Dec 3, 2009
Dubai not just a castle in the sand
By Kenneth Rogoff
GLOBAL investors are in a giant huff over Dubai's decision to allow its flagship private company Dubai World to seek a six-month standstill - implying at least partial default - on payments on about US$26 billion (S$36 billion) in debt. What exactly did investors expect when they purchased bonds in companies with names like 'Limitless World', one of Dubai World's bankrupt real-estate subsidiaries? Talk about a bubble mentality.
The notion, I guess, was that the emirate's government would stand behind every loan, no matter how risky. And if the oil-poor Dubai government didn't have the money, then somehow its oil-rich sister state Abu Dhabi would cough up.
An absurd expectation, one might think. But it is hardly more improbable than many of the other massive bailouts we have seen around the world in the wake of the recent financial crisis. What really upset investors, of course, was the realisation that, yes, some day untenable debt guarantees will have to be withdrawn. Eventually, an over-leveraged world is going to have to find a way to cut debt burdens down to size, and it won't all be pretty.
There are those who revel in what they see as a comeuppance for brash Dubai's outsized ambitions. I do not share this view. Yes, Dubai, with its man-made islands, hotels simulating Venice, and rooftop tennis courts, is a real-world castle in the sand. Yet, Dubai has also shown the rest of the Middle East what entrepreneurial spirit can accomplish.
Its airport has become a global hub of such significance that German regulators recently had to force the Emirates airline to raise its rates to Frankfurt, lest national champion Lufthansa lose too much business. And with its relatively open goods and capital markets, Dubai has become a trading hub not only for the entire Middle East, but also for parts of Africa and Asia. On the eve of the financial crisis, other Gulf states had started to look to Dubai for insight into how they might diversify their economies and continue to thrive when the oil wells run dry.
Yes, Dubai is certainly an autocratic state where finances are tightly and secretively controlled. Indeed, lack of detailed information on the emirates' finances was a central reason why the Dubai World default came as such a shock.
But in many ways, Dubai's rulers have been remarkably tolerant of free expression. A year ago, I sat through an evening of presentations at the University of Dubai by local artists. One artist, an Emirati photographer, presented a visual timeline of the construction of one of the stations of Dubai's new metro system. This local artist has lived through the stunning transformation of the city-state over the past 13 years, which has been driven by the kind of building boom that one associates with the fastest growing Chinese cities, not the Middle East.
But rather than simply praising the government's new constructions, the artist emphasised how jarring the change was to long-time citizens. How does one relate to the inanimate objects rising out of the barren yet majestic desert sands? Another artist presented a vision of how outside lighting could be used to transform minarets, and help them to stand out in the blur of modern buildings that characterise the contemporary Middle Eastern city. His visions were magnificent, and apparently somewhat radical. One had to be impressed that such ideas could be expressed openly.
Anyone familiar with Dubai understands that these are but small examples of a much broader embrace of creativity that has allowed the country to court elite foreign professionals in finance and other industries. Much as in the United States, elite foreigners have played a key role in developing Dubai's various service industries.
Of course, other countries in the Gulf also have some stunning accomplishments to their credit. Saudi Arabia's national oil company has achieved home- grown expertise in oil drilling that is widely admired in the West. Qatar has had success in media with Al Jazeera, while Abu Dhabi has helped sponsor remarkable advances in artificial intelligence through its support of computer chess. But Dubai, with very little black gold of its own, has done more with less than any other state in the region.
Unfortunately, Dubai ultimately proved subject to the laws of financial gravity. Massive speculation and borrowing led to excessive debt burdens and, ultimately, to default.
Is this the end of the road for Dubai's epic growth? I doubt it. Countries throughout history have defaulted on their debts and lived to talk about it, even prosper. There is no way around the need for Dubai to restructure and prune its excesses before it can resume a more sustainable growth trajectory, though achieving this will take time.
Will there be contagion to vulnerable countries in Europe and elsewhere? Not just yet. While the Dubai case is not different, it is special, so the effect on investor confidence should remain contained for now. But investors are learning the hard way that no country's possibilities and resources are limitless.
The writer, a former chief economist of the International Monetary Fund, is a professor of economics and public policy at Harvard University.
PROJECT SYNDICATE
Thursday, December 3, 2009
ST : S'pore is 9th most expensive Asian city
Dec 3, 2009
S'pore is 9th most expensive Asian city
Living costs for expats hit by a stronger Sing$ and rise in inflation
By Fiona Chan
ST PHOTO: ALPHONSUS CHERN
A STRONGER currency and a rise in inflation have made Singapore a more expensive place for expatriates to live in, a survey has found.
Singapore jumped three spots from a year ago to become the ninth priciest Asian city in the latest cost of living ranking by human resource company ECA International.
It beat Taiwan's Taipei and China's Shenzhen and Guangzhou, but remained cheaper than Japan's Tokyo and Yokohama, and China's Beijing, Shanghai and Hong Kong.
Worldwide, Singapore's rising cost of living catapulted it into the 78th spot on this year's global survey, up almost 20 places from 97th last year.
The main reason for the movement - and, in fact, for most of the changes in this year's survey - was exchange rate fluctuations, said ECA International.
The Singapore dollar has gained about 10 per cent against the US dollar since March. This has helped push up the cost of living in Singapore, compared with some neighbouring cities whose currencies are pegged to the US dollar such as Hong Kong.
According to ECA International, living costs in Singapore are now just 7 per cent lower than in Hong Kong, compared with a 15 per cent gap last year.
'While such increases are unlikely to deter companies from relocating staff to Singapore, the cost of doing so is now higher than it was a year ago,' said Mr Lee Quane, regional director of Asia for ECA International.
He said the stronger Singdollar, coupled with the fact that inflation here has been slightly higher than in some other Asian cities, means that companies have to pay their expat workers higher cost-of-living allowances.
The same applies to Japanese cities, which maintained their top spots in the Asia ranking as the yen soared against the greenback. South Korean locations also surged up the ranks, with Seoul jumping four places to seventh this year, after the won regained some of its lost value.
Expats in Singapore said yesterday that they feel the cost of living has gone up.
'In terms of personal costs, day-to-day expenses have definitely increased,' said Mr Trevor Gawne, who is from Australia and based here as managing director of Fuchs Lubricants.
He said the prices of raw food in particular, such as eggs and fresh milk, have gone up quite considerably in the past 12 months, especially if they are imported from countries like New Zealand and Australia, which have seen their currencies strengthen against the Singdollar.
But while rising costs are a concern, a bigger worry is the volatility of costs, said Mr Phillip Overmyer, an American and the chief executive of the Singapore International Chamber of Commerce.
'What I think is a bigger concern at the corporate level is the high fluctuation we are seeing in Singapore costs in general,' he said.
'Housing rentals, office rentals and the prices of general goods and services have been swinging back and forth a lot over the last couple of years.'
This is worrying for companies because they cannot predict costs and plan accordingly, and it hurts Singapore's competitiveness, he said.
Ms Laura Deal, executive director of the American Chamber of Commerce in Singapore, agreed that the extreme swings in costs 'can really destroy budgets and cause pain for small companies'.
'You can get caught in a really bad housing or office lease if you sign at the wrong time, and end up paying 30 per cent more than your neighbour,' she said. 'We think it is important for the Government to control the volatility of costs a little bit more.'
ECA International's survey calculated the cost of living around the world based on a basket of day-to-day goods and services. The survey is done twice a year, but comparisons are made year-on-year to strip out seasonal differences.
In March, Singapore was 10th in the Asia rankings.
In the global rankings, Angola's capital Luanda took top spot as the city with the highest cost of living in the world - many regularly used items are expensive to obtain in the city due to the country's war-damaged infrastructure.
Other cities placed in the global top 10 included Tokyo, Yokohama, Oslo and Copenhagen.
S'pore is 9th most expensive Asian city
Living costs for expats hit by a stronger Sing$ and rise in inflation
By Fiona Chan
ST PHOTO: ALPHONSUS CHERN
A STRONGER currency and a rise in inflation have made Singapore a more expensive place for expatriates to live in, a survey has found.
Singapore jumped three spots from a year ago to become the ninth priciest Asian city in the latest cost of living ranking by human resource company ECA International.
It beat Taiwan's Taipei and China's Shenzhen and Guangzhou, but remained cheaper than Japan's Tokyo and Yokohama, and China's Beijing, Shanghai and Hong Kong.
Worldwide, Singapore's rising cost of living catapulted it into the 78th spot on this year's global survey, up almost 20 places from 97th last year.
The main reason for the movement - and, in fact, for most of the changes in this year's survey - was exchange rate fluctuations, said ECA International.
The Singapore dollar has gained about 10 per cent against the US dollar since March. This has helped push up the cost of living in Singapore, compared with some neighbouring cities whose currencies are pegged to the US dollar such as Hong Kong.
According to ECA International, living costs in Singapore are now just 7 per cent lower than in Hong Kong, compared with a 15 per cent gap last year.
'While such increases are unlikely to deter companies from relocating staff to Singapore, the cost of doing so is now higher than it was a year ago,' said Mr Lee Quane, regional director of Asia for ECA International.
He said the stronger Singdollar, coupled with the fact that inflation here has been slightly higher than in some other Asian cities, means that companies have to pay their expat workers higher cost-of-living allowances.
The same applies to Japanese cities, which maintained their top spots in the Asia ranking as the yen soared against the greenback. South Korean locations also surged up the ranks, with Seoul jumping four places to seventh this year, after the won regained some of its lost value.
Expats in Singapore said yesterday that they feel the cost of living has gone up.
'In terms of personal costs, day-to-day expenses have definitely increased,' said Mr Trevor Gawne, who is from Australia and based here as managing director of Fuchs Lubricants.
He said the prices of raw food in particular, such as eggs and fresh milk, have gone up quite considerably in the past 12 months, especially if they are imported from countries like New Zealand and Australia, which have seen their currencies strengthen against the Singdollar.
But while rising costs are a concern, a bigger worry is the volatility of costs, said Mr Phillip Overmyer, an American and the chief executive of the Singapore International Chamber of Commerce.
'What I think is a bigger concern at the corporate level is the high fluctuation we are seeing in Singapore costs in general,' he said.
'Housing rentals, office rentals and the prices of general goods and services have been swinging back and forth a lot over the last couple of years.'
This is worrying for companies because they cannot predict costs and plan accordingly, and it hurts Singapore's competitiveness, he said.
Ms Laura Deal, executive director of the American Chamber of Commerce in Singapore, agreed that the extreme swings in costs 'can really destroy budgets and cause pain for small companies'.
'You can get caught in a really bad housing or office lease if you sign at the wrong time, and end up paying 30 per cent more than your neighbour,' she said. 'We think it is important for the Government to control the volatility of costs a little bit more.'
ECA International's survey calculated the cost of living around the world based on a basket of day-to-day goods and services. The survey is done twice a year, but comparisons are made year-on-year to strip out seasonal differences.
In March, Singapore was 10th in the Asia rankings.
In the global rankings, Angola's capital Luanda took top spot as the city with the highest cost of living in the world - many regularly used items are expensive to obtain in the city due to the country's war-damaged infrastructure.
Other cities placed in the global top 10 included Tokyo, Yokohama, Oslo and Copenhagen.
TODAY Online : Dubai debacle a taste of things to come
Dubai debacle a taste of things to come
05:55 AM Dec 03, 2009
by Loh Chee Kong
SINGAPORE - The Dubai financial crisis would be the first of many to come as the global economy undergoes a painful transition, warned Financial Times associate editor and chief economics commentator Martin Wolf.
Speaking yesterday at a seminar organised by the Singapore Institute of International Affairs, Mr Wolf pointed out that it was only a matter of time that Dubai- "essentially a very large commercial real estate" - ran into credit problems.
"(The banks) lent to everybody in every conceivable way," said Mr Wolf, "We are still very much at the beginning stage of working through the full implications of the bad lending that occurred in the Great Credit Boom."
Still, Mr Wolf noted that the US$26 billion ($35.9 billion) debt incurred by Dubai government's investment arm Dubai World "seemed almost trivial" compared to the losses that hit government-sponsored companies in the United States at the onset of the global financial crisis.
Doubting Asia's ability to replace the US as the world's chief consumer - particularly in China where a large proportion of corporate profits do not flow down to the average households - Mr Wolf reiterated that prospects for the global economy remain bleak.
And "serious inflation" could set in "seven, eight" years - as the US government deals with a burgeoning fiscal deficit. Said Mr Wolf: "There are just two ways out of it: Close the fiscal deficit dramatically whatever it costs ... big tax rises, big spending cuts. Or they go to the Central Bank and they'll say this is what you are for, buy the (treasury bonds)."
Mr Wolf also dismissed the notion of an era of Asian dominance. The idea that Asian countries such as Japan, India and China could cooperate "so closely as to run the world to the exclusion of the West strike me as one of the higher fantasies", he added. Loh Chee Kong
05:55 AM Dec 03, 2009
by Loh Chee Kong
SINGAPORE - The Dubai financial crisis would be the first of many to come as the global economy undergoes a painful transition, warned Financial Times associate editor and chief economics commentator Martin Wolf.
Speaking yesterday at a seminar organised by the Singapore Institute of International Affairs, Mr Wolf pointed out that it was only a matter of time that Dubai- "essentially a very large commercial real estate" - ran into credit problems.
"(The banks) lent to everybody in every conceivable way," said Mr Wolf, "We are still very much at the beginning stage of working through the full implications of the bad lending that occurred in the Great Credit Boom."
Still, Mr Wolf noted that the US$26 billion ($35.9 billion) debt incurred by Dubai government's investment arm Dubai World "seemed almost trivial" compared to the losses that hit government-sponsored companies in the United States at the onset of the global financial crisis.
Doubting Asia's ability to replace the US as the world's chief consumer - particularly in China where a large proportion of corporate profits do not flow down to the average households - Mr Wolf reiterated that prospects for the global economy remain bleak.
And "serious inflation" could set in "seven, eight" years - as the US government deals with a burgeoning fiscal deficit. Said Mr Wolf: "There are just two ways out of it: Close the fiscal deficit dramatically whatever it costs ... big tax rises, big spending cuts. Or they go to the Central Bank and they'll say this is what you are for, buy the (treasury bonds)."
Mr Wolf also dismissed the notion of an era of Asian dominance. The idea that Asian countries such as Japan, India and China could cooperate "so closely as to run the world to the exclusion of the West strike me as one of the higher fantasies", he added. Loh Chee Kong
TODAY Online : Orchard Road's newest mall 313@Somerset opens today
Orchard Road's newest mall 313@Somerset opens today
05:55 AM Dec 03, 2009
SINGAPORE - With weeks to go before Christmas, 313@Somerset today becomes the final mall this year to open along Orchard Road.
All units on all eight levels of retail space were leased out four months prior to opening, an unprecedented feat in this challenging economic climate, according to the mall.
It will open in stages from today, with 177 specialty retailers and concierge ambassadors to help with most things from taxi bookings to hotel delivery services and language interpretation.
Among the global brand-name tenants are Forever 21, Uniqlo, Zara, HMV, Stadium, Marche and three "food precincts": A food hall opening in January, street-level restaurants and cafes, and a Food Republic on the fifth level featuring a unique sky garden.
URL http://www.todayonline.com/Singapore/EDC091203-0000104/Orchard-Roads-newest-mall-313@Somerset-opens-today
05:55 AM Dec 03, 2009
SINGAPORE - With weeks to go before Christmas, 313@Somerset today becomes the final mall this year to open along Orchard Road.
All units on all eight levels of retail space were leased out four months prior to opening, an unprecedented feat in this challenging economic climate, according to the mall.
It will open in stages from today, with 177 specialty retailers and concierge ambassadors to help with most things from taxi bookings to hotel delivery services and language interpretation.
Among the global brand-name tenants are Forever 21, Uniqlo, Zara, HMV, Stadium, Marche and three "food precincts": A food hall opening in January, street-level restaurants and cafes, and a Food Republic on the fifth level featuring a unique sky garden.
URL http://www.todayonline.com/Singapore/EDC091203-0000104/Orchard-Roads-newest-mall-313@Somerset-opens-today
BT: Uniqlo sees Singapore as regional gateway
Business Times - 03 Dec 2009
Uniqlo sees Singapore as regional gateway
By NISHA RAMCHANDANI
JAPANESE fashion brand Uniqlo is already planning its fourth store in Singapore - as it launches its largest store here today.
'Singapore will be the gateway to the South-east Asian region. Singapore is very significant strategically,' chief operating officer of Fast Retailing Group, Naoki Otoma, told BT in an interview yesterday.
Uniqlo's parent company is fashion retailer Fast Retailing, which also carries Comptoir des Cotonniers and Princesse tam.tam.
In fact, the stores in Singapore have helped pique the interest of potential business partners, who have since approached Uniqlo with the intention of opening similar stores in their home countries.
Uniqlo has plans to open at least five more stores in Singapore within three years, in areas such as Marina Bay, Orchard Road as well as farther out, at suburban malls. The fourth store is likely to be open by next year, Mr Otoma said.
Response to Uniqlo's first two stores in Singapore - at Tampines 1 and Ion Orchard, which collectively saw an investment of $60 million - has been 'overwhelming' and 'better than we expected', said Mr Otoma. The two stores managed to break even within six months of opening.
Uniqlo's stores in Singapore are a joint venture with Wing Tai Retail.
The latest addition covers 17,000 sq ft - the largest in South-east Asia as well as Singapore - and opens its doors today at the new 313@somerset mall.
Today also marks the official opening of the eight- storey 313@somerset, which was 100 per cent leased four months ahead of schedule.
Despite the challenging global economy, an aggressive expansion strategy is necessary, Mr Otoma feels, especially since Asia has become the centre of economic growth.
'We need to take risks to be the dominant player in Asia, to capture the market,' he said.
Uniqlo also has stores in the US, UK, France, Hong Kong, China and Korea.
And now that it has established itself in Singapore, it is looking to enter Malaysia, Thailand, Taiwan and Australia.
Uniqlo sees Singapore as regional gateway
By NISHA RAMCHANDANI
JAPANESE fashion brand Uniqlo is already planning its fourth store in Singapore - as it launches its largest store here today.
'Singapore will be the gateway to the South-east Asian region. Singapore is very significant strategically,' chief operating officer of Fast Retailing Group, Naoki Otoma, told BT in an interview yesterday.
Uniqlo's parent company is fashion retailer Fast Retailing, which also carries Comptoir des Cotonniers and Princesse tam.tam.
In fact, the stores in Singapore have helped pique the interest of potential business partners, who have since approached Uniqlo with the intention of opening similar stores in their home countries.
Uniqlo has plans to open at least five more stores in Singapore within three years, in areas such as Marina Bay, Orchard Road as well as farther out, at suburban malls. The fourth store is likely to be open by next year, Mr Otoma said.
Response to Uniqlo's first two stores in Singapore - at Tampines 1 and Ion Orchard, which collectively saw an investment of $60 million - has been 'overwhelming' and 'better than we expected', said Mr Otoma. The two stores managed to break even within six months of opening.
Uniqlo's stores in Singapore are a joint venture with Wing Tai Retail.
The latest addition covers 17,000 sq ft - the largest in South-east Asia as well as Singapore - and opens its doors today at the new 313@somerset mall.
Today also marks the official opening of the eight- storey 313@somerset, which was 100 per cent leased four months ahead of schedule.
Despite the challenging global economy, an aggressive expansion strategy is necessary, Mr Otoma feels, especially since Asia has become the centre of economic growth.
'We need to take risks to be the dominant player in Asia, to capture the market,' he said.
Uniqlo also has stores in the US, UK, France, Hong Kong, China and Korea.
And now that it has established itself in Singapore, it is looking to enter Malaysia, Thailand, Taiwan and Australia.
BT : Asia is poised for V-shaped recovery next year
Business Times - 03 Dec 2009
Asia is poised for V-shaped recovery next year
By CONRAD TAN
ASIA is poised for a sharp economic recovery next year, even as developed economies in the West continue to struggle, according to Standard Chartered's chief economist.
'Our forecasts suggest the recovery will take the shape of an L or a U in the West and a V in the East,' Gerard Lyons, who is also the group's head of global research, says in a report published yesterday.
But open and export-dependent economies - Singapore, Hong Kong and Taiwan - are likely to grow below trend, due to sluggish exports to major markets in the West, the report says.
In Asia, growth will be centred on China, India and Indonesia, which have large domestic markets and relatively closed economies that cushion them from external shocks.
Overall, '2010 is likely to be the year of global recovery', Mr Lyons says. 'A double-dip recession would require either an external shock - most likely an event that drove oil prices sharply higher, such as an escalation of tension with Iran - or a policy-induced shock triggered by premature policy tightening in the West.
'We are not predicting a double-dip, although we would not be surprised if a number of economies witnessed a negative quarter of growth at some stage.'
But even as Asia leads the global recovery, 'we continue to stress the need to focus on levels' - the dollar value of goods and services produced - rather than just growth rates, Mr Lyons says.
In 2008, the world's economic output, measured by gross domestic product, was US$60.9 trillion, with advanced economies including the US, Japan, Germany, France and the UK accounting for more than half of global output, according to International Monetary Fund data.
'If the West is not booming, the world will not boom. And the West is not going to boom,' Mr Lyons says. 'The US consumer, the key driver of the global economy for some time, faces a difficult outlook.'
He expects the world economy to grow 2.7 per cent next year, after shrinking an estimated 1.9 per cent this year.
Asia's economic output is projected to expand 7 per cent in 2010, faster than this year's estimated growth of 4.5 per cent.
Its biggest economic growth engines, China and India, are expected to expand 10 per cent and 7.5 per cent, respectively, compared with 8.5 per cent and 6.8 per cent in 2009.
Asia is poised for V-shaped recovery next year
By CONRAD TAN
ASIA is poised for a sharp economic recovery next year, even as developed economies in the West continue to struggle, according to Standard Chartered's chief economist.
'Our forecasts suggest the recovery will take the shape of an L or a U in the West and a V in the East,' Gerard Lyons, who is also the group's head of global research, says in a report published yesterday.
But open and export-dependent economies - Singapore, Hong Kong and Taiwan - are likely to grow below trend, due to sluggish exports to major markets in the West, the report says.
In Asia, growth will be centred on China, India and Indonesia, which have large domestic markets and relatively closed economies that cushion them from external shocks.
Overall, '2010 is likely to be the year of global recovery', Mr Lyons says. 'A double-dip recession would require either an external shock - most likely an event that drove oil prices sharply higher, such as an escalation of tension with Iran - or a policy-induced shock triggered by premature policy tightening in the West.
'We are not predicting a double-dip, although we would not be surprised if a number of economies witnessed a negative quarter of growth at some stage.'
But even as Asia leads the global recovery, 'we continue to stress the need to focus on levels' - the dollar value of goods and services produced - rather than just growth rates, Mr Lyons says.
In 2008, the world's economic output, measured by gross domestic product, was US$60.9 trillion, with advanced economies including the US, Japan, Germany, France and the UK accounting for more than half of global output, according to International Monetary Fund data.
'If the West is not booming, the world will not boom. And the West is not going to boom,' Mr Lyons says. 'The US consumer, the key driver of the global economy for some time, faces a difficult outlook.'
He expects the world economy to grow 2.7 per cent next year, after shrinking an estimated 1.9 per cent this year.
Asia's economic output is projected to expand 7 per cent in 2010, faster than this year's estimated growth of 4.5 per cent.
Its biggest economic growth engines, China and India, are expected to expand 10 per cent and 7.5 per cent, respectively, compared with 8.5 per cent and 6.8 per cent in 2009.
BT : Blackstone builds student dorm in City of London
Business Times - 03 Dec 2009
Blackstone builds student dorm in City of London
£205m skyscraper overlooking Broadgate will open in mid-2010
(LONDON) The tallest tower in London's main financial district to open next year will not house bankers or office workers - it will be a student dormitory.
The 33-story building's owner is Blackstone Group LP, the world's largest private-equity company. Blackstone entered the UK's student-housing market four years ago and has so far invested more than £400 million pounds (S$911.4 million). Rents have risen even as Britain endured its worst property slump in more than three decades.
'There is a chronic imbalance between supply and demand in this sector,' said Stuart Grant, the Blackstone executive who oversees the student-housing unit. The average occupancy rate in the industry is 99 per cent.
The shortage of accommodation for London's growing student population has caused average rents to rise by an annual 5 per cent over the last six years, Knight Frank LLP said in a Nov 23 report.
That compared with an average gain of 0.6 per cent for all commercial properties, according to the London-based real estate broker.
Nido Spitalfields, Blackstone's second student hall in the UK capital, will have space for 1,204 pupils paying as much as £300 a week for an en-suite room. The 105m skyscraper is due to open in the middle of next year. It will overlook Broadgate, the office complex in the City of London that is half-owned by the New York-based company, and will cost about £205 million, according to Mr Grant.
There are 270,000 full-time students in London, according to a survey published in March by Drivers Jonas, a broker based in the city. That number will increase by about 40,000 within three years as overseas students keep flocking to London and more UK teenagers choose higher education in a weak job market, the firm estimated.
More than 60,000 people attend three of the UK capital's largest universities: London Metropolitan, Middlesex and the University of Westminster.
'Given the lack of finance currently available for development and the constrained pipeline, rents are likely to continue to rise for the foreseeable future,' Knight Frank said in its report.
Nido Spitalfields will be similar to Blackstone's first student-housing project in the UK, a pair of 16-storey towers in the King's Cross area of north London that were completed in 2007. The property has 846 rooms, or 'cubes' as the company calls them. Most have 16.6 sq m to 18.4 sq m of space.
The expansive foyer, with a manned security desk alongside a kiosk selling Starbucks coffee, is spotless and the only sign of student mischief is a supermarket trolley lurking in the lift. It would not look out of place in Canary Wharf, the cluster of glass-and-steel buildings in east London occupied by companies including Barclays plc, Credit Suisse Group AG, HSBC Holdings Plc and Citigroup Inc.
Most rooms in Nido King's Cross cost £245 to £270 per week. Internet access is free and students have the option of paying for a maid. That is expensive, even by London standards. For the same price, they could rent a local one-bedroom apartment with a separate lounge, kitchen and bathroom.
About 80 per cent of the tenants are from outside the UK, according to Blackstone's Mr Grant. Parents are often willing to pay for accommodation, especially in the first year, if their children are guaranteed security in a city that many are probably unfamiliar with, he said. Americans and Chinese are the largest groups of foreign students.
In the US, most campuses offer some form of accommodation. Around 20 per cent of London students can live in rooms provided by their university.
'Higher education is increasingly a global business,' Mr Grant said. 'We're providing a safe environment for foreign kids coming to London.'
Blackstone plans to build a third residence for students in London next year on a site close to Notting Hill, a fashionable district in west London, Mr Grant said. The building's 272 rooms will be available starting from 2011.
Blackstone Real Estate Advisors, the firm's property investment and management unit, has raised more than US$29 billion since it was formed in 1992, according to the company's website. The firm started investing in student housing and properties such as pubs and nursing homes about four years ago as European retail and office buildings were becoming too expensive, Mr Grant said. Blackstone hired brand consultant Tyler Brule in 2005 to design Nido, which means nest in Spanish and Italian.
Blackstone will operate student homes with about 2,200 beds by mid-2010. The biggest provider of this type of accommodation in the UK, Unite Group plc, has about 38,500 beds, according to its website. Unite's biggest shareholders are Fidelity International Ltd and JPMorgan Chase & Co, according to data compiled by Bloomberg.
'We offer some defensive characteristics in a tough economic environment,' said Mark Allan, Unite's chief executive officer. 'Student accommodation is now firmly recognised by investors as providing that.'
Blackstone will probably sell the Nido business within three years, Mr Grant said. This could take the form of an initial public offering to create a real estate investment trust, he said.
The US firm has already purchased a site in Barcelona to build accommodation for 850 students and is looking at others in Paris, Sydney and Singapore. -- Bloomberg
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Student life: Nido Spitalfields will have space for 1,204 pupils paying as much as £300 a week for an en-suite room
Blackstone builds student dorm in City of London
£205m skyscraper overlooking Broadgate will open in mid-2010
(LONDON) The tallest tower in London's main financial district to open next year will not house bankers or office workers - it will be a student dormitory.
The 33-story building's owner is Blackstone Group LP, the world's largest private-equity company. Blackstone entered the UK's student-housing market four years ago and has so far invested more than £400 million pounds (S$911.4 million). Rents have risen even as Britain endured its worst property slump in more than three decades.
'There is a chronic imbalance between supply and demand in this sector,' said Stuart Grant, the Blackstone executive who oversees the student-housing unit. The average occupancy rate in the industry is 99 per cent.
The shortage of accommodation for London's growing student population has caused average rents to rise by an annual 5 per cent over the last six years, Knight Frank LLP said in a Nov 23 report.
That compared with an average gain of 0.6 per cent for all commercial properties, according to the London-based real estate broker.
Nido Spitalfields, Blackstone's second student hall in the UK capital, will have space for 1,204 pupils paying as much as £300 a week for an en-suite room. The 105m skyscraper is due to open in the middle of next year. It will overlook Broadgate, the office complex in the City of London that is half-owned by the New York-based company, and will cost about £205 million, according to Mr Grant.
There are 270,000 full-time students in London, according to a survey published in March by Drivers Jonas, a broker based in the city. That number will increase by about 40,000 within three years as overseas students keep flocking to London and more UK teenagers choose higher education in a weak job market, the firm estimated.
More than 60,000 people attend three of the UK capital's largest universities: London Metropolitan, Middlesex and the University of Westminster.
'Given the lack of finance currently available for development and the constrained pipeline, rents are likely to continue to rise for the foreseeable future,' Knight Frank said in its report.
Nido Spitalfields will be similar to Blackstone's first student-housing project in the UK, a pair of 16-storey towers in the King's Cross area of north London that were completed in 2007. The property has 846 rooms, or 'cubes' as the company calls them. Most have 16.6 sq m to 18.4 sq m of space.
The expansive foyer, with a manned security desk alongside a kiosk selling Starbucks coffee, is spotless and the only sign of student mischief is a supermarket trolley lurking in the lift. It would not look out of place in Canary Wharf, the cluster of glass-and-steel buildings in east London occupied by companies including Barclays plc, Credit Suisse Group AG, HSBC Holdings Plc and Citigroup Inc.
Most rooms in Nido King's Cross cost £245 to £270 per week. Internet access is free and students have the option of paying for a maid. That is expensive, even by London standards. For the same price, they could rent a local one-bedroom apartment with a separate lounge, kitchen and bathroom.
About 80 per cent of the tenants are from outside the UK, according to Blackstone's Mr Grant. Parents are often willing to pay for accommodation, especially in the first year, if their children are guaranteed security in a city that many are probably unfamiliar with, he said. Americans and Chinese are the largest groups of foreign students.
In the US, most campuses offer some form of accommodation. Around 20 per cent of London students can live in rooms provided by their university.
'Higher education is increasingly a global business,' Mr Grant said. 'We're providing a safe environment for foreign kids coming to London.'
Blackstone plans to build a third residence for students in London next year on a site close to Notting Hill, a fashionable district in west London, Mr Grant said. The building's 272 rooms will be available starting from 2011.
Blackstone Real Estate Advisors, the firm's property investment and management unit, has raised more than US$29 billion since it was formed in 1992, according to the company's website. The firm started investing in student housing and properties such as pubs and nursing homes about four years ago as European retail and office buildings were becoming too expensive, Mr Grant said. Blackstone hired brand consultant Tyler Brule in 2005 to design Nido, which means nest in Spanish and Italian.
Blackstone will operate student homes with about 2,200 beds by mid-2010. The biggest provider of this type of accommodation in the UK, Unite Group plc, has about 38,500 beds, according to its website. Unite's biggest shareholders are Fidelity International Ltd and JPMorgan Chase & Co, according to data compiled by Bloomberg.
'We offer some defensive characteristics in a tough economic environment,' said Mark Allan, Unite's chief executive officer. 'Student accommodation is now firmly recognised by investors as providing that.'
Blackstone will probably sell the Nido business within three years, Mr Grant said. This could take the form of an initial public offering to create a real estate investment trust, he said.
The US firm has already purchased a site in Barcelona to build accommodation for 850 students and is looking at others in Paris, Sydney and Singapore. -- Bloomberg
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Student life: Nido Spitalfields will have space for 1,204 pupils paying as much as £300 a week for an en-suite room
BT : 6 whole floors sold at Marina Bay Suites preview
Business Times - 03 Dec 2009
6 whole floors sold at Marina Bay Suites preview
Buyers include Indonesians, Singaporeans and other Asians
By KALPANA RASHIWALA
ABOUT half a dozen floors at Marina Bay Suites changed hands at last week's preview of the project, BT understands.
The buyers of the whole floors are understood to be Indonesians, Singaporeans and other Asians.
Some of them bought through companies. The foreigners are believed to be Singapore permanent residents.
In absolute terms, the biggest transaction was close to $45 million, involving at least two floors. The buyer is understood to be an Indonesian party.
Market watchers estimate that it could have cost buyers between $17 million and $18 million to purchase a whole floor at the 99-year leasehold condo based on prices at last week's preview.
Each floor has four apartments - two three-bedroom units and two four bedders. The total saleable area per floor is slightly under 8,000 square feet.
Thomas Tan, head of marketing (residential) at Raffles Quay Asset Management (RQAM), told BT yesterday that 87 of the 90 units released for the preview have been sold.
The 87 units fetched close to $400 million, he added.
Two thirds of the units were sold to Singapore residents (including PRs). The remaining one third was sold to non-PR foreigners, including Indonesians, Malaysians, mainland Chinese, Australians and Americans.
'We do have multiple-unit buyers, but due to client confidentiality and privacy reasons, we are unable to reveal such information,' Mr Tan said when asked about purchases of entire floors.
RQAM is the asset manager for Marina Bay Suites, which is being developed by a joint venture involving Hongkong Land, Keppel Land and Cheung Kong Holdings.
Mr Tan declined to give details about pricing except to reiterate that 'the average price range was between $2,200 psf and $2,500 psf'. BT understands that on an average basis, the 90 units were priced at close to $2,300 psf.
However, the range at which the apartments were sold could be about $1,800 psf to slightly over $2,600 psf.
Mr Tan said that the apartments released were from the seventh to the 40-plus floors of the 66-storey development.
The 221-unit project comprises 218 three or four-bedroom apartments and three penthouses. Currently, the plan is to begin construction of the project sometime in the first half of next year, Mr Tan said.
Mr Tan: Some 87 of the 90 preview units have been sold. The 87 units sold fetched close to $400m
'We have no immediate plans to release more units for the rest of this year but we'll continue to register interested buyers. We'll monitor the market and determine the price at the time of launch.'
6 whole floors sold at Marina Bay Suites preview
Buyers include Indonesians, Singaporeans and other Asians
By KALPANA RASHIWALA
ABOUT half a dozen floors at Marina Bay Suites changed hands at last week's preview of the project, BT understands.
The buyers of the whole floors are understood to be Indonesians, Singaporeans and other Asians.
Some of them bought through companies. The foreigners are believed to be Singapore permanent residents.
In absolute terms, the biggest transaction was close to $45 million, involving at least two floors. The buyer is understood to be an Indonesian party.
Market watchers estimate that it could have cost buyers between $17 million and $18 million to purchase a whole floor at the 99-year leasehold condo based on prices at last week's preview.
Each floor has four apartments - two three-bedroom units and two four bedders. The total saleable area per floor is slightly under 8,000 square feet.
Thomas Tan, head of marketing (residential) at Raffles Quay Asset Management (RQAM), told BT yesterday that 87 of the 90 units released for the preview have been sold.
The 87 units fetched close to $400 million, he added.
Two thirds of the units were sold to Singapore residents (including PRs). The remaining one third was sold to non-PR foreigners, including Indonesians, Malaysians, mainland Chinese, Australians and Americans.
'We do have multiple-unit buyers, but due to client confidentiality and privacy reasons, we are unable to reveal such information,' Mr Tan said when asked about purchases of entire floors.
RQAM is the asset manager for Marina Bay Suites, which is being developed by a joint venture involving Hongkong Land, Keppel Land and Cheung Kong Holdings.
Mr Tan declined to give details about pricing except to reiterate that 'the average price range was between $2,200 psf and $2,500 psf'. BT understands that on an average basis, the 90 units were priced at close to $2,300 psf.
However, the range at which the apartments were sold could be about $1,800 psf to slightly over $2,600 psf.
Mr Tan said that the apartments released were from the seventh to the 40-plus floors of the 66-storey development.
The 221-unit project comprises 218 three or four-bedroom apartments and three penthouses. Currently, the plan is to begin construction of the project sometime in the first half of next year, Mr Tan said.
Mr Tan: Some 87 of the 90 preview units have been sold. The 87 units sold fetched close to $400m
'We have no immediate plans to release more units for the rest of this year but we'll continue to register interested buyers. We'll monitor the market and determine the price at the time of launch.'
BT : Vegas home prices slip 34% in October
Business Times - 03 Dec 2009
Vegas home prices slip 34% in October
(LAS VEGAS) Las Vegas home prices fell 34 per cent in October from a year-earlier as foreclosed properties accounted for two-thirds of sales, reducing the value of single-family houses and condominiums, MDA DataQuick said on Tuesday.
The median price paid for all new and re-sold houses and condos in the Las Vegas metropolitan area fell to US$130,000 in October from US$196,000 a year earlier, the San Diego- based real estate research company said on Tuesday in a statement.
The price has been at or close to US$130,000 since July and hasn't fallen below that level since April 1999, when it was US$129,000.
Homes that had been foreclosed on in the previous 12 months rose to 67 per cent of resales in October, from 65 per cent a year earlier, MDA DataQuick said.
It was the highest foreclosure rate that month among metropolitan areas with populations of 200,000 or more, according to RealtyTrac Inc.
A total of 5,068 new and resale houses and condominiums were sold in the Las Vegas-Paradise metropolitan, an increase of 1.1 per cent from September and 22 per cent from a year earlier, MDA DataQuick said.
Of those, 485 were newly built, down 34 per cent from a year earlier\. \-- Bloomberg
Vegas home prices slip 34% in October
(LAS VEGAS) Las Vegas home prices fell 34 per cent in October from a year-earlier as foreclosed properties accounted for two-thirds of sales, reducing the value of single-family houses and condominiums, MDA DataQuick said on Tuesday.
The median price paid for all new and re-sold houses and condos in the Las Vegas metropolitan area fell to US$130,000 in October from US$196,000 a year earlier, the San Diego- based real estate research company said on Tuesday in a statement.
The price has been at or close to US$130,000 since July and hasn't fallen below that level since April 1999, when it was US$129,000.
Homes that had been foreclosed on in the previous 12 months rose to 67 per cent of resales in October, from 65 per cent a year earlier, MDA DataQuick said.
It was the highest foreclosure rate that month among metropolitan areas with populations of 200,000 or more, according to RealtyTrac Inc.
A total of 5,068 new and resale houses and condominiums were sold in the Las Vegas-Paradise metropolitan, an increase of 1.1 per cent from September and 22 per cent from a year earlier, MDA DataQuick said.
Of those, 485 were newly built, down 34 per cent from a year earlier\. \-- Bloomberg
BT : CB Richard Ellis in tie-up with Malaysia's Regroup
Business Times - 03 Dec 2009
CB Richard Ellis in tie-up with Malaysia's Regroup
CB Richard Ellis said yesterday it has signed an affiliate agreement with Malaysian real estate services company Regroup Associates as part of a larger strategy to provide full-service offerings in major markets across Asia.
Regroup, set up by Allan Soo, is a familiar name in Malaysian property market circles. It offers a full range of commercial and residential property services, including valuation, investment sales and acquisitions, commercial leasing, auctions, development consultancy and marketing, research and property management.
CBRE said Regroup will adopt CBRE branding going forward. The firm, set up in March 1995, has offices in Kuala Lumpur, Johor Bahru and Penang, with 160 professional and administrative staff.
CBRE's expansion into Malaysia comes at a time of improved economic growth and further relaxation of rules relating to foreign ownership of Malaysian property.
Chris Brooke, president and CEO of CB Richard Ellis in Asia, said: 'We believe prospects for the real estate sector in Malaysia are very strong. Regroup is an established and trusted brand that is well positioned to capitalise on the opportunities presented by the real estate market in Malaysia, which is becoming increasingly international.
'Strategic affiliations such as that which we are pursuing with Regroup are a key component of our strategy to maintain a leading position in major business centres both within Asia and internationally.'
Regroup executive director Paul Khong said Regroup has worked closely with CBRE on joint marketing assignments since 2005. The new agreement, with its combined service offerings, will allow the group to serve its clients more effectively.
CB Richard Ellis in tie-up with Malaysia's Regroup
CB Richard Ellis said yesterday it has signed an affiliate agreement with Malaysian real estate services company Regroup Associates as part of a larger strategy to provide full-service offerings in major markets across Asia.
Regroup, set up by Allan Soo, is a familiar name in Malaysian property market circles. It offers a full range of commercial and residential property services, including valuation, investment sales and acquisitions, commercial leasing, auctions, development consultancy and marketing, research and property management.
CBRE said Regroup will adopt CBRE branding going forward. The firm, set up in March 1995, has offices in Kuala Lumpur, Johor Bahru and Penang, with 160 professional and administrative staff.
CBRE's expansion into Malaysia comes at a time of improved economic growth and further relaxation of rules relating to foreign ownership of Malaysian property.
Chris Brooke, president and CEO of CB Richard Ellis in Asia, said: 'We believe prospects for the real estate sector in Malaysia are very strong. Regroup is an established and trusted brand that is well positioned to capitalise on the opportunities presented by the real estate market in Malaysia, which is becoming increasingly international.
'Strategic affiliations such as that which we are pursuing with Regroup are a key component of our strategy to maintain a leading position in major business centres both within Asia and internationally.'
Regroup executive director Paul Khong said Regroup has worked closely with CBRE on joint marketing assignments since 2005. The new agreement, with its combined service offerings, will allow the group to serve its clients more effectively.
BT : Expats find Singapore a tad more expensive
Business Times - 03 Dec 2009
Expats find Singapore a tad more expensive
S'pore moves up 3 spots to 9th position in Asia: survey
By JOYCE HOOI
(SINGAPORE) IT is not all cheap hawker food and iPods for expatriates who are based in Singapore.
The latest Cost of Living survey from ECA International has given expatriates here a stronger case to make when lobbying company headquarters for a larger expense package.
This year, Singapore climbed three spots - from 12th - to be the ninth most expensive Asian city, having been on the receiving end of both rising inflation and a strengthening Singapore dollar.
This makes Singapore a more expensive city to live in than Taipei, Shenzhen or Guangzhou.
Japanese cities dominated this year's rankings in Asia, with Tokyo ranking first, followed by Yokohama, Nagoya and Kobe.
While Hong Kong remain more expensive than Singapore at fifth place, the gap in the cost of living has narrowed, from 15 per cent last year to 7 per cent this year.
'While such increases are unlikely to deter companies from relocating staff to Singapore, the cost of doing do is now higher than it was a year ago,' said Lee Quane, regional director of ECA International for Asia.
'Companies employing international assignees are likely to be paying higher cost of living allowances to ensure that their employees continue to maintain their purchasing power while on assignment.'
Singapore's cost of living is put into better context from a global perspective, with the island ranking only 78th this year. Even so, this represents a quantum leap in rankings, from its 97th position last year.
Globally, Luanda in Angola remained the most expensive city, with Tokyo and Oslo in second and third place respectively.
ECA International's Cost of Living survey is carried out twice a year, comparing a basket of consumer goods and services commonly purchased by assignees in over 390 places globally.
While the survey includes items like food, clothing and motoring expenses, it does not take into account other living costs like accommodation, utilities, car purchases and school fees.
These expenses tend to make the expatriate bill significantly larger but are often compensated for in separate expatriate packages, according to ECA International.
Expats find Singapore a tad more expensive
S'pore moves up 3 spots to 9th position in Asia: survey
By JOYCE HOOI
(SINGAPORE) IT is not all cheap hawker food and iPods for expatriates who are based in Singapore.
The latest Cost of Living survey from ECA International has given expatriates here a stronger case to make when lobbying company headquarters for a larger expense package.
This year, Singapore climbed three spots - from 12th - to be the ninth most expensive Asian city, having been on the receiving end of both rising inflation and a strengthening Singapore dollar.
This makes Singapore a more expensive city to live in than Taipei, Shenzhen or Guangzhou.
Japanese cities dominated this year's rankings in Asia, with Tokyo ranking first, followed by Yokohama, Nagoya and Kobe.
While Hong Kong remain more expensive than Singapore at fifth place, the gap in the cost of living has narrowed, from 15 per cent last year to 7 per cent this year.
'While such increases are unlikely to deter companies from relocating staff to Singapore, the cost of doing do is now higher than it was a year ago,' said Lee Quane, regional director of ECA International for Asia.
'Companies employing international assignees are likely to be paying higher cost of living allowances to ensure that their employees continue to maintain their purchasing power while on assignment.'
Singapore's cost of living is put into better context from a global perspective, with the island ranking only 78th this year. Even so, this represents a quantum leap in rankings, from its 97th position last year.
Globally, Luanda in Angola remained the most expensive city, with Tokyo and Oslo in second and third place respectively.
ECA International's Cost of Living survey is carried out twice a year, comparing a basket of consumer goods and services commonly purchased by assignees in over 390 places globally.
While the survey includes items like food, clothing and motoring expenses, it does not take into account other living costs like accommodation, utilities, car purchases and school fees.
These expenses tend to make the expatriate bill significantly larger but are often compensated for in separate expatriate packages, according to ECA International.
BT : Lend Lease wins £1.5b London contract
Business Times - 03 Dec 2009
Lend Lease wins £1.5b London contract
(SYDNEY/MELBOURNE) Australian developer Lend Lease Corp has won a £1.5 billion (S$3.4 billion) contract to redevelop a swathe of London's Southbank, the firm said on Tuesday, sending its share prices sharply higher.
The project is one of Europe's biggest urban regeneration schemes, comprising more than 300,000 square metres of new build, mixed-use development and infrastructure improvements, it added.
Shares of Lend Lease jumped after the announcement, rising more than 6 per cent in early afternoon trade, outperforming the A-Reit index which was down about one per cent.
The scheme has been split into six phases, starting with demolition in February, the firm said.
Lend Lease would masterplan and develop the site, putting money into the project over time but the investment would be small, said Lend Lease spokeswoman Sally Cameron.
'Lend Lease is expected to invest some capital in it but there is no expectation that Lend Lease would fund £1.5 billion,' said Ms Cameron, adding that the income would mainly be generated from construction and development management fees.
Lend Lease also aims to expand its retirement-home business by buying out retirement village operator Lend Lease Primelife. On Tuesday, Lend Lease announced that it had raised its offer to 35 US cents per security from 31 US cents. -- Reuters
Lend Lease wins £1.5b London contract
(SYDNEY/MELBOURNE) Australian developer Lend Lease Corp has won a £1.5 billion (S$3.4 billion) contract to redevelop a swathe of London's Southbank, the firm said on Tuesday, sending its share prices sharply higher.
The project is one of Europe's biggest urban regeneration schemes, comprising more than 300,000 square metres of new build, mixed-use development and infrastructure improvements, it added.
Shares of Lend Lease jumped after the announcement, rising more than 6 per cent in early afternoon trade, outperforming the A-Reit index which was down about one per cent.
The scheme has been split into six phases, starting with demolition in February, the firm said.
Lend Lease would masterplan and develop the site, putting money into the project over time but the investment would be small, said Lend Lease spokeswoman Sally Cameron.
'Lend Lease is expected to invest some capital in it but there is no expectation that Lend Lease would fund £1.5 billion,' said Ms Cameron, adding that the income would mainly be generated from construction and development management fees.
Lend Lease also aims to expand its retirement-home business by buying out retirement village operator Lend Lease Primelife. On Tuesday, Lend Lease announced that it had raised its offer to 35 US cents per security from 31 US cents. -- Reuters
BT : Central bank rate should rise with market rate: Fed official
Business Times - 03 Dec 2009
Central bank rate should rise with market rate: Fed official
(NEW YORK) Charles Plosser, Philadelphia Federal Reserve Bank president, has said that the central bank should increase its main interest rate in the future in line with market rates, which will rise with the strengthening of the US economy.
The economy will expand 'about 3 per cent' from the fourth quarter of this year to the fourth quarter of 2010, and at a 'similar' pace in 2011, Mr Plosser told business leaders on Tuesday in Rochester, New York. Such growth is faster than the economy's underlying trend of 2.75 per cent, which means that investors will push market interest rates up to compensate for the risks of higher inflation, he said.
'To conduct monetary policy, we need to be forward-looking; and looking ahead, I see an economy that will be growing over the next two years, which means real interest rates will be rising,' Mr Plosser said. 'As they do, the federal funds rate should be permitted to rise with them.'
Central bankers on Nov 4 renewed their pledge to keep the overnight rate near zero for an 'extended period', saying that policy will remain unchanged as long as inflation expectations are stable and unemployment fails to decline. Mr Plosser's comments suggest that he would prefer the Fed move more quickly to withdraw liquidity from the economy.
In the short run, an 'exaggerated' danger of deflation has passed and inflation is under control, he said. Core consumer prices, which rose 0.2 per cent for a second month in October, on a year-over-year basis are up 1.7 per cent. The rate is below the 2 per cent level that many Fed officials have said they prefer.
'Unfortunately, the prospects for inflation over the next two to five years are much more uncertain,' Mr Plosser said.
Mr Plosser rejected the argument, put forth by Fed chairman Ben Bernanke, vice-chairman Donald Kohn and New York Fed Bank president Bill Dudley that the economic slack implied by high unemployment and low inflation help keep prices in check.
He cited 'theoretical and empirical evidence' which shows that low resource utilisation is difficult to measure and an unreliable predictor of inflation.
'So making policy decisions based on measures of such slack and particularly on forecasts of slack many quarters ahead becomes problematic,' he said. 'Ultimately, inflation is a monetary phenomenon and there is no question that current monetary policy is extraordinarily accommodative.' - Bloomberg
Central bank rate should rise with market rate: Fed official
(NEW YORK) Charles Plosser, Philadelphia Federal Reserve Bank president, has said that the central bank should increase its main interest rate in the future in line with market rates, which will rise with the strengthening of the US economy.
The economy will expand 'about 3 per cent' from the fourth quarter of this year to the fourth quarter of 2010, and at a 'similar' pace in 2011, Mr Plosser told business leaders on Tuesday in Rochester, New York. Such growth is faster than the economy's underlying trend of 2.75 per cent, which means that investors will push market interest rates up to compensate for the risks of higher inflation, he said.
'To conduct monetary policy, we need to be forward-looking; and looking ahead, I see an economy that will be growing over the next two years, which means real interest rates will be rising,' Mr Plosser said. 'As they do, the federal funds rate should be permitted to rise with them.'
Central bankers on Nov 4 renewed their pledge to keep the overnight rate near zero for an 'extended period', saying that policy will remain unchanged as long as inflation expectations are stable and unemployment fails to decline. Mr Plosser's comments suggest that he would prefer the Fed move more quickly to withdraw liquidity from the economy.
In the short run, an 'exaggerated' danger of deflation has passed and inflation is under control, he said. Core consumer prices, which rose 0.2 per cent for a second month in October, on a year-over-year basis are up 1.7 per cent. The rate is below the 2 per cent level that many Fed officials have said they prefer.
'Unfortunately, the prospects for inflation over the next two to five years are much more uncertain,' Mr Plosser said.
Mr Plosser rejected the argument, put forth by Fed chairman Ben Bernanke, vice-chairman Donald Kohn and New York Fed Bank president Bill Dudley that the economic slack implied by high unemployment and low inflation help keep prices in check.
He cited 'theoretical and empirical evidence' which shows that low resource utilisation is difficult to measure and an unreliable predictor of inflation.
'So making policy decisions based on measures of such slack and particularly on forecasts of slack many quarters ahead becomes problematic,' he said. 'Ultimately, inflation is a monetary phenomenon and there is no question that current monetary policy is extraordinarily accommodative.' - Bloomberg
BT : Its DNA is intact but Dubai's reputation is in tatters
Business Times - 03 Dec 2009
COMMENTARY
Its DNA is intact but Dubai's reputation is in tatters
By VIKRAM KHANNA
(SINGAPORE)
HERE'S how not to communicate you're in a financial hole: Put out a terse statement asking for a six-month payment moratorium on US$60 billion of debt that you owe, and then promptly close shop for a four day public holiday.
That is what Dubai World did last Wednesday. It scared the daylights out of the markets and, in the absence of any further information, triggered all manner of paranoid speculation. Is Dubai itself going bust? Will there be contagion? Who will be next? Can already weakened banks withstand this?
After the emirate finally emerged from its holiday this week, Dubai's government made clear that it will not stand guarantee for the debts of Dubai World, even though the latter is a state-owned conglomerate. Thereafter, Dubai World, which has operations spanning property, ports, infrastructure and much else, tried to reassure everyone that things actually aren't so bad. It revealed that it plans to restructure only US$26 billion of its debt. Moreover, many of its assets are on a 'stable financial footing' such as Dubai Ports World, the Jebel Ali Free Trade Zone and the investment arm Istithmar, and these would not be part of any deal; the restructuring will apply only to the dud assets, mainly property. Meanwhile, Dubai's oil-rich fellow emirate of Abu Dhabi indicated, ever so cautiously, that it will consider providing financial support for Dubai World, but only on a 'case-by-case basis'.
No systemic threat
What does one make of this confusing, opaque mess?
The good news is that Dubai's woes pose no systemic threat. After the bailouts and workouts we have witnessed over the 15 months, a restructuring of US$26 billion, or even US$60 billion, is manageable. This does not, of course, mean there won't be pain. High on the list of the losers will be some banks, mostly British, which lent with wild abandon during the heyday of Dubai's construction boom - probably the biggest in the region since the building of the pyramids.
Some bankers are reportedly furious, indicating they were conned into believing that they were covered by a sovereign guarantee - even though this was not explicitly spelt out. But as with other instances of over-exuberant lending, the bankers have only themselves to blame.
They are not the only losers, however: Construction, engineering and consulting firms are also stuck with unpaid bills; UK engineering firms alone are owed some £pounds; 250 million (S$575.2 million). But the most innocent victims are the hundreds of thousands of construction and other blue-collar workers, mostly from Asia, who have been rendered jobless overnight, with sometimes months of back wages unpaid. Thousands of well paid expatriates too, will take a hit. A lot of unhappy people will be leaving Dubai, never to return.
What of the debt restructuring itself? The Dubai government's refusal to make good the debts of Dubai World is wise. The loans were clearly commercial deals, whether or not bankers believed otherwise. However, Dubai World's attempt to ring fence its good assets and try to limit the restructuring to only those loans related to property sounds like a non-starter. More likely, in the complicated negotiations that will follow, everything will have to be put on the table. So while bankers may take some haircuts, Dubai World may also have to sell some of its good assets - and there's plenty to choose from, ranging from golf courses to indoor ski resorts, to port facilities to stakes in blue-chip companies. From all indications, Abu Dhabi, too, will demand a quid pro quo for its financial support - which may include taking control of some of the assets owned by Dubai World.
Damage repair
When the mess is finally cleaned up, Dubai World could be a shadow of its former self. But that won't be the end of the story. Dubai itself will have a lot of work to do to repair its reputational damage. It will have to put in place greater accountability, corporate governance and prudential controls - all of which have, as is now obvious, been in short supply. It will also have to rein in some of its extravagant ambitions - no more pharaonic projects, even if for no other reason than that there are unlikely to be bankers available to finance them, at least for a while.
Eventually, however, Dubai will be back as a vibrant business and financial centre. It has the location, it has the connectivity and it has the DNA that no other city in the Gulf can come close to matching.
COMMENTARY
Its DNA is intact but Dubai's reputation is in tatters
By VIKRAM KHANNA
(SINGAPORE)
HERE'S how not to communicate you're in a financial hole: Put out a terse statement asking for a six-month payment moratorium on US$60 billion of debt that you owe, and then promptly close shop for a four day public holiday.
That is what Dubai World did last Wednesday. It scared the daylights out of the markets and, in the absence of any further information, triggered all manner of paranoid speculation. Is Dubai itself going bust? Will there be contagion? Who will be next? Can already weakened banks withstand this?
After the emirate finally emerged from its holiday this week, Dubai's government made clear that it will not stand guarantee for the debts of Dubai World, even though the latter is a state-owned conglomerate. Thereafter, Dubai World, which has operations spanning property, ports, infrastructure and much else, tried to reassure everyone that things actually aren't so bad. It revealed that it plans to restructure only US$26 billion of its debt. Moreover, many of its assets are on a 'stable financial footing' such as Dubai Ports World, the Jebel Ali Free Trade Zone and the investment arm Istithmar, and these would not be part of any deal; the restructuring will apply only to the dud assets, mainly property. Meanwhile, Dubai's oil-rich fellow emirate of Abu Dhabi indicated, ever so cautiously, that it will consider providing financial support for Dubai World, but only on a 'case-by-case basis'.
No systemic threat
What does one make of this confusing, opaque mess?
The good news is that Dubai's woes pose no systemic threat. After the bailouts and workouts we have witnessed over the 15 months, a restructuring of US$26 billion, or even US$60 billion, is manageable. This does not, of course, mean there won't be pain. High on the list of the losers will be some banks, mostly British, which lent with wild abandon during the heyday of Dubai's construction boom - probably the biggest in the region since the building of the pyramids.
Some bankers are reportedly furious, indicating they were conned into believing that they were covered by a sovereign guarantee - even though this was not explicitly spelt out. But as with other instances of over-exuberant lending, the bankers have only themselves to blame.
They are not the only losers, however: Construction, engineering and consulting firms are also stuck with unpaid bills; UK engineering firms alone are owed some £pounds; 250 million (S$575.2 million). But the most innocent victims are the hundreds of thousands of construction and other blue-collar workers, mostly from Asia, who have been rendered jobless overnight, with sometimes months of back wages unpaid. Thousands of well paid expatriates too, will take a hit. A lot of unhappy people will be leaving Dubai, never to return.
What of the debt restructuring itself? The Dubai government's refusal to make good the debts of Dubai World is wise. The loans were clearly commercial deals, whether or not bankers believed otherwise. However, Dubai World's attempt to ring fence its good assets and try to limit the restructuring to only those loans related to property sounds like a non-starter. More likely, in the complicated negotiations that will follow, everything will have to be put on the table. So while bankers may take some haircuts, Dubai World may also have to sell some of its good assets - and there's plenty to choose from, ranging from golf courses to indoor ski resorts, to port facilities to stakes in blue-chip companies. From all indications, Abu Dhabi, too, will demand a quid pro quo for its financial support - which may include taking control of some of the assets owned by Dubai World.
Damage repair
When the mess is finally cleaned up, Dubai World could be a shadow of its former self. But that won't be the end of the story. Dubai itself will have a lot of work to do to repair its reputational damage. It will have to put in place greater accountability, corporate governance and prudential controls - all of which have, as is now obvious, been in short supply. It will also have to rein in some of its extravagant ambitions - no more pharaonic projects, even if for no other reason than that there are unlikely to be bankers available to finance them, at least for a while.
Eventually, however, Dubai will be back as a vibrant business and financial centre. It has the location, it has the connectivity and it has the DNA that no other city in the Gulf can come close to matching.
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