Abu Dhabi: NO Dubai Debt Bailout (Big UK Problem)
ANNOUNCEMENT: The UAE's richest Emirate Abu Dhabi just announced that it would only back the Sovereign debt of its cousins in Dubai on a case-by-case basis. This announcement has caused unnecessary panic.
Dubai has just lost the understood 'implicit guarantee' for its Sovereign debt by Abu Dhabi and that damages its credit worthiness as an Emirate. Why has Abu Dhabi pulled the plug?
Rumours that Dubai's debt was overextended, rampant over the last few years, have been confirmed by Dubai during the Thanksgiving and Eid holidays (US and Middle Eastern markets closed).
Dubai has asked for a debt moratorium on $50+ billion credit loans for Dubai World which is the government-owned holding company founded in March 2006 to manage four main arms of investment: transport and logistics, drydocks and maritime, urban development, investment and financial services.
Economists say the first two categories are advanced in structure and in excellent financial condition. They form the basis of a renewal of and support to Dubai's stature as an international trading hub.
Dubai, like much of the world, expanded its urban development and local financial investment at a time just before the international financial services' industry melted down.
Their debt is not high compared to other countries, but they could be forced to default at a time when many countries' Sovereign funds are under scrutiny. The Ukraine is the top of the suspect list and the State of California (USA) is number 10.
Complicating matters is that the Ruler of Dubai, Sheikh Mohammed, holds a majority stake in Dubai World. His personal (business-related) debt added on is said to extend the Dubai debt to $80+ billion.
Dubai has been criticised for a lack of transparency in not revealing the debt situation sooner. Markets lost billions of dollars over the holiday with the 'shock' news.
'Shock' is disingenuous; it is just more mismanagement of international financial markets.
RBS, HSBC and the Standard Bank hold most of the debt which will mean that British taxpayers will be stung for the losses in these bailed-out banks if a solution is not found.
Many of the top executives of Dubai-based companies are British and could lose their jobs.
Thousands of British jobs, especially in the racing industry, and a huge chunk of British gross national product are dependent on Dubai and its Royal Family.
In the end, Britain needs to be smart, agree to a moratorium and work with Sheikh Mohammed to sort the mess.
Part of Dubai's problem is simply timing. Prime Minister Gordon Brown is smart enough to understand that.
Dubai is one of the most exciting country developments in the world engineered by a marketing genius. It should NOT be allowed to fail.
Susan's Views http://www.susansviews.com
Dubai has just lost the understood 'implicit guarantee' for its Sovereign debt by Abu Dhabi and that damages its credit worthiness as an Emirate. Why has Abu Dhabi pulled the plug?
Rumours that Dubai's debt was overextended, rampant over the last few years, have been confirmed by Dubai during the Thanksgiving and Eid holidays (US and Middle Eastern markets closed).
Dubai has asked for a debt moratorium on $50+ billion credit loans for Dubai World which is the government-owned holding company founded in March 2006 to manage four main arms of investment: transport and logistics, drydocks and maritime, urban development, investment and financial services.
Economists say the first two categories are advanced in structure and in excellent financial condition. They form the basis of a renewal of and support to Dubai's stature as an international trading hub.
Dubai, like much of the world, expanded its urban development and local financial investment at a time just before the international financial services' industry melted down.
Their debt is not high compared to other countries, but they could be forced to default at a time when many countries' Sovereign funds are under scrutiny. The Ukraine is the top of the suspect list and the State of California (USA) is number 10.
Complicating matters is that the Ruler of Dubai, Sheikh Mohammed, holds a majority stake in Dubai World. His personal (business-related) debt added on is said to extend the Dubai debt to $80+ billion.
Dubai has been criticised for a lack of transparency in not revealing the debt situation sooner. Markets lost billions of dollars over the holiday with the 'shock' news.
'Shock' is disingenuous; it is just more mismanagement of international financial markets.
RBS, HSBC and the Standard Bank hold most of the debt which will mean that British taxpayers will be stung for the losses in these bailed-out banks if a solution is not found.
Many of the top executives of Dubai-based companies are British and could lose their jobs.
Thousands of British jobs, especially in the racing industry, and a huge chunk of British gross national product are dependent on Dubai and its Royal Family.
In the end, Britain needs to be smart, agree to a moratorium and work with Sheikh Mohammed to sort the mess.
Part of Dubai's problem is simply timing. Prime Minister Gordon Brown is smart enough to understand that.
Dubai is one of the most exciting country developments in the world engineered by a marketing genius. It should NOT be allowed to fail.
Susan's Views http://www.susansviews.com
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