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Egypt tunnel blockade takes toll on gaza business

* Long power cuts after Egypt chokes off smuggled fuel* Hamas looks for solutions, domestic criticism mutedBy Nidal al-MughrabiGAZA, Dec 9 Mohammed Al-Telbani, owner of one of Gaza's biggest food factories, is the sort of businessman plucky enough to thrive despite an Israeli blockade of the Palestinian coastal enclave, but even he says he is finally running out of answers. With a new military-backed government in Egypt shutting smuggling tunnels that had kept Gaza alive, he now worries for the first time that the siege will choke off his business and consign his 400 employees to poverty. Last month he was forced to pay 60,000 shekels ($17,000) for Israeli fuel to power his four generators. He shut down for 11 days but says he still hopes to keep the business going."We are suffering great financial losses but I cannot close my business. I need to maintain my customers even if that means sacrificing profits or taking some losses," he said. "We have to share the good times and bad times and stick together."Under years of Israeli sanctions, Gazan businessmen cobbled together a smuggling-fueled economy that sustained the enclave under rule by Hamas Islamists. But with the overthrow of a sympathetic Muslim Brotherhood government in Egypt tightening the blockade, many Gazans say they have never had it so tough. Short on fuel, the lone Gaza power plant has ceased to serve nearly half the 1.8 million population. Patchy alternative supplies of electricity from Israel's grid have meant 12-hour blackouts every day. Night casts a pall over Gaza City, just 70 km (44 miles) down the Mediterranean coast from sparkling Tel Aviv. Shops close early to ration spare private generators. Residents who live on upper floors feel trapped in their buildings. While the homes of those with means hum from private generators, poorer folk huddle in dark silence."No electricity. No power to heat the house when it pours with rain," said Ahmed Hamid, a taxi driver. "We blame everyone. Leaders in Gaza, in the West Bank, even Obama. Whoever sees us and does nothing is responsible for our tragedy."Gazans say the economic trials loom even larger than the perennial fear of war with Israel. The last major fighting was more than a year ago and both sides appear to be keeping to a truce, which was brokered by Egypt's government, then led by the Muslim Brotherhood which has an historic kinship to Hamas.

The Egyptian military, which overthrew the Brotherhood in July, sees Hamas as a security threat and has since closed most of the 1,200 tunnels that used to run under the sandy frontier between Sinai and Gaza. That has choked off supplies of weapons as intended, but also of commercial goods including construction materials, and, most damagingly, of cheap Egyptian petrol. CLOSURES AND LAYOFFS Businesses such as bakeries, restaurants, hotels and even farms say they may have to scale back work or lay off staff to stay solvent. For a populace already suffering 32 percent unemployment, that spells deeper misery. The Hamas government has lost revenue it earned from taxing the smuggling tunnels. Salaries for many of Gaza's 50,000 public servants have arrived late in the past three months.

For the first time since 1995, Hamas will not be sponsoring annual Dec. 14 celebrations of its founding. The cancellation, Hamas said in a statement, was decided "in acknowledgment of the difficult conditions our people are living in". In public, Gazans still tend to rally to Hamas, whose die-hard ethos of conflict with Israel is reinforced by the sense of siege. Hamas says it is seeking other sources of support."We are sparing no effort to help our people exit the current crisis. We are speaking to every country and every party in order to find a solution," said Ghazi Hamad, deputy foreign minister for the Gaza government. Talks were under way with Cairo over the fuel and power crisis, and Gaza had appealed to states further afield like Qatar for aid, he said. Hamas also tried to mend ties with Iran, a former patron that scaled back funding for the Palestinian Islamists after Hamas quit its headquarters in Damascus out of opposition to President Bashar al-Assad, Iran's ally. At home, Hamas has shown little tolerance for large-scale dissent. Human rights groups accuse its police of breaking up demonstrations under the pretext that organisers did not obtain proper licenses. A Gaza group modelling itself on Tamarud ("Rebellion"), an Egyptian movement that agitated against the Muslim Brotherhood, abandoned plans for a mass rally on Nov. 11 citing fears for participants' safety. Hamas sought to belittle the threats of a rebellion, and accused Israel and its Palestinian rivals of trying to "destabilise public order."

MUTED CRITICISM "It's natural to ask Hamas to find solutions, but no one can be spared blame," Said Samir Mohammed, a 31-year-old public servant, naming the rival Palestinian Authority, which governs in the occupied West Bank, and Israel as culprits too. Before Egypt's tunnel crackdown, the Gaza economy had been recovering from the destruction of last year's brief war, according to local and international statistics. It grew at a rate of 12 percent in the first quarter of 2013, the World Bank said, in contrast to the Palestinian economy in the West Bank, which contracted by 0.6 percent. Maher Al-Tabbaa', a Gaza economy expert, estimated that since Egypt closed the tunnels this summer, the enclave's economy had lost $450 million in potential growth."In simple terms, Gaza businesses are collapsing under the blockade and the shortages of power and fuel," Tabbaa' told Reuters. He predicted unemployment would reach 38 percent by the end of the year unless the crisis eased. The construction industry, already slowed by Egypt's closure of the tunnels, ground to a halt altogether when Israel also stopped supplying materials in retaliation for the discovery of a Hamas tunnel under its border in October. On the black market, the price of a tonne of cement rose more than seven-fold since June to hit 2,900 shekels (more than $800), from 400 shekels. Hamas says the government is trying to create new jobs. Some private business owners say they have been given access to government-held emergency fuel reserves. Police have been posted at petrol stations and cooking-gas depots in what Hamas calls a precaution against price-gouging and unfair distribution. Meanwhile, people soldier on."Gaza is not going to die, whatever happens," said an elderly man, Abu Hassan. "First they fight us with planes and tanks, and now with darkness and blockades."

Gulfs mixed takaful rules hurting margins, ratings agency

Feb 7 Inconsistent regulation across the Gulf's takaful (Islamic insurance) industry is hurting profit margins and credit ratings, while leaving the door open to regulatory arbitrage, according to global insurance rating agency A. M. Best. New rules in Oman and updated ones in Bahrain are expected this year, but lack of coordination among regulators is making life difficult for takaful operators, said Vasilis Katsipis, Dubai-based general manager for market development at the firm."Regulators have little interest in coordinating among themselves, but there is growing recognition of the importance of takaful. We are seeing regulators thinking about it," he told Reuters. In some cases companies are having to establish complex and expensive safeguards, such as ring-fencing assets, to make up for weaknesses in regulatory regimes, increasing their funding costs by as much as 1 percentage point, Katsipis said. Loose regulation can also affect ratings. "In lax regimes, unless they put safeguards, the rating will be deep in the unsecured level. Five to six notches could be the extreme."The takaful sector, which has its core markets in the Gulf and southeast Asia, is a bellwether of consumer appetite for Islamic finance products. But slowing growth in core markets is raising pressure on the sector to boost profits.

Global takaful contributions were expected to reach $12.4 billion in 2012 but profitability remained below that of conventional insurers, according to a report by consultants Ernst & Young last April. Variation in rules has prompted some companies to take advantage of the differences - booking business in one country while selling policies elsewhere, Katsipis said."If you are a company that writes business in more than one location, it's easy to set up in one and write business in another branch. An arbitrage opportunity is still there and will remain there as long as you have differences between regulators."

Jurisdictions with specific takaful rules include the United Arab Emirates, Bahrain, the Dubai International Financial Centre and the Qatar Financial Centre. Some others, such as Kuwait, do not have specific regulations. DIFFERENCES A report by A. M. Best said Kuwait lagged the Gulf in developing regulation for takaful because its insurance rules dated back to 1961, but a planned new insurance law was expected to have a separate code for Islamic insurance.

In Saudi Arabia, insurance legislation is applicable to both takaful and conventional insurers, but rules don't require segregation of takaful funds from shareholder funds; some Islamic scholars view such segregation as necessary to ensure that operators invest in sharia-compliant ways. The Saudi regulator has discouraged takaful operators from using specialist terms in their accounts to ensure comparability with conventional insurers, leaving Islamic contracts "hidden" in the accounts, the report said. Rules on the winding-up of takaful companies vary. UAE and DIFC rules give priority to takaful beneficiaries, but there are no equivalent provisions in the QFC, Bahrain or Saudi Arabia, and in Kuwait the situation is unclear, the report said. The regulatory environment is complicated by the relative youth of the takaful industry, as there are few if any recent examples of takaful firms being wound up. Other regulatory safeguards, such as ring-fencing assets, have yet to be tested. When firms manage multiple takaful funds, an issue can arise over whether a surplus in one fund can be used to subsidise a deficit in another. Such subsidisation can be seen as inconsistent with the risk-sharing principles of takaful, but with the exception of the QFC, this issue is not addressed directly in the Gulf's takaful rules, the report said.

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