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Dubai’s debt-to-GDP ratio low: DIC

Dubai’s debt is manageable and is far lower if compared to the debt-GDP ratios of other developed countries such as the UK, Germany and the US, according to Sameer Al Ansari, Executive Chairman and Chief Executive Officer of Dubai International Capital. In his remarks to the Leaders in Dubai forum yesterday, he said the resources are guaranteed to pay the emirate’s debt obligations, which are variably estimated at $47billion (Dh172bn) to $70bn. « The next years will be better as all the resources are there for repayment. A lot of those debts are from companies with commercial operations that are extremely successful and very profitable and with strong cash flows, » he said. According to Al Ansari, compared to other countries, « Dubai’s debt to GDP is one is to one and the UAE’s debt to GDP is one-third of the GDP. In the UK, debt is five times compared to GDP, in Germany it is three times, in the US it is three and a half times. » Al Ansari’s remarks complement Emaar Chairman Mohamed Alabbar’s recent statement in the World Economic Forum that the Government of Dubai is fully covered to service its debt for the next seven quarters. Experts at the forum exuded optimism that the Gulf will continue to grow, albeit at a slower rate, indicating that GCC is not in a crisis. « Do you even know the real picture? We are receiving winds of contagion from the West but we do not have the crises that are swirling Wall Street. The important thing is to look at profitability and the balance sheets of the banks and they will appear. If you want to disregard the profits made by the banks and focus on the negative side, it is not fair. We will weather this. This is not being self congratulatory but there is no point in looking at a glass which is half empty, » said Dr Muhammad Al-Jasser, Vice-Governor, Saudi Arabian Monetary Agency. « Let us not forget Dubai is the financial, commercial, trading, logistics and tourism sector for the whole region. The region has strong fundamentals and Dubai will continue to be at the epicentre of the region’s prosperity, » Al Ansari said. « Dubai’s success is commercial, using leverage and foreign investment, » he added. « Some of you would remember that in the 1960s the Ruler borrowed heavily from Kuwait to dress the Creek and set Dubai to be the international logistics centre. « Dubai has always been bold and has always been taking uncertainty to its advantage, providing a safe haven in the region for the region. » Earlier, investment bank EFG-Hermes said as a ratio to the emirate’s fiscal revenues, it saw little to suggest the debt level was either unmanageable or unsustainable. Karen Remo-Listana business24-7.ae

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Gulf will weather the global financial crisis

The Gulf will continue to grow, albeit at a slower rate, indicating that GCC is not in a crisis, said experts. Dr Muhammad Al Jasser, Vice-Governor, Saudi Arabian Monetary Agency (Sama), said: « Do you even know the real picture? We are receiving winds of contagion from the West but we do not have the crises that are swirling Wall Street. The important thing is to look at profitability and the balance sheets of the banks and they will appear good. « If you want to disregard the profits made by the banks and focus on the negative side, it is not fair. We will weather this. This is not being self congratulatory but there is no point in looking at a glass that is half empty. » Dave Ulrich, professor of business at the University of Michigan believes that GCC will stay over the crises. « I do not have an exact answer as to when the region will come out of this but most people say it should take about one year. I think the region will just stay over the crises, » he told Emirates Business. Giving the example of the Saudi banking sector, Dr Al Jasser focused on the strong fundamentals in the region. « Our banking sector has shown good results and remains resilient amid global crisis. Saudi reserves have increased from SR157 billion (Dh156bn) in 2002 to SR1.3 trillion today. The banking sector has a leverage ratio of eight per cent and 120 per cent deposits are deployed domestically, » he said. Moreover, unlike the West, the GCC governments have followed a rather conservative policy, thus avoiding any kind of crash in the banking sector seen in the United States and Europe. « We have one of the most demanding and conservative supervisory regimes. We are very tough. Market economy is prone to excesses and if you do not have a regulator things will happen. « We have a very developed corporate governance structure. There are two external auditors for each bank with an internal audit department and have a compliance officer – all that has paid well for us, » he said. « Our domestic economy has absorbed all the liquidity. Our banks are also involved internationally but that is extremely small and does not exceed 11 per cent of the balance sheet, so the exposure is very small. On the macro economy level global financial crises is neutral, there is very little consumer debt, banks have healthy balance sheets without over leveraging and our government has paid off its debt and has built very large foreign reserve, » he said. Shuchita Kapur business24-7.ae

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Mohammed approves new bridge

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has approved the design of the seventh crossing over Dubai Creek to be known as the « Dubai Smile ». The project, with an estimated cost of Dh810 million, will run between Dubai Creek Park, Wonderland Park and Dubai Courts in Bur Dubai, and Deira City Centre and Dubai Golf Club in Deira. Chairman of the Board and Executive Director of the Roads and Transport Authority Mattar Al Tayer said the bridge is one of the landmark projects to be undertaken by RTA, and is aimed at easing traffic congestion around the Creek. The bridge will consist of 12 lanes, six in each direction, and will have a width of about 61.6 metres. The bridge will also feature an arch rising to over 100 metres and will be able to accommodate up to 24,000 vehicles per hour. business24-7.ae

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Lower asset prices and tight supply drive rental yields up

Rental yields expanded in October on the back of lower asset prices and a tight supply market, as gross yields increased to 6.3 per cent from 4.7 per cent in September, said a new report. « Rental demand is likely to remain robust as we sense potential buyers are deferring their plans until there is better visibility in the credit markets, » HSBC Holdings said in a monthly real estate report. Yield expansion reflects the market tightness. The shortage of stock has been further exacerbated by a clear shift from holding to selling, as investors try to exit the market, Majed Azzam, co-author of the report, said. « This trend in part reflects risk aversion in the current period of uncertainty, especially since rental regulation in Dubai favours tenants (rental caps, anti-eviction laws, etc), making tenanted units less attractive. » Additionally, new government regulations prohibiting the sharing of villas by more than one family are likely to add to pent-up demand, particularly for smaller units. On the other hand, the change in visa requirements for relatives, whereby proof of either ownership or tenancy of a two-bedroom residence is required, should increase demand for larger units, Azzam said. Meanwhile, secondary prices showed weakness for the first time in October as property prices in Dubai and Abu Dhabi fell. Prices in Dubai fell four per cent from September, while prices in Abu Dhabi were down five per cent. Villas in Dubai were hit, with the average price falling 19 per cent between September and October on the back of tightening lending conditions. The decline in villa prices had more to do with « affordability than anything else, especially in light of lower mortgage loan to values (LTV) », HSBC said. The average villa price of $2.6 million (Dh9.5m) in September would now require a minimum down payment of $650,000. Average apartment asking prices in Dubai were flat month-on-month, despite the majority of development prices being down. « This is due to a rise in the weighting of high-end projects, » Azzam said. Although prices in Abu Dhabi fell due to the emirate’s « heavy off-plan rating », the capital offers the « best shelter for investors and provides good appreciation potential », the report said. Apartments were down six per cent month-on-month, villas were up four per cent due to their scarcity. The report expects the market in Abu Dhabi to remain tight near term, as pent-up demand alone is more than enough to meet supply coming on to the market in the next two years. Raha Gardens, the only development that is ready, was down two per cent month-on-month. « We believe, similar to Dubai, this is because of the lower LTVs and thus affordability. However, it could also be related to the development’s liquidity as it is only open to local investors, » HSBC said. HSBC said in its September report that property prices had surged in the UAE, with Dubai and Abu Dhabi registering an increase of 17 per cent and 11 per cent month-on-month. « Price growth is picking up again after a brief moderation during the summer. However, while prices remain on an upward spiral, rental rates in Dubai seem to be stabilising, thereby compressing rental yields. This shows we have reached a level where affordability is getting breached, » the bank had said. Loan-to-values ratio falls As mortgage rates have risen on average by 100 basis points, loan-to-values for apartments have fallen from an average of 85 per cent to 60 per cent and for villas from 85 per cent to 75 per cent. The average down payment increased from $98,000 to $220,000, but the average monthly mortgage payment is down from $7,100 to $5,750, a decline of 20 per cent month-on-month. The average monthly rental payment is up from $3,600 to $4,500, 25 per cent increase, which means it now covers 80 per cent of the mortgage payment once the initial down payment is done. Parag Deulgaonkar business24-7.ae

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Saudi telecommunications grows with a CAGR of 7.1%

A ‘pro-competition’ regulator, high population growth and attractive demographics would be the key drivers of the Saudi telecoms sector, resulting in a compound annual growth rate (CAGR) of 7.1 per cent, a Dubai-based investment bank has said in its new report. Al Mal capital in its recent report on the Saudi telecoms sector said that the revenue from mobile, internet and fixed telephone segments in Saudi Arabia will grow 44.4 per cent over six years – from SR45.3 billion (Dh44.3bn) in the year ending 2007 to SR65.4bn in 2013. Competition between multiple players and ‘digital natives’, meaning people who primarily use services such as mobile phones and the internet will serve as the stimulators of growth of telephony in the country, the report said. The report projects Saudi Arabia’s telecom scene over the next six years. Saudi telecommunications market, the largest in the GCC, is characteriesed by a appreciably high per capita GDP ($15,731, or Dh57,733, for 2007), high mobile penetration (116 per cent in 2007) and growing internet penetration (26 per cent in 2007) and a steady but surprisingly low fixed-line penetration (16.8 per cent for 2007). Saudi Arabia joined the WTO in November 2009 and so became bound by the WTO agreement on basic telecommunications committing it to provide full market access for its telecommunications services, allowing an increasing level of foreign participation from 2005 to 2008. While 60 per cent of the country’s landline services are open to competition, 70 per cent of the other services (mobile and internet) are open to other companies. Regulatory policies with regards to interconnection and traffic regulation has helped the Saudi telecoms sector prosper and will continue to do so in future, the report said. « Given the strength of the former incumbent STC, and in order to ensure it did not abuse its dominant market position, a Reference Interconnection Offer (RIO) was drafted by the Saudi Telecom Company (STC). The STC RIO is reviewed and amended annually, in light of market developments, with the aim of moving the interconnections fees to a long-run incremental cost basis by 2010, » it said. « Overall key regulatory policies are in place, and, with Zain KSA launching services, there is very strong competition in the mobile segment. With the issue of three new fixed-line licenses, there will be competition in that segment as well, which should drive fixed line penetration, » it added. Competition between the players fuelled the growth of Saudi mobile market, Al Mal said. « The Saudi mobile market has benefited greatly from the introduction of competition, with mobile penetration increasing from 40 per cent in 2004 (when there was no competition) to 116 per cent by the year end 2007, » the report said. The Average Revenue Per User fell 47.3 per cent as competition grew – from SR189 in 2004 to SR100 by the end of 2007, the report said. Rising population and demographics of Saudi Arabia, the report said, have also played a role in invigorating the country’s telecommunications markets. « While the increasing population is a growth driver, it is the demographics of the population that should have the greatest impact on the telecom sector, with more than 50 per cent of the population under the age of 25. These are the ‘digital natives’ who have grown up with digital technology such as computers, the internet, mobile phones, cameras and MP3 players. As the ‘digital natives’ pursue further education, the workforce will become economically self sufficient, they will increasingly use telecoms devices and services. Additionally, more than 28 per cent of the population is estimated to be under the age of 10 and currently use telecom services, thus providing a strong potential demand for the future, » Al Mal said. The STC which is owned 70 per cent by the government is now « feeling the heat » from competitors and its share in mobile, landline and ISP market segments will decline over the years, the report showed. While etisalat of the UAE (through Etihad Etisalat) and Zain of Kuwait (through Zain KSA) are the two other mobile players in Saudi Arabia, three fixed-line licenses have been awarded to firm from the United States, Hong Kong and Bahrain. The report said STC’s mobile market share will deplete to 46 per cent from the current 67 per cent, its fixed-line market share will decrease to 70 per cent from the current 100 per cent. Shashank Shekhar business24-7.ae

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UAE to step up measures to protect marine environment

The UAE’s Ministry of Environment will step up measures aimed at protecting marine environment and conservation of natural resources as part of the government’s strategy to achieve sustainable development. The ministry will work out a number of policies and streamline existing regulations to prevent the extinction of marine life. The UAE Federal Minister of Environment and Water, Dr Rashid Ahmed bin Fahad, yesterday signed a Memorandum of Understanding (MoU) with the Regional Clean Sea Organisation (Recso) to develop a comprehensive national plan for the protection of the country’s marine environment and preserving its natural resources. The MoU is the first of its kind that binds the Ministry with a national and regional non-governmental organisation. While the MoU follows a set of other steps taken by the ministry to preserve marine environment, it will help set the basis for the much-needed long-term co-operation and co-ordination between the Ministry and Recso in taming potential hazards to marine life. « This is a well-studied step, which reflects one of the Ministry’s important tasks in the field of environment protection, fighting pollution and preservation of the country’s marine natural resources, » said Bin Fahad. « The Ministry of Environment and Water is aware of the significance and importance of effective response to human and marine activities which result in byproducts and hazardous material that harm marine environment. Swift action in this respect is one of the ministry’s fundamental tasks. » The first clause of the MoU considers the development of the first Comprehensive National Environment Plan, which addresses marine issues in co-operation with Recso. The plan will effectively respond to all urgent incidents of marine pollution derived by oil and marine industrial operations including shipping and pollution from other sources in the Gulf waters and shores of the UAE. « The MoU specifies the areas for co-operation between the Ministry and Recso in implementing the Comprehensive National Environment Plan and acquiring the machinery, equipment and qualified work force and identifying the areas of operation and centres. This will facilitate quick response and actions in cases of emergency and incidents when required, » said Khamis Juma Bu-Amim, Resco President and CEO The President of the National Shipping Company of Saudi Arabia-Dubai, and the President Oil and Gas, Saleh bin Abdul Rahman Al Shamekh, said this step will draw the organisation into playing a wider role in the interest of the Gulf nations by ensuring a clean and safe sea. The Maritime Department of the National Transport Authority has since the beginning of this year turned down more than 100 applications for ships seeking to register under the UAE flag due to their failure to meet environmental standards. By Ashaba K Abdul Basti business24-7.ae

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Developers ease property payment plans

A number of developers in Dubai are announcing easy payments plans to attract and hold on to buyers, as property market worries intensify across the globe. Emaar Properties yesterday officially announced it will launch two schemes, of which the first extends property payments over five years after handover and the second allows buyers to rent a property before deciding whether to purchase it or not. « The ‘Plan to Own’ and ‘Rent to Own’ programmes are aimed at further strengthening the property sector by facilitating easier purchases and making property more affordable for our customers, » Issam Galadari, Chief Executive Officer, Emaar Properties, said. Another developer, Union Properties, said it has eased payment terms on two of its real estate projects – Index and Limestone House in Dubai International Financial Centre. « We are altering the payment terms in these two developments as we do not expect someone to walk in with the full 65 per cent required before hand over in today’s market conditions, » Zaid Ghoul, Chief Financial Officer, Union Properties, told Emirates Business. ETA Star Property Developers is open to talks with potential buyers and will offer tailor-made payment plans in some of its units, said Shyam Sunder, General Manager, Marketing, ETA Star. New regulation Off-plan buyers wishing to halt purchases will have to obtain a cancellation notification from the developer and forfeit 30 per cent of the total value of the units. The announcement by the Dubai Land Department is intended to deter speculation in the property market. By Parag Deulgaonkar business24-7.ae

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Promoting Bahrain!

MANAMA: Bahrain took part in the World Travel Market (WTM) which began in London yesterday. The participation of Bahrain came as part of efforts to attract tourists through this grand international event which brings together 5,000 tourism and airline companies and travel services suppliers. Information Ministry tourism promotion and marketing project chief executive Mohammed Nass affirmed the importance of Bahrain’s participation in the event. Tourism sector marketing head Bader Nasser said Bahrain was one of the first Gulf countries to take part in the WTM for 20 years. Sabic profit warning RIYADH: Saudi Basic Industries Corporation (Sabic) said yesterday it expects fourth-quarter earnings to be hit by a rapid slide in prices and a slowdown in demand due to the global financial crisis. « The prices curve nosedived from September 1 to today. Prices of polypropylene and polyethylene for instance were above $2,000, now they are below $1,000, » chief executive Mohamed Al Mady said. Rio to review plan DUBAI: Rio Tinto Alcan said yesterday it will review a $10.6 billion aluminium joint venture with Saudi firm Maaden, and sources close to the project said it could be delayed by one or two years. « We are looking at the technical and financial feasibility of all our projects, this is not unique to Maaden, » the source said at an industry conference here. gulf-daily-news.com

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His Majesty to preside over Council of Oman meet today

MUSCAT — His Majesty Sultan Qaboos bin Said will preside over the annual meeting of the Council of Oman at the council hall in Al Khuwair today. His Majesty the Sultan will deliver a speech in which he will review the progress of the development projects being implemented, their features and horizons in realising a solid growth that enhances security and stability of the nation. The session will be attended by members of the Royal family, the chairmen of the State Council and Majlis Al Shura, ministers, advisers, the inspector-general of police and customs, the head of the Internal Security Service, the chief of staff of the Sultan’s Armed Forces (SAF), the SAF corps commanders, members of the State Council and Majlis Al Shura, heads of diplomatic corps in the Sultanate, a number of sheikhs and dignitaries, editors-in-chief of Oman News Agency (ONA), local newspapers and delegates of Arab and foreign media. The Council of Oman was set up by Royal Decree No. 86/97, issued on December 16, 1997, and comprised the State Council and Majlis Al Shura. The Basic Law of the State determines its prerogatives, terms, settings, regulations, number of their members, membership conditions, the methods of selecting or appointing them and causes of their dismissal among other regulations. ONA timesofoman.com

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Kuwait stocks edge lower

KUWAIT: Most Gulf share markets dropped for the second straight day yesterday as a strong rebound in Asian stocks failed to offset anxieties about the regional economy. Only the Omani market was up slightly, while the other five bourses dipped as investors appeared to take the view that the global crisis may have a deeper impact on the oil-rich Gulf states than initially thought. Furthermore, the meeting, which was attended by the finance and commerce ministers and governor of the Central Bank, was informed that Kuwaiti foreign investments have been affected by the global crisis. Secretary of the financial committee MP Ahmad Lari said « the impact on our investments has been less than others ». He also added that the Central Bank has already pumped funds into the banks and made some deposits in order to help them cope with the crisis. Global General Index (GGI) ended the session down by 4.05 points (-1.62 percent) to close at 246.33 points. The Kuwait Stock Exchange Price Index dropped 148.10 points (-1.57 percent), to close at 9,256.30 points. Market capitalization went down by 1.62 percent to reach KD39.53bn during the day. During yesterday’s session, market breadth was skewed toward decliners as 95 stocks retreated, while 22 gained and 83 stocks remained unchanged. A total of 131 stocks were traded yesterday. Volume and value of shares traded on the exchange ended the day on a negative note, as investors exchanged 130.08mn shares (-14.47 percent), at a total traded value of KD51.08mn (-17.03 percent). The Investment Sector was the volume leader, accounting for 27.81 percent (36.18mn) of total volume. This was due to Ekttitab Holding Company which has been the volume leader for two days in a row with 12.16mn shares exchanged. The stock ended the day up by 5.10 percent at 93fils. Furthermore, Banking Sector was the value leader with a total traded value of KD20.42mn. The sector was backed by Kuwait Finance House which has been also was the value leader for two days in a row with a total traded value of KD11.68mn. In addition, the scrip was unchanged for the day to stay at KD1.640. It is worth mentioning that Global Banking Sector has decreased by 29.28 percent since the beginning of the year. Moreover, the Governor of the Central Bank of Kuwait (CBK) Sheikh Salem Abdulaziz Al-Sabah said yesterday that all indicators showed that Kuwait’s banking sector enjoyed high profitability, abundant liquidity and sound solvency. On the other hand, total transactions for the day decreased by 19.09 percent to reach 3,273 deals. Hits Telecom Holding was the top gainer for the day, adding 7.14 percent to close at 375fils. On the other side, National Industries Company for Building Materials was the biggest loser, as its share price declined by 10.39 percent to close at 345fils. Sector-wise, all the indices went down yesterday, except for Global Insurance Index adding 0.15 percent to close at 61.07 points. It is worth mentioning that Wethaq Takaful Insurance was the only gainer in the sector, which increased by 4.35 percent to clos e at 144fils. On the other side, Global Real Estate Index was the top decliner for the day shedding 3.85 percent to reach 91.84 points. The index’s drop was caused by heavyweights Al-Mazaya Holding Company and Mabanee Company dropping 8.33 and 6.33 percent, respectively. Global Industrial Index was the second biggest decliner shedding 3.38 percent to reach 236.30 points. This was a result of National Industries Group (Holding) which decreased by 6.73 percent to close at 485fils. During today’s session, all the Global Special indices ended the day on a negative note, with Global High Yield Index being the biggest decliner shedding 2.95 percent to close at 226.81 points. Global Islamic Index was next, dropping 1.98 percent to close at 851.34 points. kuwaittimes.net

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