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Ankit
 

Ankit

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    Ankit Ankit Presentation Transcript

      • Dobuy
      • Dobye
      Crisis in the Emirates of Desert
    •  
    • DUBAI WORLD
      • Dubai World was established under a decree ratified on 2 March 2006 by  Sheikh   Mohammed bin Rashid Al Maktoum , Vice President and Prime Minister of the  United Arab Emirates  and Ruler of  Dubai . He also holds the majority stake in Dubai World.
      • On 2 July 2006, it was launched as a  holding company  with more than 50,000 employees in over 100 cities around the globe. The group now has extensive real estate investments in the  United States , the  United Kingdom  and  South Africa . Dubai World made headlines in March 2008 after its chairman, Sultan Ahmed bin Sulayem, threatened to take the fund's money out of  Europe . [1]  Dubai World's threats came shortly after the European Union attempted to lay out "a set of principles for transparency, predictability and accountability" for sovereign wealth funds. [2]
    • Contd..
      • The 60-year-old Mohammed's confidence and ambition gave way to aspirations to place Dubai in the same league as London or New York.
    • Major creditor’s
      • Biggest debtor royal bank of scotland $17.9 billion
      • Standard charted bank $4 billion.
      • Local merchant’s Saad and Algosaibes have lended $16 billion
      • Emirates airways and many other small players including 70 investors.
    • When did people felt the heat???
      • On 25 th November Wednesday,Government of dubai asked Dubai World and its subsidiary Nakheel ,for a stand still on debt worth billions of dollar($60 billion of total $80 billion debt of whole country).
      • Dubai World asked for time frame of 6 months and debt worth $26 billions to restructure the finances and coming to terms .
      • Once the renowned banker said “Dubai world is an example of too big to fail but also too big to guarantee”
    • Immediate aftermath of Dubai crisis
      • SENSEX shed 645 points, FTSE 100 index in London bearish by 3%.dow jones industrial average lost about 155 points and oil prices plunged by & 7%.
      • Major investor Abu Dhabi not keen to bailout Dubai. (richest among neighbours).
      • Dubai world stated that they needed 6month standstill on payment of debt.
      • Major creditors like Standard Charted, HSBC, Royal bank of Scotland, Emirates NBD and Abu Dhabi commercial bank were found guessing the next step of Dubai world.
      • Dubai world investment were in high hand retailer Barneys to W Hotel in Washington, property in London as well as invested in Disney.
      • Even if loans are secured and underlying paper work is comprehensive ,region’s law are unfriendly to creditor’s.
      • Even if loans are paid back preference would be given to local lenders.
    • Impact on India
      • Bank of Baroda had an exposure of around $200 million to Dubai world.
      • India’s biggest export market after U.S. is UAE.
      • Dubai 40% population constitutes on Indian forming 10 to 12% of India’s invert remittances.
      • Indian talk the list of Villa buyers with 21% ownership.
      • Host of Indian companies such as L&T Nagarjuna construction ,Omaxe,Afscon Infrastructure and Country Club(Mahindra and Mahindra) said that they were reviewing the option of investment in Dubai.
    • India could take a leaf of Dubai Crisis…
      • Dubai had the ambition to grow like Singapore and Hongkong.
      • The only difference between Dubai and other 2 countries was that Dubai had economy based on service ,real state ,little oil deposits and tourism where as Singapore and Hongkong had economy fundamentals of manufacturing hence consolidated.
      • What India is expected is to grow at the high G.D.P for yrs to come with only strong fundamentals of service sectors but we need to understand that skipping manufacturing sector to grow at high pace could lead to unstability and developed nations like U.S and U.K had also grown with strong manufacturing growth.
    • Lesson learnt hard way….
      • Out of control spending
      • Lack of Future Planning
      • Poor Management
    • Factors leading to crises
      • The nerves showed in credit markets, at the centre of the financial storm triggered by the Lehman Brothers' bankruptcy last year.
      • Asian credit default swaps, used to insure against default, were at their widest in a month, with the Asia ex-Japan iTraxx investment-grade index touching 124/129 basis points.
      • Dubai's credit default swaps were being quoted as high as 500-550 basis points, some traders said on Thursday.
      • Dubai's debt problems are a hangover from a property bubble that imploded after the financial crisis derailed its plans to become a magnet for tourists and a regional hub for everything from shipping to entertainment.
      • Banks' exposure to a Dubai default pales in comparison to the $2.8 trillion in writedowns the International Monetary Fund estimates U.S. and European lenders will have to make between 2007 and 2010 as a result of the credit crisis.
    • Macro Economic Factors leading to Dubai crisis
      • counter-crisis measures like low interest rates and abundant flow of capital .
      • Sale prices in the residential real state have dipped by 40-60% and rents by 30-50 percent in the areas they monitor.
      • Oil production in Dubai is very limited compared to other states of U.A.E,
      • tourism took a jolt because of economic recession ,development projects took the back seat with changing economy scene.
      • .
    • Creditors should play safe
    • Consequences of Dubia crisis
      • Exposure to Dubai World and its restructured entities among local banks and contractors is significant, that employment levels and confidence will suffer and that local banks will become even more reluctant to lend into the domestic economy. 
      • The Dubai government is rather small in relation to the size of the economy and has limited resources at its disposal.  This constrains its ability to provide fiscal stimulus to offset shocks to the private sector. 
    • Contd…
      • Abu dhabi is now not concerned to give money to Dubai because of their unplanned expenditure.
    • Key Activities required to cease the crisis
      • $10 billion immediate funding from Abu dhabi.
      • Intervention of UAE Central Bank to modurate rates of Libor, Corporate bond spreads, TED spreads, US dollar commodities .
      • Selling away the Assets like Jumeirah Essex House and Barnay’s New York.
      • Interestingly, Dubai World had already raised $5 billion from Abu Dhabi banks on Wednesday, making it possible to pay the $3.5 billion to the holders of its Islamic bond by Dec. 14
      • Following Dubai's request last week for a six-month moratorium on debt of billions of dollars, the implementation of an "exit strategy" will likely be pushed back further.
      • Thank You