Fuel price to increase again

"Abu Dhabi: Local petroleum products distributors have decided to increase the price of a litre of petrol by 20 fils from Thursday, July 15, at all fueling stations across the UAE.
A statement issued on Monday by the distributing companies said the increase is part of liberalisation of prices and their gradual rise. “The announced rise comes within efforts to gradually mitigate accumulated and growing losses these companies are sustaining due to continuous surge in cost of the product,” the statement added."

More here: Petrol prices to go up by 20 fils (Gulf News)

(Link via AdamFlinter on twitter)

Sheikh Mohammed speaks out

It's a very rare thing indeed to hear the man speak. And when he does, it's worth a listen. An Embiz24/7 special covers the entire online interview with the press held on Saturday, as well as report on the current crisis:

"I believe that no preventive measures, neither in the UAE nor any other country in the world, would have provided the desired immunity from the ramifications of the global financial meltdown...Our position is far better than other countries, and encouraging economic indicators have just started to emerge."

I personally think this a step in the right direction, considering the recent barrage of articles on the 'dark side' of Dubai.

Oh, as a side note, he also says there's no income taxes anytime soon. Yeay.

Dubai sets its own rules as foreigners flee hard times

AP Report:

"Dubai has been the poster boy for globalisation and the free flow of globalised capital," said Mahdi Mattar, author of the Shuaa Capital report. "It built a reputation as a city run like a company. You see what happens to companies when globalised capitalism begins to fall apart."

At least the article's not touted as being written by a so-called journalist who got to know Dubai by either spending 2 hours in transit at DXB or taking a big bus tour.

UAE will not implement VAT for now

From what I'm reading in this report from Embiz 24/7, looks like the silver lining in the recession is no VAT in the UAE for now:

Hisham Abdullah Al Shirawi, Second Vice-Chairman of Dubai Chamber of Commerce and Industry, said he is not sure whether VAT will be implemented, adding that in times like these, the government is rather expected to lower its service fees[...]"I would expect the government to take certain actions to minimise governmental fees and the cost of operating business in the private sector so that it can be more competitive and much more active."

What do you think about VAT in the UAE?

Please share your opinion on Emiratization

Can I please ask for your participation in a survey on Emiratization, which should not take longer than 5 - 10 minutes to complete.

The purpose of this survey is to better understand employers' and managers' perceptions of Emiratization and their experience with and perception of the people at the centre of this topic - UAE nationals in the workplace.

Click here to take the English language version of the survey

Click here to take the Arabic language version of the survey

A key issue a multitude of stakeholders, academics and practitioners alike simply don’t understand at this point is why exactly Emiratization is not working to the extent it should, while at the same time everybody is an expert in Emiratization and has an opinion, a story or a ready stereotype why it doesn’t work. The truth is more likely that we don’t really know why it isn’t working, and therefore we also don’t know where to start to make it work. This is an issue we are hoping to shed light on by putting this survey in front of a larger audience.

Should you have any questions or feedback, please do not hesitate to contact the authors of the survey directly, the contact details of whom you can find on the welcome page of the survey.

Thank you !

Dubai: Has the bubble burst?

Nov 27th 2008 | DUBAI
From The Economist print edition

As the sheen comes off glitzy Dubai, the other Gulf states are getting nervous too

Full article here

“THEY said you couldn’t create islands in the middle of a city,” shouts a property advertisement over a jammed Dubai motorway. “We said, what’s next?” The range of answers has become gloomier by the week, as the debate moves from whether the Dubai property bubble will burst to just how bad it is going to get. Some nervous bankers think property prices could fall by 80% or so in the next year or so. A few months ago, rich foreigners who had bought villas in Dubai were complaining about the quality of the sand on their artificial beaches or the difficulty of getting water to circulate around the twiddly fronds of the man-made island shaped like a palm. Now prices for some smart developments have been cut by 40% since September, shares in property firms have lost 80% of their value since June, and big developers are laying people off.

The region’s banks will suffer too. Gulf policymakers are still making cheery statements about the region’s limited exposure to subprime loans but are quieter about heavy investments in inflated local property markets by regional banks, particularly Islamic ones. But worried banks are sharply reining in their mortgage lending. A series of arrests of senior businessmen as part of a fraud investigation is also making people twitchy. There is even talk of a coming “Gulf Enron”.

While the stunning opacity of government economic data is increasing the air of uncertainty, Muhammad Alabbar, who heads Emaar, a giant state-controlled property developer, took the rare step of telling people how indebted the country is. Together, the government and state-owned enterprises owe $80 billion—148% of GDP. Dubai still has a far larger stock of assets, at least some of which are likely to be sold, to cover the debts, to Abu Dhabi or the federal sovereign-wealth fund of the seven-state United Arab Emirates, of which Dubai and Abu Dhabi are the two richest.

The rest of the Gulf has met Dubai’s phenomenal boom with a mixture of envy and emulation. Now there are hints of pleasure at the idea that the epicentre of bullishness may be humbled. But there are worrying questions for the others, too. Could the Dubai property slump prove contagious? Will the Gulf Co-operation Council pull together to protect the region’s economy? Should its planned monetary union be set aside as governments focus on protecting their own currency?

Who do we listen to now?

Since everyone else has been trying to copy Dubai, it is unclear how economic policy should be reshaped if the model has to be rescued. Advisers who have been preaching free markets and foreign investment will have a tougher time as economic power shifts back to the more conservative, oil-rich governments such as Abu Dhabi and Saudi Arabia.

Political stability may be affected too. A worsening economy may encourage political reform, on the assumption that people can be more easily bought off in times of plenty. At a recent BBC debate in Doha, Qatar’s capital, on whether Gulf Arabs value profit over people, young Qataris said critics of their countries’ poor treatment of foreign workers should look on the bright side; local citizens benefit from large gifts of land and free university education. Since the oil boom began in 2003, mega-rich Qatar has ramped up public spending by an average of 28% per year; the less well-endowed states have had to make do with annual rises of some 15-20%.

Several GCC economies will go into budget deficits next year for the first time since at least 2002, including Saudi Arabia, whose budget is based on oil at around $50 a barrel but excludes the cost of Saudi Aramco’s massive programme of capacity expansion. Unemployment will rise as thousands more young people, many of them graduates with high expectations, enter the job market. Social unrest is likely to brew. The question is whether governments will meet it with repression or political concessions.

"Emirates See Fiscal Crisis as Chance to Save Culture"

"“This is a blessing; we needed it,” Abdul Khaleq Abdullah, a political science professor at United Arab Emirates University, said of the fiscal crisis. “The city needs to slow down and relax. It’s good for the identity of our country."

......

“I hear this complaint over and over, but what is the solution?” said Abdul Ghaffar Hussain, a businessman and writer. “What should I do, go to the street with a stick and chase people out? You have to be reasonable.”"

http://www.nytimes.com/2008/11/12/world/middleeast/12dubai.html?pagewanted=1

I wonder, do all Emaratis feel this way?

WSJ: Dubai's Debt Cloud

Friday the Wall Street Journal ran an article about market concerns over the level of sovereign in Dubai. An ungated copy of the article is here. Among other things the article points out that big investors want more transparency such as access to Dubai government's books.

The UAE student blog Broadcasters of Tomorrow astutely observes: "In the end, if Dubai gets into financial trouble it would take its neighbours with it. Or perhaps they're counting on a regional bailout."

Similarly, for the Emirates Economist (shameless plug) the money quote from the WSJ article is this one: "The assumption is that Sheikh Mohammed or his government will come to the rescue in a pinch. And if Dubai gets overextended, analysts expect the emirate's much-richer cousins in Abu Dhabi will lend a hand."

With that attitude you've got the same element that fueled the savings and loan real estate scandals in the US in the 1980s - removal of downside risk.

So what do you think? Would Abu Dhabi do a bailout? Are Dubai's investors counting on it? And if so, what can Abu Dhabi do about it now?

UPDATE - Marginal Revolution links here and writes "sell short."

Headline: U.A.E.'s Drive for Emirati-Run Economy Is Thwarted by Handouts

Bloomberg.com: Europe

The handouts, based on traditions of royal patronage dating back centuries to Bedouin society, now discourage citizens from working, academics say. Expatriates outnumber Emiratis and dominate fields such as banking, law and technology. The quandary for Sheikh Mohammed is how to reduce the culture of dependence without alienating his people.

``The relationship between work and income is broken,'' says Kenneth Wilson, Dubai-based director of the Economic and Policy Research Unit at Zayed University, a school for Emirati women that opened in 1998. ``That's unlikely to change until the government starts trying to give incentives to work in the private or corporate sector.''

Thanks largely to the country's oil-fueled economic boom, the average male Emirati receives benefits worth about 204,000 dirhams ($55,500) a year, according to the university's research.
...
More significant steps to reduce privileges for Emiratis may be met with resistance, says Anthony Harris, a former U.K. ambassador to the U.A.E. who lives in Dubai.

``I'm sure there would be a call from within the royal family to change the sheikh to one that provided the benefits if there was a move to remove them,'' Harris says. ``The social contract is that you get given things by the sheikh and in return you give the sheikh your allegiance.''

Do you agree that the prevailing attitude is that allegiance is paid for, and that this gets in the way of reforming the system such that greater incentives to work in the private sector are created?

An interview with Minister of Economy Lubna Al Qasimi

In the McKinsey Quarterly (free reg. req.)