Singapore, Abu Dhabi Face $10 Billion Loss on UBS, Citigroup

It took theGovernment of Singapore Investment Corp. three days in 2007 to agree to prop up UBS AG, ailing from subprime losses. It may take a decade to recoup that investment of 11 billion Swiss francs ($10 billion).

GIC, manager of more than $100 billion of the city-state’s foreign reserves, faces a paper loss of about 5.6 billion francs when it becomes the biggest shareholder of UBS on March 5, as shares of Switzerland’s largest bank trade at a third of the conversion price on notes it holds.

Singapore isn’t alone among sovereign wealth funds facing losses from supporting banks in Europe and the U.S. in the credit crisis. More than $69 billion in investments by such funds has so far produced $20 billion in realized and paper losses, according to data compiled by Bloomberg. Hurt by their contributions to the health of the financial system and stuck with some of the investments for years, sovereign wealth funds may shy away from coming to the banks’ aid the next time.

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Saudi Arabia’s Reform Timeline

Saudi Arabia has been on a fast-paced cycle of reform for the past decade. In the past, Kuwait used to be the leader of the Gulf in everything. Fifteen years ago we envied the Emaratis for Dubai. Ten years ago it was Bahrain, five years ago it was Qatar, and now it is Saudi Arabia. King Abdullah of Saudi has been leading a major overhaul; an economic evolution.

Refer to the list below for the major achievements:

Today Kuwait is starting to move. There is hope. The government hadn’t formally presented to the Parliament a 5-year since 1986, but it did this year. There is a massive infrastructure budget that seems to be going the right way. A Capital Markets Authority law will be enacted. The government rejected appeals for loan forgiveness and was prudent enough not to splurge money at paper investment companies. I hope someone will be posting a 10 year reform chart as solid as Saudi’s for Kuwait in the near future.

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Cassation Court Verdict Closes Nakheel Case

Cassation Court Verdict Closes Nakheel Case

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Two former employees of leading property developer Nakheel were found guilty of accepting a bribe of Dh5.1 million and sentenced to a three-year prison term each by the Court of Cassation on Monday.
The two — a former Emirati general manager (sales) and a former Egyptian salesman — were also fined Dh 3m each by the court, which upheld the earlier decision of the Court of Appeal in this corruption case.

The court also specified that the 29-year old Egyptian salesman would be deported after he had served his prison sentence. Earlier, according to court records, the Court of Appeal had also upheld on January 17 the preliminary verdict given by the Court of First Instance – sentencing on May 31, 2009, the former general manager (sales) and the salesman to three years in prison each for accepting the over Dh 5m bribe.

According to court records, the two former Nakheel employees were accused of overcharging a company following the purchase of a plot on the sea front at Palm Jebel Ali.

They illegally took the 2 per cent difference between the plot’s original and the sale price, worth over five million dirhams, as a ‘commission’ to which they were not entitled.END

Abu Dhabi steps in to cut cost of home loans

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The Government has stepped in to reduce the cost of home loans in the capital. Buyers can now obtain mortgages at 5.75 per cent interest, compared with current rates of more than 8 per cent, a saving of Dh2,450 (US$667) a month on a typical Dh2 million loan.

Abu Dhabi Finance, a mortgage provider part-owned by the Government, revealed yesterday that it had received funds from the Department of Finance with which it will cut the cost of borrowing to 1 per cent below the best available.

“Abu Dhabi Finance is one of the tools that the Government is using to stimulate the real estate market,” said Ali Eid al Mehairi, the company’s chairman.

How the global downturn took its toll on the Waterfront

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In a city of huge projects, the Waterfront was to trump them all.

At a ceremony revealing the plans in 2005, executives from Nakheel, the Dubai World subsidiary that created Dubai’s Palm islands and The World archipelago, described the project that would balloon into a 130 square kilometre piece of land that would one day have enough homes and offices for 1.5 million people. It would be a new city that would unify two other massive projects: the reclaimed Palm Jebel Ali and a 75km waterway through the desert called the Arabian Canal. It would cost Dh100 billion (US$27.22bn).

Not only was the Waterfront Nakheel’s largest project, but it also formed the backbone of the company’s multibillion-dollar financing strategy. Waterfront land valued at Dh7.6bn was used to secure three Islamic bonds issued by Nakheel with a total value of $5.25bn. The sprawling project will play a major part in Dubai World’s restructuring proposal to creditors in the next few months as the conglomerate weighs which phases will be built and which should be scaled back or redesigned in the aftermath of the property decline.

Capital gains in Dubai?

Buried deep in the recent IMF report about Dubai is a very interesting nugget. Describing how the property bubble got out of hand, the IMF team say that the Dubai authorities are looking at other ways to limit "renewed speculative pressures in the real estate sector":

• "More frequent and closer monitoring of bank practices related to this sector;
• "The possible introduction of a capital gains tax on property transactions (registered by the Dubai Land Department) and on securities that derive their value from real property;
• A more active Real Estate Regulatory Authority (Rera) as concerns compliance with Anti-Money Laundering regulations by property developers, brokers and other intermediaries. This could help slow down transactions that do not require local financing."

Obviously, the large font is my emphasis. But this seems like a major change on the horizon that would have far reaching consequences for property investors and home buyers in Dubai. We're unlikely to find out from Rera what the plan is for the time being. The regulators of the property sector in Dubai have pulled out of the public sphere for the last year.

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United Arab Emirates: 2009 Article IV Consultation—Staff Report; Public Information Notice; and Statement by the Executive Director for United Arab Emirates

The following documents have been released and are included in this package:

• The staff report, prepared by a staff team of the IMF, following discussions that ended on
January 13, 2010, with the officials of United Arab Emirates on economic developments and
policies. Based on information available at the time of these discussions, the staff report was
completed on February 3, 2010. The views expressed in the staff report are those of the staff
team and do not necessarily reflect the views of the Executive Board of the IMF.

• A Public Information Notice (PIN).

• A statement by the Executive Director for United Arab Emirates.

Dubai to Cut Spending to Save $1 Billion This Year

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Dubai ordered government departments to cut spending this year to reduce the size of the emirate’s planned 6 billion dirham ($1.6 billion) deficit, the department of finance said.

Departments were told to reduce spending by 15 percent to save about $1 billion and narrow the emirate’s planned budget deficit, a spokeswoman at the department of finance said in response to e-mailed questions.

The government said Jan.7 that it expects to run a budget deficit for a second year in 2010 even after cutting spending by 6.1 percent. The economy has been battered by the global crisis as credit markets seized up, trade declined and real estate prices plummeted. The slowdown forced Dubai World, one of the emirate’s three main state-owned business groups, to seek a delay on $26 billion in debt payments. The emirate received $20 billion in financial support last year from the Abu Dhabi government and the U.A.E. central bank.

Islamic finance industry launches derivatives standard

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A template for an over-the-counter Islamic derivative contract was launched on Monday, offering a channel for the emerging industry to better hedge itself against risks.

FINANCIALS

The contract, in the making for three years, is expected to pave the way for quicker and cheaper Islamic risk management and more frequent cross-currency transactions by offering a template that is accepted by Islamic scholars.

The young Islamic finance industry has not yet developed all of the products used by conventional banks, and its banks are seen as at a disadvantage on making cross-border investments as they can not hedge against currency risks.

Bahrain's bid to boost investment

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PROCEDURES could be streamlined to attract foreign businessmen, traders, tourists and students to Bahrain, it was revealed yesterday.

His Royal Highness Prime Minister Prince Khalifa bin Salman Al Khalifa and His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Deputy Supreme Commander, yesterday urged facilities and initiatives to promote this objective.

The need to streamline entry procedures has become necessary more than ever as Bahrain hosts global economic, cultural and sport events.

UAE's RAK Petroleum buys 30 pct Tunisia field stake

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The UAE's RAK Petroleum has signed an agreement to acquire a 30 percent stake in a Tunisian offshore oilfield, a company statement said on Monday.

The stake in the Hammamet licence acquired by RAK Petroleum was previously held by Canada-based Storm Ventures International which will retain a 35 percent operated interest, the statement said.

Cooper Energy of Australia holds the remaining 35 percent, it added.

UAE's Invest AD raising $400 million PE fund

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Abu Dhabi investment firm Invest AD is seeking to raise $325 million from third-party investors for a $400 million private equity fund that will invest in North Africa and the Middle East (MENA), a senior executive said on Monday.

DEALS

The fund, the second PE fund launched by Invest AD for the MENA region, aims to achieve a net internal rate of return of at least 25 percent, Invest AD's head of private equity Samir Assaad told the Reuters Private Equity and Hedge Funds Summit.

Invest AD, which has seed capital of $75 million from the Abu Dhabi government for its second MENA fund, hopes to achieve a first closing of at least $200 million for the fund by June.

Dubai debt woes dent bank’s profits

The extent of Dubai’s economic woes were underlined yesterday when HSBC Middle East reported that its profits slumped last year, mainly because of loan impairments in the United Arab Emirates, its largest market in the region.

Dubai, the UAE’s main business hub, is still reeling from a severe property crash and was forced in late November to seek a debt restructuring of its Dubai World conglomerate. Talks with creditors, including HSBC, are continuing.

HSBC Middle East reported that regional loan impairments more than quintupled last year to $1.7bn, depressing the bank’s pre-tax profits to $455m, down 74 per cent from 2008.

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