Dubai’s Exponential Revival Reverie
UAE shares up 90 percent further dominated the Gulf cohort as Dubai won the host competition for World Expo 2020 on some $50 billion in planned infrastructure outlays by end-decade as the event itself raises GDP an estimated 2 percent. Air terminal expansion is also in view as the Emirates flag carrier recently placed a $55 billion order for Boeing 777 jumbos financed with aid from the US Export-Import Bank. Property prices have rebounded almost 30 percent the past year despite new bank limits and fees, as defaulters from the post-2008 crash remain in jail demanding legal reforms for release. The medium-term debt headache includes $20 billion owed to Abu Dhabi and the central bank next year and $85 billion in maturities through 2017 according to the IMF, as state-owned lender Emirates NDB holds $25 billion in exposure. After acquiring BNP Paribas’ Egypt operations it will also emphasize Islamic and small enterprise credit there, as peers push deeper into Africa to service regional and Asian clients mainly from China. Dubai’s trade with the continent rose 25 percent to $30 billion in 2012, as the big four Chinese banks moved into the international financial center for cross-border reach. Export credit along the corridor increased 5 percent in the first half, as global emerging market specialists Barclays and Standard Chartered try to defend their franchises. Sub-Sahara boosters believe that the WTO’s administrative facilitation accord will benefit key countries in light of a comprehensive African Development Bank report citing dozens of filings and procedures for simple customs passage. Private equity investors are also scouring the area for basic financial services plays as evidenced by Abraaj’s buyout of Ghana Home Loan, which may eventually seek an Accra exchange listing.
Saudi Arabia’s capital markets regulator approved UAE cross-listings in November in another modest liberalization step helping to maintain the largest bourse’s annual 20 percent gain. Utilities like the Civil Aviation Authority with a $4 billion placement have accounted for three-quarters of GCC Islamic bonds in 2013, as tiny neighbor Oman facing a $2.5 billion public wage jump contemplates initial recourse. Debt/GDP is low at just 5 percent, but a likely oil price drop to $90 per barrel could warrant additional revenue options through privatization sales and foreign worker taxes. Over $15 billion in assets are available through sovereign wealth funds, and the government could also slash food and fuel subsidies. Qatar’s gross debt at 35 percent of GDP is the group’s highest and it has introduced fresh borrowing controls with $200 billion in facilities due to be built for the 2022 soccer World Cup. The world’s leading natural gas producer has an investment-grade sovereign rating with the benchmark bond yielding 3.5 percent, but credit has jumped at triple the pace of 6 percent economic growth. Bahrain has been the performance exception with an 8 percent loss on continued Shia backlash against the ruling family and corruption with the main aluminum company under trial both at home and in London.
