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Monday, 11 May 2009

KKR granted licence to operate from the Dubai International Financial Centre

Kohlberg Kravis Roberts & Co (KKR), a leading global alternative asset manager, today announced that KKR MENA has been granted a license by the Dubai Financial Services Authority to operate from the Dubai International Financial Centre (DIFC).

Abdulla Al Awar, Managing Director of the DIFC Authority, said: “The MENA region, and especially the Arabian Gulf, has been relatively less impacted by the ongoing global financial crisis than North America, Europe or Asia. The Gulf has been particularly well-cushioned by the windfall revenues from the high oil prices witnessed during most of 2008. This surplus income has been earmarked for continued investments in infrastructure projects to upgrade existing ones and build new capacities.

“Concurrently, our region is also witnessing a deepening of the financial markets and private equity is not only abundant here, but is fairly active. We are pleased to note that a globally respected firm such as KKR has chosen Dubai as their base to operate across the MENA region. We wish them the very best and offer all support for their continued success as we welcome them to the DIFC,” said Al Awar.

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Payout time; V, U or L; Tea time in Dubai? (Weekly opinion)

So here we are in mid-May and the first confirmed recipient, Nakheel, of the Dubai Government Bond, first tranche subscribed to in late February, has given an exclusive interview to Business24/7. (If my memory serves me correctly, I thought the first public words on the disbursement were made by Nasser Al Shaikh on 21 April, 2009, "Dubai Business Breakfast", radio.)

    • Is it true that Nakheel has asked contractors to revise prices on their contracts by 30 per cent? What about issues of payments in these tough times?

    • We are definitely talking to our contractors to help them and ourselves through the current situation. We are at the stage of commercial settlements and negotiations........

Above published in Business24/7.

    • But Nakheel, part of Dubai World, an indebted government-owned umbrella group, has asked some suppliers to accept payments of 50-75 per cent, and asked them to write-off or reschedule the remaining balances, according to people dealing with the company.

As reported in Financial Times this afternoon.

What a charitable term, "to help them", used by Chris O'Donnell, CEO Nakheel, compared with the brutality of Financial Times reporting "payments of 50-75 per cent,..."!

Again I do wonder at the communication skills within the region, hopefully Westminster style democracy and corporate behaviour will be kept at bay!

Unusual to have Winston Churchill as the intoductory photograph, but with all the talk of a V shaped recovery, along with many Green Shoots being reported,I thought it might be useful to offer the alternative viewpoints:

Charting the ’suckers rally’ (A UK site)
The Pragmatic Capitalist (A USA influenced site)
Blogoronomy (A UAE Stock Market site)
ArabianMoney (A Universal blog)

So it looks like a U shaped recovery is on the way, but when?

I will close with this heartening story, picked up from The Arizona Republic,

"Scottsdale firm to distribute tea in Middle East."

"International sales in general make good business sense, said Dan Schweiker, co-founder with Martinson of China Mist. The weak dollar means U.S. products are cheaper for foreigners to buy, and increasing foreign sales can offset slow sales in the recession-plagued U.S. market," he said.

Will Dan's colleagues and friends point out to him that the UAE Dirham is pegged/fixed to the mighty Greenback, and what about the opening Nakheel story, which strikes me as fairly plagueish?

Have a good week.

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Zain-led group to get Iran's third mobile licence

A consortium led by Kuwait's Mobile Telecommunications, Zain, will be awarded Iran's third mobile licence, ousting bid winner Emirates Telecommunications, Etisalat, the official IRNA news agency said.

Iran said in January that a consortium made up of Etisalat and Iran's Tamin Telecom had won an international tender for the licence.

But IRNA quoted the spokesman of Iran's Communications Regulatory Authority as saying on Monday the Etisalat-led group had "not fulfilled its obligations".

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Want a job in the UAE? First pack a heavy CV

Veteran managers with experience in crisis management, who speak Arabic or have ties to the region remain in demand despite the economic downturn, experts say.

And the few companies that do need staff have little use for the kind of inexperienced expatriate professionals who were able to land jobs before.

“What is happening is we’re suddenly getting people with a bit of grey hair, people who have been through a business cycle, coming out to the Middle East,” said Anthony Simpson, managing partner of the Middle East office of Ray & Berndtson in Dubai. “We’re looking [to recruit] people to come to this part of the world who can actually add value to businesses and make things happen ... you’re seeing veterans but also better-quality expatriates coming.”

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Saudi urged to pump more funds into banks

Saudi Arabia needs to inject more funds into its banking system as part of overall plans to ensure sufficient liquidity and avert a lending problem in the next two years, the Gulf Kingdom's largest bank said yesterday.

The National Commercial Bank (NCB) said such plans should also involve payment of public debt to banks, higher public investment in the banking sector and creation of a credit rating system to expand bond issue by banks.

NCB, the largest bank in Saudi Arabia by assets, said it expected a resurgence of the funding problem by banks in 2010 and urged the Kingdom's Central Bank, the Saudi Arabian Monetary Authority (Sama), to act from now. "Our short-term recommendations include the injection of (medium-term) deposits by Sama to provide an immediate liquidity relief and a stable source of funding to the banking system throughout 2009-2010, in line with the SAR6.1 billion that had been injected back in the fourth quarter of 2008, given the estimated funding gap of around SAR73bn and SAR101bn in 2009 and 2010, respectively," NCB said in a study sent to Emirates Business.

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Banks in Kuwait to undergo stress tests for third time

Kuwait's central bank will ask banks to undergo stress tests for the third time since the financial crisis began, its central bank governor said.

Sheikh Salem Al Sabah said the central bank would ask local banks to conduct stress tests according to methodology he will determine.

The governor said he is "more comfortable" with the economic situation in general than he was in the fourth quarter of last year. "I have no concern for the financial system in the presence of the financial stability decree law," Sheikh Salem told Al Rai newspaper.

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Nakheel confirms receiving funds

Nakheel has started receiving funds from Dubai Government, confirmed its Chief Executive Officer (CEO) Chris O'Donnell in an exclusive interview with Emirates Business. However when asked if the figure stood at Dh2 billion, the chief executive said: "The actual figure is confidential and so are all the other details. But yes, Nakheel is receiving funds."

The developer is also talking to its contractors and re-negotiating payments plans and contracts. "Yes, we are trying to help them and ourselves through our current situation. We are at the stage of commercial settlements and negotiations. Rather than detail on percentages, it is a true statement to say that construction costs are falling and there is definitely a reduction," said O'Donnell.

"Part of our obligation to our customers is to ensure that we get them the best buildings. Hence, we are talking to our contractors to get cost-effective solutions."

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Business leaders see growth in next one year

Top management officials in the UAE feel that financial crisis could last up to two years, according to a survey conducted by a global professional services firm.

"This survey has helped us to put a time frame according to the business owners and professionals," said Crispin Marriott, Managing Director of the firm, Towers Perrin Middle East.

The survey in 50 companies across a number of industries revealed that most of the senior leaders expect their business to show positive growth in the next 12 months. Interestingly owners have a slightly higher growth perception than senior leaders who in turn were more optimistic than directors or department heads.

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UAE officials dispute IMF's 2009 growth forecast

Key government officials yesterday disputed the IMF's Regional Economic Outlook, which projects the UAE real GDP growth will drop by -0.06 per cent this year before going up to 1.6 per cent in 2010, down from a growth of 7.4 per cent in 2008.

Nasser Saidi, chief economist of DIFC said the IMF has been "unduly pessimistic", adding that there may also be a large margin of error. "I am still projecting 1-2 per cent overall growth," he said.

Ahmad Abu Gaida, Acting Director of Economic Planning at Abu Dhabi Department of Economic Development, said the UAE will continue to rake in positive real growth primarily due to its ongoing investment and infrastructure projects.

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Omani oil output defies forecasts

Oil production in Oman rose more than 6 per cent in the first quarter, figures showed today, defying some predictions that output was in irreversible decline.

The sultanate produced an average of 786,000 barrels per day (bpd) of crude oil and natural gas condensate in the three-month period, up from 741,000 bpd in the first quarter last year, according to statistics from the ministry of national economy.

The figures are already higher than forecasts for the year offered by the Omani oil minister, Mohammed al Rumhy, in December.

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OPEC set to keep supply targets

With less than three weeks before OPEC’s next meeting and crude prices rising, a consensus is emerging that the oil exporters’ group will leave supply targets unchanged.

There are concerns that the global recovery could be harmed if crude prices climb too fast, damping prospects for a rebound in demand for fuel that would draw down swollen oil inventories.

Last week crude saw its strongest weekly gain this year, rising 10 per cent to a six-month high of US$58.75 a barrel in New York. That is still well below the $70 to $80 a barrel that most OPEC members have said would be needed to stimulate investment in oil development, but above the $50 a barrel that the Saudi oil minister, Ali al Naimi, recently said was Saudi Arabia’s contribution to economic recovery.

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2009 is going to be a tough year: IMF (Q & A)

Q) In your outlook last October, your department forecast 6 per cent growth for the Middle East and Central Asia. Now you forecast growth of just 2.6 per cent. Why have things deteriorated so much?

A It has gone down a lot. But when you look at that number, you want to distinguish between the oil importers and the oil exporters. And when you look at oil exporters you want to disaggregate the oil GDP and non-oil GDP. Oil GDP for that group is going down by 3 per cent or 3.5 per cent this year. But that’s simply saying that oil production is going down. The more meaningful number for oil exporters is non-oil GDP, which is going up by between 3.5 per cent and 4 per cent. That’s a reflection of the fact that they’ve decided, most of them, to continue to spend. Particularly for capital projects. And this is softening the impact of oil prices on them, and it’s protecting their neighbours a little bit, because of the linkages they have with their oil imports.

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Merger likely to win approval

Amlak Finance PJSC and Tamweel PJSC, the Dubai mortgage lenders, are likely to win creditor approval for their merger, Moody's Investors Service said.

"It's in nobody's interest to have Tamweel and Amlak going into default," said Moody's Paris-based analyst Anouar Hassoune, who rated Tamweel bonds issued last year.

The Amlak and Tamweel merger may help revive the region's mortgage market which was hurt by the global credit crunch and easing real estate prices. The UAE government took control of Dubai's biggest mortgage providers in November, suspending their shares and blocking new lending, as the financial turmoil caused house prices to plunge by almost 50 per cent since their peak in August, according to Colliers International.

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Arabtec owed dues of Dh3.6b

The chief executive officer of Arabtec Holding, the UAE's largest construction company by market capitalisation, said yesterday it is owed dues of Dh3.6 billion with Dubai government and quasi-government entities owing 80 per cent of the total dues.

"The outstandings for Arabtec stand at Dh3.6 billion& 80 per cent of this outstanding amount is owed by Dubai government and quasi-government entities," Riad Kamal told reporters on the sidelines of a news conference here.

At the news conference, Abu Dhabi-based International Capital Trading (ICT) announced the award of a Dh1.6 billion contract to a joint venture comprising Arabtec Construction LLC and National Projects and Construction LLC.

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Stress-testing Islamic Finance

Now that the results of the US Treasury’s stress test of US banks have been released, it seems apt to also turn the attention to other financial systems. Islamic Finance has been touted as an alternative model, less exposed to securitization, with ethical guidelines, and its proponents hoped better insulated from global trends.

However, Islamic banking and finance faces many of the same vulnerabilities as conventional finance (See more on the outlook for Islamic financial institutions in this recent presentation). These financial institutions, both Islamic banks and those issuing Sharia-compliant investment products, are vulnerable to changes in liquidity and growth conditions globally and in the targeted regions. The countries of the Gulf Cooperation Council (GCC) a particular source of growth in demand for Islamic financial products continue also to suffer from tight liquidity.

In this piece we look at some of the vulnerabilities but also the opportunities of Islamic finance, to discuss how one might test this financial model. We focus on the dynamics in the GCC especially in relation to GCC investors, sovereign and private, and to Islamic banks operating in the GCC and MENA region though some of the analysis is also relevant to South East Asia.

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Morgan Stanley positive on Middle East equities

Morgan Stanley today revised its recommendation on the MSCI Arabian Markets Index, recommending investors to begin increasing their exposure to Middle Eastern stocks as valuations are more attractive now than at any time in the past two years.

Since advising investors to reduce their exposure to the region in October 2008, the region has underperformed other emerging markets and Morgan Stanley's latest report "MSCI Arabian Markets: Economically resilient and valuations appealing again-start increasing exposure," states that the timing is now right to begin increasing exposure in regional equity markets, highlighting Saudi Arabia as a particularly attractive market for investors along with Qatar and Egypt.

In the report, Michael Wang, a Global Emerging Market Strategist at Morgan Stanley, says: "Saudi Arabia is in one of the strongest positions to weather the global crisis due to the fact it possesses one of the largest pools of FX savings and accumulated fiscal surpluses in the world, a sound banking system and minimal real estate exposure. The prospect for further liberalization of equity markets in the country to foreign investors provides an additional incentive to increase positions".

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An assured Assad

Not long ago, the Damascus regime of Bashar al-Assad was shunned as a dangerous pariah, a troublemaker that meddles in Iraq, provokes unrest in Lebanon and cheers at the Middle Eastern misfortunes of the west.

The Syrian president, who inherited his rule from his father in 2000, was ostracised even by Arab friends infuriated by his tightening alliance with Iran and by the repeated promises of co-operation that were never kept.
These days, however, it must feel like the “Bashar Spring” in Damascus. The 43-year-old Mr Assad is enjoying a rare run of fortunate events that are easing the international pressures and offering a chance at rehabilitation.

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Gulf economies to contract, says IMF

The Gulf’s largest economies are expected to contract this year as Opec-mandated cuts in oil production and declining petroleum revenue erode growth.

The International Monetary Fund said on Sunday that real gross domestic product in Saudi Arabia, the United Arab Emirates and Kuwait would shrink after a slump in oil prices spurred the cartel to reduce output – the region’s main export and source of government revenue.

Until oil prices plunged last autumn, the Gulf had seemed relatively immune to the financial crisis. It has soaring oil revenues, big currency reserves and a financial sector largely unpolluted by toxic securities. But the worsening of the financial crisis last autumn sent oil prices tumbling and abruptly ended hopes that the region could decouple from the economic woes of the west.

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