Saturday, June 29, 2013

A New Emir – the First Changes

With His Highness Sheikh Tamim having now become Emir first item of business was to change the Council of Ministers. Most of the Ministers under the previous Emir have been changed and the papers provided the full list of the new Ministers. That the Prime Minister resigned was expected, even UK newspapers were reporting on his impending resignation a few weeks ago, instead speculation was around some of the other high-profile Ministries.

The Minister of Finance is now Mr. Ali Shareef Al-Emadi. He's the only new Minister whose name I immediately recognized as he is the CEO of Qatar National Bank, easily the largest bank in Qatar (and recently awarded by Bloomberg as something like the safest large bank in the world). I guess if you're going to appoint someone as your Minister of Finance appointing someone who's taken a large bank to such greatness is a pretty good choice. A Qatari also told me that he's the son-in-law of the former Minister of Finance but I haven't been able to verify that online.

The Minister of Energy kept his post though, one of the few who has not been changed.

But the post getting the most attention is the new Prime Minister (and Minister of Interior), Sheikh Abdullah bin Nasser bin Khalifa Al Thani. There've been some press articles looking more closely at this gentleman to see if there'll be any significant changes in foreign policy under his watch. Initial discussions indicate that the likely not be any significant policy shifts in the near future.

If you recall my post on Qatari names, and compare the names of the new Emir and Prime Minister:

Sheikh Tamim bin Hamad bin Khalifa Al Thani
Sheikh Abdullah bin Nasser bin Khalifa Al Thani

It looks like they might share the same grandfather, in which case they would be cousins. In fact I just assumed that they were but I decided to double check. Surprisingly according to Wikipedia, Shekih Tamim’s grandfather, Sheikh Khalifa, did not have a son named Nasser. This means the Khalifa in the Prime Minister's name refers to a different Khalifa so the Emir and Prime Minister could not be cousins.

Anyway, overall Qataris have no issue with the change in power to the new Emir, though most expressed sadness that His Highness Sheikh Hamad abdicated as he oversaw incredible change in Qatar and the life of your average Qatari improved dramatically. No one expects much to change in terms of Government policy in the near-term but I'm sure there will be a few things here and there -- Sheikh Hamad abdicated so that his son could provide fresh, innovative ideas, and what would be the point of that if nothing were to then change?

Tuesday, June 25, 2013

The Transition of Power

So today His Highness Sheikh Hamad, the former Emir, gave a speech announcing his abdication in favour of his son Sheikh Tamim. A translation of his speech can be found on Al Jazeera's website or, but the main reason was his desire to transfer power to the younger generation who would have innovative ideas and be able to move the country forward. It is encompassed by a saying by the 4th Caliph, Ali bin Ali Taleb, which Sheikh Hamad quoted as part of his speech:

“Teach your children other than that what you were taught; as they are created for a time other than yours.”

With his announcement that he will be abdicating Sheikh Tamim essentially became the Emir. Apparently Sheikh Tamim has to make a vow to serve his nation but once that is done he can be considered the Emir. I'm guessing that has occurred already.

And that was that. Qatar does not have crowns or other symbols of office that have to be bestowed to symbolize the handling over of power so there was no need for any formal ceremony. Sheikh Tamim is now the Emir of Qatar.

Today the streets were quiet except for the area near my place as it is close to the Diwan (essentially the main Government palace). Around the Diwan there were plenty of police and security on hand as hundreds and hundreds of Qatari men came to the Diwan to pay their respects to Sheikh Hamad and give their congratulations and pledges of support to the new Emir. Qatar TV showed lots of footage of Qatari men in bishts one after the other shaking Sheikh Hamad’s hand then Sheikh Tamim’s hand, sometimes kissing it, and sometimes doing other forms of Arab greeting (like touching noses).

I met with some Qatari friends today and not surprisingly it was the main topic of conversation. One had already been to the Diwan and others were planning to go. I did learn some interesting things during the discussion:

I asked if there was an equivalent ceremony for ladies, where ladies would go to give their congratulations to the new Emir’s wives. No, there is no separate meeting for women.

My previous post noted how rare it is for abdications to occur but that was incorrect. While abdicating in favour of the Heir Apparent is rare in the rest of the Gulf it is not uncommon for the Al Thani rulers. It has happened at least twice before in recent times, for example His Highness Sheikh Abdullah bin Jassim Al Thani abdicated in 1949, and His Highness Sheikh Ali bin Abdullah Al Thani abdicated in 1960 to give power to his son.

All agreed that there will not be any major sudden changes in policy, with the exception of a cabinet reshuffle, as Sheikh Tamim had already been making many of the decisions in the last few years so he was already involved with much of what is planned for the future.

Monday, June 24, 2013

A New Emir!

Rumors were swirling, articles had come out earlier in Western papers, and it looks like it's all come true -- His Highness the Emir will abdicate power to his son Sheikh Tamim. Apparently he met today with members of the Royal Family to announce the decision, and tomorrow has been declared a National Holiday.

I had gotten wind of big changes coming to the hierarchy from some of the Qataris I know, and today everyone had been talking about an impending meeting His Highness was having as all assumed it was an announcement he would transfer power. For this region it is pretty uncommon, possibly unique, for there to be a smooth transition of power in this manner, typically rulers in the Gulf stay in power for their rest of their lives. Even more unique, not only will the new Emir’s father be around, but his grandfather, former Emir Sheikh Khalifa, is still alive as well (though Sheikh Khalifa’s transfer of power was not smooth -- he was deposed by his son, the current and soon-to-be-retiring Emir, in 1995). Three generations of rulers will be living in Qatar during Sheikh Tamim’s reign.

Once Sheikh Tamim becomes the Emir (or maybe he has already, I don't think Qataris have grand formal coronation ceremonies like they do in Britain), I wonder who will be the Crown Prince? Sheikh Tamim’s children are very young, he’s only 33 himself, but I asked a couple of Qataris and apparently they do not do what many European monarchies do and nominate regents to assist the now-too-young Crown Prince in case he becomes ruler due to early death of the monarch. I assume then the Crown Prince will be one of Sheikh Tamim’s younger brothers until such time as one of his sons is old enough to assume the role. Anything is possible though, it could be a half-brother or even one of his uncles.

Also unlike most European monarchies the Al Thani family does not automatically pass rule to the eldest son. Sheikh Tamim is (I think) the Emir’s 4th eldest son, not the oldest. It appears the Al-Thani family looks closely at who becomes Crown Prince, perhaps because without a strong ruler their position as the ruling clan may be in jeopardy. In any event the eldest son is not automatically entitled to become the Emir. Older brothers or half-brothers have held the position of Crown Prince in the past but eventually had to step down to give it to another. Sheikh Tamim has been Crown Prince since 2003.

Everyone I've spoken to does not expect a lot of change. Many Qataris have told me that Sheikh Tamim was already overseeing large parts of the country as his father was giving him more and more responsibility over the years. Numerous policies were likely developed by Sheikh Tamim himself, and some have said that he was practically running everything now anyway, so the secession should be without a lot of problems.

So why the abdication? I can only speculate (maybe more detail will come forth when the Emir gives a speech to the people tomorrow), but I think there’s two reasons. Firstly, ensure a smooth succession -- the previous two sessions were due to coups from within the Al Thani family, and I think this father-son team will have no issue hanging onto power.

Secondly, maybe His Highness knows that in this day and age it's better that someone younger lead the way. The Emir himself took over when he was in his early 40s, and went on to transform Qatar in astounding ways. I think some newspaper reports have shown the economy has increased seven-fold in the 18 years he has ruled. Heck, I occasionally wax poetic on this blog about the amount of change that has occurred here in just the last seven years! Perhaps he recognizes that he too yearned to take the country in a new direction when he was still relatively young, and that his son would as well. It's an incredibly bold, and likely wise, move from His Highness to ensure that Qatar stays dynamic rather than stagnating.

Like I said, this transition is probably unique in the Arab world. In some ways it's unbelievable to think that His Highness would abdicate at 61 to a new generation.

Congratulations to the new Emir, Sheikh Tamim.

Thursday, June 13, 2013

Kuwait Turns a Critical Eye to Expats

It looks like the move by Kuwait to reduce the number of expats is heating up. Thousands have been deported so far and the goal is to reduce the number of expat visas by 100,000 a year for the next 10 years -- not a small number given the total population of the country (expats and citizens) is around 3 million:

And Kuwait’s new policy of Kuwati-only mornings at hospitals has been rolled-out at one hospital where it will be tested for six months before possibly being expanding to the entire country, further seen as a sign that Kuwait is discouraging expats:

So what’s been driving these measures? Well if you read the news most people point to a large number of illegal workers in the country, a lack of employment opportunities for Kuwaitis as expats are taking most of the good jobs, and crowding at hospitals and other facilities because of all the expats.

As for the number of illegals I have one Kuwaiti friend who did tell me once that illegals are a problem there, some Kuwatis run visa-schemes where people from South Asia pay a sum of money to a Kuwaiti and in return he sponsors them to come to Kuwait, telling the Government about fake jobs that they will supposedly be working, at which point they arrive and roam around doing whatever work they can, likely in the underground economy, to earn money. A recent article in Arabian Business stated the Indian Embassy estimates there are likely 20,000 illegal Indians in Kuwait. There’s probably a similar number of illegal Pakistanis. I’m not sure if that is the only problem, there may be a lot of people from other troubled countries in the region like Iraq, Syria, or Egypt who had made their way into Kuwait as well.

As for the employment I think the Government is starting to get concerned. The country has a large youth population that will be looking for work soon, so the Government is taking measures to try to ensure job opportunities go to citizens.

But I suspect there is another driver, finances. Take a look at these two paragraphs from a recent IMF report on Kuwait:

16. Nonetheless, rising public sector wage and pension costs and rapid population growth are expected to exert pressures on public finances. The average real and nominal growth rate of the public sector wage bill has more than doubled in the last six years (2006/07–2011/12), to 8 percent and 13 percent, respectively (Figure 8). The continuation of such a trend could put significant pressures on government finances—via higher wage payments, government pension contributions, and an increase in the unfunded liabilities of the pension system—and would be difficult to reverse if oil prices were to decline significantly in the future. The cost to the pension system is onerous for Kuwait, particularly given its low retirement age (see Annex 1) and generous benefits.18 Finally, rapid population and labor force growth—about 60 percent of the Kuwaiti population is under 24 years—is likely to put increasing pressures on public sector employment and the provision of public services going forward.

17. Fiscal consolidation is therefore needed in the medium term if current spending trends continue. The mission estimates that government expenditure will exhaust all oil revenues by 2017, which means that the government will not be able to save any portion of these revenues for future generations (Figure 9). In this context, medium-term benchmarks for government expenditure can help the government determine its fiscal envelope in order to target intergenerational equity in the distribution of oil resources. Kuwait’s nonoil primary deficit is already above the estimated baseline benchmarks (based on the permanent income hypothesis), and some fiscal consolidation would be needed in the medium to long term (Figure 10, upper panel). In this context, an adjustment of at least 12 percentage points of the nonoil primary deficit to GDP (or KD 7 billion against a projected expenditure of around KD 25 billion in 2017) would be needed by 2017 to ensure long-term fiscal sustainability. The need for fiscal consolidation is larger and more urgent in a scenario of lower oil prices.

Paragraph 17 is pretty shocking -- despite all of their oil wealth the IMF estimates that, if oil prices remain relatively stable, the Kuwaiti Government’s spending will still exceed the revenue earned from oil by 2017. If oil prices drop this could happen even sooner.

Kuwait appears to be under pressure to either earn more revenue or start spending less. Since so many things are subsidized (medical, water, power etc.) one way to save some money is to reduce the population, thus reducing amount of money spent subsidizing many services. Combine that with concerns about upcoming youth employment (60% of Kuwaitis are 24 and younger!), and on the face of it reducing the number of expats looks like a "two birds with one stone" kind of solution. I also suspect it could help reduce inflation, especially with rental prices, driving down real estate prices as the overall population shrinks. This will reduce pressure on the Government to have to increase housing allowances and other subsidies to keep up with spiraling rents.

Is raising revenue also possible? You’ll see further along that they’ve already been increasing oil output over the last number of years so I don’t think the solution lies there. Taxation? I saw it mentioned in the health article but that is the first time I've heard of the issue being discussed so I'm not sure if Kuwait is seriously thinking about that route. Large-scale tax regimes can be costly to implement so in a country of 3 million one would have to weigh the costs with the revenue that would be collected.

There’s also the question of how much oil Kuwait has left. British Petroleum does a great report every year on world energy reserves:

Proven oil reserves by country are listed on page 6. One problem with OPEC producers is the only source of information you have is what the individual countries themselves disclose. So what kind of reserves does Kuwait have?

1991: 96.5 billion barrels
2001: 96.5 billion barrels
2010: 101.5 billion barrels
2011: 101.5 billion barrels

Kuwait’s oil reserves have not decreased from the 1991 figure. In fact that 96.5b figure was established in 1985! There's not been any decrease to their reserves for the oil they have produced and sold, nor for the Iraqi invasion (when the Iraqis lit many of the wells as they were leaving, causing an estimated loss of 1 to 1.5 billion barrels). The official figure can’t be correct.

Page 8 of the report lists the production, in thousands of barrels per day. I’ll give the last 5 years in terms of barrels per year:

2007: 966m barrels
2008: 1,007m barrels
2009: 904m barrels
2010: 919m barrels
2011: 1,046m barrels

Now production is higher than it has been in the past but if we assume an average production of 850m barrels a year since 1985 it equals production of 24.2 billion barrels since the “96.5b” figure was originally created.

If the 96.5b figure was correct then Kuwait has around 72b left (around 65-70 years of production) but that’s only if those “proven reserves” were actually proven. There are some doubts. For example if you google around there is some mention of a leaked memo purported to be from Kuwait’s Ministry of Oil from 2001 which noted that the real reserves were far lower. Unfortunately there was no way to verify whether the memo was authentic, and if it was, then Kuwait could have as little as 15-20 years at current rates of production.

While I think the current stated reserves are overinflated I also suspect that unless that leaked memo can be verified as authentic I don't think 15-20 years is likely either or the Kuwaiti Government would have been acting far sooner to reduce expenses. I think it's something in between, possibly 25-30 years. In the meantime Kuwait is also facing potentially having to spend more than it makes on oil just to maintain its current system. The Kuwaiti Government may have realized that it needs to start doing something or else 25 to 30 years down the road it will find itself financially in a very bad position. Given that, I can't see the situation for expats changing there.

Thursday, June 06, 2013

Ezdan Mall Update – June 6th

[the most up-to-date information I have on Ezdan Mall is from August 21st and can be found here]

I haven’t been at Ezdan Mall for 2 weeks and surprisingly not a lot has changed.

The Carrefour is definitely open but for some inexplicable reason Forever 21 was closed [update: it opened the next day, June 7th].

For food and beverage only one more café has opened

That means your options are two cafés, Tim Hortons, KFC, and MotiMahal. The only proper restaurant that looks close to opening is Royal Tandoor.

Otherwise here's the other stores that are now open:

And a couple that are getting ready

Wednesday, June 05, 2013

Italian Vacation

I was just in Milan for around six hours so I wandered around the La Scala (Opera House) before heading back to the Duomo. For a fee you can wander around the roof which was more impressive than I thought it would be, there was a lot of decoration and work that went into the roof of the Cathedral.

Later I met up with some friends in front of the Duomo and we drove to the island of Monte Isola in Lake Iseo. I had been there a couple of years ago and really enjoyed my time there. We even stayed at the same hotel on the southern tip of the island.

The next day we wandered around the island

said hi to some people

and met up for lunch with a friend of one of my friends who lives in a small village on the island.

From there we wandered back to the ferry and crossed back to the lakeshore to get our car.

From there it was off to Verona for the evening. We chilled out in the square

And wandered around looking at the cool buildings, such as this Roman-era Coliseum that is still being used for concerts.

The next day I said bye to my friends as they dropped me off at the train station and I headed off to Venice.

Venice has to be one of the coolest cities to just hang around in. Happened to stumble upon some sort of Catholic ceremony in San Marco Square.

I really have no idea what was going on but there appeared to be some ceremony led by the Archbishop (maybe Cardinal?) with some holy object or another and then they all filed into St Mark’s Basilica.

I’ve been to Venice before so I knew some decent restaurants to eat at and basically spent the time just wandering around the city. Next day I took the ferry to the airport.

I can't believe I did all that traveling in Switzerland and Italy in just six days. I now need another vacation just to recover from this one :)

Tuesday, June 04, 2013

Swiss Vacation Continued

So the next day my friend and I drove from Geneva, along the lake, to the town of Montreux to visit the impressive Château de Chillon, a medieval castle on the lakeshore.

We toured the castle for a while

and then left to have lunch in the nearby town of Gruyères.

It’s a small town that kept its medieval charm but is more famous for Gruyère cheese, which comes from this area. No cars are allowed in the town so you have to park at the bottom of the hill and walk up to it.

But there was something else in the town– the H.R. Giger Bar and Museum. H.R. Giger is a surrealist artist best known for working on the art direction and special effects for the movie Alien (for which he won an Academy Award). Why something so out-of-place was in this picturesque town I have no idea but when my friend told me it was here I wanted to see it. I love H.R. Giger’s work and have one of his anthologies on my bookshelf here.

Check out the bar. Wish I could have taken pictures inside the museum but unfortunately pictures are not allowed.

So after eating something at the bar, going to the museum, wandering around the town, and buying some Gruyère cheese, we returned to Geneva. From there I took a train . . .

. . . to Milan.

Yep, this trip now goes Italiano. Stay tuned.