👋 Hello from the Middle East!

Today in the Daily Circuit, we’re looking at Saudi Arabia’s projected return to economic growth, Mubadala-owned Sanad’s new Airbus contract, Indonesia’s quest for a free trade agreement with the GCC and the gourmet menu being offered to SpaceVIP’s amateur astronauts with their $495,000 ticket. But first, Islamic finance is fueling a surge in the Gulf debt market.

Two of Kuwait’s biggest banks are exploring a merger that would create an Islamic lender with more than $50 billion in assets. The proposed tie-up comes amid a wave of banking consolidation across the Middle East, partly driven by competition for financing large-scale projects as Gulf countries rapidly diversify away from oil. 

Boubyan Bank, with assets worth $29 billion and Gulf Bank, with assets worth $24 billion, will conduct due diligence and valuation studies into the potential deal, the two lenders said in a statement. The move comes as Kuwait Finance House weighs taking a large stake in Saudi Investment Bank, while National Bank of Bahrain considers a potential merger with Bank of Bahrain and Kuwait.

Consolidation of financial institutions in the GCC is being driven by the need to create lenders with greater scale as countries seek financing for mega-projects and other diversification activities aimed at boosting the non-oil economy. These capital intensive activities, and the development and diversification of funding channels are expected to drive the GCC’s debt capital market to reach $1 trillion outstanding by next year, according to a new report from Fitch. 

Saudi Arabia, which is contending with lower oil profits and mounting expenses associated with its Vision 2030 transformation plans, held a 43% share of the $940 billion outstanding government debt in the GCC at the end of Q1 2024, while the UAE held 30%. Around 40% of outstanding government debt was sukuk – bonds compliant with Islamic sharia law – while the rest was in conventional bonds, Fitch said.

Environmental, social, and governance (ESG) sukuk, meanwhile, reached $18 billion outstanding in GCC countries, driven by increasing sustainability commitments, according to Fitch.

RIYADH REBOUND

Saudi Arabia’s yearlong economic contraction has slowed with a transition to growth coming soon as the effect of oil production cuts begins to fade. Forecasts compiled by Bloomberg show the $1.1 trillion economy is set to return to growth in the third quarter with a gain of almost 4%, in what would be the biggest acceleration since the end of 2022. “We expect this to be the last quarter of deeply negative hydrocarbon sector growth,” Carla Slim, an economist with Standard Chartered, told the news agency. OPEC+ has been withholding supplies for almost two years in a bid to prop up oil prices. While that has kept the benchmark Brent crude at an average price of $83.50 a barrel so far this year, that’s lower than the price Saudi Arabia needs to balance its budget, which the IMF estimates at $96 a barrel.

SPACE GOURMET

Forget the early days of Tang and squeeze-tube turkey or freeze-dried spaghetti and meatballs on the International Space Station. Travelers aboard SpaceVIP’s Neptune capsule who pay $495,000 for the journey to Earth’s stratosphere will be treated to a menu prepared by innovative Danish chef Rasmus Munk, Arabian Business reports. With the maiden six-hour flight scheduled for the second half of 2025, SpaceVIP founder Roman Chiporukha says interest from the UAE has been particularly strong. Though the menu hasn’t been finalized yet, Munk’s Michelin-starred Alchemist restaurant in Copenhagen is known for such dishes as lamb’s brain in walnut oil and cherry sauce, rhubarb gazpacho and “Bikini Toast” filled with Gruyére cheese and Joselito ham. “I want to highlight food as a common thread in our human existence, and it will be truly meaningful to serve it while gazing down at the Earth’s curvature,” Munk said.

💲 Sovereign Circuit

Mubadala: Sanad, an aerospace engineering company owned by the Abu Dhabi sovereign wealth fund, signed an agreement with Airbus to provide maintenance, repair and overhaul services for the European planemaker’s aircraft.

Public Investment Fund: Hassan Allam Holding, an Egyptian engineering and construction company, said its Saudi unit – in partnership with El Seif Engineering Contracting and China Harbour Engineering Arabia – has secured a contract to design and build the PIF-backed Port of Neom’s Container Terminal 1 and Marine Services Area.

Abu Dhabi Investment Authority: A consortium led by Blackstone that includes ADIA and Singapore’s sovereign wealth fund GIC and is targeting a majority stake in Indian snack brand Haldiram, has reportedly sweetened its bid. The group will attempt to acquire a 51% stake in the company in a $4.8 billion deal, according to Moneycontrol.

↪↩ Closing Circuit

⛽ Gas Costs: European natural gas prices rose for a fourth session on Wednesday as growing Middle East violence is deepening concern in Europe about retaining sufficient fuel supplies.

🇹🇷 Turkish Turnaround: Turkey, which is negotiating a free-trade agreement with the GCC, has become the darling of emerging market investors after instituting financial reforms and drawing in $30 billion since last year from foreign purchases of stocks and bonds, Bloomberg reports.

🤝 Venture Matchmaker: Steel Atlas, a New York investment firm that hopes to match U.S. and European startups with funders and deployment opportunities in Saudi Arabia, has raised its first venture fund of $10 million, the Wall Street Journal reports.

🛏️ Hotel Finder: Holisto, an Israeli startup whose technology helps find the most suitable hotel prices, raised $10 million from travel site Trivago.

🗣 Circuit Chatter

⚽ Planning Ahead: Saudi Arabia, the only bidder for the 2034 World Cup, announced it will host the 48-team soccer tournament in 15 stadiums across five cities, including eight in Riyadh.

💱 Free Trade: The GCC and Indonesia started formal negotiations in Riyadh on Wednesday to write a free trade agreement that would slash commercial tariffs between the wealthy Arab bloc and the most populous Muslim-majority nation.

⚓ Yacht Haven: Qatar’s Old Doha Port has been turned into a luxury yachting haven and will host the first Qatar Boat Show this year to showcase “marine innovation and leisure lifestyle.”

🏜️ Desert Limits: Saudi Arabia has set up a joint operation room in Riyadh to streamline its efforts to host the 11-day U.N. Convention to Combat Desertification in December, known as COP16.

🌍 Power Circuit

Queen Rania of Jordan officially opened a new radiation oncology building at the King Hussein Cancer Center in Amman on Wednesday. The facility includes the country’s first public umbilical cord blood bank, a cellular therapy and applied genomics department, and a bone marrow-transplant program.

Iranian President Masoud Pezeshkian received Sheikh Abdullah bin Zayed, UAE Deputy Prime Minister and Minister of Foreign Affairs, on the sidelines of the presidential inauguration ceremony in Tehran on Tuesday.

➿ On the Circuit

Kelly Ortberg, a longtime aerospace industry veteran, was appointed on Wednesday as president and CEO of  Boeing, the world’s second-largest planemaker. The company faces a safety and quality crisis which has caused long delays in the delivery of new planes to UAE flag carrier Emirates and Saudi Arabia’s soon-to-be launched Riyadh Air.

Chakib Benmoussa, Morocco’s Minister of National Education called on private schools during a meeting in Rabat to strengthen their teaching standards and refrain from raising tuition.

Lieut. Col. Sheikh Saeed bin Hamdan, Commander of the UAE Naval Forces, met in Abu Dhabi on Wednesday with Chinese Ambassador Zhang Yi Ming to discuss cooperation between the navies of both nations.

🎶 Culture Circuit

🕌 Super Shrine: Oman’s Bab Al Salam Mosque was named to Time magazine’s annual list of the world’s 100 best places to visit in 2024. The mosque which was designed by architect Marwan Al Balushi and sits west of the capital city of Muscat, “is not just a place of spiritual reflection; it symbolizes Oman’s forward-thinking approach to design and culture, bridging the past and the future in a breathtaking edifice,” Time wrote.

📷 Photo of the Day

🗓️ Ahead on The Circuit

July 2-Aug. 25, Riyadh, Saudi Arabia: Esports World Cup. An international competition for professional gamers with a $60 million prize pot. Boulevard City.

July 27-Aug. 4, Washington D.C. Mubadala Citi DC Open. Tennis tournament featuring nine of the world’s top 20 players. Rock Creek Park.

Aug. 12-15, Riyadh, Saudi Arabia: Saudi Food Expo. One of the kingdom’s largest trade shows for the food & beverage industry. Riyadh Front Exhibitions.

Sept. 10-11, Dubai, UAE: Global Vertical Farming Show 2024. Annual event brings together investors, growers, and executives in the vertical farming industry from around the world. Le Méridien Dubai Hotel & Conference Centre.

Sept. 24-25, Dubai, UAE: ACT Middle East Treasurers Summit. Corporate treasurers and financial professionals from across the region gather for policy discussions on issues ranging from cash management to sustainability. Grand Hyatt Dubai

Sep. 30-Oct. 2, Dubai, UAE: Future Hospitality Summit. The global conference for leaders in the hospitality industry expands this year at a new location with dedicated space for ESG planning, country pavilions and a larger exhibition area. Madinat Jumeirah.