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December 2009

News Letter - 13th December 2009

Markets in UAE continue to drop in the after effects of the fall out from the Dubai debt servicing – or lack of any real transparency in the servicing of the debt and the Dubai stocks fell another 6.39% on Wednesday – this takes the losses on the Dubai market to over 25% since Dubai first indicated on 25th November they needed a rollover of $26B of debt of Dubai World scheduled for repayment on 19th December. On the same day the Abu Dhabi market fell by a more modest 2.82%. The rest of the Arabian Gulf’s stocks are weathering the Dubai fallout much better. The vast majority of Dubai’s financial problems stem from the high exposure to the real estate and financial services sectors and this is reflected in the recent falls with those two sectors taking the brunt of the falls.

A major contributory factor to these falls is that lack of transparency results in conjecture and innuendo in the market, which is a major cause of uncertainty. Markets do not act favourably to any uncertainty and the results are falls in the market which are probably out of proportion to that which would result if there were some transparency. Although the Dubai government says it wont bail out these ‘’Non Government Entities’’ from their debts it is a widely held view within the community and financial experts that Abu Dhabi will give the necessary financial assistance to Dubai from their vast oil revenues (oil prices are well above the expected 2009 levels) but it is expected that Abu Dhabi will extract a high price for the rescue in the form of taking prize Dubai assets as collateral for any further loans and bail outs. 

Maybe its not all ‘gloom and doom’ and this is now the time to come back in the market – assuming it is at or near bottom – however the real concern is how much more has to be revealed on the debt side or do we now know it all – I think not ---- yet?

 As the Copenhagen Climate summit grinds on with little or nothing to really show to date the UAE continues to develop its carbon neutral, zero waste city of Masdar City. This demonstrates what can be done when a determined effort is made, along with the necessary investment to reduce the human effects on the environment. The ‘big boys’ attending the Copenhagen conference should maybe spend a few minutes from their constant bickering and ‘penny pinching’’ looking at what can be done to reduce climate change in a small country like the UAE.

 If the world fails to deliver a political agreement at the UN climate conference in December, it will be “the whole global democratic system not being able to deliver results in one of the defining challenges of our century”, says incoming COP15 president, Connie Hedegaard. 

See www.masdar.ae for more information on this revolution in city development.