Archive for June, 2008

Dubai, one of the seven emirates in the UAE, has a population of 1.6M. However, its government is willing to bet big – $82B big – that its geographic location and timing are right to build the world’s largest airport. Doug McVitie of consultancy Arran Aerospace: “The Middle East is taking over the aerospace industry and Dubai is at the heart of it.” According to consultancy McKinsey, the Gulf economies need to create more than 4 million jobs over the next decade for its citizens. More than 350,000 new jobs could come from the aviation sector by 2015. Read this informative article by MarketWatch.com.

The sheikh ruler of Dubai, Sheikh Mohammed Bin Rashid al-Maktoum, promised (6/23) to build a new $60B city complete with 800 million square feet including residential, commercial, educational and tourism components. To be developed by Dubai Properties, the Eric Kuhne-inspired desert city promises rising opportunities in these sectors as well as materials, utilities, and services.

“They’ve got the money and they’re smart enough to know their oil won’t last forever,” says SAP CEO Henning Kagermann (6/19). ME local investing in tech and innovation spurred the SAP chief’s comments according to a recent BusinessWeek post. Kagermann and Co. see a particularly interesting play in ME universities. Focusing on local talent to help with software installations, Kagermann adds, “We’ll help produce skilled young people who can handle our software.”

Reuters reports (6/19) that a new $250M fund-of-funds has been established in the Caymans to connect investors with shariah compliant investment opportunities. The fund will be managed by Tocqueville Asset Management, Lucas Capital Management, Zweig-DiMenna International Managers, Ospraie Management and BlackRock. Dubai’s most recent move highlights the growing attractiveness in shariah compliant investing.

Reuters Dubai reports by way of the Financial Times that Qatar’s sovereign wealth fund the Qatar Investment Authority (QIA) is considering backing a share issue by Barclays PLC (NYSE ADR: BCS). The issue could approach US$8 billion. QIA has already bought a stake of under 2% in Credit Suisse (NYSE ADR: CS). QIA is said to have about $60B of AUM and is looking to spend $10B – $15B on bank stakes over the next two years.

The Wall Street Journal recently published “Celebrity Endorsers Help Lure the Rich to Dubai: Brad Pitt Will Design Five-Star Hotel, Resort; Even B-List Makes It.” Beyond the talk of celebrities and buried in the latter portion of the article is the following:

“That said [in light of the threat of a Las Vegas-style property bust and recent scandals involving emirate real estate players ], there are few signs that investors are shying away from the region’s real-estate market. According to Dubai-based research firm Proleads, about $2.4 trillion in real-estate projects are currently under construction in the oil-rich Gulf Cooperation Council region, which includes Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman. Dubai alone, the second-largest emirate in the U.A.E., after Abu Dhabi, expects $50 billion in real-estate investment by 2010.” (Emphasis added)

Early Friday, MarketWatch published the first of a new series of columns about socioeconomic happenings in the United Arab Emirates. “Letters from Abu Dhabi,” by Raymond Beauchemin, deputy foreign editor of The National in Abu Dhabi, is worth the read for the street level views. The inaugural publishing covers the heated topic of inflation. Price caps and freezes seem to be doing the trick, at least for now, but looking further out, the de-pegging of dirham from the US$ appears inevitable.

General Electric’s (NYSE: GE) Energy division announced over $1.5B in deals between Friday, June 6 and Monday, June 9. The first deal was a contract signed with Iraq for $480M to build three power plants and includes two other contracts each worth $41M for supplying of spare parts. The Monday announcement was for a nearly $1B contract GE won to supply Algeria with gas turbines for power stations.

By way of the New York Post, Reuters reports the Abu Dhabi Investment Council is under negotiations to buy a 75% stake in the NYC Chrysler Building, an investment valued at $800M.

Contrary to what finance sources have suggested to the Wall Street Journal late last month, investors are expecting the ME to organize a currency union by 2010, quashing speculation about a quick end to the USD peg. US Treasury Secretary Henry Paulson is in the region encouraging investment in the US, hoping to help attract  some of the $4T held by ME funds following strong profits on petroleum revenues.