ST : S'pore firms shrug off Dubai default

Nov 28, 2009
S'pore firms shrug off Dubai default
Those with links to Gulf emirate expect little impact on tie-up projects
By Fiona Chan

THE debt troubles of Dubai World appear to have had a limited impact on Singapore companies with links to the Gulf emirate.

Property group City Developments (CDL), which tied up with the Dubai government investment company to develop the billion-dollar South Beach site near Suntec City, said it does not expect 'any impact at all' on the site's development.

'Dubai World holds only a one-third share' of the development, a CDL spokesman said yesterday. CDL has another third, and the last third belongs to the United States-based El-Ad Group.

The spokesman told The Straits Times that no further capital needs to be pumped into the project at present.

'However, when the time comes for construction to proceed, all partners will be required to put in their share of additional funds. Should Dubai World decide not to contribute their proportionate share for whatever reasons, their shareholding will be diluted.'

Dubai World had asked on Thursday for six more months to repay its debts, sending global financial markets into a panic over Dubai's possible bankruptcy.

Analysts singled out banks as among the most vulnerable to a Dubai debt default. The news could have a 'meaningful impact' on banks across Asia, said Mr Daniel Tabbush, a banking analyst at CLSA in Bangkok.

He listed Standard Chartered, HSBC and Singapore's DBS Group as the most exposed in the region.

DBS has a branch in Dubai that was opened in 2006, marking the bank's first foray into Islamic finance. DBS could not be reached for comment yesterday.

Along with United Overseas Bank and OCBC Bank, DBS is also part of a syndicate helping to finance CDL's South Beach project.

Market observers said the banks that have exposure to Dubai only through the South Beach project are unlikely to be affected by Dubai's financial problems, as they will have collateral in the form of the property.

Public transport company SMRT also has a partnership with Nakheel, a property developer that works under the umbrella of the Dubai World group.

SMRT has a six-year contract worth about $120 million with Nakheel to operate and maintain a monorail running through the Palm Jumeirah development in Dubai.

In response to queries about how Dubai's debt difficulties would affect SMRT, chief operating officer Yeo Meng Hin said the impact to the monorail's operations, if any, would be minimal.

'We are long-term partners with Nakheel, and will continue to work closely with its management during this challenging time,' he said.

Other Singapore companies that have crossed paths with Dubai World include Labroy Marine and Pan-United Marine. The Dubai firm bought both Singapore shipyards in 2007 for about US$2 billion (S$2.7 billion).

Earlier that year, Dubai World's sister firm Dubai Ports World grabbed headlines in Singapore when it beat PSA International to buy P&O Ports for £3.9 billion (S$8.8 billion).

fiochan@sph.com.sg


--------------------------------------------------------------------------------

From fishing village to desert paradise in 40 years

IN A land seemingly built for the purposes of conspicuous consumption, Dubai never lacked extravagant icons of success.

The most extravagant - and most emblematic of the once sleepy fishing village's transformation to oasis playground for the rich - were surely the palm tree and the sail.

In keeping with the tiny Gulf emirate's grandiose vision, both were artificial. One was a set of man-made islands in the shape of palm trees and the other the sail-shaped Burj Al Arab, the world's most expensive hotel.

Then there was the man-made harbour, the largest in the world, built at Jebel Ali while a free-trade zone was created around the port, catapulting Dubai into the league of major international business hubs.

Billing itself as a safe haven within a volatile region for investors and tourists alike, Dubai, which discovered oil in 1966, tripled its economy to US$34.5 billion (S$47.9 billion) in the 10 years to 2006 and achieved double-digit growth every year until the financial crisis struck.

Its expansion was relentless. By last year, foreign direct investment into Dubai totalled US$21 billion, according to the Financial Times.

The Gulf emirate established itself as the region's trade and tourism hub, developing businesses such as port operator DP World that became leaders in their field.

It also set out to become a world-class financial centre, competing with the likes of New York and London and boasting an edge in the burgeoning area of Islamic finance.

In 2007, Dubai and Qatar became the two biggest shareholders of the London Stock Exchange, the third-largest bourse in the world.

Within its own borders, Dubai embarked on a massive six-year building boom that turned sand dunes into a glittering metropolis and the city into a magnet for the young, rich and glamorous.

No project was too lavish for Dubai. It is home to the world's biggest shopping mall - the 1,200-shop Dubai Mall - and will have the world's tallest building when the 160-storey Burj Dubai is completed next year at an estimated cost of US$1 billion.

The Burj Al Arab hotel was itself the tallest building in the world when it was completed in 1999. The hotel gave itself a seven-star rating - the first in the world - and watched as the publicity, room rates and bookings rocketed.

Dubai made the unthinkable possible with Ski Dubai, which opened in 2006 to offer the ultimate in luxury: skiing in the desert, on one of the world's largest indoor ski slopes with fresh powder all year round.

Celebrities converged on Dubai's sands, with David Beckham and Brad Pitt reportedly owning villas in the Palm Jumeirah development, the only one of three planned palm-tree shaped islands that has been completed.

The future of the other two Palm islands is now up in the air - much like that of Dubai itself.