Morning All,
UAE Solidarity Special – Abu Dhabi comes to the rescue in true Hollywood Fashion
Monday morning, and already we have a partial nationalisation of Citigroup on the cards (reports government will increase stake to 40%), a bail-out of its own form in the UAE, an intra-day trading high of $1,000/oz on Gold, the end of Swiss banking-privacy as we know it, proposals for hedge funds to come under EU regulations and an elimination of some tax-havens (concerns over money-laundering here by any chance? – see Madoff and Stanford for clarification) and a whole bunch of Oscar statues awarded to a movie about a “slumdog” millionaire come good - at least some form of capitalism is working!
As if to celebrate the Oscars ceremony and instill its own portion of Hollywood suspense and thrill, the UAE dramatically and at the last minute unveiled a $20bn bond programme announced yesterday by Dubai, and fully subscribed to by the Federal Government (i.e. Abu Dhabi) – it has succeeded in clarifying what had been a rather opaque situation here in the UAE. The 5-year unsecured note will have an interest rate of 4%. Dubai is now clearly being supported by the Federal government and will be provided with the liquidity necessary to refinance any of its upcoming payment obligations . The “will they/won’t they” scenario of Bourse Dubai last week caused much undue anxiety amongst local and international investors/market watchers alike – a clear-cut and exhaustive solution such as that administered is exactly what we needed to see, and the UAE should be applauded for finally taking charge of its affairs without uncertainty. Whilst we will never truly know the details that sit behind any agreements amongst the member states of the UAE, there is now confidence that support is there and an unwillingness to witness the total demise of Dubai’s standing as an economic entity exists. Seems some of the difficult decisions that had to be made were faced head-on. Must have been fun witnessing what surely were some tense conversations amongst the relevant Abu Dhabi/Dubai clans (fly on the wall anyone?) – let us hope any further situations are dealt with in a similar fashion and the need to come so close to the brink once-again avoided.
Not all is well in the UAE yet though. Following some positively surprising reaction to the widely-disseminated “Soft-Shell-Crab-Index” a couple of weeks back, I just wanted to point out the latest report from a monthly UAE research body (YouGov’s Reality Check) where apparently they have found “consumers in the UAE are adjusting to a more economical lifestyle” and that 46% of respondents to the survey indicated they are considering relocating out of the UAE due to the current economic environment – hmmm, we of course do not want to see people leaving the UAE, rather more of the adjustment to lifestyle as it is only a concerted effort by consumers (rapidly dwindling in number) that will bring about the necessary changes to the Dubai pricing structure - I use the word “structure” loosely as most pricing here seems to be plucked out of thin air and decided upon using a benchmark made up of 5yr old (midst of bull-market) data.
A negative and indirect result of this change in lifestyle?; Dubai trying to pluck every last Durham from those using its services it seems: a recent flight on Emirates saw a passenger fly into Dubai from London Heathrow with a few kilos in excess of the allowance in one suitcase but an understanding and kind staff there allowing the excess without incident – only for the same passenger to be told they would have to pay 110DHS/kilo (it is only 40Dhs/Kilo on Sri Lanka Air – a partner airline) when returning to London from Emirates’ (gleaming and totally empty) new Terminal 3 at Dubai Int’l. How can it be that Emirates’ Heathrow staff are so lenient yet the Home terminal of the airline insists on charging its “much valued” customers every which way they turn? Is Dubai really that strapped for cash that it is going to start destroying the very element it should be working hard to be known for – good service and great value for money?
You certainly will not find any value for money if you are a resident in Dubai and looking to spend the day at one of the hotel pools/beaches. In a baffling move where prices have actually been increased significantly (100% to be precise) at a well-known international hotel resort, it will now cost you almost as much as carrying 5 extra kilos on Emirates ((per person!) to spend the day in the sun – I am wondering whether it would actually be cheaper to book into the hotel for the night judging by the internet specials going around across the (languishingly low occupancy rate) hotels at present and make use of the facilities. At least that way you would be able to pack-up all the little soaps and shower gels as you check-out and feel better about not having just gone to the free public-beach in the first place (only problem there is you cannot swim without risk of catching E-Coli). To put this beach-access-discrepancy into context: to spend the day at the beach at one of the world’s most pretentious, over-priced resorts in one of the world’s most pretentious, over priced cities – St Tropez, would still cost you 30% less per person than walking into a Dubai 5* Hotel. I look forward to the UAE consumer/tourist ensuring changes to this inexplicable price differential is rectified.
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