You could help yourself to any of these I guess, they're on a one kilometre stretch in Dubai Marina.
There are two more that could be holiday cars but the dust is getting thicker and they're beginning to look as though they may be abandoned too...
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Thursday, September 23, 2010
Free cars
An update on the abandoned cars posts I've been doing every so often.
You could help yourself to any of these I guess, they're on a one kilometre stretch in Dubai Marina.
There are two more that could be holiday cars but the dust is getting thicker and they're beginning to look as though they may be abandoned too... 
You could help yourself to any of these I guess, they're on a one kilometre stretch in Dubai Marina.
There are two more that could be holiday cars but the dust is getting thicker and they're beginning to look as though they may be abandoned too...
Monday, August 09, 2010
Trivia
Admittedly it's not much of a photo but I thought I should record the end of a saga:
Why do I bother with a photo of a parking bay?
I've posted a couple of times about an abandoned BMW, in fact the first post was a year ago when the car had already been abandoned for months.
It was in the parking bay in the first photo. It's gone at long last.
The end of another Dubai story.
Why do I bother with a photo of a parking bay?
I've posted a couple of times about an abandoned BMW, in fact the first post was a year ago when the car had already been abandoned for months.
It was in the parking bay in the first photo. It's gone at long last.
The end of another Dubai story.
Wednesday, July 21, 2010
Car dumping
The reality behind that very silly tabloid story of thousands of cars left at the airport by fleeing expats is that abandoning cars is par for the course in this area.
There are figures based on reports from banks, car dealers and the police that about 1400 cars a year on average are abandoned around Dubai.
I guess the reason for the phenomenon is a combination of factors.It's a very transient society with people moving in or leaving every day. People come here 'for a couple of years', or they decide they don't like it and leave, or their contract finishes or, in more recent times, they lose their job.
Then there's the draconian debtor law.
And the time & frustration involved in doing anything like selling a car.
People borrow money from a bank to buy their car. Then for whatever reason they leave Dubai.
The easy way out is to think of the payments as a car rental or lease...and just leave it where you last parked it.
The giveaway is the amount of dust on the car.
Those left while the owners are on holiday get a layer of dust, but it's not too thick and it's cleaned off as soon as they get back.
Others though have a thick layer and they start to attract message writers.
In just over one kilometre in Dubai Marina this morning I saw a few that could still be holiday cars, but there are others in the thick dust category. It's quite a few abandoned cars for a short stretch of road:
But they're not all from Dubai:
And this BMW is a permanent fixture. It had already been there for months when I first posted about it in August 2009.
Here it is this morning...
There are figures based on reports from banks, car dealers and the police that about 1400 cars a year on average are abandoned around Dubai.
I guess the reason for the phenomenon is a combination of factors.It's a very transient society with people moving in or leaving every day. People come here 'for a couple of years', or they decide they don't like it and leave, or their contract finishes or, in more recent times, they lose their job.
Then there's the draconian debtor law.
And the time & frustration involved in doing anything like selling a car.
People borrow money from a bank to buy their car. Then for whatever reason they leave Dubai.
The easy way out is to think of the payments as a car rental or lease...and just leave it where you last parked it.
The giveaway is the amount of dust on the car.
Those left while the owners are on holiday get a layer of dust, but it's not too thick and it's cleaned off as soon as they get back.
Others though have a thick layer and they start to attract message writers.
In just over one kilometre in Dubai Marina this morning I saw a few that could still be holiday cars, but there are others in the thick dust category. It's quite a few abandoned cars for a short stretch of road:
But they're not all from Dubai:
And this BMW is a permanent fixture. It had already been there for months when I first posted about it in August 2009.
Here it is this morning...
Sunday, July 11, 2010
Camel milk to Europe
Camel milk exported to Europe?
The UK Daily Telegraph says:
The European Commission has provisionally approved plans by two Middle Eastern camel farms to export the milk to Britain.
United Arab Emirates-based firm Camelicious says it is only waiting on checks by EU health and hygiene inspectors and hopes to begin exports to Europe next year.
Looks like a small example of how the local economy is diversifying.
While it probably won't be more than a fad, sold in health food shops, it could be good business for Camelicious.
The story's here.
The UK Daily Telegraph says:
The European Commission has provisionally approved plans by two Middle Eastern camel farms to export the milk to Britain.
United Arab Emirates-based firm Camelicious says it is only waiting on checks by EU health and hygiene inspectors and hopes to begin exports to Europe next year.
Looks like a small example of how the local economy is diversifying.
While it probably won't be more than a fad, sold in health food shops, it could be good business for Camelicious.
The story's here.
Monday, July 05, 2010
That's more like it
It's back to basics with the official opening of the new Dubai World Central/Al Maktoum airport.
As I've said in many previous posts, Dubai is all about trading and always was. It's the reason for its very existence.
The city's economy has always been based on trading, on doing business. Spurts of growth have come as a result of forward-thinking investment in infrastructure based on growing the business base.
The feverish concentration on residential real estate over the past six or so years, particularly as it was unplanned and unregulated, had nothing to do with what Dubai's all about and it's caused most of the problems we're experiencing now.
In the sixties the investment in business infrastructure was the dredging of The Creek, using money borrowed from oil-rich Kuwait, to allow larger cargo boats to use it as a base.
The then ruler Sheikh Rashid also invested in excellent, for the time, telecoms infrastructure.
For access for business people and cargo he invested in Dubai International Airport and Port Rashid.
That good communications infrastructure led to international companies relocating their Middle East offices to Dubai when they left Beirut because of the civil war in the early seventies.
Then came Jebel Ali Port and money was also put into industrial development, such as Dubal, Ducab, all now highly successful and profitable.
I was here in those days and I remember the scepticism, and ridicule, about it all. They were dismissed as 'a waste of money' and 'ego trip developments'. Jebel Ali Port had no commercial future, it was far too big and not on any major trade routes, it was really for the US fleet to use as a base.
The same ridicule is not uncommon about the new airport. Why on earth does Dubai need the biggest airport in the world? What a huge waste of money on a grandiose ego trip. And there have been many gleeful posts on blogs and other sites saying with authority that it was one of the projects cancelled when the economic meltdown hit.
I remember an interview a few years back with someone high up in the airport management, I forget who it was. His point was that it wasn't about what we need now but is about planning ahead, anticipating what would be needed thirty or forty years in the future.
His made the points that land is at a premium in the emirate and if it wasn't reserved now for the airport it wouldn't be available when it was needed in forty or fifty years time. The airport wouldn't be the biggest in the world for some years, it would be constructed in stages depending on demand. And of course it was close to Jebel Ali Port to conveniently link sea and air cargo.
Appropriately the new airport has opened with cargo carriers, while passenger traffic is due to begin next March.
Gulf News has a report on the opening of the new airport here.
As I've said in many previous posts, Dubai is all about trading and always was. It's the reason for its very existence.
The city's economy has always been based on trading, on doing business. Spurts of growth have come as a result of forward-thinking investment in infrastructure based on growing the business base.
The feverish concentration on residential real estate over the past six or so years, particularly as it was unplanned and unregulated, had nothing to do with what Dubai's all about and it's caused most of the problems we're experiencing now.
In the sixties the investment in business infrastructure was the dredging of The Creek, using money borrowed from oil-rich Kuwait, to allow larger cargo boats to use it as a base.
The then ruler Sheikh Rashid also invested in excellent, for the time, telecoms infrastructure.
For access for business people and cargo he invested in Dubai International Airport and Port Rashid.
That good communications infrastructure led to international companies relocating their Middle East offices to Dubai when they left Beirut because of the civil war in the early seventies.
Then came Jebel Ali Port and money was also put into industrial development, such as Dubal, Ducab, all now highly successful and profitable.
I was here in those days and I remember the scepticism, and ridicule, about it all. They were dismissed as 'a waste of money' and 'ego trip developments'. Jebel Ali Port had no commercial future, it was far too big and not on any major trade routes, it was really for the US fleet to use as a base.
The same ridicule is not uncommon about the new airport. Why on earth does Dubai need the biggest airport in the world? What a huge waste of money on a grandiose ego trip. And there have been many gleeful posts on blogs and other sites saying with authority that it was one of the projects cancelled when the economic meltdown hit.
I remember an interview a few years back with someone high up in the airport management, I forget who it was. His point was that it wasn't about what we need now but is about planning ahead, anticipating what would be needed thirty or forty years in the future.
His made the points that land is at a premium in the emirate and if it wasn't reserved now for the airport it wouldn't be available when it was needed in forty or fifty years time. The airport wouldn't be the biggest in the world for some years, it would be constructed in stages depending on demand. And of course it was close to Jebel Ali Port to conveniently link sea and air cargo.
Appropriately the new airport has opened with cargo carriers, while passenger traffic is due to begin next March.
Gulf News has a report on the opening of the new airport here.
Saturday, June 26, 2010
Yes, but when?
Sheikh Mohammed Bin Rashid's CNN interview is getting plenty of exposure, especially the 'everything we started, we are going to finish' comment.
I don't doubt it, but the real question for residents suffering from construction fatigue is when.
An example is the Al Sufouh tram line. Nothing's happened for months.
The roads in front of JBR and all the way past Media City, after years of construction, were finished. Then they were dug up. Re-finished. Then dug up again for the tram line.
Then...nothing.
We're left to negotiate several kilometres of abandoned road works.
That's something that clearly hasn't been affected by the meltdown, digging up areas which have, at great expense and to the huge relief of users, been completed.
The same areas are dug up over and over again.
It seems to me that hole digging's one of the very few jobs-for-life these days.
CNN interview.
Projects will be finished.
I don't doubt it, but the real question for residents suffering from construction fatigue is when.
An example is the Al Sufouh tram line. Nothing's happened for months.
The roads in front of JBR and all the way past Media City, after years of construction, were finished. Then they were dug up. Re-finished. Then dug up again for the tram line.
Then...nothing.
We're left to negotiate several kilometres of abandoned road works.
That's something that clearly hasn't been affected by the meltdown, digging up areas which have, at great expense and to the huge relief of users, been completed.
The same areas are dug up over and over again.
It seems to me that hole digging's one of the very few jobs-for-life these days.
CNN interview.
Projects will be finished.
Wednesday, February 24, 2010
Getting back to basics
People say that Dubai has no culture. I think it has, and that culture is working.
Trading. Doing business. Wheeling and dealing.
Location has always been a key. Added to that has been access and infrastructure. Dubai has always led the region in all three.
It's very much a working city. People come here to work, they work long and hard hours. It's all about working. Working is Dubai's DNA.
It's something I've talked about it in several previous posts, recently in response to gleeful 'Dubai crash' stories.
The fact is that Dubai always has been and always will be a trading centre, but that was all but forgotten in the mad property scramble.
It was madness.
Billions of dollars changed hands in spite of there being no laws governing the sector.
Speculators were allowed to flip properties, even without having made one payment, and made millions doing so. For the first two or three years it was all done not only with no laws in place but with no properties actually built.
Caught up in the madness too many senior executives went on huge ego trips. They announced more and more outlandish developments and they borrowed short term money to buy companies which would produce only long term returns.
Then the world hit the wall. Dubai is part of the world so we hit the wall too.
Not a bad thing, it was a runaway train out of control.
Huge, badly thought out developments have been halted. Many of the incompetent senior executives have gone.
But behind all that madness, unnoticed, was the trading Dubai. From the big merchant family conglomerates to the small and medium business which are so important to the economy, the trading went on. The world didn't comment because it didn't notice.
It's why the 'Dubai doomed' stories, the 'ghost town' predictions are wrong. The people writing them don't know Dubai's history. They think, indeed they say, that the city sprouted from the desert ten years ago. Before that it was just a small village they say. They think that property is what Dubai is all about.
They couldn't be more wrong.
Today's Gulf News has some stories talking about the real economy.
The lead story is that Dubai's non-oil direct exports jumped 23% in 2009 over 2008. The value of exports through Dubai Customs exit points in 2009 was Dh52.4 billion (US$14.25 billion).
The major product categories were valuable metals and products made from them, processed food products, plastics, rubber and natural metal products.
The top export markets were India, Switzerland, Saudi Arabia, Pakistan, Iran.
Another front page story says that passenger and cargo business at Dubai International Airport were way up in January over January last year. Passenger traffic was up 17% at 3.38 million, which was also a monthly record, beating the previous best of 3.81 million of December 2009.
Freight volume was up 31.5% over last January, at 171,453 tonnes.
The airport is now the world's fourth busiest for passenger traffic and fifth busiest for freight. Last year 40.9 million passengers used the airport.
A fourth Chinese airline, China Eastern from Yunan, also began flying into Dubai this week, so trade with the world's third largest economy should grow.
The new cruise ship terminal was also opened yesterday, in a joint inauguration with the cruise ship Costa Deliziosa.
The terminal, which can handle four ships simultaneously, is currently used by Costa Cruises, Royal Caribbean and Aida cruises. Last year there were eighty cruise ship calls to Port Rashid, bringing 263,000 passengers.
So there's plenty going on in the real world of Dubai's economy, as it always has.
Let's hope that lessons have been learned and in future the focus will be on Dubai's strengths.
The full stories:
Exports.
Airport.
Chinese airline
Cruise terminal.
Trading. Doing business. Wheeling and dealing.
Location has always been a key. Added to that has been access and infrastructure. Dubai has always led the region in all three.
It's very much a working city. People come here to work, they work long and hard hours. It's all about working. Working is Dubai's DNA.
It's something I've talked about it in several previous posts, recently in response to gleeful 'Dubai crash' stories.
The fact is that Dubai always has been and always will be a trading centre, but that was all but forgotten in the mad property scramble.
It was madness.
Billions of dollars changed hands in spite of there being no laws governing the sector.
Speculators were allowed to flip properties, even without having made one payment, and made millions doing so. For the first two or three years it was all done not only with no laws in place but with no properties actually built.
Caught up in the madness too many senior executives went on huge ego trips. They announced more and more outlandish developments and they borrowed short term money to buy companies which would produce only long term returns.
Then the world hit the wall. Dubai is part of the world so we hit the wall too.
Not a bad thing, it was a runaway train out of control.
Huge, badly thought out developments have been halted. Many of the incompetent senior executives have gone.
But behind all that madness, unnoticed, was the trading Dubai. From the big merchant family conglomerates to the small and medium business which are so important to the economy, the trading went on. The world didn't comment because it didn't notice.
It's why the 'Dubai doomed' stories, the 'ghost town' predictions are wrong. The people writing them don't know Dubai's history. They think, indeed they say, that the city sprouted from the desert ten years ago. Before that it was just a small village they say. They think that property is what Dubai is all about.
They couldn't be more wrong.
Today's Gulf News has some stories talking about the real economy.
The lead story is that Dubai's non-oil direct exports jumped 23% in 2009 over 2008. The value of exports through Dubai Customs exit points in 2009 was Dh52.4 billion (US$14.25 billion).
The major product categories were valuable metals and products made from them, processed food products, plastics, rubber and natural metal products.
The top export markets were India, Switzerland, Saudi Arabia, Pakistan, Iran.
Another front page story says that passenger and cargo business at Dubai International Airport were way up in January over January last year. Passenger traffic was up 17% at 3.38 million, which was also a monthly record, beating the previous best of 3.81 million of December 2009.
Freight volume was up 31.5% over last January, at 171,453 tonnes.
The airport is now the world's fourth busiest for passenger traffic and fifth busiest for freight. Last year 40.9 million passengers used the airport.
A fourth Chinese airline, China Eastern from Yunan, also began flying into Dubai this week, so trade with the world's third largest economy should grow.
The new cruise ship terminal was also opened yesterday, in a joint inauguration with the cruise ship Costa Deliziosa.
The terminal, which can handle four ships simultaneously, is currently used by Costa Cruises, Royal Caribbean and Aida cruises. Last year there were eighty cruise ship calls to Port Rashid, bringing 263,000 passengers.
So there's plenty going on in the real world of Dubai's economy, as it always has.
Let's hope that lessons have been learned and in future the focus will be on Dubai's strengths.
The full stories:
Exports.
Airport.
Chinese airline
Cruise terminal.
Sunday, December 20, 2009
Catching up
The past couple of days have been spent with Dilip retrieving various file from my computer after the virus got in and stuffed it. He's getting the files out without bringing the virus with them.
So far so good, we've managed to find some of the e-mail stuff that I hadn't got around to backing-up so, for example, I've found some of the e-mail addresses I thought I'd lost. I'm gradually rebuilding the address book, and also putting sites back into Favourites. There's also softwear to re-install so it's all taking a lot of time.
That's delayed me following on from the Abu Dhabi rescue story, which I wanted to do a few days ago.
The rescue attracted the usual comments about AD grabbing Dubai's assets, such as Emirates, in return, but I don't subscribe to that theory.
Even in the unlikely event that it happened we wouldn't know about it anyway. It would be done quietly behind closed doors. But I don't think for one moment it will happen.
The only real long-shot is a merger between Emirates and Etihad to make a true national airline. But I don't even see that happening. They're both strong international brands which billions have gone into building and to compromise that would be a ridiculous business decision.
Another real long-shot would be an Al Nahyan on the board of Dubai World to make sure the restructuring is done to their satisfaction - but again I don't see it as a realistic possibility.
The deal was a straight commercial one, $10 billion over five years at 4% interest are the reports.
Additionally, AD doesn't need the money. They pump about 2.7 million barrels of oil a day which at about $7o a barrel is getting on for $70 billion a year. That makes the profits from companies such as Emirates, Dubal, Ducab, Jumeirah relatively trifling.
When people have enough money what want is power and that's what I think AD will want in return for helping the other emirates. Less independence for individual emirates with more federal (meaning Abu Dhabi) influence over events, laws, conduct.
So far so good, we've managed to find some of the e-mail stuff that I hadn't got around to backing-up so, for example, I've found some of the e-mail addresses I thought I'd lost. I'm gradually rebuilding the address book, and also putting sites back into Favourites. There's also softwear to re-install so it's all taking a lot of time.
That's delayed me following on from the Abu Dhabi rescue story, which I wanted to do a few days ago.
The rescue attracted the usual comments about AD grabbing Dubai's assets, such as Emirates, in return, but I don't subscribe to that theory.
Even in the unlikely event that it happened we wouldn't know about it anyway. It would be done quietly behind closed doors. But I don't think for one moment it will happen.
The only real long-shot is a merger between Emirates and Etihad to make a true national airline. But I don't even see that happening. They're both strong international brands which billions have gone into building and to compromise that would be a ridiculous business decision.
Another real long-shot would be an Al Nahyan on the board of Dubai World to make sure the restructuring is done to their satisfaction - but again I don't see it as a realistic possibility.
The deal was a straight commercial one, $10 billion over five years at 4% interest are the reports.
Additionally, AD doesn't need the money. They pump about 2.7 million barrels of oil a day which at about $7o a barrel is getting on for $70 billion a year. That makes the profits from companies such as Emirates, Dubal, Ducab, Jumeirah relatively trifling.
When people have enough money what want is power and that's what I think AD will want in return for helping the other emirates. Less independence for individual emirates with more federal (meaning Abu Dhabi) influence over events, laws, conduct.
Monday, December 14, 2009
Abu Dhabi in last minute rescue
Today is when the Nakheel $4.1 billion sukuk, or Islamic bond, is due for payment.
It's the big one. It's been the focus of much international attention since the global slump hit Dubai, attention which reached fever pitch about three weeks ago when Dubai's government said it was seeking a delay in payment of Dubai World companies' debts.
I posted about that here with links to some of the international reactions.
It had been assumed by investors and commentators that the debts of Dubai government related or owned companies were guaranteed by the government. And ultimately by oil-rich Abu Dhabi if necessary.
But both governments said that there had never been such a guarantee.
Abu Dhabi went further and said that they would 'pick and choose' which companies they supported.
Non payment would mean default, legal action to seize assets has been threatened, the whole Islamic bond industry was under a cloud...and today's the day.
A couple of hours ago the Emirates news agency WAM issued a statement from Sheikh Ahmed bin Saeed Al Maktoum, in his capacity as Chairman of the Dubai Supreme Fiscal Committee.
"The Government of Abu Dhabi has agreed to fund $10 billion to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World.
As a first action for the new fund, the Government of Dubai has authorized $4.1 billion to be used to pay the sukuk obligations that are due today. The remaining funds would also provide for interest expenses and company working capital through April 30, 2010..."
Phew!
Brinkmanship.
By the way, BBC World Service news says that there are no conditions on the $10 billion.
Hmmmmm...
The announcement in full is here.
It's the big one. It's been the focus of much international attention since the global slump hit Dubai, attention which reached fever pitch about three weeks ago when Dubai's government said it was seeking a delay in payment of Dubai World companies' debts.
I posted about that here with links to some of the international reactions.
It had been assumed by investors and commentators that the debts of Dubai government related or owned companies were guaranteed by the government. And ultimately by oil-rich Abu Dhabi if necessary.
But both governments said that there had never been such a guarantee.
Abu Dhabi went further and said that they would 'pick and choose' which companies they supported.
Non payment would mean default, legal action to seize assets has been threatened, the whole Islamic bond industry was under a cloud...and today's the day.
A couple of hours ago the Emirates news agency WAM issued a statement from Sheikh Ahmed bin Saeed Al Maktoum, in his capacity as Chairman of the Dubai Supreme Fiscal Committee.
"The Government of Abu Dhabi has agreed to fund $10 billion to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World.
As a first action for the new fund, the Government of Dubai has authorized $4.1 billion to be used to pay the sukuk obligations that are due today. The remaining funds would also provide for interest expenses and company working capital through April 30, 2010..."
Phew!
Brinkmanship.
By the way, BBC World Service news says that there are no conditions on the $10 billion.
Hmmmmm...
The announcement in full is here.
Wednesday, December 02, 2009
Removing abandoned cars
On my regular route through Dubai Marina I pass four obviously abandoned cars.
Dust on cars is normal of course and when people are on holiday for a month it starts to really build up. But the abandoned ones are obvious because the dust is really thick and graffiti starts to appear in it.
They just stay where they are, the authorities seem not to be active in this area removing them, like the BMW I posted about here.
Things may be improving though:
Apart from the fact that's it's the first infringement notice I've seen in this area, the department involved caught my attention.
Not the police, as I'd assumed it would be, but the Waste Management Department.
They're on the ball on this one too, it can't have been left too long ago. The only fine, for Salik, is on July 16.
Dust on cars is normal of course and when people are on holiday for a month it starts to really build up. But the abandoned ones are obvious because the dust is really thick and graffiti starts to appear in it.
They just stay where they are, the authorities seem not to be active in this area removing them, like the BMW I posted about here.
Things may be improving though:
Here's the sticker on the windscreen:
Apart from the fact that's it's the first infringement notice I've seen in this area, the department involved caught my attention.
Not the police, as I'd assumed it would be, but the Waste Management Department.
They're on the ball on this one too, it can't have been left too long ago. The only fine, for Salik, is on July 16.
Monday, November 30, 2009
Impact from the DW issue
I treat this blog not only as somewhere where I can express my own opinions but also as a place for conversation. I start the conversation by posting something, people join in by leaving comments, I and others respond and so the conversation goes on.
This post is an example, I'm continuing a conversation by responding to questions left on my last post about the Dubai World debt issue and the PR surrounding it. I started to answer in the comments box but it was really too long as a comment so I decided to turn it into a new post.
The question was: How do you think this will impact Dubai in the next 3 months and also, if this has just come out now, what other stories do you think will start to 'appear' that have remained hidden so far?
First a disclaimer: Predicting the future is nothing more than a guess. Whoever does it, however expert they are, it's just making a personal guess as to what may happen.
I've been asked what I think, I could be right or I could be wrong, it's only a guess, but here goes:
Impact over the next three months? Three months is a very short period. My thoughts are that we won't see much impact down here at street level in that time. Unless you work for one of the DW companies, that is. If you do then you can expect even more changes than you've experienced over the past year. But for the rest of us, no.
There is currently bad publicity internationally for Dubai on a massive scale and I'm sure that will continue, but it relates to business so I don't see it affecting, for example, tourist arrivals.
As for the financial world, after the initial and inevitable panic, and when eventually the information vacuum is filled by official, meaningful, believable statements from the authorities here, things will settle down. It will take a long, long time for confidence to be restored but it will be eventually.
In the real economy, as a result of the global downturn we, like many other places, already have economic slowdown, redundancies, companies closing, invoices not being paid resulting in huge cashflow problems, a property price slump, tighter credit conditions, less spending. I don't see the DW issue making any difference to that in the short term.
The Feds are in damage control mode, taking action to limit impact on the economy in general.
There's been the entirely expected run on the local share markets this morning, when they re-opened after the Eid holiday. Dubai’s lost 7.2% late morning, the biggest drop since November 2008, and Abu Dhabi’s index was down 8.2%, the most since May 2006.
Big drops, but we've seen it before. They'll bounce back.
The Feds have announced support for the banks, the companies most at risk from the Dubai World problem, having set up a special liquidity facility for local and foreign banks operating in the UAE. They've also stated that they will support selected Dubai companies, without naming them. I assume it will depend on which ones they think are viable.
There are obviously high-level meetings going on between Federal and Dubai government officials so I expect more measures will be announced if they're felt necessary as the Feds get to the facts.
Put into perspective, ignoring the terrible handling of the issue in Dubai over the last year culminating in the new PR disaster, the root of the issue is that a company is planning to restructure its debt. That's normal business practice and if it had been handled competently we wouldn't have the problem we now have.
So in the next three months, which was the question, I don't think we'll experience any impact specifically from this Dubai World issue.
To carry on the thought, over the longer term I think the impact will be positive.
What I expect to see is a stop to the overdevelopment, especially of farcical projects which were simply not viable and were nothing to do with commerce, the lifeblood of Dubai. They're what caused the problem in the first place.
The companies in DW group will be reorganised now by someone who knows how to do it, and who according to the reports will be given the authority to carry out whatever's necessary. I assume there'll be payment of overdue invoices, a restructuring of debt and the companies left in the group will be commercially viable.
In a more general sense I think that instead of focusing on property and the speculation that goes with it the focus will go back to Dubai's tradition of trading based on its location, plus the new tourism industry. That should have been the focus for Dubai's latest development boom; they should have built the airport, the commercial cluster 'cities' and at least parts of Dubailand but not Palm Deira, Palm Jebel Ali/Waterfront, The World, the Arabian Canal for example. They didn't, they got carried away and lost focus but I'm sure it will now get back to those basics.
Politically, I think there'll also be far less independence in future for Dubai, and the other emirates, with a much stronger federal government.
On that subject it'd be interesting to know whether the complete lack of comment from Dubai authorities is voluntary head-in-the-sand or whether the Feds have said 'keep quiet and leave it to us'.
The other question was: Any other hidden stories? The normal way of dealing with bad events in this region is to do it behind closed doors, sort out the problem without letting anyone know there even was a problem. Maybe there have been others, will be others, which will be dealt with in that traditional way.
But I can't see another similar problem to this Dubai World debt thing appearing.
It's the big one. It involves the biggest companies, government related or owned, responsible for the biggest, most-publicised projects.
For months the authorities have been saying there would be no problem with meeting the commitments, the markets have been led to believe that governments were underwriting the debts. Then an out-0f-the-blue announcement that there was problem. And of course the realisation that the government had never actually said that it would guarantee company debts.
I don't think there's another one to spring on us.
This post is an example, I'm continuing a conversation by responding to questions left on my last post about the Dubai World debt issue and the PR surrounding it. I started to answer in the comments box but it was really too long as a comment so I decided to turn it into a new post.
The question was: How do you think this will impact Dubai in the next 3 months and also, if this has just come out now, what other stories do you think will start to 'appear' that have remained hidden so far?
First a disclaimer: Predicting the future is nothing more than a guess. Whoever does it, however expert they are, it's just making a personal guess as to what may happen.
I've been asked what I think, I could be right or I could be wrong, it's only a guess, but here goes:
Impact over the next three months? Three months is a very short period. My thoughts are that we won't see much impact down here at street level in that time. Unless you work for one of the DW companies, that is. If you do then you can expect even more changes than you've experienced over the past year. But for the rest of us, no.
There is currently bad publicity internationally for Dubai on a massive scale and I'm sure that will continue, but it relates to business so I don't see it affecting, for example, tourist arrivals.
As for the financial world, after the initial and inevitable panic, and when eventually the information vacuum is filled by official, meaningful, believable statements from the authorities here, things will settle down. It will take a long, long time for confidence to be restored but it will be eventually.
In the real economy, as a result of the global downturn we, like many other places, already have economic slowdown, redundancies, companies closing, invoices not being paid resulting in huge cashflow problems, a property price slump, tighter credit conditions, less spending. I don't see the DW issue making any difference to that in the short term.
The Feds are in damage control mode, taking action to limit impact on the economy in general.
There's been the entirely expected run on the local share markets this morning, when they re-opened after the Eid holiday. Dubai’s lost 7.2% late morning, the biggest drop since November 2008, and Abu Dhabi’s index was down 8.2%, the most since May 2006.
Big drops, but we've seen it before. They'll bounce back.
The Feds have announced support for the banks, the companies most at risk from the Dubai World problem, having set up a special liquidity facility for local and foreign banks operating in the UAE. They've also stated that they will support selected Dubai companies, without naming them. I assume it will depend on which ones they think are viable.
There are obviously high-level meetings going on between Federal and Dubai government officials so I expect more measures will be announced if they're felt necessary as the Feds get to the facts.
Put into perspective, ignoring the terrible handling of the issue in Dubai over the last year culminating in the new PR disaster, the root of the issue is that a company is planning to restructure its debt. That's normal business practice and if it had been handled competently we wouldn't have the problem we now have.
So in the next three months, which was the question, I don't think we'll experience any impact specifically from this Dubai World issue.
To carry on the thought, over the longer term I think the impact will be positive.
What I expect to see is a stop to the overdevelopment, especially of farcical projects which were simply not viable and were nothing to do with commerce, the lifeblood of Dubai. They're what caused the problem in the first place.
The companies in DW group will be reorganised now by someone who knows how to do it, and who according to the reports will be given the authority to carry out whatever's necessary. I assume there'll be payment of overdue invoices, a restructuring of debt and the companies left in the group will be commercially viable.
In a more general sense I think that instead of focusing on property and the speculation that goes with it the focus will go back to Dubai's tradition of trading based on its location, plus the new tourism industry. That should have been the focus for Dubai's latest development boom; they should have built the airport, the commercial cluster 'cities' and at least parts of Dubailand but not Palm Deira, Palm Jebel Ali/Waterfront, The World, the Arabian Canal for example. They didn't, they got carried away and lost focus but I'm sure it will now get back to those basics.
Politically, I think there'll also be far less independence in future for Dubai, and the other emirates, with a much stronger federal government.
On that subject it'd be interesting to know whether the complete lack of comment from Dubai authorities is voluntary head-in-the-sand or whether the Feds have said 'keep quiet and leave it to us'.
The other question was: Any other hidden stories? The normal way of dealing with bad events in this region is to do it behind closed doors, sort out the problem without letting anyone know there even was a problem. Maybe there have been others, will be others, which will be dealt with in that traditional way.
But I can't see another similar problem to this Dubai World debt thing appearing.
It's the big one. It involves the biggest companies, government related or owned, responsible for the biggest, most-publicised projects.
For months the authorities have been saying there would be no problem with meeting the commitments, the markets have been led to believe that governments were underwriting the debts. Then an out-0f-the-blue announcement that there was problem. And of course the realisation that the government had never actually said that it would guarantee company debts.
I don't think there's another one to spring on us.
Saturday, November 28, 2009
A PR disaster
On Thursday, the morning after Dubai World's bombshell announcement that payment of the Nakheel bond due on December 14 was to be delayed, I said it was "badly, badly handled all round".
An understatement.
It was actually a classic of mishandling. Business schools should use it as a case study of exactly what not to do. Of how to turn bad news into a disaster.
There's inevitably been over-reaction, with bond and stock markets plunging from Europe to Asia to the US to Australia, bank shares hammered, a flight to safe havens, damning stories all around the world.
"Nervous traders, trying to understand what it meant, caused havoc across global markets. Shares plunged, currencies were battered and billions of pounds were wiped off the value of all companies with Middle East connections. British banks, considered to be among the most exposed to Dubai, were at the centre of this new maelstrom and collectively shed £14bn in value on Thursday alone."
Daily Telegraph
An overreaction of course but panic is the natural reaction of markets to bad news. After a short period it settles down as people think rather than just act but blind panic is always the first response.
To put it in perspective the amounts involved (about $60billion) are tiny in relation to what's been going on in the world. Companies like Lehman Bros ($613billion liabilities), banks by the dozen, countries like Iceland were leveraged multiple times more than DW, making Dubai World's debts almost petty cash.
But Dubai's reputation is taking a battering because of the way the thing was handled.
Statements in the months leading up to the maturing of Nakheel's bond were that the finances were all in order, then came the terse announcement on Wednesday that payment due on December 14 would be deferred at least six months. The timing of the announcement minutes before the ten day holiday added immeasurably to the problem, causing the doubts and panic, increasing the fallout. An obvious attempt to dodge the hard questions that were bound to be asked.
The problem isn't only the admission that the commitments couldn't be met - there's still belief that Abu Dhabi will come to the rescue. The way it's been handled leads people to believe that Dubai's much-vaunted business acumen is a myth. If they can't even handle something like this competently...
I've been glancing through some of my regular reads and I'm finding:
"Released after the markets shut, ahead of the 10-day Eid holiday and the Thanksgiving break in America, the notice was designed to have minimum impact. It wasn't the Dubai government's first miscalculation.amateurish...botched messaging...episode of incompetence...the biggest debt-market cock-up...this week's events have damaged its reputation for economic competence"
The Nakheel bond has been the subject of much speculation for a year at least. It was the big test of Dubai's ability to service its debt, of Dubai's ability to run businesses effectively. In a wider sense it was also taken a representative of Islamic bonds in general.
Past months have seen senior government figures reassuring the markets. Dubai could and would meet its commitments they said.
Even earlier in the day of the announcement statements were released about Dubai raising another $5 billion from Abu Dhabi banks.
So everything was under control.
What happened?
They decided to make the announcement of what is being seen as a default at close of business.
At close of business on the eve of a ten day holiday.
Drop a bombshell as you leave for holiday.
"Dubai’s authorities have acted badly....This week’s revelations were not only unexpected; they were also delivered just as the Gulf states shut up shop for an extended holiday. This is the action of a company that seems to think that it can operate in a globalised marketplace only when it suits its purposes."
The Times
I seems it's not only investors and traders who were caught by surprise. More than one report suggests that even Abu Dhabi wasn't aware that the announcement was going to be made.
"Thursday's market turmoil appeared to take federal officials in the capital Abu Dhabi by surprise. One person familiar with their thinking said there was dismay over the reaction to the handling of the announcement."
Wall Street Journal
There are also reports that 'frantic phone calls' to government officials and business leaders were unanswered.
Naturally. Everyone's on holiday. Try again about December 6. No problem, that's not even two weeks away and everything's under control anyway.
It was carefully planned, according to the statement issued late on Thursday.
I like the column by Alistair Osborne in the Daily Telegraph on the subject:
"Why we must consider Dubai's 'careful planning' a work of pure genius
Let's be generous here. Maybe Dubai was just trying to set another record.
It's already given us the biggest building, biggest indoor ski slope, biggest shopping mall and biggest theme park. Surely, it was only a matter of time before it went for another biggie: the biggest debt-market cock-up.
The Wall Street journal says:
"For Dubai to now claim it had anticipated the market reaction to its "sensible business decision" is preposterous. Dubai stands accused of irresponsibility, incompetence and bad faith. Few will trust now anything it says."
So, a PR disaster of the highest magnitude. Unbelievably badly handled. I can't imagine what they were thinking, it shows a complete unawareness of the real business world.
It's astonishing from a city that owes its very existence to commerce. A city that's been a successful trading, commercial centre from its beginnings. Where business is the culture.
It really should, and probably will, be required study at business schools.
But it won't be the end of Dubai, in spite of what some commentators will now be saying. We've already seen some of that, plus highly critical pieces using the announcement as an excuse to come back into print, such as the latest Johann Hari piece in The Independent.
The sky won't fall in. The desert won't reclaim the city. It won't be a ghost town.
Think of it terms we've grown accustomed to over the past year. Think of it as toxic debt. It's separate from the real economy. It's like the financial markets and the real economy, they're very different from each other.
This is about the ability of one company in particular, and associated companies, to repay its loans.
Dubai has two sectors, the most important is the real economy where tens of thousands of generally SMEs are still trading, still doing profitable business. Dubai Chamber of Commerce has over 100,000 members for example, and Jebel Ali Free Zone alone has over 6,000 companies registered there.
Other large government-related companies such as Emirates Airline, Dubal, Ducab, Dubai International Airport, Dubai Duty Free are all producing excellent profits.
And of course the old established merchant family conglomerates are still going strong - Al Ghurair, Al Futtaim, Al Majid, Al Habtoor, Galadari and the others.
So business goes on much as usual in the real world. It's always been there, trundling along quietly and profitably out of the news. Dubai's history since the early eighteen-hundreds has been about being commercially successful and going on into the future that will continue.
The other sector is the fantasy world of unsustainable development. But that was a blip in the grand scheme of things for the last five or six years, for other parts of the world too, not just for Dubai - although Dubai's was more outrageous, more unsustainable than probably anywhere. That's what's dead, the fantasy world, the parallel universe, to which Nakheel was the worst contributor.
I said earlier that Dubai's culture was business, which is what I've long argued with people who've said there's no culture. People are here to work, to do business, and always have been. It's the focus of just about everyone here and it's the reason for the city's existence.
But another part of the culture is 'I must have it now' and that's been a large part of the problem. Wanting to build a city the size of Singapore in a decade.
What's actually been achieved is amazing but Nakheel in particular went far too far in too many grandiose developments at the same time. Reality went out of the window and they were off in the land of the fairies. Reality always reappears as it has now.
It's a pity the old established merchant families weren't in charge. In fact it seems with the recent sackings and sideways transfers of some big-name rising stars that the old guard is being brought in to get things back onto a more sensible level.
A huge PR disaster, damage to Dubai's reputation, damage that will take some time to repair, and a setback for Dubai's growth. But not its collapse.
You can read some of the international press I've quoted from here:
The Times.
Daily Telegraph.
Wall Street Journal.
An understatement.
It was actually a classic of mishandling. Business schools should use it as a case study of exactly what not to do. Of how to turn bad news into a disaster.
There's inevitably been over-reaction, with bond and stock markets plunging from Europe to Asia to the US to Australia, bank shares hammered, a flight to safe havens, damning stories all around the world.
"Nervous traders, trying to understand what it meant, caused havoc across global markets. Shares plunged, currencies were battered and billions of pounds were wiped off the value of all companies with Middle East connections. British banks, considered to be among the most exposed to Dubai, were at the centre of this new maelstrom and collectively shed £14bn in value on Thursday alone."
Daily Telegraph
An overreaction of course but panic is the natural reaction of markets to bad news. After a short period it settles down as people think rather than just act but blind panic is always the first response.
To put it in perspective the amounts involved (about $60billion) are tiny in relation to what's been going on in the world. Companies like Lehman Bros ($613billion liabilities), banks by the dozen, countries like Iceland were leveraged multiple times more than DW, making Dubai World's debts almost petty cash.
But Dubai's reputation is taking a battering because of the way the thing was handled.
Statements in the months leading up to the maturing of Nakheel's bond were that the finances were all in order, then came the terse announcement on Wednesday that payment due on December 14 would be deferred at least six months. The timing of the announcement minutes before the ten day holiday added immeasurably to the problem, causing the doubts and panic, increasing the fallout. An obvious attempt to dodge the hard questions that were bound to be asked.
The problem isn't only the admission that the commitments couldn't be met - there's still belief that Abu Dhabi will come to the rescue. The way it's been handled leads people to believe that Dubai's much-vaunted business acumen is a myth. If they can't even handle something like this competently...
I've been glancing through some of my regular reads and I'm finding:
"Released after the markets shut, ahead of the 10-day Eid holiday and the Thanksgiving break in America, the notice was designed to have minimum impact. It wasn't the Dubai government's first miscalculation.amateurish...botched messaging...episode of incompetence...the biggest debt-market cock-up...this week's events have damaged its reputation for economic competence"
The Nakheel bond has been the subject of much speculation for a year at least. It was the big test of Dubai's ability to service its debt, of Dubai's ability to run businesses effectively. In a wider sense it was also taken a representative of Islamic bonds in general.
Past months have seen senior government figures reassuring the markets. Dubai could and would meet its commitments they said.
Even earlier in the day of the announcement statements were released about Dubai raising another $5 billion from Abu Dhabi banks.
So everything was under control.
What happened?
They decided to make the announcement of what is being seen as a default at close of business.
At close of business on the eve of a ten day holiday.
Drop a bombshell as you leave for holiday.
"Dubai’s authorities have acted badly....This week’s revelations were not only unexpected; they were also delivered just as the Gulf states shut up shop for an extended holiday. This is the action of a company that seems to think that it can operate in a globalised marketplace only when it suits its purposes."
The Times
I seems it's not only investors and traders who were caught by surprise. More than one report suggests that even Abu Dhabi wasn't aware that the announcement was going to be made.
"Thursday's market turmoil appeared to take federal officials in the capital Abu Dhabi by surprise. One person familiar with their thinking said there was dismay over the reaction to the handling of the announcement."
Wall Street Journal
There are also reports that 'frantic phone calls' to government officials and business leaders were unanswered.
Naturally. Everyone's on holiday. Try again about December 6. No problem, that's not even two weeks away and everything's under control anyway.
It was carefully planned, according to the statement issued late on Thursday.
I like the column by Alistair Osborne in the Daily Telegraph on the subject:
"Why we must consider Dubai's 'careful planning' a work of pure genius
Let's be generous here. Maybe Dubai was just trying to set another record.
It's already given us the biggest building, biggest indoor ski slope, biggest shopping mall and biggest theme park. Surely, it was only a matter of time before it went for another biggie: the biggest debt-market cock-up.
The Wall Street journal says:
"For Dubai to now claim it had anticipated the market reaction to its "sensible business decision" is preposterous. Dubai stands accused of irresponsibility, incompetence and bad faith. Few will trust now anything it says."
So, a PR disaster of the highest magnitude. Unbelievably badly handled. I can't imagine what they were thinking, it shows a complete unawareness of the real business world.
It's astonishing from a city that owes its very existence to commerce. A city that's been a successful trading, commercial centre from its beginnings. Where business is the culture.
It really should, and probably will, be required study at business schools.
But it won't be the end of Dubai, in spite of what some commentators will now be saying. We've already seen some of that, plus highly critical pieces using the announcement as an excuse to come back into print, such as the latest Johann Hari piece in The Independent.
The sky won't fall in. The desert won't reclaim the city. It won't be a ghost town.
Think of it terms we've grown accustomed to over the past year. Think of it as toxic debt. It's separate from the real economy. It's like the financial markets and the real economy, they're very different from each other.
This is about the ability of one company in particular, and associated companies, to repay its loans.
Dubai has two sectors, the most important is the real economy where tens of thousands of generally SMEs are still trading, still doing profitable business. Dubai Chamber of Commerce has over 100,000 members for example, and Jebel Ali Free Zone alone has over 6,000 companies registered there.
Other large government-related companies such as Emirates Airline, Dubal, Ducab, Dubai International Airport, Dubai Duty Free are all producing excellent profits.
And of course the old established merchant family conglomerates are still going strong - Al Ghurair, Al Futtaim, Al Majid, Al Habtoor, Galadari and the others.
So business goes on much as usual in the real world. It's always been there, trundling along quietly and profitably out of the news. Dubai's history since the early eighteen-hundreds has been about being commercially successful and going on into the future that will continue.
The other sector is the fantasy world of unsustainable development. But that was a blip in the grand scheme of things for the last five or six years, for other parts of the world too, not just for Dubai - although Dubai's was more outrageous, more unsustainable than probably anywhere. That's what's dead, the fantasy world, the parallel universe, to which Nakheel was the worst contributor.
I said earlier that Dubai's culture was business, which is what I've long argued with people who've said there's no culture. People are here to work, to do business, and always have been. It's the focus of just about everyone here and it's the reason for the city's existence.
But another part of the culture is 'I must have it now' and that's been a large part of the problem. Wanting to build a city the size of Singapore in a decade.
What's actually been achieved is amazing but Nakheel in particular went far too far in too many grandiose developments at the same time. Reality went out of the window and they were off in the land of the fairies. Reality always reappears as it has now.
It's a pity the old established merchant families weren't in charge. In fact it seems with the recent sackings and sideways transfers of some big-name rising stars that the old guard is being brought in to get things back onto a more sensible level.
A huge PR disaster, damage to Dubai's reputation, damage that will take some time to repair, and a setback for Dubai's growth. But not its collapse.
You can read some of the international press I've quoted from here:
The Times.
Daily Telegraph.
Wall Street Journal.
Thursday, November 26, 2009
Shock at Dubai World announcement
The business world was expecting Nakheel to redeem its Islamic bond when it matures in two weeks.
Recent comments from Dubai government VIPs reinforced the expectation that debts would be paid on time.
So there's alarm in markets around the world since Dubai World briefly announced that it was asking creditors to defer payment for at least six months.
What a disastrous blow for Brand Dubai.
The bond has enormous significance because it's both the world's largest Islamic financial instrument and is considered the ultimate litmus test for Dubai's ability to meet its commitments.
Equally bad, the announcement was made after close of business on the eve of the Eid holiday, so now no-one's available for comment or clarification. That fact hasn't been missed by commentators either.
Badly, badly handled all round.
Commentators around the world are talking about it in disapproving terms and there's the question of whether this will be considered a default, with enormous implications for not only Dubai but Islamic bonds in general.
The New York Times says that the move demostrates that Abu Dhabi won't unconditionally bail out Dubai government controlled companies but that there has to be a genuine restructuring of the debt with the pain being equally shared by Dubai and its banks.
The Wall Street Journal talks about bankers and executives being stunned by the announcement, and says 'Dubai's efforts to deal with its mountain of debt estimated to exceed $80 billion were dealt a hammer blow.'
The Times, once one of the world's great newspapers but now reduced to near-tabloid level since being bought by Rupert Murdoch, predictably goes with the cliche 'Dubai World and properties built on sand.'
The UK Daily Telegraph headlines its report 'Dubai recovery hopes hit by debt 'standstill' call' and says that 'the credit-crunched Gulf playground, has shattered hopes of imminent financial recovery.'
The Financial Times has the widest coverage and talks about markets reeling at the announcement and acting with alarm at fears of default. Comments from analysts confirm the reaction.
There's only one positive side to the announcement and predictably the local media puts that spin on it, that Dubai World is to be re-restructured and an outside world-renowned expert is being brought in as Chief Restructuring Officer. Gulf News print edition headline, for example, says 'Dubai World gets a breather'.
The trouble is that it's the right move but it's taken far too long for the move to be made.
For nearly a year the Dubai World companies have been going through a 'restructuring'. But it's always a nonsense for the management responsible for a company's troubles to be allowed to create and preside over a restructuring made necessary because of their own policies. A Chief Restructuring Officer, an outside expert with a proven track record, was needed from the beginning of the crisis to sort the mess out. But it wasn't treated with the urgency the situation demanded.
They became bloated companies with unnecessarily huge numbers of people being paid huge amounts of money, huge duplication of job functions between the companies in the group, unnecessary competition to build the biggest, tallest.
That led to too many mega-projects all going ahead at the same time. Worse, many were pushing engineering into uncharted waters but second and third versions were being pushed ahead before the engineers had worked out how to make the first one. The Palm Islands/The World are a classic example.
Heads, senior heads that is, should have rolled long ago.
Thankfully the financial crisis put a stop to the nonsense and has forced the companies to come down to earth. Restructuring was inevitable and long overdue. It is happening but it's all taken far too long.
We're a year into the crisis before the real moves are made that needed to be made there and then.
(The Tamweel/Amlak merger is another example. The property market is desperate for mortgage providers but the two largest have been in limbo for over a year without a policy decision being made to get them back into business. And we've been told that it won't happen until next year.)
To my mind this is the biggest blow to Brand Dubai that I can recall. The one that will do the most damage to Dubai's reputation as a good, safe place to do business, as a place that understands what business is all about and knows how to conduct it.
We'll undoubtedly be seeing more of the 'Dubai collapsing, reclaimed by the desert' stories from certain commentators as a result of this announcement.
Ignore them, Dubai will survive as the commercial centre that it's been for nearly two hundred years.
But this is a huge setback.
You can read some of the comments about it here:
NYT. Dubai Fund Asks for Stay on Debt Payments.
WSJ. Dubai Debt Woes Turn Ugly After It Seeks Standstill Deal
The Times. Dubai World and properties built on sand.
Daily Telegraph. Dubai recovery hopes hit by debt 'standstill' call.
FT. Dubai shock after debt standstill call which also has links to related articles.
Recent comments from Dubai government VIPs reinforced the expectation that debts would be paid on time.
So there's alarm in markets around the world since Dubai World briefly announced that it was asking creditors to defer payment for at least six months.
What a disastrous blow for Brand Dubai.
The bond has enormous significance because it's both the world's largest Islamic financial instrument and is considered the ultimate litmus test for Dubai's ability to meet its commitments.
Equally bad, the announcement was made after close of business on the eve of the Eid holiday, so now no-one's available for comment or clarification. That fact hasn't been missed by commentators either.
Badly, badly handled all round.
Commentators around the world are talking about it in disapproving terms and there's the question of whether this will be considered a default, with enormous implications for not only Dubai but Islamic bonds in general.
The New York Times says that the move demostrates that Abu Dhabi won't unconditionally bail out Dubai government controlled companies but that there has to be a genuine restructuring of the debt with the pain being equally shared by Dubai and its banks.
The Wall Street Journal talks about bankers and executives being stunned by the announcement, and says 'Dubai's efforts to deal with its mountain of debt estimated to exceed $80 billion were dealt a hammer blow.'
The Times, once one of the world's great newspapers but now reduced to near-tabloid level since being bought by Rupert Murdoch, predictably goes with the cliche 'Dubai World and properties built on sand.'
The UK Daily Telegraph headlines its report 'Dubai recovery hopes hit by debt 'standstill' call' and says that 'the credit-crunched Gulf playground, has shattered hopes of imminent financial recovery.'
The Financial Times has the widest coverage and talks about markets reeling at the announcement and acting with alarm at fears of default. Comments from analysts confirm the reaction.
There's only one positive side to the announcement and predictably the local media puts that spin on it, that Dubai World is to be re-restructured and an outside world-renowned expert is being brought in as Chief Restructuring Officer. Gulf News print edition headline, for example, says 'Dubai World gets a breather'.
The trouble is that it's the right move but it's taken far too long for the move to be made.
For nearly a year the Dubai World companies have been going through a 'restructuring'. But it's always a nonsense for the management responsible for a company's troubles to be allowed to create and preside over a restructuring made necessary because of their own policies. A Chief Restructuring Officer, an outside expert with a proven track record, was needed from the beginning of the crisis to sort the mess out. But it wasn't treated with the urgency the situation demanded.
They became bloated companies with unnecessarily huge numbers of people being paid huge amounts of money, huge duplication of job functions between the companies in the group, unnecessary competition to build the biggest, tallest.
That led to too many mega-projects all going ahead at the same time. Worse, many were pushing engineering into uncharted waters but second and third versions were being pushed ahead before the engineers had worked out how to make the first one. The Palm Islands/The World are a classic example.
Heads, senior heads that is, should have rolled long ago.
Thankfully the financial crisis put a stop to the nonsense and has forced the companies to come down to earth. Restructuring was inevitable and long overdue. It is happening but it's all taken far too long.
We're a year into the crisis before the real moves are made that needed to be made there and then.
(The Tamweel/Amlak merger is another example. The property market is desperate for mortgage providers but the two largest have been in limbo for over a year without a policy decision being made to get them back into business. And we've been told that it won't happen until next year.)
To my mind this is the biggest blow to Brand Dubai that I can recall. The one that will do the most damage to Dubai's reputation as a good, safe place to do business, as a place that understands what business is all about and knows how to conduct it.
We'll undoubtedly be seeing more of the 'Dubai collapsing, reclaimed by the desert' stories from certain commentators as a result of this announcement.
Ignore them, Dubai will survive as the commercial centre that it's been for nearly two hundred years.
But this is a huge setback.
You can read some of the comments about it here:
NYT. Dubai Fund Asks for Stay on Debt Payments.
WSJ. Dubai Debt Woes Turn Ugly After It Seeks Standstill Deal
The Times. Dubai World and properties built on sand.
Daily Telegraph. Dubai recovery hopes hit by debt 'standstill' call.
FT. Dubai shock after debt standstill call which also has links to related articles.
Monday, November 16, 2009
Changing times
Not so long ago, seeing one of these around Dubai Marina was unthinkable. Now there are more than a few:
Not good for investors but good for tenants and for business in general. The ridiculous and unsustainable rents were killing the goose that laid the golden egg.
Not good for investors but good for tenants and for business in general. The ridiculous and unsustainable rents were killing the goose that laid the golden egg.
Thursday, October 29, 2009
Still there
When I posted a photo of an abandoned BMW back at the end of August it had obviously been in the parking spot in Dubai Marina for some time.
The last fines the owner racked up were in December '08 so I'm guessing it was probably left to its fate around the beginning of this year.
It's still there, gathering even more dust and graffiti:
The last fines the owner racked up were in December '08 so I'm guessing it was probably left to its fate around the beginning of this year.
It's still there, gathering even more dust and graffiti:
Monday, October 05, 2009
Dubai, ghost town
You'll recall the confident predictions, from sections of the British press in particular which was gleefully repeated by people living here, that the economic meltdown would destroy Dubai.
With absolute certainty they insisted that Dubai would rapidly become a ghost town, abandoned by its expats and reclaimed by the desert sands.
The hysterical reports told us there were three thousand cars abandoned at the airport by fleeing expats. Hundreds more maxed-out expats were sleeping at the airport and in the desert.
But worse was to come because tens of thousands more would flee at the end of the school term.
All absolute nonsense of course.
Thousands of cars were not abandoned at the airport, there were not hundreds of homeless, jobless, maxed-out expats living in the airport or the desert.
And the thousands who were only staying so that their children could finish the term's schooling, well, they're still here.
We're at the start of the new school term and the schools are still full.
Many more roads have been completed but the traffic is still heavy - and chaos when there's one of our regular crashes.
The cafes and restaurants are still doing good business as people still eat out.
In a post at the beginning of December I said I thought there would be an upside to the downturn, that it would force a pause in the frenzy of development, allow for better planning, allow time for infrastructure to catch up.
A downturn and slowdown yes, a ghost town no.
I've posted many times that the predictions of Dubai's collapse were gross exaggerations with no understanding of its history. The evidence I see backs me up.
Plenty of traffic this morning in New Dubai around 10 o'clock after the peak...
And there was no evidence of a ghost town at The Walk at JBR early Friday evening...
I'm not holding my breath that the writers who made those confident, often spiteful, predictions will bother themselves with a retraction.
With absolute certainty they insisted that Dubai would rapidly become a ghost town, abandoned by its expats and reclaimed by the desert sands.
The hysterical reports told us there were three thousand cars abandoned at the airport by fleeing expats. Hundreds more maxed-out expats were sleeping at the airport and in the desert.
But worse was to come because tens of thousands more would flee at the end of the school term.
All absolute nonsense of course.
Thousands of cars were not abandoned at the airport, there were not hundreds of homeless, jobless, maxed-out expats living in the airport or the desert.
And the thousands who were only staying so that their children could finish the term's schooling, well, they're still here.
We're at the start of the new school term and the schools are still full.
Many more roads have been completed but the traffic is still heavy - and chaos when there's one of our regular crashes.
The cafes and restaurants are still doing good business as people still eat out.
In a post at the beginning of December I said I thought there would be an upside to the downturn, that it would force a pause in the frenzy of development, allow for better planning, allow time for infrastructure to catch up.
A downturn and slowdown yes, a ghost town no.
I've posted many times that the predictions of Dubai's collapse were gross exaggerations with no understanding of its history. The evidence I see backs me up.
Plenty of traffic this morning in New Dubai around 10 o'clock after the peak...
And there was no evidence of a ghost town at The Walk at JBR early Friday evening...
I'm not holding my breath that the writers who made those confident, often spiteful, predictions will bother themselves with a retraction.
Saturday, August 29, 2009
Dumped cars
You'll remember the silly story, long-discredited, about 3,000 cars abandoned at Dubai airport by fleeing expats.
It conjoured, as it was meant to, pictures of streams of refugees fleeing in panic. Dubai was doomed, being reclaimed by the desert. It was all part of the Dubai-bashing rumours that followed the earlier breathless and equally unbalanced 'miracle of Dubai' reports.
The rumour spreaders could be having another field day now because there seem to be even more abandoned cars around the streets, parked in the same place gathering dust. There seems to be hardly a street without at least one.
But the reality is that many of the owners are simply away on holiday and after a few weeks you'll see most of them cleaned up and moved.
But not all.
Like this one, which has been in the same place for months.
There were 3,000 vehicles abandoned, but all across the city not at the airport. And the figure has to be put into context. In a normal year there are about 1,500 vehicles abandoned.
It's a high number but it's all part of the unique society we have with eighty or higher percent of the population being expatriate, here as temporary guest workers.
It also reflects the legal structure regarding bankruptcies and debts and the antiquated payments system.
The mix means that the old-fashioned post-dated cheque system is the norm. People might pay for their year's rent by a number of post-dated cheques - but if they have insufficient funds later in the year, because they lost their job for example, it's off to Al Slammer. Non-payment of car loans gets the same result.
In their home countries the owners who can't meet the payments have their cars repossessed.
Here if they lose their jobs their best option is to take off back home, leaving their belongings and debts behind. If they stay and try to sort it out the problem is that they will almost certainly end up in Al Slammer.
That's the real story. That the law and the way of doing business with post-dated cheques really needs to be changed.
An interesting story earlier in the year on abandoned vehicles was in The National.
It conjoured, as it was meant to, pictures of streams of refugees fleeing in panic. Dubai was doomed, being reclaimed by the desert. It was all part of the Dubai-bashing rumours that followed the earlier breathless and equally unbalanced 'miracle of Dubai' reports.
The rumour spreaders could be having another field day now because there seem to be even more abandoned cars around the streets, parked in the same place gathering dust. There seems to be hardly a street without at least one.
But the reality is that many of the owners are simply away on holiday and after a few weeks you'll see most of them cleaned up and moved.
But not all.
Like this one, which has been in the same place for months.
There were 3,000 vehicles abandoned, but all across the city not at the airport. And the figure has to be put into context. In a normal year there are about 1,500 vehicles abandoned.
It's a high number but it's all part of the unique society we have with eighty or higher percent of the population being expatriate, here as temporary guest workers.
It also reflects the legal structure regarding bankruptcies and debts and the antiquated payments system.
The mix means that the old-fashioned post-dated cheque system is the norm. People might pay for their year's rent by a number of post-dated cheques - but if they have insufficient funds later in the year, because they lost their job for example, it's off to Al Slammer. Non-payment of car loans gets the same result.
In their home countries the owners who can't meet the payments have their cars repossessed.
Here if they lose their jobs their best option is to take off back home, leaving their belongings and debts behind. If they stay and try to sort it out the problem is that they will almost certainly end up in Al Slammer.
That's the real story. That the law and the way of doing business with post-dated cheques really needs to be changed.
An interesting story earlier in the year on abandoned vehicles was in The National.
Monday, July 27, 2009
It ain't just Dubai...
Yesterday's Sunday Times had an article headlined 'Dubai expatriates unable to meet liabilities', not inaccurate but highlighting Dubai as though it was somehow unique in having people who can't meet their commitments.
"During Dubai’s boom years, expatriates from around the world took advantage of cheap credit and a booming economy to live a luxury lifestyle. Easy credit arrangements meant that they could buy penthouses, motorboats and expensive cars with little or no scrutiny from lenders. When the economy slowed, many foreign workers lost their jobs or had their salaries cut and became unable to keep up with their payments."
Today's Financial Times has a couple of articles which put all that in some perspective. They tell us the reality, that people around the world did exactly the same thing, not just those living in Dubai.
I could rewrite the first sentence in the Sunday Times article to make it more accurate:
DuringDubai’s the world's boom years, expatriates people from around the world took advantage of cheap credit and a booming economy to live a luxury lifestyle.
The FT gives an example:
"Mick Longfellow is teetering on the edge of financial chaos. A dedicated teacher married to an equally hard-working nurse, living in a modest house in Newcastle in the north-east of England, the pair spent the past decade treating themselves to gadgets, gizmos and home upgrades.
They put in new windows. They bought the biggest television and sound system their living room could accommodate. They changed their cars every year or two. With two children to spoil as well, they were living on credit - lots of it. There were store cards, car loans, personal loans and credit cards.
Now, amid the recession, those lenders want their money back. "The bank just closed down our overdraft. That was the killer blow," says Mr Longfellow. But with the family's debts running to £30,000 ($49,200, €34,600), far more than their annual disposable income, repayment is going to take a very long time.
It is a sad blow for the Longfellows. But multiply one family's debts by the millions of people across the world who are in an even worse state, losing jobs and homes, and the scale of the problem is clear.
The second article says:
Lenders in Europe bracing themselves for a rising wave of consumer debt defaults as the credit card crisis that has caused billions of dollars in losses among US banks spreads across the Atlantic.
The International Monetary Fund estimates that of US consumer debt totalling $1,914bn, about 14 per cent will turn sour. It expects that 7 per cent of the $2,467bn of consumer debt in Europe will be lost..."
As I said, it's not unique to Dubai. All over the world money was cheap, credit was easy, banks pushed people to take large loans, credit card companies threw cards with high limits at people, credit checks hardly existed. That's why the world, not just Dubai, is in the mess it's in.
But back to the Sunday Times article. It includes a quote from a Mr Nuseibeh repeating the myth "Many of the British expatriates in particular tried to hang on as long as possible to life there and sadly many have ended up writing bounced cheques, having their passports confiscated so they cannot leave the country and really living in appalling conditions in bedsits shared with maids, or even in cars parked in car parks."
A request. Would anyone living in a car in a car park, or anyone who knows anyone living in a car in a car park, please tell me where so that I can go and verify the so-called fact.
This nonsense started in the seriously inaccurate Johann Hari article a few months back and it's become part of the folklore.
Sunday Times article.
Financial Times articles here and here.
"During Dubai’s boom years, expatriates from around the world took advantage of cheap credit and a booming economy to live a luxury lifestyle. Easy credit arrangements meant that they could buy penthouses, motorboats and expensive cars with little or no scrutiny from lenders. When the economy slowed, many foreign workers lost their jobs or had their salaries cut and became unable to keep up with their payments."
Today's Financial Times has a couple of articles which put all that in some perspective. They tell us the reality, that people around the world did exactly the same thing, not just those living in Dubai.
I could rewrite the first sentence in the Sunday Times article to make it more accurate:
During
The FT gives an example:
"Mick Longfellow is teetering on the edge of financial chaos. A dedicated teacher married to an equally hard-working nurse, living in a modest house in Newcastle in the north-east of England, the pair spent the past decade treating themselves to gadgets, gizmos and home upgrades.
They put in new windows. They bought the biggest television and sound system their living room could accommodate. They changed their cars every year or two. With two children to spoil as well, they were living on credit - lots of it. There were store cards, car loans, personal loans and credit cards.
Now, amid the recession, those lenders want their money back. "The bank just closed down our overdraft. That was the killer blow," says Mr Longfellow. But with the family's debts running to £30,000 ($49,200, €34,600), far more than their annual disposable income, repayment is going to take a very long time.
It is a sad blow for the Longfellows. But multiply one family's debts by the millions of people across the world who are in an even worse state, losing jobs and homes, and the scale of the problem is clear.
The second article says:
Lenders in Europe bracing themselves for a rising wave of consumer debt defaults as the credit card crisis that has caused billions of dollars in losses among US banks spreads across the Atlantic.
The International Monetary Fund estimates that of US consumer debt totalling $1,914bn, about 14 per cent will turn sour. It expects that 7 per cent of the $2,467bn of consumer debt in Europe will be lost..."
As I said, it's not unique to Dubai. All over the world money was cheap, credit was easy, banks pushed people to take large loans, credit card companies threw cards with high limits at people, credit checks hardly existed. That's why the world, not just Dubai, is in the mess it's in.
But back to the Sunday Times article. It includes a quote from a Mr Nuseibeh repeating the myth "Many of the British expatriates in particular tried to hang on as long as possible to life there and sadly many have ended up writing bounced cheques, having their passports confiscated so they cannot leave the country and really living in appalling conditions in bedsits shared with maids, or even in cars parked in car parks."
A request. Would anyone living in a car in a car park, or anyone who knows anyone living in a car in a car park, please tell me where so that I can go and verify the so-called fact.
This nonsense started in the seriously inaccurate Johann Hari article a few months back and it's become part of the folklore.
Sunday Times article.
Financial Times articles here and here.
Thursday, May 28, 2009
Hope for contractors
Something I've been on about for a while, the payment of long outstanding invoices from contractors by our major developers, seems to be coming to some sort of a conclusion.
Nakheel has been the one most often mentioned but now says that it has received funds from the government of Dubai, presumably from the $10 billion bond fund, and some of the funds will be used for payments to contractors.
They don't give any figures but let's hope they bring all their outstanding invoices up to date. That would be a relief to a lot of companies, and their employees, and get a significant amount of money working its way through the economy.
Zawya have a short report here.
Nakheel has been the one most often mentioned but now says that it has received funds from the government of Dubai, presumably from the $10 billion bond fund, and some of the funds will be used for payments to contractors.
They don't give any figures but let's hope they bring all their outstanding invoices up to date. That would be a relief to a lot of companies, and their employees, and get a significant amount of money working its way through the economy.
Zawya have a short report here.
Tuesday, May 19, 2009
Same story, very different slant
I read two papers over coffee this morning, both of which carried the same story.
But what a difference in presentation.
The story is, in my opinion, the biggest of the day, of massive importance. It's no less than the replacement of the Director General of Dubai's Department of Finance.
GN only had it as the second lead, treating the arrival of FlyDubai's first aircraft as more important.
I've since looked at EmBiz247 and they do no more than run the WAM basic facts, buried on Page 4. I can't find it at all in Khaleej Times online.
The story I think is of massive importance is the change of Director General at the Dubai Department of Finance.
That's a hugely important position, especially in the current economic situation, one of the most important in the emirate in my opinion.
The way the two papers have treated it is interesting, to say the least.
Gulf News headline the story: "Mohammed makes appointment to key government offices" and they quote the new DG.
The Middle East edition of the Financial Times headline their report: "Dubai demotes finance director." They give it more space and include relevant comment.
The previous DG was Nasser Al Shaikh who's been moved to become Deputy Director of Foreign Affairs at the Dubai Ruler's Court.
Naturally no reason was given for the decision.
In the FT, Simeon Kerr suggests that the decision to remove Mr Al Shaikh "will prompt concern among the region’s business elite and the bankers helping to steer Dubai out of the current downturn.
The highly regarded young official, who joined the department of finance only last year, was seen as one of the few who had grasped the scope of the economic problems facing Dubai.
Mr Shaikh had been championing a more transparent approach to the emirate’s finances as a means to help restore the city’s credibility. He oversaw publication of the emirate’s most detailed ever budget in January and was leading efforts to launch a sovereign rating for Dubai."
From all I've read and heard I have to agree. My perception was that he was doing an excellent job, under very difficult circumstances.
Boy, I'd love to know what the real story behind it is.
You can compare the way the two papers have slanted the story here:
Gulf News.
Financial Times.
But what a difference in presentation.
The story is, in my opinion, the biggest of the day, of massive importance. It's no less than the replacement of the Director General of Dubai's Department of Finance.
GN only had it as the second lead, treating the arrival of FlyDubai's first aircraft as more important.
I've since looked at EmBiz247 and they do no more than run the WAM basic facts, buried on Page 4. I can't find it at all in Khaleej Times online.
The story I think is of massive importance is the change of Director General at the Dubai Department of Finance.
That's a hugely important position, especially in the current economic situation, one of the most important in the emirate in my opinion.
The way the two papers have treated it is interesting, to say the least.
Gulf News headline the story: "Mohammed makes appointment to key government offices" and they quote the new DG.
The Middle East edition of the Financial Times headline their report: "Dubai demotes finance director." They give it more space and include relevant comment.
The previous DG was Nasser Al Shaikh who's been moved to become Deputy Director of Foreign Affairs at the Dubai Ruler's Court.
Naturally no reason was given for the decision.
In the FT, Simeon Kerr suggests that the decision to remove Mr Al Shaikh "will prompt concern among the region’s business elite and the bankers helping to steer Dubai out of the current downturn.
The highly regarded young official, who joined the department of finance only last year, was seen as one of the few who had grasped the scope of the economic problems facing Dubai.
Mr Shaikh had been championing a more transparent approach to the emirate’s finances as a means to help restore the city’s credibility. He oversaw publication of the emirate’s most detailed ever budget in January and was leading efforts to launch a sovereign rating for Dubai."
From all I've read and heard I have to agree. My perception was that he was doing an excellent job, under very difficult circumstances.
Boy, I'd love to know what the real story behind it is.
You can compare the way the two papers have slanted the story here:
Gulf News.
Financial Times.
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