Dubai Learnings Presentation Final

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Dubai Learnings Presentation Final

  1. 1. International Finance: Dubai Jordan Baynard / Drew Lein4/9/2012 1
  2. 2. History of Dubai• Established in 1833 by Sheikh Maktoum bin Buti al Maktoum• Evolution of Industry: – Fishing → One of earliest known industries – Pearl → 1892 is height of industry – Trade → 1950’s, develops as major trading hub – Oil → 1966, discovers it’s own oil – Tourism → 1985, Emirates airline established – Real Estate →2003, IMF & World Bank recognize Dubai as a financial hub, introduction of freehold properties follows• Abu Dhabi remains oil rich emirate while Dubai leads the way with diverse industry
  3. 3. Economic Freedom Trending The Heritage Foundation:http://www.heritage.org/index/visualize#
  4. 4. Present U.A.E. United States Tariff Rate: 3.7 1.8 Income Tax Rate: 0 35.0 Corporate Tax Rate: 0 35.0 GDP (Billions): 246.8 14,657.8 Unemployment Rate: 2.4 9.6 Inflation Rate: 0.9 1.6 FDI Inflow (Millions): 3,948.3 228,249 Tax Burden (% GDP): 1.8 24.0Gov’t Expenditure (% GDP): 25.8 42.2 (http://www.heritage.org/index/explore?view=by-variables)
  5. 5. Present Demographics % of Population Emirati 8% 19% Other Arab & Iranian 23% South Asian 50% Other expatriates (incl Westerners & East Asians)Other Interesting Statistics:• Highest net migration rate• Highest average life expectancy compared to other Arab countries• Highest gender imbalance with male/female ratio of 2.2 CIA Fact Book
  6. 6. Growth
  7. 7. Sheikh Zayed Road 1990
  8. 8. Sheikh Zayed Road 2002
  9. 9. Sheikh Zayed Road 2010
  10. 10. Strategic Focus:• Achieving critical mass within the semiconductor market• Upstream investments into design services and technology solutions• Horizontal investments into other foundries to achieve to achieve consolidation or acquire specialty foundries• Downstream investments into assembly, packaging and testing• Broad investments into adjacent and complementary capital and technology- intensive sectors, such as life sciences and advanced chemicals and materials(Advanced Technology in Abu Dhabi – Etching a Brighter Path, ATIC)
  11. 11. Why Invest in Semiconductors?• Deliver diversification of economy while delivering financial returns• Huge growth potential: Market size of $300B in 2010 • Processors for most tech including PC, mobile, automobile, energy mgmt • 50x growth in data expected over the next 5 years • Requires less human capital• Attract the talent to innovate and strengthen overall workforce• Remain consistent with the overarching goals set forth by Mubadala
  12. 12. Investment in Human Capital:
  13. 13. Current Innovation Rankings:• Create relevant degrees and leading 1 USA universities 2 Japan• Attract leading businesses 3 Germany• Attract world class talent 4 Taiwan 5 Singapore• Prove strategic location is a huge benefit How do they get there?• Foster competition 52 UAE (Advanced Technology in Dubai – Etching a Brighter Path)
  14. 14. AchievementsGF is currently #3 in market share & capacity in foundry business: 1) Taiwan Semiconductor Manufacturing Company Limited 2) United Microelectronics Corporation 3) Global FoundriesAl Nokhba Internship ProgramFinancial Returns: 1) GlobalFoundries posted US$3.6B in 2011 revenue 2) ATIC is wholly owned by Mubadala
  15. 15. What’s Next? • SANTA CLARA, Calif., Feb. 8, 2012 /PRNewswire/ -- IBM, Samsung Electronics, Co., Ltd., and GLOBALFOUNDRIES--forming the worlds largest chip-making consortium--will preview the future of silicon technology at the 2012 Common Platform Technology Forum to be held at the Santa Clara Convention Center on March 14. • Calexda → Likely exit is strategic sale • Masdar → Build world-class, cutting-edge program • Acquisitions → Gain economies of scale “Transforming from an oil based economy to a knowledge based economy”
  16. 16. • Consulting practice dedicated to Sharia compliant finance and banking• Originally served the Dubai Islamic Bank as an internal service and in 2008 was re-launched as a full independent advisory service• Services Offered:  Product Development  Sharia Documentation  Research and Innovation  Training  Sharia Audit  Accounting and IT Support  Asset Management Department  Administration and Finance
  17. 17. Sharia Compliant Finance “All things are owned by Allah, man being a trustee and is held accountable to the by-laws of that trust” Khurram Abdallah, Dar Al Sharia• Money is a medium of exchange and not created to be sought for its own sake• Specific rules defined through jurisprudence in Islamic law• Promotes equity over debt, symmetric risk sharing• “Same, Same, Different” – outcome same, procedure is different
  18. 18. 2030: 30% of World Population will be Muslim
  19. 19. Islamic Financial Industry Map $5,000,000Annual Revenue $USD MM (log scale) $500,000 INDONESIA $50,000 $5,000 $500 BRITAIN $50 UAE PAKISTAN QATAR $5 JORDAN INDIA KUWAIT $1 BAHRAIN 0 2 4 6 8 10 12 14 16 # of Institutions = Relative Market Capitalization Source: Bloomberg LP
  20. 20. Islamic Finance: Islamic Finance Industry $USD Billions $1,399 $1,139 $1,036 $822$6202007 2008 2009 2010 2011
  21. 21. Investments: Mudarabah Musharaka(Fund Management) (JV/Partnership) Wakala (Investment Agency) 21
  22. 22. Sukuk: Securitized lease instrument withdescribed asset given as gift at maturity By Currency Sukuk Issued $USD Billions $69 USD 18% SAR 7%QAR 5% MYR 61% $32 $30 $29 $17 $10 $2 $4 2004 2005 2006 2007 2008 2009 2010 2011
  23. 23. Sale Transactions:Bai Mutlaq Bai Muajjal Murabaha (Cash Sale) (Deferred Sale) (Cost plus) Istisna Ijara Salam(Sale of a ‘Described’ (Sale of a ‘Described’ Asset) (Sale of Usufruct) Commodity) 23
  24. 24. Crisis• Only 40% of transactions done in UAE are done with Islamic Financial principles• $20 Billion Dollar bailout from Abu Dhabi for restructuring debt in 2009• Massive Foreign Worker Exodus “Ailing Dubai World forced to sell assets in quest for cash” – USA Today, December 2009
  25. 25. Future Growth Plans Trade Free Trade Promoted Finance Fills gap between Singapore and London Tourism 5 billion people within an 8 hour plane ride Real Estate Oversupply, Debt IssuesS W O TLeadership & Confusing Legal Trade w/ Asia & SustainabilityVision System Oceania EntitlementInfrastructure Financial Reform Geopolitics Interests
  26. 26. Promoting Trade: Free Zones• Free Zones: Tax Free & Foreign Ownership Allowed• Sector Clusters: Technology, Communications, Finance• 18 in total, each with own governance and regulation – 90% online forms & document registration – One-Stop Shops with government reps JAFZA
  27. 27. Dubai International Financial Center• Internationally accepted legal environment based under common law• Separate regulatory commission: only 40% of firms are regulated• Over 1000 companies registered since 2004 start• Strong Western & Chinese Presence• Only 1 registered 100% Sharia Compliant Institution
  28. 28. DIFC: Global Financial Centre in Dubai •Shanghai DIFC Region 8 hour time zoneDubai is 4 hours ahead of Greenwich Mean time (GMT) 5pm Dubai = 9am New York 1pm Dubai = 9am London 9am Dubai = 1pm Hong Kong
  29. 29. Today• Gulf Tensions: Primary Trade Partners Iran & Saudi Arabia• Perpetual Debt Issues – Emirates and DIFC restructuring $3.5 billion of debt in 2012 – Improving credit rating since near default• Sustainability – Highest per capita water utilization through Irrigation & desalinization – Energy intensive, was a net gas exporter until 2008

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