Qatar’s rebounding financing and liquidity metrics, strengthening current account surplus and elevated international hydrocarbons prices support the riyal, the Economist Intelligence Unit (EIU) has said in its latest country update. The riyal's peg to the US dollar will continue to be backed by healthy foreign reserves and QIA assets, EIU noted. Qatar’s macroeconomic indicators improved in 2021, with a return to positive economic growth both globally and domestically. “We estimate that the fiscal account returned to surplus in 2021 owing to recovering global oil and gas prices, which will ease public debt pressures. Qatar's debt obligations are high, but its ability to fully service them is not in doubt, supported by ample foreign reserves and the assets of the Qatar Investment Authority (QIA), which is the sovereign wealth fund,” EIU said. On risks to the country’s banking sector, it said: “The net negative foreign-asset position of banks is large and widening. The sector is well regulated, and although net external liabilities pose risks, strong prudential indicators insulate banks from a deterioration in asset quality arising from the recession in 2020. The non performing loan ratio is low, and profitability levels are moderate.” However, EIU noted Qatar's overdependence on hydrocarbons exports remains a vulnerability, however, “leaving it exposed” to international energy price movements. “The Qatar National Vision 2030 diversification programme will shape policy. Qatar's large stock of public debt weighs on the outlook, but a sound financial system is supportive.” In an earlier update, EIU said Qatar's overall business environment score has improved from 6.56 for the historical period (2016-20) to 7.35 for the forecast period (2021-25). This, it said, has helped Qatar's global ranking to improve by eight places from 36th to 28th, although its regional ranking remains steady at third. The largest improvements, in terms of scores, are in the categories of infrastructure and market opportunities. “Qatar's fairly open foreign investment regime, open trading relationships with regional partners and sophisticated capital markets will remain strong aspects of its business environment. The main shortcomings are in policy towards private enterprise and competition and in access to financing for small and medium-sized enterprises,” EIU noted.
The IMF has suggested diligent banking supervision in Qatar should continue for banks to promptly recognise and address NPLs and comply with provisioning and capital requirements. In its latest country report, the International Monetary Fund said Qatar’s banking sector remains well-capitalised and liquid, with non-performing loans (NPLs) at relatively low levels. However, IMF noted Qatari banks’ large and increasing exposure to foreign liabilities poses potential risks as global financial conditions tighten, while the existing prudential framework and efforts to lengthen the maturity and diversify the sources of foreign funding are mitigating factors. Strong state support provides the last line of defence, but sovereign contingent liabilities could increase. Prudential measures and reforms to promote domestic stable funding could help to alleviate the risks. Prudent public finance management and a reduced public sector’s footprint in the domestic banking sector could avoid crowding out private credit. In its report, IMF said to balance the need to facilitate the recovery and to ensure banking sector strength, a carefully calibrated exit from remaining support measures is crucial. In this context, the IMF noted: “Planned gradual reduction in the allocation for the zero-interest repo facility is welcome, while the strength of the economic recovery would allow the exit from the blanket loan moratorium in the near future — we recommend replacing it with time-bound measures targeting distressed but viable borrowers. Unviable firms should be resolved through an enhanced insolvency framework.” IMF noted: “Amid rising hydrocarbon prices and a favourable fiscal outlook, the authorities’ commitment to medium-term fiscal consolidation is particularly welcome. A balanced and growth-friendly consolidation strategy could help to achieve the dual objectives of intergenerational equity and diversification. “The strategy would call for diversifying revenues and accelerating the implementation of the value-added tax, enhancing current spending efficiency, and reorienting spending to promote productivity, economic diversification and a greener economy. “The implementation of the strategy could be underpinned by a well-designed medium-term fiscal framework (MTFF) and enhanced fiscal transparency and governance.” IMF noted: “A balanced and growth-friendly fiscal consolidation strategy could help to achieve the dual objectives of intergenerational equity and diversification. The authorities’ strong reform efforts during the pandemic should continue to accelerate diversification and build a knowledge-based, stronger, more inclusive and greener economy.” IMF hailed the “Qatari authorities’ strong response to the pandemic” and said it has helped to minimise the negative impact of the pandemic and facilitate the recovery. Near-term growth will be boosted by the 2022 FIFA World Cup and favourable hydrocarbon prices. The ongoing LNG expansion project is expected to support medium-term prospects, IMF noted. IMF also noted that Qatar’s economic recovery is gaining strength on the back of rebounding domestic demand, higher hydrocarbon prices, and the preparation for the 2022 FIFA World Cup. Real GDP growth is thus expected to accelerate to 3.2% in 2022. The North Field LNG expansion project will support growth prospects and further strengthen fiscal and external positions over the medium-term. Downside risks to the outlook stem from potential new virus strains, geopolitical tensions and conflicts, tighter and more volatile global financial conditions and energy market volatility. In the long run, while Qatar’s focus on LNG can help to ease the energy transition process, IMF said and noted, “there is the ultimate risk that the global shift to renewals could reduce demand for hydrocarbon.” “To secure the recovery and foster stronger and more diversified growth, policy priorities include to carefully manage the exit from remaining financial sector support to safeguard banking sector strength, embark on a growth-friendly medium-term fiscal consolidation, and further advance structural reforms to achieve the goals in Qatar National Vision 2030. The IMF statement followed “virtual discussions with the Qatari authorities led by Ran Bi to conduct the 2022 Article IV consultation from February 13 to March 1 this year.”
In January 2019, the Newark Liberty International Airport in New Jersey, United States, halted all landings and diverted planes for over an hour after a potential drone sighting nearby. A year earlier, in December 2018, more than 800 flights were cancelled from London’s Gatwick due to disruptions caused by the illegal and dangerous drone operations at one of the UK’s busiest airports. The flights disruption affected an estimated 100,000 passengers whose Christmas travel plans had obviously gone awry. An industry research earlier revealed that small unmanned aerial vehicles (UAVs) can actually be much more damaging to aircraft than birds at the same impact speed, even if they are of similar weight. The study, published by the Alliance for System Safety of UAS through Research Excellence, a think-tank, used computer simulations to examine the impact of bird and UAV collisions in more than 180 scenarios. The researchers found that the drones’ rigid and dense materials — such as metal, plastic and lithium batteries — can put aeroplanes at much greater risk than a bird carcass. A researcher said that in every collision scenario (with a drone) there was at least minor damage to the plane and sometimes it was much more severe. In one case, the researchers discovered that if a drone were to hit an aircraft’s fan blades when it is operating at its highest speed, the blades could shatter and snap power to the engine. A few days ago, the Biden administration called on the US Congress to expand authority for federal and local governments to take action to counter the nefarious use in the US of drones, which are becoming a growing security concern and nuisance. Recently, the White House released an action plan that calls for expanding the number of agencies that can track and monitor drones flying in their airspace. It calls for establishing a list of US government-authorised detection equipment that federal and local authorities can purchase and creating a national training centre on countering the malicious use of drones. The federal-government-wide focus comes as the Federal Aviation Administration projects that more than 2mn drones will be in circulation in the US by 2024 and as availability of detection and mitigation technologies — including jamming systems — are limited under current law. In the US, smugglers have used drones to deliver illegal drugs into the country. And Major League Baseball has had several incidents since 2020 where games have been delayed after privately owned drones have been flown onto a playing field. In 2015, there were two separate incidents in which drones crashed on White House grounds. According to Gadgets 360, an NDTV venture, US federal and local authorities say that drones have also been used to smuggle contraband, including mobile phones and drugs, into prisons. A decade ago, drones were a virtually unknown phenomenon. Nowadays, thousands of these aerial vehicles are in use worldwide, and the use for civil applications is growing fast for both recreational and commercial markets. Drones come in all shapes and sizes. They can be used for air transport (cargo, baggage, passenger), firefighting, agriculture, humanitarian (search and rescue, disaster relief), for filming and multiple other applications that require cheap and extensive aerial surveillance (border patrol, weather monitoring, nuclear security, hurricane tracking, law enforcement). The global body of airlines – IATA says the pace of development of the drone markets, both recreational and commercial, is incredibly fast, with challenges to be addressed and opportunities to be captured as it develops. “Our industry needs to react quickly to integrate, facilitate and embrace the opportunities offered by this new branch of civil aviation. As the number of drones will continue to grow exponentially, a high priority must be placed on the development of standards and recommended practices that enable the operation of Remotely Piloted Aircraft System (RPAS) into the established aviation infrastructure,” IATA noted. Industry analysts say the rogue drones menace can be curbed only by identifying the operators of such unmanned aerial vehicles and bringing them to justice. They suggest measures to accelerate co-operation among the industry, drone manufacturers and governments to reduce the risks of rogue drone operations. Such measures could include greater education and awareness for drone operators, a registry of drones above a certain level of capability, enhanced fines and prison sentences for offenders, and technological solutions to prevent drones entering restricted airspace. According to industry experts, the law that is generally accepted is that it is illegal to fly a drone within 1km of an airport or airfield boundary and flying above 400ft (120m), which increases the risk of a collision with a manned aircraft – is also banned. Endangering the safety of an aircraft is also a criminal offence, which can carry a prison sentence for a specific period. The vulnerability of most airports is all too apparent when it comes to rogue drones, and therefore only tougher laws can deter unprincipled operators of such unmanned aerial vehicles. Undoubtedly, drones flown by untrained, unlicensed personnel are a real and growing threat to civilian aircraft. Therefore, experts have called for drone regulations to be put in place before any serious accidents occur. Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn
Qatar’s listed banks had the "highest sector average" for return on equity of 13.7% compared with a GCC average of 11.3% in 2021, KPMG said in a report. In its report on GCC banking sector in 2021, KPMG said QNB continues to maintain the top spot for the largest bank in the GCC in terms of assets. Qatar’s listed banks were the clear leaders amongst their GCC peers in terms of cost-to-income ratios (23.3%), versus a GCC average of 41.1%, demonstrating the success of tight cost control measures across the sector. Non-performing loan coverage ratio of Qatar banks stood at 92.0% versus a GCC average of 66%, KPMG said. However, KPMG noted Qatar was also the only GCC country to report an increase (19.2%) in the average net provision charge, versus a GCC average decline of 14.5%, “reflecting a continued cautious approach amidst a challenging credit environment.” On some of the significant trends concerning the GCC banking sector, Omar Mahmood, head (Financial Services for KPMG in the Middle East and South Asia) and partner at KPMG in Qatar, stated, “2021 was a redefining year for banks in the GCC. The banks emerged more resilient from an unprecedented year impacted by Covid-19, witnessing improved profitability, a greater focus on digital transformation, ESG gaining prominence, and agile working becoming the norm”. Key highlights from the report are a 35.8% increase in profitability, after a double-digit dip in 2020, which was primarily due to reduced cost of funds and lower loans provisioning by 14.5%. Market sentiment also followed the fundamentals with a 36.6% rise in listed bank share prices. There was a noted improvement across numerous key financial metrics with a robust asset growth of 6.4%, ROE and ROA improving by 0.3% and 2.8% respectively, an increase in the capital adequacy ratios to a sector average of 19%, and a cost reduction in the cost-to-income ratio by 0.3%. The report also presents a forward looking view of “a new reality” being established with six key themes for the GCC banking sector. Lending is expected to be cautious and selective as banks focus on quality while effectively managing their NPLs and loan impairment across all sectors of the economy. Costs are expected to decline further as the effects of digital investment and consolidation come to fruition. Digital transformation will most likely continue as technology and innovation become business as usual and as banks embrace disruptive trends. ESG is likely to remain a front-and-centre focus for investors, regulators, banks, and customers. The rising interest rate environment and effective NPL management is likely to help drive profitability and growth. “Lastly, we see a robust economic environment, fuelled by higher oil prices, that could help to stabilise any potential credit volatility and continue to support a resilient GCC banking sector,” KPMG said. Overall, GCC banks “emerged more resilient despite a challenging year”, the report said. Mahmood noted, “GCC banks have rebounded after a difficult year courtesy of proactive balance sheet management backed by effective government support. This had cast a strong foundation for future growth while also being prepared to withstand the current and continued challenges and threats posed by the global economic conditions”.
The North Field Development is a “massive” expansion project that will reinforce Qatar’s leadership in the global LNG market at a critical time both from an energy transition and an energy security perspective, says Neil Gunnion, McDermott country head and vice-president (Operations- Qatar). Early this year, QatarEnergy announced the awarding of a major Engineering, Procurement, Construction, and Installation (EPCI) contract for the offshore scope of its North Field Expansion Project to McDermott Middle East Inc. According to QatarEnergy, the scope for the awarded contract includes 13 normally unmanned wellhead platforms topsides (eight for NFE and five for NFS), in addition to various connecting pipelines and the shore approaches for the NFE pipelines, beach valve stations and buildings. “It is clearly a very significant award and is in fact the largest single award for McDermott in Middle East, and as such the largest award for us in the Qatar market. It further solidifies our long-term relationship with both QatarEnergy and Qatargas, for whom we have been doing offshore projects to support the development of the country’s critical energy infrastructure for several decades. “To be involved in this flagship project, a project which as McDermott we have been working on for several years via the FEED, makes us all very proud,” Gunnion said in an interview in Doha. Providing an overview of McDermott operations in Qatar, he said, “We continue with our clearly stated goal to become the largest standalone EPCI delivery organisation here in Qatar, starting with the very earliest stages of project development (concept + Pre-FEED) via our IO (a joint venture between McDermott + Baker Hughes) team here in Doha through to full EPCI delivery, including fabrication of offshore infrastructure in Qatar at our fabrication facility in Ras Laffan Industrial Complex – QFAB. “QFAB is a joint venture between Nakilat and McDermott. We continue to grow all the necessary project team and support organisations to materialize this vision. This now includes the ability to fully execute large complex offshore projects entirely from Qatar – from start to finish. This has required growth in our Burj Doha execution office, for which we continue to recruit candidates locally mainly in the engineering field, but we are looking at supply chain and business candidates as we stabilise and focus on execution excellence for our customers.” Operationally, Gunnion noted, “We are ramping up QFAB to start various projects during 2022 and will be up and running in a few months, which is exciting to see. It truly is a first class facility and we look forward to fully harnessing her potential.” On the benefits of establishing QFAB, Gunnion said: “The benefits are many as we work to broaden and strengthen the local supply chain to support energy projects in Qatar. Over and above, the recruitment and training of several hundreds of skilled workers at various levels of expertise, we are also heavily engaged with the local supply chain to support our operations. “The ability to locally source support, materials, and services is crucial to the successful operation of the yard. As these in-country services grow, the ability to support more and more local development in the energy sector is a natural by-product. We are working hard to develop this long-term capability in Qatar.” Gunnion also highlighted McDermott’s focus on reducing emissions and managing the carbon footprint. He said: “As an EPC contractor in the energy industry, we believe we are uniquely positioned to influence the full value chain of emissions, starting with our own global fabrication, construction and marine operations and working with our suppliers and customers to reduce their operating emissions. McDermott has published sustainability goals to reduce emissions in our own operations (scope 1 & 2) and our suppliers (upstream, scope 3) and customers (downstream, scope 3). “In line with our commitment to reduce supply chain emissions across 10 key categories, we are actively engaged with key suppliers, such as steel suppliers, in identifying opportunities to lower the carbon intensity of their manufacturing process through sustainable solutions In January, McDermott launched ‘ArborXD’, which gives the project the capability to estimate the lifecycle emissions of the operating facility and identify low emissions pathways through engineering design. Gunnion said: “The introduction of these monitoring and assessment tools at the earliest stages of projects allow us to be aware of our environmental impact and work to select solutions with long term gain. Of particular focus during the EPC lifecycle is the main GHG emitting phases of projects, which are fabrication and offshore installation. “As we operate our own fabrication yards, we are working to significantly reduce the GHG impact of our operations. McDermott has short term targets set around renewable energy, as we actively work towards increasing our renewable energy usage through installation of onsite solar and accessing offsite renewable energy through energy attribute certificates (EACs) or power purchasing agreements (PPAs) where available.”
Power generation will be the key driver of natural gas demand growth, accounting for 42% of incremental gas demand volumes through to 2050, according to the Gas Exporting Countries Forum (GECF). This is in contrast to the residential and commercial sector, which is projected to provide just 7% of the total gas demand growth between 2020 and 2050, GECF said in its latest Global Gas Outlook 2050. The power generation sector will represent the largest growth engine thanks to the substantial rise in electricity demand as well as government policies and regulatory initiatives to phase out coal-fired capacity and nuclear power plants in some regions. In addition, with progressive solar and wind capacity additions, the need for flexibility as a pillar of electricity security will mount, and gas-fired power generation is expected to play a growing role in helping to balance variable renewables and providing stability of power systems. Batteries and demand-side response will cover part of that role, but they are unlikely to be able to offer long-duration and seasonal storage. In this context, dispatchable, low-emission generating capacities will become more central to the provision of system flexibility and gas-fired generation will remain the primary choice. Overall, between 2020 and 2050, gas demand in the power generation sector will increase by 755bcm (or by 55%) to 2,130bcm by 2050, GECF noted. At a regional level, Asia Pacific and Africa will contribute the most to this growth, together accounting for more than 70% of the increase, although Latin America and the Middle East will also demonstrate a considerable rise. Europe will be the only region to experience an evident declining trend. However, gas in this sector will remain resilient in the coming decade, filling part of the gap left by retiring nuclear and coal capacities, but gradually falling thereafter as renewables growth strengthens. Global electricity generation will more than double from 26,460TWh in 2020 to almost 54,500TWh. Simultaneously, the power generation mix continues to shift towards low-carbon sources. Assertive development of renewables will push their share from 10% in 2020 up to 46% by 2050, while the share of coal – the main fuel to lose ground – will fall from 35% to 13%. The shares of hydro and nuclear, despite output rising in absolute terms, will also decrease, although much less sharply, and will provide nearly 11% and 7% of the power generation mix respectively in 2050. Gas-fired generation, which will meet around 16% of rising electricity needs over the forecast horizon, will maintain its current share in the generation mix at 24% until the early 2030s, decreasing thereafter to 20% by 2050. In terms of gas-fired capacity additions, an expansion from 1,892GW in 2020 to 3,170GW by 2050 is forecast, given all the commissioning and retirements within the outlook period, GECF said.
Rising air freight costs, reduced air capacity and the war in Ukraine are seriously impacting the global air cargo sector, which is already battered by the Covid-19 pandemic. Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty will take their toll on air cargo’s performance in the coming months, although it benefited in February compared with January. The negative impacts of Russia’s invasion of Ukraine and related sanctions (particularly higher energy costs and reduced trade) will become more visible in future, according to the global body of airlines – International Air Transport Association (IATA). Logistics UK magazine said the cancellation of flights to Russia from the UK, the EU, the US and the closure of airspace above Russia and Ukraine is leading to lengthy detours for air freight, particularly to Asian markets, such as Japan, South Korea and China. The closure of the direct route via Russia’s Siberian air corridor is adding hours to flight times between the UK and Asia, and flight bans are estimated to affect over a fifth of air freight. Several factors benefited air cargo in February compared with January. On the demand side, manufacturing activity ramped-up quickly after the early February Lunar New Year holiday. Capacity was positively influenced by the general and progressive relaxation of Covid-19 travel restrictions, reduced flight cancellations due to Omicron-related factors (outside of Asia), and fewer winter weather operational disruptions. Global demand, measured in cargo tonne-kilometres (CTKs), was up 2.9% compared with February 2021 (2.5% for international operations). Adjusting the comparison for the impact of the Lunar New Year (which can cause volatility in reporting) by averaging January’s and February’s performance, demand increased 2.7% year-on-year. Although cargo volumes continued to rise, the growth rate decelerated from the 8.7% year-on-year expansion in December. Capacity was 12.5% above February 2021 (8.9% for international operations). Though this is in positive territory, compared with pre-Covid-19 levels capacity remains constrained, 5.6% below February 2019 levels. Limited air capacity presents a double whammy for shippers. With airspace over Ukraine closed to civilian flights and airlines avoiding Russian airspace, air freight rates are spiking, according to the firms. “The flying ban has cancelled many of these flights and removed 10mn miles of airspace from international freight routes. With airlines responsible for flying around 20% of cargo, this will dramatically decrease capacity provided by carriers," Dylan Alperin, head of professional services at supply chain software platform Keelvar told CNBC. Air freight charges had already increased following the pandemic and the reduced capacity in passenger flights. Air cargo rates were 150% above 2019 levels in December, according to IATA, and the longer routes, which require additional fuel and flight time, are making flights more expensive. In 2020, the air cargo industry generated $129bn, which according to IATA, represented approximately a third of airlines’ overall revenues, an increase of 10% to 15% compared to pre-crisis levels. In 2021, cargo demand was expected to have exceeded pre-crisis (2019) levels by 8% and revenues might have risen to a record $175bn, with yields expected to grow by 15%. This year the demand is expected to exceed pre-crisis (2019) levels by 13% with revenues expected to rise to $169bn although there will be an 8% decline in yields. “Demand for air cargo continued to expand despite growing challenges in the trading environment. That is not likely to be the case in March as the economic consequences of the war in Ukraine take hold. Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty will take their toll on air cargo’s performance,” said Willie Walsh, IATA’s Director General. Air cargo is a key driver of global economic development, facilitating trade and creating millions of jobs worldwide. It helps countries contribute to the global economy by increasing access to international markets and allowing the globalisation of production. To maintain growth momentum, the global economy requires delivery of high-quality products at competitive prices to consumers worldwide. Air cargo transports more than $6tn worth of goods, accounting for approximately 35% of world trade by value. Air cargo also helps people stay connected – some 328bn letters and 7.4bn postal parcels are sent every year and airmail plays an essential role in their delivery! The significance of air cargo is perhaps best illustrated in the supply of much-needed Covid vaccines and other essential lifesaving drugs around the world, every single day! Air cargo is critical in flying these temperature-sensitive pharmaceuticals in the best conditions, using cutting-edge technologies and procedures. Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn
The FIFA World Cup in Qatar later this year will likely benefit the travel hubs in the UAE and neighbouring countries as well as provide a boost to Qatar’s own economy, Emirates NBD has said in a report. “Overall, the outlook for the GCC region remains constructive. Expected fiscal surpluses will allow governments to spend as planned without needing to tap debt markets in a rising interest rate environment,” noted Khatija Haque, Emirates NBD head (Research) and chief economist. Recent reforms to the personal and business laws in the UAE will likely continue to drive inward investment and attract talent. Emirates NBD noted GCC economies have seen a relatively strong start to 2022. The hydrocarbons sectors have benefited from increased oil production so far this year, with crude oil production up 12% on Q1, 2021 for the UAE and 19% over the same period for Saudi Arabia. Survey data for the first quarter of the year point to a solid expansion in non-oil sectors as well, with strong growth in business activity and new work in the UAE, Saudi Arabia and Qatar. For Dubai in particular, Expo 2020 has helped to boost activity over its duration, and the relaxation of travel restrictions has contributed to a strong recovery in the tourism and hospitality sector over the same period. International visitor numbers have recovered to around 70% of pre-pandemic levels in the first couple of months of this year. Hotel occupancy bounced back in February to over 80% after slipping in January as a result of the Omicron variant of Covid-19, and hotels have been able to almost double their revenue per available room in the first two months of 2022, compared with the same period a year earlier. The largest source market for international visitors to Dubai so far this year has been Saudi Arabia, which has displaced India from the top spot, and visitors from other GCC countries have returned in larger numbers as well as travel restrictions have been relaxed, the report said. There has also been a sharp rise in the number of visitors from the UK and Europe relative to early 2021 as those countries have signalled a desire to “live with” the coronavirus. With the reopening of other markets such as Australia, New Zealand and Singapore, we are optimistic that the recovery in international tourism will continue over the course of the year, underpinning growth in the UAE’s transport and hospitality sectors, Emirates NBD said.
* According to the World Bank, Qatar’s real GDP is estimated to rise in 2022 to 4.9% on the heels of boosted hydrocarbon exports (of 10%) Qatar's hydrocarbon dependence is likely to expand this decade, as the country’s North Field facilities begin production, World Bank has said in a report. The effects of the war in Ukraine on the commodity markets and of its associated economic sanctions are positive, on balance, for Qatar’s economy, the largest exporter of liquefied natural gas in the world, the World Bank said in its latest ‘MENA Economic Update’. That aside, preparations for the soccer World Cup, scheduled for November/December 2022, have intensified diversification of the country's economy and bolstered non-oil activity despite the Covid-19 pandemic, the World Bank said. The possibility of new outbreaks of Covid-19, a spike in consumer price inflation, and rising US interest rates are likely to be modest downside risks given Qatar's high vaccination rates and sizeable sovereign financial wealth and reserves. Economic recovery is well underway and, despite temporary interruptions from Covid-19, real GDP grew by 3% in 2021, versus a 3.6% contraction the previous year, rebounding in the second quarter of 2021 at an annualised rate of 4% and remaining positive in the third quarter. The Purchasing Managers’ Index (PMI) stayed above 50 for all of 2021, reflecting economic expansion that reached a highpoint of 63 in November and has been above 57 ever since. Google mobility data experienced a short-lived dip during the most recent surge of the virus, but retail and recreation, and transit station and workplace mobility, recovered in February 2022 to pre-pandemic levels. According to the World Bank, Qatar’s real GDP is estimated to rise in 2022 to 4.9% on the heels of boosted hydrocarbon exports (of 10%). Growth in private consumption may be slightly lower, at 4.8%, driven by potentially fewer World Cup proceeds and higher prices. Consumer prices are projected to jump by an additional percentage point in the current year. This World Bank estimates that the Middle East and North Africa (Mena) region’s economies will grow by 5.2% in 2022, the fastest rate since 2016. However, uncertainty reigns with the unpredictable course of the war in Ukraine and the scientific uncertainty about the evolutionary path of the virus that causes Covid-19. The economic recovery may be uneven as regional averages mask broad differences between countries. Oil producers may benefit from elevated energy prices along with higher vaccination rates for Covid-19, while fragile countries lag. Per capita GDP, which is a more accurate measure of people’s standard of living, barely exceeds pre-pandemic levels due to a lacklustre performance for most countries in 2020-2021. If these forecasts materialise, some 11 out of 17 Mena economies may not recover to pre-pandemic levels by the end of 2022, the World Bank said.
Qatar, Iran and Saudi Arabia are the “bright spots” for Middle Eastern gas output over the next three decades, the Gas Exporting Countries Forum (GECF) has said in a report. In its Global Gas Outlook 2050, GECF said between 2020 and 2050, the natural gas supply is set to climb by an annual average growth rate of 2.4% in Iran, 2.2% in Qatar and 1.2% in Saudi Arabia. It said Qatar aims to maintain its status as the top LNG producer and exporter in the world. The planned expansion of production from the North Field and other fields will increase Qatar’s total gas production by an overall of 91%, from about 175 bcm last year to 330 bcm in 2050. National oil companies in the Middle East are focusing on developing their gas fields. As most of the countries in the Middle East are also crude oil producers, the majority of natural gas production in the region is associated gas. With almost 17% of global gas production, the Middle East is the third-largest gas-producing region worldwide after North America and Eurasia. The region is a net exporter of gas, and supply has been growing rapidly by an annual average growth rate of 6.3%, from about 190 bcm in 2000 to around 650 bcm in 2020. According to GECF, associated-dissolved natural gas (gas obtained from crude oil reservoirs) has always been accounted for as a share of total gas production. This gas can be found as free gas (associated) or in solution with crude oil, referred to as dissolved gas. Like the impact that Covid-19 had on non-associated gas production, the demand for oil also declined in 2020, resulting in a lower level of associated gas production in that year. According to the EIA, associated gas production in the US fell in 2020 by 1.5% reaching a level of around 140 bcm, following three years of growth. For the first time since 2016, the share of associated gas production in the US was reduced to almost 37.7%. The GECF report forecasts that the demand for oil will stabilise through to 2050 and the level of global oil production will peak at slightly more than 100 mboe/d in around 2035 and will steady at around 90 mboe/d by 2050. This lower level of crude oil production will consequently affect the level of associated gas production. Furthermore, the need for EOR measures by the injection of associated gas into oil wells will be magnified by the ageing oil reservoirs. “So a lower level of associated gas will reach the market, and the total volume of production from this category in the future is forecast to be lower than current levels,” GECF said. Currently, it is estimated that slightly less than 500 bcm of marketed natural gas is sourced from oil wells, and this level excludes the volume of the gas obtained from unconventional crude oil production. The total level of associated gas production is even higher than this, as injection and recirculation do not count in marketed production, GECF noted.
* Qatar's $29bn FID on North Field expansion is a game-changer, noted GECF Global Gas Outlook 2050 LNG liquefaction investment that dropped in 2020 may have scaled up to more than $23bn in 2021 led by Qatar, US and Russia, according to Gas Exporting Countries Forum (GECF). Qatar’s project, with a final investment decision (FID) of $29bn taken in February 2021 on North East Field expansion, which will add 33mn tonnes per year (mtpy) to the currently existing 77mtpy, is a game-changer, noted the GECF Global Gas Outlook 2050. Asia Pacific, the main destination of the world’s LNG at present and by 2050, will represent the largest transformational challenge for the currently fragmented natural gas market. Asia Pacific with 70% share of LNG trade in 2020 to make up for even more impressive over 80% by 2050. The top four largest LNG importers emerged in Asia Pacific and will remain so in 2050 with India becoming second largest LNG importer. China became the top global LNG importer in 2021 overtaking Japan as the leader in the consumption of liquefied gas, followed by South Korea, and India. By 2050, the majority of incremental growth in natural gas imports will be undoubtedly attributed to Asia Pacific with almost 650bcm additions over 2020-2050. Latin America and Europe, with total increases of 55bcm and 35bcm, respectively will follow, the GECF noted. The underlying demand will be balanced out by supply increases from primarily Eurasia (285bcm) Middle East (230bcm) together with North America (160bcm) and Africa (50bcm) over the long term. Asia Pacific will account for the highest share of global imports by 2050, while the share held by the European market will be gradually decreasing as import volumes increase slowly by 2030 due to a significant drop in domestic production but will later slow down till 2050. The overall natural gas demand in Europe is starting to decrease as decarbonisation and the “green deal” efforts are seen to move gas out of energy mix. Slow LNG demand is seen in Africa, the Caribbean and partially in the Middle East. A very few import terminal projects are currently being built there. Pipeline trade will see relatively modest growth, mainly due to shifting the export focus from the European to the Asian market, ramping up exports from Russia and Turkmenistan to China. According to the GECF, a rapid shift in demand for LNG from traditional markets to emerging markets will be envisaged in the coming 30 years. The Asian natural gas market is anticipated to stay the largest regional market over the 2020-2050 period, as more countries start importing natural gas with existing importers from predominantly developing Asia ramp-up the existing inflow trade. The incremental growth in Asian imports will be attributed to China (195bcm) and India (107bcm), 14bcm by South Korea, with the balance taken by new importers from South and Southeast Asia and other developing Asia. Legacy importers such as Japan and Taiwan will slowly decrease gas imports. The share of global demand met by the traditional markets – Japan, South Korea, and Taiwan – will drop from 39% in 2020 to 18% by 2040, mainly due to lower gas demand for power generation in Japan, the GECF said.
After being battered and thrust into a crisis by Covid-19, the global aviation industry is slowly emerging from the worst of the pandemic, but facing a likely challenge of pilot shortage. A major question facing the aviation industry now, according to industry experts, is when demand will actually return. For passenger recovery, estimates range from early 2022 to 2024 and beyond, noted researcher OliverWyman. For pilots, however, demand is driven by aircraft departures and utilisation rather than passengers. The global in-service fleet has already recovered in size to 76% of pre-Covid levels. In recent years, airlines have provided a more direct path to the cockpit for new pilots, expanding cadet training programmes and providing financing. With Covid, many of the airline pipeline levers have come under pressure. Faced with mounting costs and a pilot surplus, cadet programmes are being trimmed. Some of the banks that have supported the financing seem to be reconsidering the risk profile of a new pilot cadet. Finally, the attraction of a stable and lucrative career path now looks much less secure. “These trends have created a supply shock. Pilot candidates will think twice about entering such a cyclical industry. Many furloughed pilots will return, but some may pursue other opportunities. Finally, airlines in some regions have relied heavily on early retirements to reduce costs, which will permanently decrease the supply,” says OliverWyman. The most important question is not whether a pilot shortage will reemerge, but when it will occur and how large the gap will be between supply and demand. Based on a modest recovery scenario, OliverWyman believes a global pilot shortage will emerge in certain regions no later than 2023 and most probably before. However, with a more rapid recovery and greater supply shocks, this could be felt as early as late this year. Regarding magnitude, in its most likely scenarios, there is a global gap of 34,000 pilots by 2025. This could be as high as 50,000 in the most extreme scenarios. Eventually, the impact of furloughs, retirements, and defections will create very real challenges for even some of the biggest carriers around the world. In an outlook, global aerospace giant Boeing said as the commercial aviation industry navigates an uneven global recovery from the recent market downturn caused by Covid-19, effective training and an adequate supply of personnel remain critical to maintaining the health, safety and prosperity of the aviation ecosystem. Long-term demand for newly qualified aviation personnel remains strong, as 612,000 new pilots, 626,000 new maintenance technicians and 886,000 new cabin crew members are needed to fly and maintain the global commercial fleet until 2040. Meeting projected pilot, aircraft mechanic and flight attendant demand is wholly dependent on industry’s investment in a steady pipeline of newly qualified personnel to replace those who have left or will soon exit the industry through mandatory retirement, early retirement, recent layoffs and furloughs, and ongoing attrition. According to Boeing, the global aviation industry will need to keep a sharp focus and engage in collective efforts to build a robust, diverse talent pipeline through more educational outreach and recruitment, development of new pathways to aviation careers, investment in early-career learning opportunities, and deployment and adoption of more efficient learning methods. Opportunity for aspiring aviators will abound while operators will face stiff competition in recruiting and retaining top tier talent. Airlines are going to continue to buy, modernise their fleets, and as they do that, they are certainly going to require pilots. Many airlines are aggressively trying to rehire pilots, as well as cabin crew and ground staff, but that has not been a simple process, and some jobs are left unfilled. This is because careers in the industry no longer look as secure as before. A situation made worse by the Covid-19 pandemic. Industry analysts say many pilot candidates may think twice about entering such a cyclical industry. Many furloughed pilots will return, but some may pursue other opportunities. A shortage of pilots in the US, the world’s largest aviation market, has already led to airlines cutting schedules and having to boost pay and bonuses to staff their operations. The pilot shortage in the United States started making itself felt in the second half of 2021 as carriers ramped up operations to take advantage of returning travel demand after the Covid-19 pandemic. Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn
Qatar remains one of the most promising markets in the region and worldwide, primarily due to positive momentum from the country’s huge LNG expansion, favourable energy prices and hosting FIFA World Cup, QNB Financial Services has said in a report. Qatar’s significant LNG expansion will drive overall demand and growth over the coming years, QNBFS said. The LNG expansion will see Qatar’s overall LNG output increasing by 64% to reach 126mn tonnes per year, from the current 77mn tpy. “We note that Qatar should remain among largest global LNG exporters. Qatar exported an estimated 80.2mn tonnes of LNG in 2021; given its current expansion plans, Qatar is expected to be the second largest LNG exporter in the world by 2027 with 126mn tpy,” QNBFS said. Citing rising oil and gas prices, QNBFS said sanctions by western countries on Russia are causing global oil and gas supply concerns, which in turn are having a major impact on global oil and gas prices. Brent crude prices averaged $108/b in March 2022, with LNG prices (Japan/Korea import prices) averaging $16/MMBtu in February 2022. “Higher oil and gas prices will lead to higher government revenues for Qatar, enable flexibility in government expenditures and improve overall money supply (liquidity). Moreover, higher commodity prices continue to heighten investor appetite for Qatari equities,” QNBFS noted. On FIFA World Cup 2022, QNBFS said it will act as an important catalyst in driving the domestic market. According to Qatar’s Supreme Committee for Delivery and Legacy, this major global event is expected to contribute $20bn to the economy, in sectors such as tourism, sports and construction. Among the global safe-haven alternatives for investment, the Qatar Stock Exchange has been a key beneficiary of flight-to-safety for investors looking to sidestep the Russian crisis. The QSE’s net foreign institutional inflows exceeded initial expectations reaching $2,416mn by April 12. Overall net investment buy activity (foreign +GCC/Arab institutions) reached the equivalent of $2,936mn already overtaking the entire investment flows of $2,063mn achieved during the full year 2021. According to QNBFS, three banks (Qatar Islamic Bank, QNB and Masraf Al Rayan) have fully implemented their 100% Foreign Ownership Limit (FOL) requirements and the Qatar Central Securities Depository has modified the FOL for all three of them to be 100% of capital. In the QNBFS view, these three banks have firmly beaten the deadline for the MSCI and FTSE rebalance. “While it is not certain that all major companies will meet their MSCI cut-off (any last 10 business days of April starting from April 18), we remain fairly confident that the market will continue to attract substantial foreign inflows. We note that while any actual MSCI-related flow increase will take place in May at the earliest (and FTSE in June), the market should continue to move in anticipation of this major event. The MSCI and FTSE rebalance should see additional foreign institutional investment flows estimated at around $1.3-1.5bn with banks making up nearly90% of these inflows,” QNBFS noted.
* Hamad International Airport’s annual passenger capacity is set to increase to 58mn (Phase A) before the year-end, and more than 60mn, post-2022 (Phase B) and will cater to Qatar’s thriving economic diversification and growth Hamad International Airport’s two-phased passenger-centric expansion plan will ensure increased capacity and greater facilities and cater to Qatar’s thriving economic diversification and growth. The annual passenger capacity is set to increase to 58mn (Phase A) before the year-end, and more than 60mn, post-2022 (Phase B). According to Hamad International Airport, which was chosen as the world’s best airport 2021 by SKYTRAX, the expansion is an investment into the country’s future and will accommodate the growing needs of national carrier, Qatar Airways. HIA’s expansion will enhance the multi-dimensional offerings of the five-star airport by integrating world-class art collection and refreshing environment of lush greenery with contemporary retail and dining concepts among other leisure attractions and facilities under one expansive terminal. Inspiring positive emotions and taking the stress out of travel, HIA’s expansion will introduce a 10,000 sqm indoor tropical garden and 268-sqm water feature, which serves as the central anchor of the expansion, creating a focal point for all travellers. The ‘Tropical Garden’ will provide passengers an opportunity to be part of an experience to display the importance of environmental conservation to all passengers, HIA noted. “The expansion plan design will allow passenger flow to seamlessly tie up with the existing terminal and at the same time, improve the overall passenger experience, including minimising travel distances for connections, providing clarity and intuitive wayfinding and a unique passenger experience through the lush rainforest and garden,” HIA told Gulf Times. Meanwhile, the flora for HIA’s ‘Indoor Garden’, which is part of its expansion plan, is being brought in from sustainable forests from around the world. All plants have been selected to acclimatise to the internal conditions of the terminal, decreasing tremendously the ecological impact of the development – as it continues to grow throughout the prosperous life of the airport. Trees shipped to Qatar in March are currently housed in two temporary nurseries offsite to the south-west of the airport. Designers have developed a column free, 85m long grid shell roof with performance glass to control and filter the light required to maintain a rainforest with mature trees. Terminal will be flooded with natural light to create a calming ambiance and promote well-being. Enhanced leisure, retail, food & beverage offerings: The expansion will offer 11,720 sqm of multi-dimensional retail and F&B offerings. New retail and dining concepts will be set against the refreshing environment of lush greenery. It will also have 9,000 sqm of the world class ‘Al Mourjan’ lounge to complement existing lounge space overlooking the garden. The lounge will include additional spas, gym, restaurants, and business centres. Sustainability: A landmark in global aviation, HIA continues to prove its commitment to environmental sustainability with its new Central Concourse, Concourses D & E Expansion, North Node Lounges and Hotel, the New Al Mourjan Lounge, and the Remote Transfer Baggage Facility building targeting a minimum three-star under Global Sustainability Assessment System (GSAS) sustainability rating system. HIA will be the first airport in the region and the world to achieve the GSAS certification. The Central Concourse and Concourses D & E are aiming to achieve Leadership in Energy and Environmental Design (LEED) Silver, the globally recognised green building certification. Ends
The GCC region will see “planned and committed investments” totalling $71bn up to 2024 in its chemical industry, according to Gulf Petrochemicals and Chemicals Association (GPCA). This is despite considerable reductions in global investments, GPCA noted in its latest annual report. However, there are concerns that petrochemical companies in the region may hold on from bringing additional capacity before the demand for chemical products completely recovers. According to GPCA, GCC chemical revenue may have ranged between $60bn and $63bn in 2021. Mena’s chemical output is expected to rise by 3.6%, and by about 1.2% in the GCC. GCC’s lower than usual output growth last year was largely due to no major capacity coming onstream in 2021, GPCA noted in its latest annual report. The GCC chemical industry appears to be on the recovery path and witnessed a rebound in growth in 2021, though at a gradual pace. The World Bank estimated GCC economies to return to an aggregate growth of 2.6% in 2021, buoyed by global economic recovery, due to stronger oil prices and the growth of non-oil sectors. Brent crude prices rose to their highest levels in November 2021 since October 2018, reaching $86.04 per barrel. GPCA expects the current positive momentum to carry into 2022, thanks to stronger oil exports, public expenditure, and credit growth. This acceleration can be attributed to the phased-out Opec+ mandated oil production cuts. Moreover, higher oil prices attract additional investment and improve business attitude due to favourable oil market conditions. However, the outlook in the medium-term is bound by risks from slower global recovery, potential new coronavirus outbreaks, and oil market instability. According to GPCA, the Covid-19 pandemic caused an unprecedented blow to the GCC economy in 2020 due to measures associated with the pandemic, national lockdowns, and the collapse in crude oil prices. The chemical industry in the region is closely linked to economic activity, demand and supply headwinds, fluctuations in feedstock prices, and growth in end-user industries. It, naturally, experienced the negative implications of the coronavirus pandemic and the overall economic situation. The GCC chemical industry is one of the most important contributors to the manufacturing value added, in addition to the indirect and direct impact it has on other sectors of the economy. Therefore, the performance of the chemical industry has a significant impact on economic development, especially the non-oil sector. It is also widely recognised as the cornerstone in the economic diversification drives of GCC countries. The report also noted GCC chemical companies are pivoting towards renewable energy to secure clean, reliable, and competitive power sources. To decarbonise the world, hydrogen can play a powerful role in enabling the energy transition. Green hydrogen produced by using renewable energy sources (wind or solar) with no carbon emissions is gaining attraction in the GCC region thanks to its strong potential to provide clean power for manufacturing.
Qatar’s public debt to GDP will fall continually over the next five years from 50.8% this year to 47.6% in 2026, according to researcher FocusEconomics. In its latest country report, FocusEconomics said the country’s public debt (as a percentage of GDP) will be 48.2 in 2023, 49.5 (2024), 48.5 (2025) and 47.6 (2026). FocusEconomics estimate shows Qatar’s gross domestic product (GDP) will scale up to $228bn in 2026 from $200bn this year. However, this may dip to $196bn next year, before rising to $203bn (2024) and $215bn (2025). GDP per capita has been estimated to total $71,437 this year, $68,795 (2023), $69,719 (2024), $72,586 (2025) and $75,319 (2026). Current account balance, according to the FocusEconomics estimate, will be $23.8bn this year, $16.4bn (2023), $14.2bn (2024), $17.3bn (2025) and $20.7bn (2026). Current account balance (as a percentage of GDP) will be 11.9 this year, 8.4 (2023), 7.0 (2024), 8.1 (2025) and 9.1 (2026). Fiscal balance (as a percentage of GDP) will be 8.0 this year, 6.0 (2023), 4.2 (2024), 4.1 (2025) and 3.9 (2026). Merchandise trade balance has been estimated at $67.2bn this year, $65.4bn (2023), $64.7bn (2024), $68.1bn (2025) and $76.1bn (2026). According to FocusEconomics, Qatar economy recorded a mild expansion in Q4, 2021 based on recent data. The non-energy sector drove the reading, buoyed by the easing of restrictions, with the transport and hospitality sub-sectors growing by double digits. Meanwhile, the energy sector recorded softer growth. Turning to Q1 this year, January saw a slight lull in non-energy activity due to surging Covid-19 cases, although momentum seemed to recover in February according to PMI data as caseloads fell. Moreover, a further rollback of Covid-19 restrictions from mid-March should have aided non-energy activity at the end of the quarter. Meanwhile, hydrocarbon production expanded solidly year-on-year in January. The energy sector is likely to receive a boost in the short, medium and long term, thanks to geopolitics, higher energy prices and with several European countries in talks with Qatar over new gas supply deals. “GDP growth should increase this year due to improved private consumption, ongoing gas sector investment, improved relations with Gulf neighbours and the boost to tourism coming from the FIFA World Cup scheduled for late 2022,” FocusEconomics noted. However, a reinstatement of restrictions (if any) due to new Covid-19 variants remains a key risk, as is the evolution of the war in Ukraine. FocusEconomics panellists see a 4.3% rise in GDP in 2022, which is up 0.1 percentage points from last month’s forecast, and 2.6% growth in 2023. In 2024, this will scale up to 2.7%, 3.1% (2025) and 3.5% (2026). Inflation dropped to 4.0% in February from 4.2% in January. Price pressures are expected to be notably higher this year compared to last, on elevated global commodity prices and stronger domestic consumption. FocusEconomics panellists see inflation averaging 3.7% in 2022, which is up 0.4 percentage points from last month’s forecast, and 2.3% in 2023. This may fall to 2.0 in 2024, 1.8 (2025) and 1.7 (2026).
FDI in country increased by $8.2mn in Q4, 2021, compared to a drop of $57.1mn recorded in previous quarter Increasing FDIs and strong technological and innovation capabilities have helped Qatar make its debut on Kearney’s 2022 Foreign Direct Investment (FDI) Confidence Index. In Kearney’s 2022 FDI Confidence Index, Qatar ranked 24th amongst global peers, displacing Finland from the top 25. FDI in the country increased by $8.2mn in Q4, 2021, compared to a drop of $57.1mn recorded in the previous quarter. Systemic changes in economic policies ahead of the FIFA World Cup in December 2022 have boosted investor confidence, the global strategy and management consulting firm noted. Kearney’s 2022 FDI Confidence Index is an indicator of future FDI flows around the world, and the rankings reveal rebounding investor optimism about the global economy. The results illustrate both, areas of business leader foresight as well as the blind spots regarding the changes that were on the immediate horizon. Findings from the latest report suggest we are likely to see a continued shift in FDI to developed markets, capitalising on destinations marked by regulatory transparency and stability. Investors cite transparency of government regulations and lack of corruption as the most important overall factors when choosing where to make FDI. Qatar has noted relatively lower levels of inward FDI than those of its peers over the past decade. However, changes in legislations aimed at liberalisation of the business environment have prompted investors to be more optimistic in recent years. In May 2018, the Qatari government approved a draft law that allows foreign investors to own 100% capital in all sectors. Historically, foreign investors could only invest in the Qatari economy provided a Qatari national (or a company wholly owned by Qatari nationals) owned at least 51% of the share capital. Further, companies listed on the Qatar Stock Exchange have increased their foreign ownership limit to 49%, most of which had previously been set at 25%. Kearney’s FDI Confidence Index illustrates that Qatar’s strong technological and innovation capabilities are a priority factor for investors. Amiable Covid-19 policies, a strong vaccination campaign and the mending of diplomatic ties with neighbouring countries have placed the country on a path to strong socio-economic recovery. The country’s economy rebounded to a growth rate of 2.2% in 2021, up from a contraction of 3.6% in 2020. Global demand for gas as a transition fuel, significant expansion of North Field production, and a tourism sector geared for the December 2022 FIFA World Cup further strengthen the country’s outlook. “Systematic changes in economic policies have contributed to reinforcing and strengthening the national economy and building investor confidence. Qatar’s adoption of open economic policies and commitment towards diversifying the economy has made the investment environment far more attractive in recent years. Providing and supporting promising investment opportunities in various sectors, including logistics, technology, manufacturing, food security, health and sports, along with the issuing a law supporting partnership projects between the private and public sectors in the country has gone a long way in changing investor perceptions. "The country will be making history as the first in the Arab world to host the 2022 FIFA World Cup; and embracing policy changes while easing business bureaucracy ahead of the event is likely to drive further foreign director investment in the economy,” says Jad Elias, partner and Qatar office lead, Kearney Middle East. Commenting on the 2022 FDI Confidence Index, Rudolph Lohmeyer, partner, National Transformations Institute, Kearney Middle East said: “In January, investors had remarkably strong optimism regarding the global economy and FDI relative to the prior year. They did, however, have concerns regarding a rise in commodity prices, escalating geopolitical tensions, and persistent inflation. These concerns have now unfortunately unfolded and been exacerbated by Russia’s invasion of Ukraine. For Qatar, the UAE and others in the region positioned as open crossroads in a more fragmented global economy, the FDI outlook remains strong.” This year’s report also includes a thematic section that reflects on how investors view their companies’ environmental, social, and governance (ESG) commitments as well as those of their foreign investments. “Investors are clearly enthusiastic about pursuing ESG commitments,” said Erik Peterson, managing director, Global Business Policy Council and co-author of the study. Indeed, a striking 94% of investors agreed that their respective companies had developed a strategy to achieve their ESG commitments, 89% view their company’s ESG commitments as a source of competitive advantage, and 73% said their ESG commitments had become stronger over the past three years. They also point to the role that ESG can play in improving supply chain issues and boosting productivity as among the most important factors driving their company’s commitment to ESG. However, Peterson added, “Investors are still frequently split on which ESG goals to prioritise and how to measure them.”
Until two years ago, the Asia-Pacific region was hailed as the engine of global aviation growth. A rising middle class, developing economies, and sheer population numbers meant airlines in the region had every reason to be optimistic. But IATA’s latest forecast underlines the devastating impact of Covid-19 on the region, which is now expected to achieve real growth only in 2025. The 2019 levels may now be achieved in 2025 (109%) due to a slow recovery on international traffic in the region, the global body of airlines says. At that time, Asia-Pacific growth would lag that of other regions. It is estimated that Asia-Pacific will only reach 2019 levels by 2025, a full year behind the rest of the world! The continuation of international travel restrictions, and the likelihood of renewed domestic restrictions mean that, this year, traffic to and from and within Asia Pacific will only reach 68% of 2019 levels, the "weakest outcome" of the main regions. Data highlights the slow pace of recovery – the region's airlines carried 16.7mn passengers last year, just 4.4% of volumes seen in 2019, according to the Association of Asia Pacific Airlines (AAPA). “You need to look at the background to find the reason for this,” says Philip Goh, IATA’s regional vice president for Asia-Pacific. “In 2003, we had the Sars outbreak and governments in the region remembered that and were very fast in closing borders when the pandemic struck. “Because this was quite successful in the early days and the region had far lower infection rates than Europe and the United States, there was not the same push to get people vaccinated initially” he noted. “The end result is that travel restrictions were quite strict and have remained in place for longer,” Goh said. The region’s air travel recovery is also dependent on airlines being in alignment with industry partners. On the whole, governments have been supportive, introducing cost relief, reduced parking charges, and other incentives to assist airlines through the crisis. Some air navigation service providers have played their part too. Those in Australia, Indonesia, and India, for example, all took the opportunity to improve operational efficiency options for airline customers. Unfortunately, some Air Navigation Service Providers (ANSPs) increased charges or have indicated that they intend to do so, and IATA continues to consult with the appropriate parties on this matter. The challenge now is to accelerate the recovery of air travel in the region, IATA says. On the plus side, vaccination rates have improved quickly, and borders are beginning to open. Australia started welcoming international travellers in February, and such other countries as Malaysia, the Philippines, Singapore, South Korea, Thailand, and Vietnam have announced the gradual easing of restrictions. The main problem is with the larger markets, including Japan and New Zealand. The latter will only accept fully vaccinated travellers from visa waiver countries from May 1. The country is due to fully reopen in October this year although this could be brought forward. “Given the decisions to date, we don’t expect all travel restrictions to disappear in one go,” says Goh. “But there should be a rapid step-by-step process. So, first get rid of quarantine requirements where they exist and then move on to testing and begin to downscale and then dispense with that. As we move forward, we are hopeful that these incremental improvements will gather pace.” Goh insists that the pent-up demand for air travel is obvious as every reopening has been met with a surge in bookings. Studies have shown beyond doubt that the aircraft cabin is not a significant vector for the spread of the virus and in fact is far safer than most public environments. Similarly, passenger surveys reveal that airline customers are confident in air travel health safety measures. When combined with ever-increasing vaccination rates and milder variants, the appetite for travel grows stronger by the day. “People want to connect with family and friends,” insists Goh. “As we saw in the west, some customers are still wary of travel restrictions being implemented at short notice, but those concerns are fading fast.” Clearly, captains of the aviation industry hope the remaining three quarters of the year will mark a turning point in a region, where tough curbs have left Covid-battered airlines struggling to recover, and in some cases, survive! Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn