EXCLUSIVE: Private Banking CIO says Dubai World debts deterring investors.
Dubai’s decision not to act as guarantor to debt-stricken conglomerate Dubai World has deterred potential investors from pouring fresh capital into the emirate, the chief investment officer of Lloyd Banking Group’s private banking arm has said.
“The risk is increasing for the same return. So it distracts a lot of capital from this region in this sense,” said Dr George Lo, CIO of Lloyds IPB Global. “The emirate, I must say, has been negatively impacted in the sense that they didn’t know how to control the risk.”
Dubai World shook global markets on November 25 when it revealed plans to request a delay on repaying $26bn in debt linked to its main property units Nakheel and Limitless World.
The state-owned conglomerate evaded default on a $4.1bn bond linked to Nakheel after a last minute bailout from oil-rich neighbour Abu Dhabi.
Commenting on the $10bn lifeline, Dr Lo drew comparisons with the aid package likely to be extended to fiscally-ailing Greece by euro zone countries, in a bid to stave off a sovereign default.
“If you look at the leverage, the details of the arithmetic, it’s a relatively difficult situation… if you’re taking the UAE overall – it’s a bit like Greece within the EU today.
In the total picture, Greece is very small and it should be kicked out [of the bloc] according to the terms of the constitution. But then being a currency union, you want to rescue them,” he said.
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"The state-owned conglomerate evaded default on a $4.1bn bond linked to Nakheel after a last minute bailout from oil-rich neighbour Abu Dhabi." – Get the facts right. Dubai is part of a country known as UAE and Abu Dhabi is the capital of UAE. Abu Dhabi bailed out the Dubai based company called Dubai World. Just like Washington DC (America) bailed out Detroit based automakers. Stop making it sound like Abu Dhabi is an outsider. If they did not know, they are all called Emaratis.
totally agree with you that Dubai is part of the United Arab Emirates, of which Abu Dhabi is the capital. But to bring the US into this is not really a fair analogy. The US is a country governed by democratically elected representatives that use funds collected from the US population by way of taxation to run the country; in effect all monetary reserves that are held by the government at Washington are for the welfare of the country as a whole and not just for Washington. In the case of UAE however, Abu Dhabi's oil reserves are Abu Dhabi's oil reserves, not the UAEs; there's no denying that. If a new oilfield is found in Dubai, the revenue generated from there goes to Dubai's coffers, not the UAEs. Please correct me if I am wrong here; this is what I have known of UAE in the last 18 years.
True, but Abu Dhabi and Dubai in turn funds or contributes to the federal reserve or the central bank because only these two emirate has reliable income.
