tag:blogger.com,1999:blog-21258644.post1437473780317901395..comments2024-03-27T15:45:49.926+04:00Comments on Life in Dubai: Changing timesSeabeehttp://www.blogger.com/profile/06939892206726271433noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-21258644.post-6786350472908590532008-12-26T16:30:00.000+04:002008-12-26T16:30:00.000+04:00NZM, that isn't a surprise.Like everywhere, people...<B>NZM</B>, that isn't a surprise.<BR/><BR/>Like everywhere, people are losing their jobs and there's no confidence for long term employment, so that deters people from buying. It also means banks are not keen to lend - whole sectors such as real estate are on the banks' blacklist for loans.<BR/><BR/>Then, sensibly, the banks are not lending money to anyone who walks in but are putting minimum salary conditions and credit checks in place. <BR/><BR/>Also, with currencies such as Sterling and Euro at such a good rate to the AED, people are taking advantage and sending as much as they can back home. (Sterling was recently at 7.5, now is 5.4 for example). <BR/><BR/>They also have rock-bottom prices for property 'back home' so if they're going to buy that's where they're more likely to do it.<BR/><BR/>Owners are still asking silly prices though. A couple of examples are featured in today's Biz247. There's an 8 bedroom villa in Emirates Hills for AED133.9 million (£24 million - think what you could buy for that in England!) and a 5 bedroom in The Lakes at AED10 million.<BR/><BR/>Rules are now coming into place to stop 'flipping' by speculators, who were on-selling a property at 100% mark-up, or more, before they'd even payed their first mortgage instalment. And investors are worth much less than they were a few months ago, so finding millions to spend is harder for them, even if they had the confidence to do it.<BR/><BR/>It'll all settle down in due course.Seabeehttps://www.blogger.com/profile/06939892206726271433noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-18919022813648544662008-12-26T15:55:00.000+04:002008-12-26T15:55:00.000+04:00Seabee: I saw a post on Peter Cooper's blog that ...Seabee: I saw a post on Peter Cooper's blog that said that the real estate sale advertised in your image didn't sell a single property.<BR/><BR/><A HREF="http://arabianmoney.net/2008/12/22/what-will-reverse-the-uae-property-slump/" REL="nofollow">here</A>nzmhttps://www.blogger.com/profile/03160346268566279764noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-72211572430009503702008-12-18T12:05:00.000+04:002008-12-18T12:05:00.000+04:00Jan we're just going round in circles. You believe...<B>Jan</B> we're just going round in circles. You believe one thing, I believe another and neither of us will be convinced to change our view.Seabeehttps://www.blogger.com/profile/06939892206726271433noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-17106088996335582182008-12-17T22:54:00.000+04:002008-12-17T22:54:00.000+04:00dJan, the SWF reference in my post was just one sm...d<I>Jan, the SWF reference in my post was just one small part in a long bit of thinking out loud rambling.</I><BR/><BR/>Sure – there was much else to disagree with in you post but I thought to alight upon SWFs would be most fun.<BR/><BR/><I>First you seemed to confuse SWFs with nationalisation, now you confuse them with private investment funds.</I><BR/><BR/>Not at all. My view is that politicians will be unable to avoid the temptation to involve themselves in the underlying investments of a SWF. As a result, the acquisition of a business by a SWF is effectively the same as nationalizing such business. Where a SWF only makes minority investments across a wide range of companies, I grant you that this won’t result in classic nationalization, but instead will bring state interference across entire markets equivalent to that of the institutional funds and this, in my opinion, would have largely adverse consequences.<BR/><BR/>If you are able to ensure that politicians are not able to meddle in SWFs (impossible in my opinion) then you have created something little different from any of the large private investment funds, just with public ownership. This appears to be what you are advocating but as I have already noted I doubt this is possible (politicians can’t resist meddling) and even if you can achieve this I don’t think it is beneficial to a developed economy or its inhabitants to have the state, in addition to its regulatory responsibilities, competing with the private sector in the economy (who regulates the regulator?).<BR/><BR/><I>How are they different from private funds? Ownership of course. The whole point is that they are national investment funds, owned by the country, not by a company, and are used to create more long-term wealth for that country, not for an individual company's limited number of shareholders.</I><BR/><BR/>Again you are being idealistic. I shudder to think of funds owned by a state. State involvement in the commercial sector is nearly always a disaster. There will be very little or no accountability by the state to it ‘shareholders’ (i.e. citizens); investment losses will be covered up or buried in some opaque structure, no one is holding the SWF fund mangers to proper account (a civil servant dishing out tax payers money will not have the same incentives to monitor investment return as an individual investing is own money). The man on the street won’t care whether the SWF is in profit or loss and even if he does he won’t be able to do anything about it. Opportunities for graft and corruption abound. Nah, it’s better for a state to divert any funds that might otherwise earmark for a SWF to lowering taxes or reducing national debt and letting people have the freedom to invest their own money as they please. Let people make their own investment decisions but ensure that the markets/products etc. in which they make those investments are fair and transparent. Governments regulate markets; they shouldn’t participate in them.<BR/><BR/><I>They don't need extra taxation to create.</I><BR/><BR/>Of course they do, unless you advocate a cut in government spending in some other area to free up funds to invest or increased government borrowing. Where else would they get the money (unless they invade another country)?<BR/><BR/><I>Singapore for example has invested the majority of the wealth it's generated over the past few decades into its own infrastructure. But it has also put a percentage into its SWF, which it largely invests overseas. The earnings on those investments bring more foreign exchange into Singapore and add to the budget the government has at its disposal to do the things it needs to do.</I><BR/><BR/>I don’t know much about Singapore, but I gather that it is an authoritarian, albeit well run, city state which has generated large surpluses (due to its relatively small size, advantageous geography, etc.). Instead of returning those surpluses to its population through lower taxes etc. it appears to have created SWFs and invested the funds on their behalf. No doubt there are special circumstances which relate to Singapore which might justify such a ‘nannying’ attitude by its government, but I’ll need to be educated on this.<BR/><BR/><I>That's what SWFs are, funds which invest money earned by a country to generate more for the country in the future. You think that's a bad idea, I think it's simple, basic good business.</I><BR/><BR/>You are right – I think it is a very bad idea, the very antithesis of <I>simple, basic good business</I>! The state shouldn’t be in business, even passively. It generally is a very bad investor. Better to use any surpluses generated by a successful economy to have lower taxes while at the same time developing a liberal and flexible legal and regulatory regime to permit investors at home and from abroad to invest in that economy at low cost with confidence as to their property rights and with access to efficient, equitable and predictable justice. <BR/><BR/>Honestly Seebee, do you really think that over the last 30 years, had the US, European or Australian governments set up SWFs, that they would have been able to resist the temptation to raid such funds to pay off debts, support further public spending, boost employment? Do you seriously think such funds would still exist in those countries, untouched, inviolate quietly working away to further increase national wealth? And, pray do tell, when is the “future”? What is the test for when some politician can justifiably sell SWF assets to raise funds to use for some other public good? Perhaps after such a politician has followed some disastrous fiscal/economic policy that results in the state needing to be bailed out? You make it sound all very nice in principle with your idealism. The reality, as we have seen time and time again, is very different. <BR/><BR/>The best way to ensure that an economy grows successfully over time is to allow private citizens and companies the freedom to invest their own funds with only minimal but effective state oversight and regulation. Not, as you appear to advocate, to get the state to compete with such private investors – that will only end in disaster. This is a fundamental axiom and remains as true today as it did before the credit crunch ……. but I risk leading us into another debate entirely.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-21258644.post-59310183503502730452008-12-17T18:46:00.000+04:002008-12-17T18:46:00.000+04:00Jan, the SWF reference in my post was just one sm...<B>Jan</B>, the SWF reference in my post was just one small part in a long bit of thinking out loud rambling.<BR/><BR/>First you seemed to confuse SWFs with nationalisation, now you confuse them with private investment funds. <BR/><BR/>How are they different from private funds? Ownership of course. The whole point is that they are <I>national</I> investment funds, owned by the country, not by a company, and are used to create more long-term wealth for that country, not for an individual company's limited number of shareholders.<BR/><BR/>They don't need extra taxation to create. Singapore for example has invested the majority of the wealth it's generated over the past few decades into its own infrastructure. But it has also put a percentage into its SWF, which it largely invests overseas. The earnings on those investments bring more foreign exchange into Singapore and add to the budget the government has at its disposal to do the things it needs to do.<BR/><BR/>That's what SWFs are, funds which invest money earned by a country to generate more for the country in the future.<BR/><BR/>You think that's a bad idea, I think it's simple, basic good business.<BR/><BR/><I>...economies, particularly those in the Anglo Saxon west, have been dominated by private funds with substantial benefits – I don’t see how the lack of a few SWFs has made any difference?</I> <BR/>How can you not see the difference? They are two totally different things because of ownership. The principle of investing funds to generate additional income is the same. Who benefits from the investment is the difference. Private funds are private funds used to benefit their shareholders. A SWF is owned by the country and used to benefit the entire country.<BR/><BR/><I>I am also of the opinion that taxing people/business to provide funds to be given to SWFs to invest is not good policy (I’ll make my own investment decisions thank you!)</I> <BR/>You do make your own investment decisions for your own money, but you have no influence on how your government invests <I>its</I> income. Surely you're not suggesting that you have any influence over their decisions because they don't have a SWF? They raise income and decide how to spend or invest it, you're not involved in the decision whether they have a SWF or not. <BR/><BR/>You think that using a percentage of income to create a fund which generates foreign exchange and adds to the country's budget is a bad idea. I think it's a good idea.Seabeehttps://www.blogger.com/profile/06939892206726271433noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-89216504028442464622008-12-17T17:37:00.000+04:002008-12-17T17:37:00.000+04:00Neither SWFs nor nationalised industries have to b...<I>Neither SWFs nor nationalised industries have to be run by politicians and I didn't suggest that they should be. They should be run by qualified business people on purely business lines. Ownership is a separate issue - publicly listed companies are not run by the owners, the shareholders, but by appointed executives and a Board of Directors. A nationalised industry or a SWF should not be any different.</I><BR/><BR/>Ahhh Seebee, you are such an idealist. Your use of the word “should” in the last two sentences of your comment above gives you away. But I‘ll come back to this in a moment.<BR/><BR/>Okay, so if it is your contention that ownership is irrelevant, please explain how SWFs are any different from the insurance funds, pension funds and other private funds (let’s define them as “private funds”), which have so dominated the private sectors of many western countries over the past few decades. Why do you think it was <I>an astonishing lack of good business and good government over the decades</I> for western governments not to have set up SWFs? Their economies, particularly those in the Anglo Saxon west, have been dominated by private funds with substantial benefits – I don’t see how the lack of a few SWFs has made any difference?<BR/>Your whole argument seems to me to be that SWFs are somehow different, maybe superior, to all the other types of funds existing in western countries? The only reason I could think that you would conclude this was if you were of the opinion that politicians and/or civil servants are better than business people at making investment decisions and directing the management of such investments (and this being so that you might be advocating a policy not dissimilar to one of nationalizing industries). This does not appear to be the case from your response to my comment, so I am confused and cannot see how SWFs differ in anyway from other private funds. <BR/><BR/>Perhaps there is some other characteristic of SWFs that makes them stand apart? Maybe you don’t think they are any different from private funds but rather you think the tax take in western countries should have been hitherto much higher and the resulting increased income diverted into SWFs? Or maybe you think other public spending should have been reduced (defense budgets will no doubt be a favorite?) and the resulting savings invested instead in SWFs? But if this were the case, wouldn’t it be simpler for governments to simply invest part of their tax revenue in private funds rather than set up SWFs which are otherwise indistinguishable from private funds? No, I am definitely overlooking something.<BR/><BR/>Now, back to your idealism: I think you are mistaken to believe that government might be completely passive with regard to the investment decisions relating to its assets and that it would never interfere (other than in its regulatory or legal oversight functions) with the business people appointed to run/operate/manage government investments. Not in the real world! You won’t be surprised from the forgoing and my previous comment that I highly doubt that any SWF outside of Norway (and I am sceptical even in that case) is immune to extensive political meddling. Furthermore, you’ll be less surprised to learn that I think such meddling will be extremely detrimental to the long-term profitability of SWFs and the wider economy. I am also of the opinion that taxing people/business to provide funds to be given to SWFs to invest is not good policy (I’ll make my own investment decisions thank you!). So in conclusion, it won’t surprise you to learn that I think that SWFs are a bad idea for most western countries both now and in the past (I have not even touched upon the undoubted anti-trust issues they might cause) and this is why I take issue with your assertion that it was a lack of good business and good government over the decades not for western governments to have established SWFs.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-21258644.post-54460578507398398442008-12-17T12:15:00.000+04:002008-12-17T12:15:00.000+04:00Jan, i was talking about SWFs not nationalisation....<B>Jan</B>, i was talking about SWFs not nationalisation. The two things are not connected. A SWF is simply a fund of national wealth which is invested, either locally or internationally, to produce more wealth.<BR/><BR/>Neither SWFs nor nationalised industries have to be run by politicians and I didn't suggest that they should be. They should be run by qualified business people on purely business lines. Ownership is a separate issue - publicly listed companies are not run by the owners, the shareholders, but by appointed executives and a Board of Directors. A nationalised industry or a SWF should not be any different. <BR/><BR/><B>BM</B>, I remember the WA fiasco well. The problem wasn't the setting up of a SWF but the fact that it was set up by, run by and for the personal benefit of a bunch of incompetent crooks.Seabeehttps://www.blogger.com/profile/06939892206726271433noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-25054919028147202962008-12-16T19:07:00.000+04:002008-12-16T19:07:00.000+04:00Oh there are some examples of Western ventures int...Oh there are some examples of Western ventures into SWF. There was WA Inc. Aka, the WA Inc royal commission and to a period between 1983 and 1991 in Western Australia when a succession of state governments colluded in major business dealings with private businessmen including Alan Bond and Laurie Connell. The outcome was a disastrous loss of public money, estimated at a minimum of $600 million and the insolvency of several large corporations. Bond and Connell were major contributors to the party in government, the Australian Labor Party and its fund-raising structure, the Curtin Foundation. The premier for most of that time was Brian Burke. His successor Peter Dowding was also responsible for certain major transactions, including the rescue of Rothwells. In 1991, political scientist Patrick O'Brien identified the four Labor leaders most associated with WA Inc deals as premier Dowding, deputy premier David Parker, minister for industrial development Julian Grill and attorney-general Joe Berinson—known collectively as the gang of four. <BR/>Remember also WA pension money diverted into failing banks, money that was lost when the bank went under.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-21258644.post-45642682674297976292008-12-16T15:46:00.000+04:002008-12-16T15:46:00.000+04:00Only a few months ago they were ranting about SWFs...<I>Only a few months ago they were ranting about SWFs, how they were A Bad Thing, how they had to be controlled, dangerous foreigners buying up their assets. Now they're pleading for handouts from them, and I bet they're wishing they had their own to call on</I><BR/><BR/>Really? Apart from Nicolas Sarkozy, I have not seen many western governments expressing regret at to the lack of local SWFs. <BR/><BR/><I>What an astonishing lack of good business and good government over the decades. All that wealth generated, from the Industrial Revolution to the European empires plundering wealth from so many colonies and on into the post colonial era when they were still the big economic powers, and they didn't save a cent. Didn't think to establish a Sovereign Wealth Fund.</I><BR/><BR/>It appears from your statement that you think it might have been a good thing for western governments over the years and decades to have taken a portion of tax payers' money and placed it into funds or similar arrangements and procured that those funds invested in certain specified sectors of the economy? Can you construe such arrangements in principle from the policies pursued by many western governments to nationalize many key industries in western countries in the mid twentieth century? Do you think such heavy state involvement was beneficial for those sectors and the economy as a whole? In essence, are you not suggesting that politicians rather than private businessmen would be better qualified to make investment decisions and would have greater success in doing so? <BR/><BR/>I would be interested to read your thoughts on this; perhaps you think the SWF model will differ in some way from older models of state involvement in commercial sector?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-21258644.post-51348417991915354192008-12-16T14:07:00.000+04:002008-12-16T14:07:00.000+04:00Is it okay to just LOL @ Alexander's words, or doe...Is it okay to just LOL @ Alexander's words, or does Bridget have to contribute some serious-as-a-heart-attack comment..? ;)<BR/><BR/>Ta for the insight Seabee!Jones. Bridget Jones.https://www.blogger.com/profile/13891952469037092164noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-46352545261145371292008-12-16T12:14:00.000+04:002008-12-16T12:14:00.000+04:00Yes, agreed Nick, but those social facilities you ...Yes, agreed <B>Nick</B>, but those social facilities you mention - education, universal health care, public housing, social security - are new things relative to the hundreds of years over which wealth was accumulated by those countries. For most of the time the wealth was pouring in those things simply didn't exist, they're a product of the 20th century, even the second half of the 20t century. <BR/><BR/>The early public transport, trains, was privately developed and owned. In the UK for example the railway was only nationalised in 1948, which is the same year the National Health Service began. <BR/><BR/>Don't you think that just a percentage of the wealth over the centuries could have been put into a SWF?Seabeehttps://www.blogger.com/profile/06939892206726271433noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-29195843726924487812008-12-16T11:17:00.000+04:002008-12-16T11:17:00.000+04:00By and large I agree with you, but not on the subj...By and large I agree with you, but not on the subject of 'sovereign wealth funds'.<BR/>Contrary to Saudi or the puny little UAE, Western (European) countries do have public healthcare, state schools and higher education, public transport, benefits, subsidized housing programmes, motorways, trains etc etc - all to be maintained and invested in from tax revenue.<BR/>It's fricking easy to have a 'wealth fund' if you have oil and are not accountable.huthttps://www.blogger.com/profile/09299456569511629114noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-39762006868594702292008-12-16T10:37:00.000+04:002008-12-16T10:37:00.000+04:00Reasoned analysis. Which, with all due respect, is...Reasoned analysis. Which, with all due respect, isn't as fun to watch as all-out blind panic.<BR/><BR/>But I get the definite feeling that much of Dubai is still doing the fingers in the ear and shout lalala! thing...Alexanderhttps://www.blogger.com/profile/14141884153180374138noreply@blogger.comtag:blogger.com,1999:blog-21258644.post-12336833512608391802008-12-15T19:53:00.000+04:002008-12-15T19:53:00.000+04:00I agree with each & every sentence you wrote. ...I agree with each & every sentence you wrote. The way things were moving, the mess we find ourselves now was inevitable. And as you said, this slowdown should bring people & governments to their senses and help them change for the better.Anonymousnoreply@blogger.com