capital, in terms of how the monetary policies are engineered," says Lecocq.
A minute later, however, Lecocq is back in reality, recalling that whatever market-watchers thought, what really mattered was the opinion of decision-makers.
"It doesn't actually matter what we think, but what we think policy people think," says Lecocq, who doesn't see any signs of a move from Gulf countries to depeg from the dollar, even after talks in Qatar last November.
Despite being a very difficult shift to predict, Lecocq's experience tells him that the dollar will start to rally this year.
"In fact the euro has run out of steam and the pound is starting to sink a bit.
The current account in the United States is starting to shrink and the bad news is that the US and its cycle is the first one to slow down. Europe will start to slow down a bit later, and perhaps other parts of the world later on, but there's a cyclical element to it.
The dollar's probably pretty close to bottoming out and if the euro sells off into the 1.30s or 1.20s then there'll be even less pressure on countries in the GCC," predicts Lecocq.
The issue of inflation remains, and Lecocq believes that, if nothing else changes policy-makers' minds, inflation will. His gut feeling, tells him, however, "they're not ready to make the move yet". Hypothetically, if Gulf nations were to depeg tomorrow, Lecocq cites a number of advantages, but believes it is not entirely clear whether the man on the street would be better off.
There'd be a real appreciation in currency and so the ability to purchase foreign manufactured goods would go up, so the price of a flat screen TV will go down or stop rising. What may also happen is that interest rates may rise, so mortgages on houses might go up," he says.
As is the case with most economic shifts, lower classes would be affected the most. For example, if a depeg occurs, for a temporary Indian or South Asian worker in the region, the cost of living is bound to go up in rupee terms.
People with US$500m are obviously going to have a very different demand-set than people with US$5bn.A reasonable step would be a common currency, stresses Lecocq, which he thinks will bring numerous benefits to the region as with Europe's example. That "experiment" has turned out pretty well, he says. Booming inter-regional trade and the region's dynamics at the moment are all factors that make the move possible.
Story continues below ↓
advertisement
"The fact that GCC countries are currently, with the exception of Kuwait, pegged to the dollar, makes the exchange rate risk minimal but it's more of a transaction cost and that transaction cost would be eliminated by having a common currency. The common currency then could float against the dollar," says Lecocq.
He adds that, in a sense, there is no need for small countries to have their own currency. Countries with less than several million people are most likely better off having a linked currency.
While the future of the dollar peg remains unknown, the present state of the region's stock markets seems to be rather bright, or so thinks Khurram Jafree, director of the Investment and Product Office at Barclays Wealth.
"Overall they're in pretty good shape. What is beginning to happen is that you have an accommodative stance on monetary policy; you have a very powerful backdrop in the region, high oil and gas prices filtering through the entire MENA region, and you have booming trade," he says.
Jafree believes that the combination of all those factors creates "very powerful runners" that are "up there". Valuation remaining "very reasonable" has also been a plus, he says.
When it comes to giving advice in the right direction for wealthy people looking to invest their money, the experts at Barclays Wealth have a process in place. Jafree explains what goes into that system.
"The first principle we work on is that we run multi-asset class portfolios," he says.
This starts with understanding the client's goal, as the nature of a portfolio differs for a client who requires income to that of capital growth. Then comes measuring the extent of risk clients are prepared to take, followed by diversification.
"What we have seen in the last three to four months is that diversification has really played out. For example, if you had your assets in fixed income, certainly the high quality fixed income and equities, portions of equity markets will whack the fixed income.
If you had commodities, commodity markets have done very well," says Jafree, adding that there are several different places to make money at the moment in a risk adjusted manner, with diversification playing an extremely important role.
Does this mean it is "safe" to invest in the region? Not exactly. As Jafree says, the term is relative. Both Jafree and Lecocq, however, admit to loving the economic success stories.
"I might think of it this way," says Lecocq. "We are recommending people outside of the Gulf to invest here very strongly. Then again, whether people here should put all their eggs in one basket is a different story.
While the two financial experts can't help but find the region highly appealing from a macro and business perspective and a very attractive place to invest, where diversification is concerned, it all boils down to the status of the client.
"Some of the clients already have large real estate holdings; commercial, residential or industrial, and to add more geographic risk onto that may not make much sense from a diversification point of view," explains Lecocq.
"In other cases," he continues, "clients have a clear benchmark for their wealth creation. Some benchmark themselves against their equally wealthy peers. If their friends are not expanding outside the region, and if Barclays decides to put them into a global and more diversified portfolio, while regional markets continue to do expectedly well, clients may not be satisfied," explains Lecocq.
"So what we do is we spend a lot of time with our clients trying to understand their benchmark and their mentality and attitude about diversification," he adds.
And after several decades in the region, the people at Barclays must have formed a pretty good idea, especially given the "phenomenal" growth the bank has experienced in the last year and half.
"What we do here is cater to high net worth individuals, which roughly means people with investments and assets of US$1m and more and we've got a variety of bankers. Some of them concentrate on people with US$1m to US$20m, while others concentrate on US$500m and billionaires," says Lecocq.
Among the bank's clients, women make up a high percentage, says Lecocq. In his mind, Barclays Wealth is a friendly open place for women in the region to stop by, talk finance and get advice. One of the main aspects that differentiate Barclays from any other bank, according to Lecocq, is its highly personalised service.
Story continues below ↓
advertisement
"We have a team of specialists who work with clients as opposed to banks where you get sold a product. What we do is tailor portfolios around individuals. People with US$500m are obviously going to have a very different demand-set than people with US$5bn," he says.
Whatever it is the Barclays team is doing in the region, it is working. In the past year, the bank has expanded its regional staff-base by over 150% and Lecocq expects growth north of 10-12% in the year 2008.
One of the biggest contributors to the company's regional development is what Lecocq calls the "breadth of wealth creation" the region is currently experiencing.
It's one thing when a very tiny fraction of society gets rich, often from extracted industries like oil and gas, and quite another when you have an incredibly powerful and growing upper middle class of entrepreneurs, property developers, big shop owners, manufacturing and software companies, human resource, and consulting," he explains.
Lecocq believes that the amount of "breadth of society" in the region is "incredibly powerful". People with millions of dollars, reaped from building a business over the last six years, and who have very specific demands from a bank for personal attentiveness and service, make up the core client base of Barclays Wealth in the Middle East and the GCC specifically.
"That's why we are growing here quite rapidly ourselves, as are other banks," he says. At present, Dubai is the most rapidly-growing market for Barclays Wealth in terms of staff. Where assets are concerned, Abu Dhabi is the hottest spot at the moment, according to Lecocq.
The way to success, however, wasn't obstacle-free. Lecocq recalls many challenges, and a number are still present.
"The first challenge, which is also an opportunity, is that it's not yet a mature market. You go to Switzerland and you know who the clients and the bankers are.
"It's not that dynamic but it's pretty easy to find your way around. Here, because people got so wealthy so quickly, you don't actually know who all the clients are," he says.
Moreover, it's difficult to land an expert banker in the region, Lecocq complains. This, he thinks, is due to the fact that it's a wealth creation environment, which makes it hard to find best practice overall.
Tremendous growth in the region resulted in demand from banks exceeding the supply of experienced bankers.
Barclays deals with it by finding the best bankers and bringing them into the business, explains Lecocq.
"Partly, it's by bringing people who have language or banking skills from places like Europe into the region, and we're populating our team. Right now, both the challenges and opportunities are almost the same.
"It's a quite far from being a mature market," he says. The markets still have a long way to go in order to mature, but the process is accelerating, believes Lecocq. He sees his client-base expanding and plenty of room to grow and attract more customers.
"What's happened, which is good, is that clients have a very strong and well-defined sense of what they want out of their bank, whereas a couple of years ago it was less defined," he says.
This all paves the way to further regional growth for Barclays Wealth. The trick is to maintain quality control, Lecocq points out. Getting the right bankers, investment specialists and technical people into the business is essential.
Additionally, with an office in Dubai, Abu Dhabi, and Qatar as well as bankers in London and Geneva covering the Middle East region, Lecocq seems to have found the formula for success.
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