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Wednesday, 22 July 2009

Q&A-Exclusive Analysis on Middle East risk

Middle East analysts from London-based risk consultancy Exclusive Analysis answer emailed questions about Iran, Saudi Arabia and UAE.


What impact will recent unrest in Iran have on the business environment, particularly for foreign investors?

The UK and France have borne the brunt of the government accusations of Western involvement in the post-electoral unrest and have both had Tehran embassy staff subject to arrest and intimidation by the Iranian authorities. The key foreign trade partners of Iran, Italy and Germany, have had less trouble and were subject to lax verbal attacks by the administration. These developments are unlikely to leave a long-term impact on trade ties between Iran and Europe; Iran is able to effectively divorce its economic ambitions, particularly in the energy sector, from its political considerations. However, as European companies, under pressure from the US, delay starting projects in Iran's energy sector, Iran is likely to favour Chinese and domestic companies for oil-sector development.

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Exposure of rated Gulf Banks to Saad and Algosaibi Groups is significant but manageable, says S&P

Standard & Poor's Ratings Services found the exposure to the Saad and Algosaibi groups of 30 commercial banks it rates in Gulf Cooperation Council (GCC) countries to be significant but manageable, according to its report "Special Standard & Poor's survey shows that rated Gulf Banks are significantly exposed to the Saad And Algosaibi Groups."

The two prominent Saudi Arabian groups recently ran into severe and unexpected difficulties and have entered debt restructuring discussions with their respective creditors.

"Total exposure net of tangible collateral to the two groups is significant but manageable for sampled rated GCC banks," said Standard & Poor's credit analyst Goeksenin Karagoez.

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North Drilling Company to go public

A six-percent block of Iran's North Drilling Company's shares will be offered on the Tehran Stock today as an initial public offering scheme for the purpose of price exploration.

According to the Mehr News Agency, the Iran Privatization Organization plan is intended for price exploration of the shares of NDC as the first privatization-bound subsidiary of the National Iranian Oil Company in the upstream oil sector.

"The price exploration process had been planned for the past Iranian calendar year (ended March 20, 2009), but it was postponed due to some problems," the official noted.

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Dubai 'in process' of issuing second $10 bln

Dubai is in the process of issuing the second tranche of a $20 billion bond programme, a spokesman said on Wednesday on behalf of Dubai's Finance Department.

"The department is in the process of issuing the bonds," the spokesman said, speaking on condition of anonymity.

The United Arab Emirates central bank bought the first $10 billion tranche earlier this year.

Dubai said earlier on Wednesday it had set up a support fund to manage the proceeds from its $20 billion government bond programme, launched in February and aimed at supporting the emirate's economic growth plans.

The spokesman declined to give further details.END

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Dubai unveils fund to distribute $20 bln bond

Dubai unveiled a new fund on Wednesday to manage proceeds from its $20 billion government bond programme, aimed at supporting the emirate's economic growth plans.

The fund will provide loans on a commercial basis to government and government-related entities "deemed to be of strategic and development importance to the Emirate of Dubai", it said in a statement.

Dubai, which has been hit hard by the global crisis, launched the $20 billion sovereign bond programme last February to help state-linked firms. The first $10 billion tranche was sold to the UAE central bank.

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Dubai fraud suspects pursued by Gold Coast developer

"In a statement Sunland says:

EXCERPT FROM STATEMENT (voiceover): Sunland understands that the charges relate, at least in part, to the purchase by one of its subsidiaries of a site from the Dubai Government owned master developer Nakheel at Dubai Waterfront in October 2007.

The company has been assisting the authorities in Dubai with their investigations since December 2008.

RACHAEL BROWN: Sunland would not respond to questions put to it by The World Today but the Fairfax press reports it's made formal complaints about Mr Joyce and Mr Lee to the Queensland Police and the Australian Competition and Consumer Commission."

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Dragon Oil misses production forecast

Oil production at Dragon Oil, which is majority-owned by a Dubai state energy firm, increased 11 per cent in the first half compared to last year but still failed to meet forecasts, the company announced today.

Financial results for the firm are not due for another month, but the disappointing figures could undermine the position of shareholders faced with a takeover by Emirates National Oil Company (ENOC). ENOC currently owns 52 per cent of Dragon and is actively considering buying out the remaining shares.

Production growth fell in the second quarter from stronger rates recorded earlier in the year due to unexpected drilling difficulties at the company’s fields in Turkmenistan, said Abdul-Jaleel al Khalifa, the chief executive.

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Sovereign fund close to $1bn deal in Malaysia

An Abu Dhabi sovereign wealth fund seems on the verge of investing US$1 billion (Dh3.67bn) into Malaysia, according to Bernama, the Malaysian national news service.

The funds would go into 1Malaysia Development Berhad (1MDB), a new Malaysian sovereign wealth fund, and be invested in energy, property and hospitality projects, Bernama reported yesterday.

The decision coincided with the Malaysian prime minister’s visit with Sheikh Mohammed bin Zayed, the Crown Prince of Abu Dhabi, at the Emirates Palace hotel. Sheikh Mohammed is also the chairman of Mubadala Development, an investment arm of the Abu Dhabi Government.

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Aabar targets Europe in €150m deal

Aabar Investments, the Abu Dhabi government-backed investor, has a formed a partnership to target the European property market and technology-based firms.

The firm agreed to form a €150 million (Dh783m) joint venture partnership with the Berndorf group of Austria aimed at acquiring attractively priced assets in Europe.

Aabar will contribute €100m in equity funding to the new venture, to be called ABAG, and which will be incorporated in Austria.

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Abu Dhabi Islamic Bank $66m exposed to Saad

A direct loan of Dh245 million (US$66.7m) by Abu Dhabi Islamic Bank (ADIB) to the Saad Group, the troubled Saudi conglomerate, sheds light for the first time on an elusive side of Saad’s borrowings: its use of bank finance to make investments, many of which declined in value during the financial crisis.

ADIB lent the money to Saad in 2007 to finance an investment in Makhazen Industrial Investments, a warehousing company in Abu Dhabi that never started operations, according to a document obtained by The National and verified by sources familiar with the deal.

ADIB’s exposure to the group, combined with a previously reported debt of $40m, is smaller than those of many other banks in the UAE, including Abu Dhabi Commercial Bank and the Dubai-based Mashreqbank. These loans also pale in comparison to Saad’s overall debt load, which has been estimated at $20 billion.

Etisalat eyes majority stake in rival Zain

Etisalat is interested in buying a majority stake in Zain, the Kuwaiti mobile company that competes with the UAE national operator in markets across the Middle East and Africa, the company said ­yesterday.

Zain is valued at US$17.6 billion (Dh64.64bn) and said yesterday it was conducting a strategic review that could see it sell its assets in sub-Saharan Africa.

But Jamal al Jarwan, the head of Etisalat’s international investments unit, said the company was considering buying a controlling stake in the entire Zain group, which also operates networks in Gulf markets such as Saudi Arabia and Kuwait.

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Two ex-Nakheel men sent for trial

Two Australians, former employees of the property company Nakheel, have been charged after a corruption investigation.

Matt Joyce, the managing director of Nakheel’s Dubai Waterfront project, and a Nakheel colleague, Marcus Lee, were arrested on January 25 after being accused of trying to bribe a public official.

The Dubai Public Prosecution confirmed yesterday that the two men had been charged, but details of the charge would not be released for several days. Their lawyer said he also was awaiting clarification.

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UAE M2 Growth Hits a NEW LOW (Re-post)

The UAE’s M2 growth continued its downward spiral by hitting a new low of 6.2% YoY for the month of June. Comparing this figure to the 47.7% YoY growth rate in January 2008, one comprehends the significant challenges the UAE is facing. The poetic Sheik al-Maktoum once said, “Money is like water. If you lock it up, it becomes stagnant and foul-smelling, but if you let it flow, it stays fresh.” The Emarati economy is currently crying for the once abundant water, but it seems the storage tanks are.. empty.

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Dubai's Istithmar axes jobs as funds dry up

Istithmar World, Dubai’s high-profile investment vehicle that snapped up brand names across the globe, has slashed its investment workforce by three-quarters as asset prices tumble and its funds dry up, a source familiar with the matter told Maktoob Business on Tuesday.

The source said Istithmar has cut its core investment staff to around 10 from 40 over the past few months and is not looking at further assets in a dramatic turnaround in the company’s fortunes as the global financial crisis hits Dubai and its state-owned entities.

"To put it bluntly, there is no reason for being an investment company that does not have the means to invest," the source said.

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