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Tuesday, 29 December 2009

Dubai hires consultants to woo investors

The Gulf emirate of Dubai has hired foreign consultants to attract more investments after its reputation was hit following the shock announcements of debt repayment problems at its flagship companies.

Dubai's Foreign Investment Office signed an agreement with consultants A.T. Kearney and its affiliated think-tank Global Business Policy Council, according to a joint statement on Tuesday.

The partners gave no details, saying only they wanted to develop "new policy tools".

Dubai Ups Jail Sentence for Fraud

Dubai's ruler on Tuesday issued a new law imposing tougher sentences of up to 20 years in jail for those convicted of defrauding the government of funds, as it seeks to continue its clampdown on corporate crime.

The new law is to "protect Dubai's economic interests and preserve financial rights of individuals," according to a statement from the office of Sheik Mohammed bin Rashid Al Maktoum seen by Zawya Dow Jones.

Under the new law, those convicted of public, or private fraud could face between five and 20 years imprisonment, said the statement, which adds that felons may be immediately released "once they fully return the money to [its] lawful owners or through settlement agreements negotiated with their debtors." Previously, the maximum sentence had been five years.

Dubai's business community was rocked last year by a series of high profile investigations and arrests of senior executives amid a crackdown on corporate crime.END

Dubai Shares Fluctuate Before Earnings, Dubai World Debt News

Dubai’s benchmark index fluctuated between gains and losses as investors sought news on fourth- quarter earnings and Dubai World’s loan restructuring.

The DFM General Index fell for the first time in four days, losing 0.7 percent to 1,816.04 at 1:17 p.m. in the emirate. The measure had gained as much as 0.6 percent earlier. Emaar Properties PJSC, the United Arab Emirates’ biggest developer, lost 2.3 percent. Arabtec Holding PJSC, the country’s largest builder, rose to the highest in a month. Abu Dhabi’s benchmark added 0.5 percent, led by Emirates Telecommunications Corp.

“There is an absence of any real news,” said Khaled Masri, a partner at Rasmala Investments LLC. “Investors are waiting for fourth-quarter earnings and news on Dubai World’s restructuring.”

Microfinance is the need of the hour

Last month I was part of a team that travelled to Washington, D.C. and met with officials from the US administration. I learnt that President Barack Obama is holding an 'entrepreneurship in Muslim communities summit' next March in the US capital about an emerging phenomenon known as social entrepreneurship. A social entrepreneur is, according to Wikipedia, a person who recognizes a social problem and uses entrepreneurial principles to organise, create, and manage a venture to make social change. I had never heard of this concept prior to that visit, or so I thought. It turns out that the founder of one of the most popular forms of social entrepreneurship is the Nobel Laureate Mohammed Younis who developed the practice of microfinance in 1976.

Microfinance allows low income individuals who were previously outside the traditional banking and finance sectors radar screens, to have access not only to small amounts of funding but also to insurance, transfer and savings. These funds can be as low as a few score dollars and are usually requested by individuals who do not want charity but need funding to start a business and get a head start in life. By the time Mr Younis won the Nobel Prize for peace in 2006, Grameen bank had almost seven million borrowers - 97% of whom were women.

Younis’s work has lifted microfinance in to the limelight the world over. Similar concepts are now used in Asia, Africa and Latin America. But I wondered if such an idea could work in the oil rich Gulf States.


RBC recently released their 20 favorite trades for 2010. As we previously mentioned, RBC is relatively bullish though they are viewing the upcoming year as two different investment environments. They see overall fundamentals improving and the first half of 2010 serving as a period of “catch-up” for investors. That should change heading into the back half of the year as investors become more defensive. Based on this macro outlook RBC provides their 10 favorite trades for 2010:

  • Argentina external debt steepeners (Long Boden 2012’s / Short US$ 2033 Discounts)

Actionable only for sophisticated investors with foreign access. The Argentine holdout debt restructuring is likely to conclude in 2010. The holdout-debt-swap is likely to result in underperformance of the long end of the curve, given that most of the resulting debt is expected to be issued in discounts.

Seoul's U.A.E. Deal Caps Big Sales Push

South Korea used political persuasion as well as a sharpened competitive edge to win a high-profile, $20.4 billion deal to build four nuclear power plants in the United Arab Emirates.

U.A.E. officials over the weekend tapped a consortium led by Korea Electric Power Co., or Kepco, to design, build and help run the four plants from 2017 to 2020. The plants will be the first civilian nuclear reactors in the Mideast and mark the first time South Korea has exported its its nuclear-design capability.

"This success is the result of efforts by the government and many companies, but I have to tell you, I also believe this is heaven-sent national fortune," President Lee Myung-bak, who took an active role in the process, said in a national address Monday. The South Korean consortium was chosen over groups from France and the U.S.

Insuring Dubai Holding debt rises

The cost of insuring Dubai Holding debt against default has risen over the past two weeks despite what analysts say is evidence that it can meet its immediate obligations.

Concerns have risen about Dubai Holding since its sister company Dubai World announced in November a debt restructuring.

Credit default swaps (CDS) for Dubai Holding Commercial Operations Group (DHCOG) have climbed 14 per cent since December 15 to more than 2,000 basis points or 20 percentage points, according to data from CMA DataVision in New York. That means it costs more than US$2,000 (Dh7,346) to insure $10,000 worth of Dubai Holding bonds.

Mazaya Qatar preparing public issue

The Qatari affiliate of the Kuwaiti developer Al Mazaya hopes to raise as much as 500 million rials (Dh504m) in a public issue.

Mazaya Qatar Real Estate Development is preparing an initial public offering (IPO) for next month despite a weakened appetite among investors for property investments.

“Our advisers tell us that it should be well subscribed. Cash is king,” said Seraj al Baker, the general manager of the company.

Etisalat has Pakistan on hold

Etisalat has become embroiled in a US$1 billion (Dh3.67bn) payment dispute with the Pakistan government over its 2006 purchase of a stake in Pakistan Telecommunication Corporation (PTCL), the country’s largest telecoms operator.

Etisalat agreed to pay $2.6bn to the government in instalments for a 26 per cent stake in PTCL in January 2006. But it has withheld payments for more than a year because of a dispute over the ownership of several properties in Pakistan that were part of the deal.

“Transfer of land is part of the contract. It says if it doesn’t happen we can stop the payments,” said Mohammed Omran, the chairman of the UAE’s largest telecoms operator.