Amadeus to study ME potential to become travel hub
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New ways of global cooperation
Uncertainty on Bernanke vote raises economic fears
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Tuesday, January 26, 2010
www.kuwaittimes.net
Kuwait’s Global warns on Dubai debt risk Dubai may have long-lasting effects on region: Ghunaim RIYADH: Global Investment House has yet to gauge the full effect of the Dubai debt crisis, warning that it may have long-lasting effects on the region’s financial sector, the Kuwaiti bank’s founder said. Global took enough impairment charges and provisions to cover it against further investment loss or bad loans, said Maha Al-Ghunaim in an interview with Reuters, but warned that the effect of Dubai’s debt crisis may drag on. “I thought we had enough provisioning and then the Dubai crisis made us rethink our position. You don’t know how deep this is going to go or how far it is going to go,” Ghunaim, who is also the bank’s managing director, said. Yesterday, the once high-flying emirate of Dubai endured another blow after Standard & Poor’s withdrew its rating on a unit of Dubai
Holding, the major investment vehicle owned by the ruler of Dubai, citing a “materially weaker” cash position and a lack of information. Ghunaim made her comments before the S&P statement was issued. Once a regional powerhouse, Global is a major investment company that had overstretched itself just as the global economic crisis hit. Earlier this month, Global’s shareholders approved its $1.7 billion restructuring plan after the firm reached a deal with its roughly 50 creditors to reschedule debt. Like many other Gulf Arab companies awash with cash in the heyday of a regional economic boom and high oil prices, Global went on an expansion spree from China to Tunisia as a way to diversify its revenue stream. But Global learnt lessons from the economic fallout. The
firm revamped its business model and is flexing its muscles once again for a fresh start where it will focus on investment banking, asset management and brokerage, Ghunaim said. “Our priorities have changed. Today our priorities are very much focused to repay our debt and deleveraging the company, that’s number one,” she said. “Obviously, Global today is not in the business of putting further cash into certain companies as it was years ago. That business model has changed.” As part of its new strategy, the firm will scale back investments, sell assets to get cash and increase its assets under management, she said. The firm is also focusing more on big economies such as Saudi Arabia. “We are very much focused on Saudi Arabia ... to provide investment products that are extremely needed and can add value,” said
Ghunaim, who was once named one of the world’s 100 most powerful women by Forbes Magazine. “Geographically, we need to focus our attention, you can’t be everywhere, anywhere.” Dubai shocked world markets on Nov. 25 when it requested a standstill on $26 billion worth of debt owed by state-owned conglomerate Dubai World, a flagship of the emirate. Global has no direct exposure to Dubai’s debt. Ghunaim had said earlier this month that she was optimistic about the firm’s growth prospects this year and sees a “huge improvement” in its full-year 2009 earnings despite booking higher provisions in the fourth quarter. Global saw a full-year loss in 2008 of KD257.6 million ($898.5 million) mainly due to impairment charges for investments and loans, compared with a profit of KD91.4 million in 2007. — Reuters
RIYADH: Maha Al-Ghunaim, chairperson and managing director of Global Investment House, listens to questions during the 4th Global Competitiveness Forum in Riyadh. — AP
S&P deals blow to Dubai Holding unit, pulls rating DUBAI: Standard & Poor’s pulled its rating on a unit of Dubai Holding, dealing a fresh blow to the Gulf Arab Emirate’s financial reputation and drawing fresh scrutiny from investors. The ratings agency cut Dubai Holding Commercial Group (DHCOG) to B from BB+ and then withdraw the rating altogether, citing its “materially weaker” cash position and a lack of information. “It was certainly a very severe note, and seems to lend credence to the doubts that have been expressed about Dubai Holding for some time,” said David Butter, director for the Middle East and North Africa at Economist Intelligence Unit, in London. Dubai rocked global markets on Nov 25 when it sought a debt delay on $26 billion linked to its flagship conglomerate, Dubai World. DHCOG-the holding firm of Dubai Holding’s property, business parks and hospitality units which includes the planned Tiger Woods golf resort-is part of an investment vehicle owned by Dubai’s ruler. In a statement, DHCOG dismissed the S&P announcement which it said contained inaccuracies and factual errors, and said the ratings agency did not understand its operations or its relationship with the Dubai government. Dubai has faced heavy criticism over its lack of transparency especially in the wake of November’s debt news. Earlier this month, the government acknowledged a $10 billion lifeline from Abu Dhabi in December-which helped Dubai World stave off bankruptcy on a $4.1 billion Islamic bond by a property unit-included $5 billion that was previously announced. “I think the market already assumes all these Dubai Inc entities have more debt issues that they need to work out, but the worry is that transparency seems to be getting worse, which could be an issue going forward,” said Robert McKinnon, chief investment officer at ASAS Capital in Dubai. “Without proper transparency, we cannot know the true value of the assets Dubai entities own or the true size and scale of their debts.” “We understand from the information we have gathered that cash flow generation for Dubai Holding Commercial Operations Group is likely to be materially weaker than we initially expected, which in our view significantly deteriorates DHCOG’s liquidity position,” S&P analyst Pierre Georges said in a statement. S&P said the unit could face difficulty in refinancing and it was doubtful the Dubai government would lend it support. Dubai credit default swaps stood at 455 basis points, 10 basis points tighter than Friday’s close. — Reuters
Kuwait’s money supply growth up 13.1% in Dec KUWAIT: Kuwaiti money supply growth (M3) accelerated to 13.1 percent at the end of December, from 11.4 percent in the previous month, data showed yesterday. M3, the broadest measure of money circulating in the economy, rose to KD24.89 billion ($86.81 billion) in December, compared with KD22 billion a year earlier, the central bank said in a monthly bulletin. Narrow money, or M1, rose 7.78 percent to KD4.71 billion. Quasi money-which includes savings and time deposits in dinars, as well as foreign currency deposits-rose 14.8 percent to KD20.18 billion, the data showed. Banks’ total claims on the private sector, which also include their local investments, advanced 6.09 percent in the year to December to KD27 billion. Total credit facilities concluded with residents fell 11.9 percent in the year to December to KD844.2 million-down from KD894.1 million in November. — Reuters
UAE telecom watchdog issues competition rules
LONDON: Shoppers are pictured on Oxford Street in central London yesterday. The UK’s Gross Domestic Product (GDP) figures for the fourth quarter of 2009 are expected to be released today. — AFP
Obama unveils package for middle class WASHINGTON: US President Barack Obama yesterday proposed a package of new initiatives aimed at helping middle-class families, including an expanded child-care tax credit and help with retirement savings. The initiatives come as Obama is taking a more populist turn in his rhetoric, pledging to fight for the middle class and taking a tougher line toward Wall Street. A year into his presidency, Obama and his Democratic Party are seeing an erosion of his support among middle-class Americans who swept him into office. Frustration with the 10 percent unemployment rate and wariness toward Obama’s plans to change the healthcare system helped set the stage for a shocking loss by Democrats last week in a Massachusetts Senate race. At around noon EST (1700 GMT), the president will outline the child-care credit and other measures that will also be discussed in his State of the Union speech. Obama will address Congress and the nation at
US existing home sales fall in December WASHINGTON: Sales of US existing homes fell more than expected in December, by nearly 17 percent, following a three-month surge driven by a government tax credit, an industry organization said yesterday. The National Association of Realtors (NAR) said sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million units, from 6.54 million in November. The sharp decline was worse than average analyst forecast of 5.9 million units and was the steepest monthly drop since NAR began tracking the data series in 1999. The industry group said the decline was expected after sales surged from September through November as first-time buyers rushed to take advantage of federal tax credits originally due to expire on November 30. Congress passed and President Barack Obama signed an extension of the first-time tax credit that expands it to include other home purchases made prior to April 30. The December number was 15.0 percent 9:00 p.m. tomorrow (0200 GMT on Thursday) in a speech designed to lay out the challenges and set the tone for his administration in 2010. A White House official said the State of the Union speech themes would include “creating good jobs, addressing the deficit,
above the year-ago level of 4.74 million units. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, NAR chief economist. “We’ll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit. By early summer the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010.” First-time home buyers represented 43 percent of the market in December, compared with 51 percent the prior month. The industry group noted that sales had risen every month since April, apart from a slight dip in August, and had often topped expectations. For all of 2009, sales of existing homes totaled 5.156 million, a gain of 4.9 percent from 2008. “It was the first annual sales gain since 2005,” NAR said. — AFP
changing Washington, and fighting for middle class families.” The measures were developed by the White House Task Force on Middle Class Families, which is led by Vice President Joseph Biden. “There are immediate steps we can take to reduce
the strain on family budgets by helping middle class families manage their child and elder care responsibilities, save for retirement, and pay for college,” the White House said in a statement. The proposals would: • Require companies that do not offer retirement
plans to enroll their employees in direct-deposit retirement accounts unless the workers opt out. • Increase the “Savers Credit,” a tax credit for retirement savings, for families making up to $85,000. • Change some of the rules for 401K employersponsored savings accounts to make them more transparent. • Increase the child tax credit rate to 35 percent of qualifying expenses from the current 20 percent for families making under $85,000 a year. Families making up to $115,000 would be eligible for some increase in the tax credit. • Increase child care funding by $1.6 billion in 2011 to serve an additional 235,000 children. • Boost government spending by $102.5 million for programs aimed at helping families who provide home care for an aging relative. • Ease the burden for student loans by limiting a borrower’s payments to 10 percent of his or her income above a basic living allowance. — Reuters
ABU DHABI: The United Arab Emirate’s Telecommunications Regulatory Authority (TRA) has launched a new competition framework which it hopes would lower prices of telecom services in the Arab state, TRA’s director general said yesterday. The new framework will have the TRA study various sectors of services offered by mobile operators du and Etisalat and would determine whether any licensee has market power in each of those sectors. “For example, if we find there is fair competition in the Blackberry services sector we would then allow the operators to introduce packages straight to the market without being preapproved by the TRA,” Mohamed Nasser AlGhanim said.
“This new framework will help increase the level of competition in the market and in turn will drive prices down, all to benefit consumers,” he added. The TRA plans to have the framework implemented by the end of the year and is assessing and studying the different market sectors, said Ghanim. Ghanim downplayed the possibility of adding a third operator in the near future and said it was not part of the TRA’s plan. “This year we are giving a draft of the telecom policy to the cabinet and we’ll be receiving direction from the cabinet whether to have additional operators,” he told Reuters in an interview. Market penetration for mobile phones stands at a staggering 200 percent, he added. — Reuters
Dubai gold trade hit by Asian workers’ exodus DUBAI: Laid-off South Asian workers returning home have robbed the Dubai retail gold market of some of its keenest buyers, while sales in India have held up better, a leading Indian executive in the trade told Reuters. “Thousands of jobs were lost and that this directly had an impact on the volume of gold sales in Dubai,” Vasant Mehta, chairman of the Gem & Jewelry Export Promotion Council based in Mumbai said in an interview. “There were so many Indians and Pakistanis who were laid off during the economic crisis and many of these workers used to buy gold from Dubai to send home to their families and that’s why the drop in UAE gold sales was worse than India,” Mehta said. Jewelry sales in Dubai, dubbed the city of gold, have continuously declined since the end of 2008, as disposable incomes have fallen due to the global downturn. The repercussions of the economic crisis coupled with Dubai’s debt saga have shaken global investors and lead to a standstill at many of the emirate’s construction projects- reliant on workers from the sub-continent. The sales slide continued last year as gold hit a record high of $1,226.10 per ounce on Dec. 3, taking the precious metal further out of reach for cashstrapped consumers. Spot gold prices reached around $1093.65 an ounce yesterday, however Mehta expects prices to dip below the $1000 mark only if India and China’s central banks decide not to buy more reserves. “Four months ago India’s central bank bought 200 tons of gold which hyped up prices and now there are rumors of another 200 tons order in addition to China wanting to buy more reserves,” Mehta said. Despite a slow six months of sales following the economic crisis, India’s retail gold sale volumes grew by 2 percent in 2009 compared to a year earlier, said Mehta.— Reuters