Archive for the ‘oil’ Category

Egypt urges closer ties with EU for Arab states

CB018560Arab states have much to gain from their European neighbours and vice versa, but the emergence of China and Russia offer new opportunities.Egypt turned a page in its relations with the EU in 2007.
With the signing of the European Neighbourhood Policy (ENP) action plan, Cairo committed to a deeper level of political, economic and social co-operation with Europe, based on common values and objectives. We have agreed to join the EU in promoting stability, prosperity and good governance, and to work for the creation of a free trade area in the Mediterranean basin by 2010.
But now, after many rounds of discussion and on the 50th anniversary of the EU, both parties must ask themselves a basic question: is the ENP the most relevant response to the common challenges that face our two regions going forward? Is it the most effective response to shared problems such as terrorism or climate change? More importantly, will the promise of closer integration with Europe continue to have the same pull on the ‘neighbourhood’ it does today, as new players such as China and Russia court the region with aid, trade and investment?

The greatest pressures that will face Europe over the next 50 years will come from sources outside the union rather than internal ones. The neighbourhood policy tacitly recognises this fact by setting out a framework for deeper co-operation with Europe’s neighbours in the Mediterranean basin. By offering economic incentives in return for co-operation on political, economic, security and technical fronts, the policy seeks to limit the impact on the EU of the effects of conflict, crime and migration – spillovers from a troubled neighbourhood.

That Egypt should sign up for such closer co-operation with the EU is of course natural. Egypt is Europe’s longstanding ally in the region. Today, Europe is Egypt’s largest trading partner, with total trade standing at almost Eur 12,000 million ($16,000 million) in 2006.

Europe is also a significant foreign direct investor in Egypt, with more than £E 22,000 million ($3,860 million) worth of investments in 2006. Under an association agreement with Europe that came into force in 2004 (a forerunner of the ENP action plan), bilateral trade in industrial products is being fully liberalised. Active negotiations are under way to liberalise trade in agricultural produce, critical to Egypt’s exporters, as well as services.

The benefits to Arab states of such economic integration with Europe in terms of jobs, investment and technology transfer are tangible. Trade with Europe is an essential catalyst for economic liberalisation at home: the prospect of access to European export markets acts as an incentive to local industry to try to meet EU standards.

Our ties with Europe are also an asset in Egypt’s efforts to market itself to foreign direct investors. Egypt’s proximity to Europe and our strong economic ties are increasingly persuading investors to relocate their production base and move their operations closer to European customers. Over the past six months,

100 Turkish companies have visited Egypt to begin establishing factories on the Mediterranean coastline from which to export to the EU. A Russian industrial zone targeting light industry exports to global markets including Europe will be open in May. Another project is under way, with German investment, to create the first hub for automotive components to supply Europe’s largest car manufacturers. However, it is worth noting that Egypt and its regional peers have also been boosting economic ties with new partners such as China, Russia and even Kazakhstan.

Today, Middle East companies are as determined as European ones to take full advantage of the opportunities that markets such as China can offer. Egypt and China in 2006 signed a co-operation agreement to boost bilateral trade to $5,000 million by 2010, compared with about $3,100 million today. This includes plans to build the first dedicated industrial zone for Chinese manufacturers in the country. If we stay this course, China should overtake the US to become Egypt’s largest single trading partner over the next five to seven years – not by political design but through simple market economics.

So, when it comes to implementing the ENP, all parties should bear in mind that the world moved on while we were negotiating. With the rise of inter-emerging market investments, Europe’s neighbourhood today has more options in terms of trade and investment than it did just five years ago. This means that the carrots and sticks offered by the EU must also evolve to keep pace with this reality. Closer economic integration with Europe may not continue to be a sufficient incentive on its own.

by Rachid Mohamed Rachid is Egypt’s Trade & Industry Minister

MyStockVoice.com is now alive & kicking

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It’s taken a while & it’s been an interesting experience, but am pleased to say that we released MyStockVoice.com into public beta. For me personally, there have been a few challenges, “assisted” along the way by re-locating with my family from Switzerland to Slovakia.

The team at Connection Services who have designed & support the MSV platform have been excellent, especially when responding to an ever changing set of requirements. MyStockVoice started as this WordPress blog, where I could muse on my views on Emerging Markets & BRIC economies. A conversation with a friend who works in the City (London) encouraged me to look at doing something a little more. The original format, was a forum, then a newswire service & now it’s a fully fledged blog publication platform. So you can imagine how happy my colleagues at CSL were, when I tripped back every few months & said “right, this is what we are doing now”

Our aim at MSV is to provide an ever widening audience with value insights into what is rapidly becoming a major topic for hedge funds, investment managers & retail investors alike : BRIC & Emerging Markets. International stocks traded on US exchanges are becoming ever more popular, especially via Depositary Receipts (ADR,ADS,ADN) , for the more cautious or long minded, a number of ETF (Exchange Traded Funds) have sprung up to service the appetite to take part in these growing economies.

Covering all the major regions, MSV provides focussed channels into a variety of sectors & also specific categories for Macro Econmics, ADR & ETF investing. We are pleased to be working with some well established names from the investment community, along with faculties such as Knowledge at Wharton, the Economics Faculty at Beijing University, Skolkovo Business School in Moscow & Cranfiedl University in the UK.

Our strapline is “your community … your voice”  & to reflect this, we will be bringing our readers plenty of new unique content. Much of my time in the last two to three months has been spent contacting individual bloggers & also online media services that are based in the regions covered. In this way, we can present a “blend of thought”, that will allow our subscribers to formulate informed opinions on their own particular areas of interest.

So, enough jawing from me, but to close, Alex, Chris & myself would like to thank the team at CS & all the people that have had input into the project. We sincerely hope that you enjoy the MSV experience & are always open to new ideas, partnership opportunities & most of all feedback.

Many thanks

Paul

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Global Expansion of Emerging Multinationals: Post-Crisis Adjustment

SkolvokoThe SKOLKOVO Institute for Emerging Market Studies has released an analytical survey “Global Expansion of Emerging Multinationals: Post-Crisis Adjustment”. The survey reviews the activities of the active participants of this process – Russian and Chinese multinational companies (MNCs) – and analyses the impact of the economic slowdown on expansion, performance and role of these companies under the new conditions.

The last decade was characterized by impressive growth of outward foreign direct investments carried out by companies from emerging countries, including those of China and Russia, which has led to visible changes in global investment flows. Chinese and Russian companies were given ample opportunities for international expansion in the beginning of 2000s. The key role in this process belonged to the changes in policies of both countries and to the public support given by their governments to investment abroad. The main tendencies characterizing the entrance of Russian and Chinese companies to foreign markets are presented below.

Russian international expansion has been carried out mainly by private companies, whereas, in China, on the contrary, under the government’s auspices, the most large-scale activity has been shown by state-owned enterprises. Europe has become the main target region of investment for the Russian companies, whereas the Chinese companies have concentrated on Asia-Pacific. At the same time, USA market has been equally attractive both for Russia and China.

Growth of Russian and Chinese companies’ foreign investments started from roughly similar levels; however, the number of Chinese running projects has been growing considerably faster. 2008 became a record year for Chinese companies-investors. According to different estimates, in 2008, the Chinese multinationals spent abroad US$35 to US$46 billion on company mergers, whereas the Russian MNCs – around €12 billion.

The impact of the crisis on the expansion of Russian and Chinese companies differed depending not only on sector, but also on strategic model of expansion. Entrance of Russian extractive companies, such as Norilsk Nickel and Rusal, to foreign markets was carried out, primarily, to increase the scale of activity; these companies in particular have been the most severely affected by the crisis. At the same time, a number of large Russian mining and energy corporations (such as Lukoil, Gazprom and others) have been implementing a strategy combining entrance to new markets with vertical integration towards the clients. A tendency for creation of value-added products (and services) has to some extent reduced their dependability on volatile raw materials prices. Thus, as regards investment capability, they are in a better position, which is confirmed by the deals carried through the last half-year.

Most of the largest Chinese multinationals also belong to the resource sectors, such as oil and mining. However, unlike other Russian multinationals from extractive industries, they are mainly importers rather than exporters, and most of their outward investment is directed towards securing the access to strategic natural resources and, as a result, national safety. Apart from the extractive companies, government-controlled companies, which implement large infrastructural projects, also take an active part in international activity. Due to China’s solid financial standing and its aspiration to invest abroad, virtually all of these resource and infrastructure concerns are in a better position to withstand the crisis and actively continue to seek for attractive objects for investment all over the globe, all the more so as the prices have decreased.

Market seeking expansion into emerging countries is typical for the leading Russian companies working on consumer markets, such as telecommunications, retail, food products and entertainment; this process has somewhat slowed down due to hindered access to financial resources, but certainly has not stopped.  Chinese manufacturing companies, which have been using their advantages in cost price for conquering the developed markets for several years now, currently are starting to pay more attention to the emerging markets.

A distinct group of investors is comprised of Russian and Chinese manufacturing companies, which hold on to the “product-line import” strategy. It involves purchasing relatively smaller but technologically more advanced manufacturers in developed countries and localizing the production of their main lines in Russia and China. Such projects were actively carried on in 2008, however, presently, in conditions of the weakened market, they seem much less profitable and are curtailed on many instances.

It is apparent, that owing to international investing, both Chinese and Russian companies acquire knowledge and new skills, expand their managerial capabilities, create global brands and enhance their competitive advantages on the global market. The overwhelming majority of both Chinese and Russian companies, that had led the foreign expansion in the previous decade, were able to preserve their organizational integrity and position on the key markets under the conditions of the global crisis. Moreover, currently there is an opportunity of acquiring potentially interesting foreign assets with price considerably lower than before. But whether the Russian and the Chinese companies would be able to continue their active investing and to take an advantage of the emerged opportunities depends on their ability to solve their primary domestic issues exacerbated by the current economic situation.

Professor Sam Park, President of SIEMS:

“The time has passed that emerging economies offer nothing but cheap input materials. The world has seen a fast surge of emerging multinationals from Russia, China, India, and other newly developing economies that are reshaping the global competitive dynamics. It was the Japanese multinationals in the 1970s and other Asian multinationals in the 1980s that changed the global market structure. The 21st century is now filled with new breeds of emerging multinationals mostly from BRIC countries. SKOLKOVO research examines this new, but critical, phenomenon in global competitive structure. Following the ranking survey of Russian multinationals over the last two years, the current report presents a comparative overview of these multinationals from China and Russia, along with an in-depth analysis of their strategic motivations. It further examines whether there have been noticeable changes in their global expansion due to the current financial crisis. There will be a follow-up report later that examines the challenges these multinationals often run into in their global operations, which should also be able to provide valuable insights on how to address them.”

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Brazil remains bullish on oil as Petrobras sets new production record in March

offshore-oil-rigPerennial favourite Petrobras (NYSE : PBR), has announced that in March of this year, it surpassed February’s output record by 52,00 bpd. Last month, the Brazilian oil giant produced a record 1.99 million bpd from its domestic holdings. The increase has been attributed to a number of new wells in the offshore Campos Basin being brought into commercial production. Petrobras has also reported domestic production of combined oil & gas for March reached 2.3 million bpd of oil equivalent, a 9.5% month on month icrease, adding in international operations, brings an enviable 2.5 million bpd production average for the month of March.

Following up on Petrobras’ unveiling of its $174 Bn, five year investment plan, this can only be good news for investors, as the company has based its 2009-2013 plan on Brent crude running at $42 a barrel, with financing needs for 2009 based on Brent averaging at $37 a barrel. With Brent crude trading at $50.46, depressed fears over swine fever, a fiar cushion is in place.

On May 1st, President Lula will officially open Petrobras’ new Tupi operations.  Tupi,which is located in the pre-salt region and is estimated to contain between 5 billion and 7 billion barrels of crude, will initially pump 15,000 bpd through a test phase, finally ramping up to 100,000 bpd in 2010. The pre-salt region covers an offshore area 800 kilometers long and 200 kilometers wide between the states of Espirito Santo and Santa Catarina, is estimated to contain up to 80 billion barrels of light crude under a thick layer of salt far beneath the ocean floor.

As we previously discussed, the planned $175 Bn investment, is also good news for companies supplying the oil business. With offshore oil development vessels likely to be in high demand.

“In the next five to six years, we are looking for 240 different vessels… drillships, storage units, supply vessels, transportation vessels and others,” Petrobras CFO Almir Barbassa told reprorters at recent a seminar held in Seoul. “Petrobras will soon issue tenders for eight floating product storage and offloading units and seven drill ships”

Trading off a 52 week low of just $14.73, Petrobras is currently trading in the $32-$34 range (5 day spread) & the ADR has grown by 37% in the last three months of trading.