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Qatar’s Advisory Council has approved a draft law that would increase scrutiny of public money in a new effort to combat corruption.

According to the Peninsula, the draft law would give more financial authority and independence to the State Audit Bureau. The body already reports directly to the Emir.

It has the right to audit and inspect the finances of ministries, banks and organizations substantially funded by the government, as well as state joint ventures with foreign agencies.

Limited scope

However, according to Law. No. 4 of 1995, it can only recommend punitive action based on its findings.

It is also prohibited from sharing its reports with the public or media, even if it uncovers embezzling of public funds or waste of government money.

However, a proposed amendment would authorize the bureau to publish its reports after removing confidential parts, the Peninsula said.

This would help improve transparency and perhaps serve as a deterrent for erring bodies.

In December, an advisor of the bureau said changes to the law were needed for government entities to take the operation more seriously, as some do not respond to requests for information.

At the time, Mubarak Ali Almuhannadi added that falling oil prices were a good incentive for Qatar and its neighbors to improve its budgeting and auditing practices.

Influential council

The draft law was among the last pieces of legislation to be discussed by the Advisory Council before it adjourned for the summer yesterday.

In Qatar, no laws can be enacted without first being discussed by the influential body, one of the country’s two legislative wings.

Other topics of discussion this session included:

A draft data privacy law that would fine organizations who fail to prevent leaks up to QR5 million. A draft law cracking down on tobacco usage; and A debate on speeding up the Civil Defense inspection process. Currently, the Emir appoints the members of the Advisory Council.

But according to the constitution, 30 of the council’s members should be elected and 15 appointed.

However, the Emir recently renewed the council’s mandate for another three years, effectively postponing legislative elections until at least 2019.

The council will begin its 45th session toward the end of this year, after adjourning for the summer yesterday.

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Throughout much of 2016, bond markets held onto stretched valuations in US Treasuries, largely ignoring the undercurrents of rising inflation and resilient strength in the US labour market.

During the first half of the year, there were even a number of market participants arguing that inflation had become structurally lower and that deflationary risks were of great concern. Our research indicated just the opposite, and we warned investors of what we believed were exceptional vulnerabilities in US Treasury valuations and asymmetric risks in longer duration exposures.

Markets began to incrementally trend toward that viewpoint in October as the 10-year US Treasury note’s yield modestly rose. By November, a sharp correction in US Treasury valuations was fully underway, manifesting very quickly after the results of the US election as markets appeared to rapidly move toward our long-held view that inflation pressures were rising.

Once those corrections to yields began, they were quite severe in a very short period of time, demonstrating just how extreme those valuations had become. Rising yields in the US were accompanied by depreciations of the Japanese yen and the euro.

As we look towards 2017, we expect many of those underlying conditions in developed economies that were rapidly driven back into market pricing in late 2016 to only deepen and extend.

We anticipate increasing inflation in the US as wage pressures rise and the economy continues to expand, while the euro-area and Japan diverge markedly from the US path. These global trends are likely to continue to pressure bond markets in the developed world but also to generate significant opportunities in specific local currency emerging markets (EMs) where yields have been high and currencies already appeared extremely undervalued, even as their economic fundamentals have remained resilient.v We are optimistic on the valuations in specific EMs in Latin America and Asia excluding Japan, but remain wary of duration risks across the developed world.

Rising US inflation pressures in 2017

Our case for rising inflation in the US is primarily centred on rising wage pressures across a US labour force that has been at full employment for much of 2016 and continues to strengthen, accompanied by overly loose monetary policy and fiscal policy set to expand.

Core consumer price index (CPI) inflation has persisted above 2 per cent throughout 2016 and shows signs of continuing to trend higher.

Ultimately, we expect headline inflation to rise above 3 per cent in early 2017 as the base effects from last year’s decline in oil prices fall out of the figures.v Additionally, we expect an escalation in government spending from the incoming US administration, notably in the form of increased infrastructure development. This would add to existing inflation pressures, give a boost to growth and likely increase the level of US Treasury issuance.

In the event that the incoming administration imposes trade restrictions and tariffs, this would also drive up the costs of goods in the US. Taken together, we expect inflation to exceed the US Federal Reserve’s target by early 2017 and believe the Fed needs to continue to hike rates.

We also see scenarios in which the market should continue to drive yields higher regardless of the Fed’s timeline.

Weakness in the euro and Japanese yen likely to continue

As rates trend higher in the US, we expect continued strengthening of the US dollar against a number of vulnerable currencies, most notably the euro and Japanese yen.

Markets began to see a refortifying of the euro’s and yen’s depreciating trends in October as US Treasury yields rose while the European Central Bank (ECB) and Bank of Japan (BOJ) continued to run exceptionally accommodative monetary policies.

Those depreciations only deepened after the US election results in November as the 10-year US Treasury note’s yield surged above 2.2 per cent. We continue to see strong cases for on-going monetary accommodation in the Eurozone and Japan, as both regions need currency weakness to support their export sectors and drive growth. Each relies far more on the weakness in their currencies than the US does and both also need inflation, particularly Japan.

The growing rate divergences between the low to negative yields in the Eurozone and Japan and rising Treasury yields in the US, should benefit the objectives of the ECB and BOJ, in our view, motivating the central banks to take more assertive measures now that they can be more effectively deployed against firmer rate increases in the US. The euro also faces increased pressures from rising political risks with the recent rise of populist movements in the European Union (EU).

Upcoming elections in France and Germany in 2017 will be important indications of just how strong or vulnerable the political will is to uphold the EU and Eurozone project. On the whole, Europe’s need for continued policy accommodation and currency weakness is more immediate to the upcoming year, while Japan’s need is more on-going and long term. Nonetheless, we expect weakness in both currencies in the upcoming year.

Select emerging markets remain resilient and undervalued

Across EMs, we continue to see significant variations between vulnerable economies and a number of much stronger ones. Markets reacted negatively toward a broad group of EMs in the wake of the US election in November, on fears that protectionist US policies could damage global trade.

However, we have seen a shift in the incoming administration’s earlier warnings of enormous tariffs to more of a balance of free and fair trade. There are several scenarios in which the actual impacts to specific EM economies from trade policy adjustments could be minimal to negligible, in our assessment.

Additionally, a number of EMs have already weathered severe shocks over the last year and appear far more resilient to potential increases in trade costs at the margin than markets have indicated. In fact, several EMs have significantly improved their resiliencies over the last decade by increasing their external reserve cushions, bringing their current accounts into surplus or close to balance, improving their fiscal accounts, and reducing US-dollar liabilities.

During periods of short-term uncertainty, markets tend to overplay the potential US policy factors and under-recognise the more important domestic factors within the countries. We expect those valuations to ultimately revert back toward their underlying fundamentals over the longer term as markets more accurately assess their actual value.

We have positive outlooks for several local-currency exposures in specific EMs that we view as undervalued, notably Mexico, Brazil, Argentina, Colombia, Indonesia and Malaysia, among others.

Specifically regarding Mexico, any free trade restrictions would not end trade between the US and Mexico, they would just raise the costs. Many of the largest US corporations have extensive investments in Mexico and have integrated Mexican production into their supply chains. This considerably complicates the ability of any administration to significantly reduce trade between the two countries, even with an imposition of tariffs.

Negative effects on the Mexican peso from potential trade restrictions have been excessively priced in by markets in our view, and do not reflect fair value even when factoring in a reversion to World Trade Organisation trade standards. We expect a recovery in the peso as the country’s central bank continues to use policy to strengthen the currency and markets adjust to the underlying fair value.

Indonesia is also a strong example of the resiliency in specific EMs. We saw commodity prices collapse, trade volumes decline and China’s growth moderate, yet Indonesia has still been growing at 5 per cent, with a balanced current account when including foreign direct investment.

Additionally, we have seen massive depreciations in EM currencies in 2016, yet there have been no solvency issues in countries like Indonesia or Malaysia. Twenty years ago, it may have been more difficult for many of these countries to weather a protectionist trade shock, a commodity price shock and an exchange rate shock all at the same time. Yet today these countries are in much stronger positions to handle these types of macro shifts and changes to global trade policies.

Should the Trans-Pacific Partnership (TPP) not be concluded, it would not be catastrophic to countries like Indonesia—certainly the region would be stronger with that type of trade agreement, in our assessment, but Indonesia was strong without the TPP and is not dependent on an enhanced trade agreement to continue its performance. Markets have tended to follow the headline impact of trade policy rhetoric, in our opinion, yet the underlying fundamentals tell a much stronger story.

Overall, as we turn the calendar to 2017, the risks of rising populism in Europe and the US, and the potential impacts to global trade from protectionist policies bear watching.

Despite an increase in developed-market political risks, there are a number of compelling opportunities across specific EMs that give us optimism for the upcoming year.

Ironically, several Latin American countries, such as Brazil, Argentina and Colombia have recently turned away from previous failed experiments with populism and have moved toward more orthodox policies, taking pro-market and fiscally conservative approaches while maintaining credible monetary policy.

We at jba & Partners , The market Research companies in Qatar continue to prefer a number of undervalued opportunities across local-currency EMs over many of the overvaluations and low yields across the developed markets. It is our hope for 2017 that developed countries experimenting with populism can skip the negative consequences by instead returning to the successes from more orthodox policy-making.

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Qatar officially announced the end of its kafala sponsorship system for workers on Monday under reforms announced ahead of the 2022 FIFA World cup.
The country’s labour minister Issa bin Saad Al-Jafali Al-Nuaimi said the rules would be abolished effective from December 13.

In their place is a new contract-based system claimed to safeguard workers rights and increase job flexibility. This gives expats the right to leave the country after notifying their employer for leave or an emergency.
Expats can also leave the country permanently before or after completing their contract after notifying the employer. However, the employer has the right to reject leave requests, in which case an Exit Permit Grievances Committee will make a decision within three days. Should applicants receive permission they will be able to leave unless they have defaulted on debt or there is an active criminal case against them.

Foreign workers will also no longer need approval from their existing employer to change jobs if they complete the length of their fixed-term contract. Expats on open-ended contracts will also be able to change jobs if they complete five years of work.
In addition, obtaining a work visa will now require a copy of a job contract approved by the ministry and employers can be fined up to QAR25,000 per worker for confiscating passports.

Human rights groups have criticised the new reforms saying they do not go far enough and still grant employers too much power.
“This new law may get rid of the word ‘sponsorship’ but it leaves the same basic system intact. It is good that Qatar has accepted that its laws were fuelling abuse, but these inadequate changes will continue to leave workers at the mercy of exploitative bosses,” said James Lynch, deputy director for global issues at Amnesty International.

“Key problems that drive abuse remain. In practice, employers can still stop migrant workers from leaving the country. By making it easier for employers to confiscate workers’ passports, the new law could even make the situation worse for some workers. The tragedy is that many workers think that this new law will be the end of their ordeal.” In response, Qatari authorities urged observers to allow time to see how effective the new system was.

“Jba & Partners , Accountants in qatar welcome any comment or constructive criticism, and will continue to do so in the future. However, we urge the international community not to draw any definitive conclusions until there has been time to see the new law in action,” Al-Nuaimi said. Approximately 2.1 million foreign workers in Qatar will be governed under the new system.

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Middle East stocks fell sharply on Sunday because of Britain's vote to leave the European Union but Gulf bourses came well off their lows. Egypt was hardest hit because of concern that fund inflows into the country could shrink further.

Most of the Gulf does not depend heavily on foreign capital or non-oil exports, so the main threat to it from Brexit is that slower growth in Europe could push down oil prices; Brent oil sank 4.9 percent to $48.42 a barrel on Friday.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, said that among the six Gulf Cooperation Council economies, she expected the greatest impact of a weak pound and euro to be felt in the United Arab Emirates, because its large tourism and real estate sectors were vulnerable to exchange rate moves.

"We see a weaker private consumption and investment outlook in the UAE following Brexit," she wrote in a report. She also noted that while Brexit was likely to deter any US interest rate hike for the time being, it could require GCC economies to tighten fiscal policy further to limit the widening of their deficits and protect financial market sentiment. "Moreover, with the fall in oil prices and elevated global market uncertainties, foreign borrowing rates for GCC entities will likely increase. This will place more pressure on domestic borrowing and potentially push up interbank rates further."

But so far, movements in Gulf forex forwards and sovereign debt insurance costs since the British referendum have been minor, suggesting foreign investors are not for now using Brexit as a cue to speculate heavily against GCC assets.

One-year US dollar/Saudi riyal forwards, used to hedge against the risk of future currency depreciation, barely moved on Friday and Sunday, staying in the range of the past few weeks. High-grade Gulf bond prices moved little.

Five-year Saudi credit default swaps have risen 6 points to 182 points but that is a small move given the volatility in global markets, and CDS are below highs hit earlier this month. Sebastien Henin, head of asset management at Abu Dhabi's The National Investor, said further selling of stocks in the UAE and Qatar could not be ruled out if Brexit caused risk-averse global funds to cut their allocations to emerging markets in general. But he said a significant fall in demand for oil was unlikely.

"I'm not so pessimistic - the markets face some headwinds, but it's manageable. I'm not expecting oil prices to dive." Dubai was the weakest GCC bourse on Sunday because its economy is most exposed to foreign investment. Its index dropped 3.3 percent to 3,258 points in its biggest daily fall since January, as trading volume more than doubled from Thursday.

But the index came off its intra-day low of 3,209 points and held technical support on the May low of 3,197 points. Real estate shares underperformed, with Emaar Properties down 4.7 percent; banks fared relatively well.

Abu Dhabi's index sank 1.9 percent with energy firms hit hard. Abu Dhabi National Energy, which has substantial investments in Britain and Europe, sank 7.6 percent. In Saudi Arabia the index closed 1.1 percent lower at 6,479 points but bounced from an intra-day low of 6,257 points. Petrochemical blue chip Saudi Basic Industries fell 1.5 percent and National Commercial Bank was down 1.3 percent.

But Arabian Pipes, which soared last week after winning a contract from oil giant Saudi Aramco, jumped its 10 percent daily limit for a fourth straight day. Utility Saudi Electric, seen as a defensive stock, rose 1.6 percent.

Egypt's stock market dropped much more sharply than Gulf bourses and closed near its intra-day low.

Naeem brokerage said in a note that the economic impact on Egypt of Brexit would not be very serious, because weakness in the British pound and euro could actually benefit the current account balance of the import-driven Egyptian economy, and 16 percent of the country's external debt was denominated in euros.

But initially at least, investors focused on the risk that the global market turmoil would make it even harder for Egypt to attract fund inflows. That would worsen the hard currency shortage which is plaguing local industry, possibly making more depreciation of the Egyptian pound inevitable.

Real estate developer Talaat Mostafa lost 7.4 percent. Juhayna Food Industries, which exports its products to Europe and could see that business hurt by currency weakness there, slid 4.3 percent.

Commercial International Bank, Egypt's biggest bank and a favourite of foreign investors, outperformed, falling 2.2 percent. Beltone Financial dropped 1.3 percent after it filed a lawsuit against the heads of the Cairo stock exchange and Financial Supervisory Authority over their repeated cancellation of trades in its stock.