Dubai has made it into the international news again. This time it’s all about one of Dubai’s biggest companies – DUBAI WORLD. The news read like:
Indian stock markets joined the tumble in bourses around the world on Friday after Dubai government-owned holding company Dubai World, which manages that country’s portfolio of businesses, said it had asked creditors for an extension of six months on debt repayments.
Stock markets across the globe suffered fresh falls on Friday as global investors scrambled to understand the implications of Dubai World’s restructuring and unexpected debt standstill. The lack of information about Dubai’s flagship government-owned holding company, made worse by a religious holiday in the Middle East, prompted indiscriminate selling of stocks linked to the region. The cost of insuring against default in emerging markets around the world also leapt.
The Reserve Bank of India (RBI) on Friday said it would ask banks to furnish details of their direct and indirect exposure to Dubai World, the beleaguered Dubai government-owned holding company which asked for more time to repay its debt. While RBI played down the issue, it emerged that Bank of Baroda (BoB) had an exposure of around $200 million (Rs 928 crore at Friday’s rates) to Dubai World, a senior bank executive said. “The amount is due for repayment only after 2011. It is paying interest and there are no overdues. So, we have absolutely no immediate concern,” a senior bank executive said. The bank’s total exposure in the United Arab Emirates (UAE) was estimated at around Rs 10,000 crore, of which, the share of Dubai was around Rs 4,000 crore, the executive said.
A wave of selling swept across Asian markets Friday, with banking giant HSBC Holdings knocked lower, as investors scrambled to piece together how much exposure regional lenders have to the financial troubles in Dubai. Selling pressure accelerated in the afternoon session as futures’ markets indicated a sharply lower opening in New York. Investors were also spooked by broader fears that global financial markets have not healed properly since last year’s crisis, and that the Dubai problem could expose these weaknesses.
Taiwan’s banking sector has a total of NT$6.3 billion (US$195 million) in financial risk exposure to Dubai-linked financial assets. The amount was higher than originally estimated but should not pose severe financial threats, according to officials. “As of Friday, after several Taiwanese banks filed in their estimates, we calculate that the size of Taiwanese banks’ exposure to debts in Dubai stands at US$195 million,” said Hsiao Chang-jui, deputy chief of the Banking Bureau under the Cabinet-level Financial Supervisory Commission (FSC).
Both equities and commodities came under pressure after yesterday’s news that state owned Dubai World had delayed its debt repayment obligations. Many economists expect the neighboring Emirate state of Abu Dhabi to bail out Dubai. However many of the world’s major institutional investors and central banks hold the Emirate state’s sovereign debt and the potential fallout of any default remains unclear.
For years Dubai was not really important enough (according to the same newspapers which now happily share the bad news) to influence the international markets, nobody really agreed that Dubai is becoming a big player in the international financial market. It was always just some rich Locals playing with their oil money. And yet suddenly, once the hungry old news-agencies can get their teeth into some bad news about the luxury playground Dubai – there they are.
What does it really mean? Is Dubai affected by the financial crisis? Of course, maybe Dubai World could just cope with it a bit longer than other international companies? Did we all forget about the billion-dollar-losses the worlds biggest companies made? And Dubai World just asks for a delay in payment. Maybe Dubai World should have reorganized those things earlier, maybe, maybe, maybe…
It is probably rather good for the future of Dubai since everybody realizes now that Dubai is an important player in the international financial market, speculators will be driven away even more now and serious businesses can growth. Initiatives have already been launched to make way for more start-ups. International companies will keep coming to Dubai – not just as their Middle East hub but rather as their base. And yes, Dubai may not have much oil left, but don’t forget Abu Dhabi where the black gold is still flowing and flowing. Abu Dhabi already showed that it’s supporting Dubai whatever it takes. So is Dubai dead now? I don’t think so. What do you think? Please leave your opinion below…
I am an expat, from Dubai, A very higly trained person…..But I am back at my home country …..I would like to come back to Dubai…..It is fantastic to experience what they created. I got along very well with the locals…..But they have to relax their laws.
I go out for quick holiday and come back……They search me for nearly 2 hours and this when I was tired and had an operation and was full of pain……… They pull all my luggage apart even though they can see my Dubai residence stamp in my passport……..I come in peace to work as a very senior person in a company I will not name………I begged them to take blood tests…..I do not use drugs……all I do is I smoke cigarettes…Two hours being interrogated and searched….is not good if they want western people there ……not while I am in pain from operation…….Anonymous
Dubai’s life and death rely on AUH. It’s proven that eventhough Dubai had live it’s flashy years recognized worldwide cannot deny the fact that they’ve lack proper planning and transparency in doing biz which resulted to all these losses and debts! It’s abit too late for the govt to realise the need for transparency and ‘control’ of most of their stateowned companies. However, it’s better to be late than sorry! Hopefully, they will be able to walk over this crisis else it will really be a morale deterimental to the Arab world, as they’ve poised themselves as being the lead of many changes.If the govt can default payment, where will investor boast their confidence to trade with companies? As the saying goes, clean your house from inside first. This country need alot of cleaning internally, regardless of any SECTORS! You can’t pump funds into a biz, without understanding how the funds were managed and ensure that they are being used correctly.
all i wish is Dubai comes out of the present un-certainity and continue its march towards progress and developement. the world and especially the south asian expat community needs dubai to succeed. Our success is very much interlinked with Dubai's success.