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Thursday, 12 March 2009

Nouriel Roubini is a Ponzi

We wouldn’t have thought to ask Nouriel Roubini about Bernie Madoff’s alleged Ponzi scheme. But someone else has, and it’s thrown up an interesting tirade from the master of economic doom and gloom. Reprinted in its full forcefulness below, with selected highlights from us.

A reporter contacted me today with the following question:

“I am a reporter and I am doing a story on Bernard Madoff’s life after pleading guilty. As part of this I was wondering if you could comment on what significance he will have in the history of this period. Will he represent more than a scamster who stole a lot of money from a lot of people? As Bernie Ebbers and Ken Lay came to embody corporate greed and deceit, what will Madoff symbolize? I would really appreciate your insights on this”.

Dubai emergency funds ready soon -official

Funds from an emergency $10 billion programme to assist Dubai's debt-strapped companies will flow to businesses within two weeks in the form of loans or through banks, a senior official said on Thursday.

"Dubai-based companies will be drawing on it soon," Nasser al-Shaikh, head of Dubai's finance department, said at a conference.

Dubai launched the $10 billion bailout plan in February, paid for by bond purchases from the United Arab Emirates central bank in a move lauded by investors for restoring confidence in the former boomtown, hard hit by the financial crisis.

Buying bank loans makes economic sense

Today’s column was originally scheduled to discuss the economic consequences of jumping taxi queues, a subject of increasing urgency in Abu Dhabi, where cabs are as rare as rain, and of increasing irrelevance in Dubai, where reports are emerging of taxis stalking pedestrians. Suffice to say that the solution involves the well-placed application of a cricket bat.

It has been suggested, however, that recent developments in the nation’s efforts to blunt the impact of the global economic crisis may deserve a considered view. In particular, officials have been suggesting an imminent conclusion to the long-delayed merger of Dubai mortgage lenders Amlak Finance and Tamweel into a federal bank.

Some reports have suggested that the Government may help out the merged bank by buying some of its existing loans.

UAE to invest $500 million in Nigeria's real estate

APPARENTLY concerned by the housing deficit in the country, the Real Estate Developers Association of Nigeria (REDAN) has wooed an Arab based construction firm- EMBRAN of United Arab Emirate (UAE) to build 100, 000 houses in Nigeria.

At a press conference in Abuja, President of REDAN, Chief Olabode Afolayan noted that the project, which would cost EMBRAN about $500 million would be executed through the application of a modern technology called slabs.

He observed that government of UAE is very willing to invest in Nigeria's real estate, adding that the Association and the construction firm have concluded all the necessary arrangements regarding the project and would by next week sign an M.O.U. to that effect.

Stampede to sell UK gilts

Investors flocked to sell government bonds to the Bank of England as it launched an unprecedented programme to expand the money supply. The success of the Bank’s so-called reverse auction, in which investors sell their bonds rather than buy them from the authorities, augurs well for the Bank’s historic quantitative easing move to buy up to £75bn in gilts over the next three months.

Kuwait oil giant planning $80bn investment

A top official at the Kuwait Petroleum Corporation announced on Wednesday that the company would invest about $80 billion over the next five years to increase production and expand refinery capacity.

On the oil price which was at $46 a barrel, Sheikh Nawaf Saud Nasir Al Sabah, deputy managing director and general counsel, thought it was now "not far away form the comfortable zone".

The official, who was speaking at the sidelines of the Wharton Global Forum in Dubai, admitted the global economic crisis had forced the company to rethink some of its timings to achieve its goals.

Businessman sues three for Dh7b in trade dispute

Following a commercial dispute, an Iranian businessman has sought Dh7 billion in civil compensation from a real estate company sponsored and managed by three shaikhs.

The Iranian businessman's lawyer Salim Al Sha'ali, of Al Sha'ali and Co Advocates and Legal Consultants, presented the civil lawsuit against the company and the three shaikhs before the Dubai Civil Court.

The first hearing of the case was heard yesterday.

Dubai 'Fraud': Where Are The Locals?

Seven suspects have reportedly been singled out by the authorities, but all of them are foreigners.

Dubai's anti-corruption probe seemed in full swing Tuesday, after seven expatriate businessmen were reportedly accused by prosecutors of taking part in a $500.0 million fraud at Dubai Islamic Bank. The suspects included three Britons, two Pakistanis, one Turk and one American, according to the Associated Press, raising concerns that local Emiraatis might not be held as fully accountable as the expat brigade.

"Some might say that it's evidence of the anti-corruption drive, but again, where are the Emiraatis?" wondered Christopher Davidson, a British academic who has authored several books on Dubai and the United Arab Emirates. "There have to be the local sponsors, the line managers, the people whose desk at which the buck stopped."

ADCB assures fund investors despite posting loss this year

The Abu Dhabi Commercial Bank (ADCB), one of the largest banks in the Middle East, sought yesterday to reassure fund investors about their money despite losses this year because of the global financial crisis.

ADCB Fund Management Head, Mark Friedenthal, said the bank aims for high return from fund investment in the long run rather than the short term, adding that the crisis would not prompt any change in such a strategy.

Quoted by the ADCB's monthly bulletin, Excellency, he said the Bank would continue to focus on the UAE and other Middle East markets on the grounds they are more secure and profitable than global markets in the current conditions.

Qatar economy surges 44% despite Q4 slump

Qatar's economy dived by more than 23 per cent in the fourth quarter of 2008 but ended the year higher by a staggering 44 per cent because of a surge in oil prices and gas exports, official figures showed yesterday.

From QR83.2 billion (Dh84bn) in the third quarter, the Gulf country's nominal gross domestic product (GDP) shrank to QR77.2bn in the last quarter, a quarterly decline of nearly 23.2 per cent.

But the GDP jumped by about 44 per cent through 2008 to peak at QR372.4bn compared with QR258.6bn in 2006, according to Qatar's Government statistics authority. "The decline in the fourth quarter was a result of a sharp drop in oil prices of around 55 per cent… there was also a similar fall in condensates prices… despite the steady rise in LNG revenues, this sector was negatively affected by the condensates price fall as it receded by 8.3 per cent."

The renaissance of gold as security

Gold is the safe-haven asset of choice for many investors uncomfortable about the future. So perhaps NASDAQ Dubai chose the right time to launch the region’s first Sharia-compliant tradable security backed by gold last week.

The product’s masterminds at the World Gold Council, which has sponsored 12 gold exchange traded funds (ETFs) across the globe that account for 85 per cent of the market, are betting on Dubai becoming their latest success story.

The price of gold has been rising eight years in a row. It traded in the middle of last month above US$1,000 (Dh3,673) an ounce for the first time in almost a year. Its highest level was $1,032 last March.

Gulf firms get ready to explore changing world

Professor Witold J Henisz, The Wharton School; Rami Makhzoumi, President and CEO, Future Pipe Industries; Tarek Sultan, Chairman and Managing Director, Agility Logistics; Sami Baroum, Managing Director, Savola Group; and Mohammed Alshaya, Executive Chairman, M H Alshaya Co, at the first-ever Wharton Global Alumni Forum being held in the Middle East in Dubai. (LOAY ABU HAYKEL)
Gulf-based businesses are preparing for the new economic order by leveraging on the new growth opportunities presented by the current global financial crisis.

Long-term growth measures include acquiring assets, recruiting fresh talent and training them and exploring non-traditional growth markets with a focus "more volume, less value" deals.

This was the unanimous conclusion of a panel of GCC-based business leaders at the first-ever Wharton Global Alumni Forum being held in the Middle East in Dubai.

Little impact of global crisis on Gulf hedge funds

The Gulf has not been as badly impacted by the turmoil as other regions around the world and regional markets would be among the first ones to recover from the global economic tumult, said panelists at the 10th Annual Hedge Funds World Middle East conference.

"If we look at the region as a whole it's been an embryonic market in the funds industry as a whole.

"There are lot of people who have settled down here. What we have seen is development of that industry, the arrival of skill set and we have seen that 50 per cent of asset management firms are actually manufacturing products on ground.

IPIC to fund LNG plant stake with $700m loan

Abu Dhabi’s International Petroleum Investment Company (IPIC) will take out a US$700 million (Dh2.57 billion) loan to help it buy a stake in a liquefied natural gas (LNG) facility in Papua New Guinea.

IPIC, an energy-focused sovereign wealth fund worth $15bn, will pay 300 basis points above the London interbank offered rate (LIBOR) for the loan, Reuters reported, citing two anonymous sources close to the deal.

IPIC officials could not be reached for comment on the report today.

Dubai to retain financial hub status

Dubai will overcome its current problems and retain its position as the Middle East's financial hub when the global economic crisis ends, delegates at a discussion session said yesterday.

Fifty-four per cent of those quizzed backed the view that the emirate will remain the region's financial capital, while just 11 per cent said it would have difficulty hanging on to that status.

The figures emerged at an event called 'A Local Perspective on the Global Economic Recession' held yesterday by Dubai Knowledge Village.

Do not believe reports of Dubai’s demise

Dubai must feel a little like Mark Twain, these days. Upon reading his own obituary in the newspaper, Twain wrote: “The report of my death was an exaggeration.”

Dubai has had its share of obituaries as it suffers from a property bust and contagion from the global credit crisis. Headlines from Cairo to London to New York, laced with schadenfreude, proclaim its demise. Newsweek said simply: “Goodbye, Dubai.”

The emirate is certainly stumbling. Many of its state-owned entities drown in debt. Several high-profile property projects have wilted under tight credit, debt and corruption. Its stock market has been in free-fall. Many of its top officials, who once swaggered on the world stage, now skulk in denial.

Saudi brings Syria back into the fold

Saudi Arabia attempted to overcome damaging rifts in the Arab world and weaken Iranian influence in the region by playing host on Wednesday to Bashar al-Assad, the controversial Syrian president, in a big show of reconciliation.

The leaders of Egypt and Kuwait also joined King Abdullah, Saudi Arabia’s ruler, at the summit in an attempt to create some unity among wrangling Arab states ahead of an Arab League summit scheduled for March 30.

Syria has long been seen as a troublesome maverick because of its close ties to Iran and its support for militant groups including Hizbollah, the Lebanese Shia movement, and Hamas, the Palestinian Islamist group that controls the Gaza Strip.

Areva seeks Mideast funding

Paris is looking at opening up the share capital of Areva, the French state-owned nuclear champion, to Middle Eastern investment funds in an attempt to reinforce its political influence and the company’s business prospects in the region.

Exploratory talks have been held about the potential for sovereign wealth funds to take minority stakes of 1 to 5 per cent in Areva, people close to the subject said. No decision has yet been taken, but the possible shift by Paris is part of a wider review of the future of Areva, which is in urgent need of new capital to take advantage of the global nuclear revival.

Investment from strategic partners or funds in important markets, such as United Arab Emirates and Saudi Arabia, could bring new resources while reinforcing Areva’s competitive position in a region in need of new production capacity.

Scandal-hit bank seeks fresh start

Dubai Islamic Bank claims to be the oldest Islamic bank in the world, but it also has a history punctuated by scandal.

Its new management hopes the referral of seven defendants to court this week for allegedly participating in a scheme to defraud the bank of more than $500m will end the latest period of uncertainty, which has revived awkward memories of the past.

“We are pleased to close this chapter,” Abdulla al-Hamli, chief executive, said in a statement on Tuesday.

Gulf companies suffer earnings ‘bloodbath’

No one expected Gulf company earnings in the last three months of 2008 to make for anything but grim reading, but for some industries in particular the numbers have so far been eye-wateringly bad.

With two-thirds of results out to date, financial services earnings declined about 88per cent in the last three months of the year, while real estate profits shrank 96 per cent from the year-earlier period, according to Markaz, a Kuwaiti investment bank.

Despite a largely positive start to 2008, full-year results showed a 20 per cent earnings drop for financial institutions and 4 per cent for real estate companies. Only telecommunications companies reported a modest year-on-year increase in profits, according to Markaz.