8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 1/19

DOBUY DOBYE

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 2/19

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 3/19

Dubai World was established under a decree ratified on 2March 2006 by Sheikh Mohammed bin Rashid Al Maktoum ,Vice President and Prime Minister of the United ArabEmirates and Ruler of Dubai . He also holds the majoritystake in Dubai World.On 2 July 2006, it was launched as a holding company withmore than 50,000 employees in over 100 cities around theglobe. The group now has extensive real estate investmentsin the United States

, the United Kingdom and South Africa .Dubai World made headlines in March 2008 after itschairman, Sultan Ahmed bin Sulayem, threatened to takethe fund's money out of Europe .[1] Dubai World's threatscame shortly after the European Union attempted to lay out"a set of principles for transparency, predictability andaccountability" for sovereign wealth funds .[2]

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 4/19

The 60-year-old Mohammed's confidence andambition gave way to aspirations to placeDubai in the same league as London or NewYork.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 5/19

Biggest debtor royal bank of scotland $17.9billionStandard charted bank $4 billion.Local merchant·s Saad and Algosaibes havelended $16 billionEmirates airways and many other small players

including 70 investors.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 6/19

On 25 th November Wednesday,Government ofdubai asked Dubai World and its subsidiaryNakheel ,for a stand still on debt worth billions ofdollar($60 billion of total $80 billion debt of wholecountry).Dubai World asked for time frame of 6 months anddebt worth $26 billions to restructure the financesand coming to terms .

Once the renowned banker said ´Dubai world isan example of too big to fail but also too big toguaranteeµ

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 7/19

SENSEX shed 645 points, FTSE 100 index inLondon bearish by 3%.dow jones industrialaverage lost about 155 points and oil pricesplunged by & 7%.Major investor Abu Dhabi not keen to bailoutDubai. (richest among neighbours).Dubai world stated that they needed 6monthstandstill on payment of debt.Major creditors like Standard Charted, HSBC,Royal bank of Scotland, Emirates NBD and AbuDhabi commercial bank were found guessing thenext step of Dubai world.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 8/19

Dubai world investment were in high handretailer Barneys to W Hotel in Washington,property in London as well as invested inDisney.Even if loans are secured and underlying paperwork is comprehensive ,region·s law areunfriendly to creditor·s.Even if loans are paid back preference wouldbe given to local lenders.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 9/19

The nerves showed in credit markets, at the centre of the financial storm triggered by theLehman Brothers' bankruptcy last year.

Asian credit default swaps, used to insure against default, were at their widest in amonth, with the Asia ex-Japan iTraxx investment-grade index touching 124/129 basispoints.

Dubai's credit default swaps were being quoted as high as 500-550 basis points, sometraders said on Thursday.Dubai's debt problems are a hangover from a property bubble that imploded after thefinancial crisis derailed its plans to become a magnet for tourists and a regional hub foreverything from shipping to entertainment.Banks' exposure to a Dubai default pales in comparison to the $2.8 trillion in writedownsthe International Monetary Fund estimates U.S. and European lenders will have to makebetween 2007 and 2010 as a result of the credit crisis.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 10/19

Out of control spendingLack of Future PlanningPoor Management

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 11/19

Bank of Baroda had an exposure of around $200million to Dubai world.India·s biggest export market after U.S. is UAE.

Dubai 40% population constitutes on Indianforming 10 to 12% of India·s invert remittances.Indian talk the list of Villa buyers with 21%ownership.

Host of Indian companies such as L&T Nagarjunaconstruction ,Omaxe,Afscon Infrastructure andCountry Club(Mahindra and Mahindra) said thatthey were reviewing the option of investment inDubai.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 12/19

Dubai had the ambition to grow like Singapore andHongkong.The only difference between Dubai and other 2countries was that Dubai had economy based onservice ,real state ,little oil deposits and tourism whereas Singapore and Hongkong had economyfundamentals of manufacturing hence consolidated.What India is expected is to grow at the high G.D.P foryrs to come with only strong fundamentals of servicesectors but we need to understand that skippingmanufacturing sector to grow at high pace could leadto unstability and developed nations like U.S and U.Khad also grown with strong manufacturing growth.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 13/19

Liquidity remains tight through out most of theworldDubai could be the first domino that starts thedescent into double-dip recession.Oil production in Dubai is very limitedcompared to other states of U.A.E, tourism

took a jolt because of economic recession,development projects took the back seat withchanging economy scene.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 14/19

Sale prices in the residential real state havedipped by 40-60% and rents by 30-50 percent inthe areas they monitor.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 15/19

Exposure to Dubai World and its restructuredentities among local banks and contractors issignificant, that employment levels and confidencewill suffer and that local banks will become evenmore reluctant to lend into the domestic economy.The Dubai government is rather small in relationto the size of the economy and has limitedresources at its disposal.

This constrains its ability to provide fiscal stimulusto offset shocks to the private sector.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 16/19

Abu dhabi is now not concerned to give moneyto Dubai because of their unplannedexpenditure.

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 17/19

$10 billion immediate funding from Abu dhabi.Intervention of UAE Central Bank to moduraterates of Libor, Corporate bond spreads, TED

spreads, US dollar commodities .Selling away the Assets like Jumeirah EssexHouse and Barnay·s New York.Interestingly, Dubai World had already raised$5 billion from Abu Dhabi banks onWednesday, making it possible to pay the $3.5billion to the holders of its Islamic bond byDec. 14

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 18/19

8/8/2019 Crisis in the Emirates of Desert

http://slidepdf.com/reader/full/crisis-in-the-emirates-of-desert 19/19

Thank You