For A Better Day

HH Sheikh Mohammed bin Rashid Al Maktoum’s vision to make Dubai the “Silicon Valley for the region” is slowly becoming reality, as Dubai Internet City continues to expand. The emirate’s free zone for technology and media companies is targeting 10% annual growth in numbers over the coming years, as it starts a 167k sq mt expansion later in the year. The 18-year-old entity is home to over 1.6k operating companies, of which 60% are in the SME category, in such classifications as AI, e-commerce, computer gaming and cyber security. It is expected that this ratio will continue to increase in the coming years making the free zone a hotbed for innovation hubs and tech entrepreneurs.

The Dubai Ruler also met with senior officials at the weekend and later announced a number of measures, with the aim of boosting three essential economic sectors – housing, SMEs and retail. He wants to ensure that the country has “the ability to absorb rapid changes in an unstable global economy in order to achieve sustainable economic growth and enhance its competitiveness at all levels”.

To attract more investment in the property sector, the introduction of time-sharing ownership of property in the emirate is under consideration which could involve overseas residents being able to own a fractional share of an apartment or villa for personal use for a set period each year; the Department of Tourism and Commerce Marketing is looking at up to 1k such units coming to the market. SMEs continue to be another target with Dubai’s Department of Finance expected to allocate 20% of tenders to this sector’s entities as well as additional incentives to attract more tech entrepreneurs to the emirate.

Dubai’s Moosa Enterprises is set to open three new properties – Hilton The Palm (608 keys), TAJ Exotica Resort & Spa (325 rooms) and Marriott The Palm (608 rooms) – by Q1 2019. This will increase the company’s Dubai room portfolio by 48.2% to over 4.7k.

Citymax Hotels, a division of the Landmark Group, is planning to double the size of its properties to eight this year, with room numbers 68.6% higher at 2.3k. Two of the properties will be located in Dubai, with the other two in the burgeoning emirate of Ras al Khaimah which is growing its hospitality sector at a rate of knots.

Four-year old Roda Hotels and Resorts added a new property, Roda Links Al Nasr, to its Dubai portfolio bringing its total to seven, with 1.5k rooms. The hotel group has several other properties under development and expects that the Roda brand will have 4.5k rooms under management by 2020.

Damac Hotels & Resorts estimates that its portfolio of rooms will top 15k by 2021 – currently 13k are in development.

Nakheel and U City PCL have signed an agreement in Bangkok to build the First Vienna House in the ME – the 600-room Vienna House Deira Beach. Located in Deira Islands, and part of the Dubai developer’s new 15.3 sq km master planned waterfront city, it will be Nakheel’s third hotel there following previous JVs with Spain’s RIU Hotels and Resorts and Thailand’s Centara Hotels and Resorts.

Nakheel has also awarded a US$ 162 million contract to Metac General Contracting Company for the construction of its 1.4 million sq ft Nad Al Sheba Mall. Due for completion by 2021, the mall will be the centerpiece of Dubai’s Nad Al Sheba district that will have more than 11k villas, 1.6k of which are being built by Nakheel themselves.

FIM Partners, a Dubai-based emerging and frontier markets investment management specialist, have appointed Strategic Housing Group (SHG), to manage the building of The Myriad Dubai in International Academic City (DIAC). The urban-styled student housing community will have 1.8k fully furnished en-suite rooms, with common lounges on each floor and retail outlets, as well as the requisite add-ons of multi-sporting facilities.

Arabtec has announced that its engineering service offshoot has been awarded a US$ 118 million, 30-month Dubai Municipality contract for infrastructure work for the authority’s DS188 Jebel Ali Industrial Sewerage and Drainage System.

MAF becomes only the second company to attain a license for a movie theatre in Saudi Arabia and will soon open a four-screen multiplex cinema in Riyadh. The Dubai-based group is planning to invest US$ 553 million and to open 600 theatres there over the next five years.

Careem confirmed that the company was a victim of a cyber-attack in January, resulting in the theft of the personal data of some 14 million people in the region. Over three months later, the ride-sharing platform indicated that it has “no evidence of fraud or misuse related to the incident” and “it is our responsibility to be open and honest with you. . . “.

To enhance its position as one of the world’s leading cruise destinations, Dubai is to add more capacity at DP World’s two million sq mt Mina Rashid Cruise Terminal that would make it the biggest in the world. Currently, the facility, which welcomed 625k passengers last year (compared to 320k just three years earlier) and 156 cruise ship calls, is able to handle 25k passengers and seven cruise liners at the same time.

Dubai International recorded a 4.5% increase in March traffic, as passenger numbers reached 7.85 million, with Q1 numbers 1.1% higher at 22.7 million, compared to the same period in 2017. Despite monthly flight numbers falling 1.5% to 34.1k, passengers per flight increased by 2.7% to 230. As in the past, London, Mumbai and Bangkok were the top city destinations with numbers totalling 348k, 217k and 209k respectively, with India (1.0 million), UK (572k) and Saudi Arabia (566k) the three leading countries. In March, freight handled dipped 5.7% to 236k tonnes.

Dubai tourist numbers in March rose 2.0% to 4.7 million, boosted by a growing number of Russian and Chinese visitors being 106% higher at 259k and 12.0% up to 258k respectively. The three main markets continued to be India (up 8.0% to 617k), Saudi and the UK which saw an 8.0% fall in numbers.

With the use of AI for the first time, Dubai Police caught a 10-man Asian gang involved in a Bitcoin-scam armed robbery, involving US$ 2 million. Two brothers had been lured into a trading office on the promise of a Bitcoin deal when they were assaulted and robbed.

As the impact of lower housing rentals and fuel prices take effect, Dubai’s inflation rate declined 1.8% month-on-month in March on the back of falls in prices of housing, water, electricity, gas, and other fuels However, there were increases in transportation (6.6%) and telecommunications (5.4%).

Official data showed that Dubai’s 2017 economic growth slowed marginally to 2.6% (2.8% – 2016), as its GDP rose to US$ 106 billion. However, the economy’s two largest segments showed increases – wholesale/retail (accounting for 26.6% of GDP) was 0.9% higher and transportation/storage (11.8%) grew by 4.5%. Meanwhile the third largest contributor to the economy, financial/insurance services remained flat at 10.4%. Manufacturing, generating US$ 10.0 billion, contributed 9.4% of GDP, whilst real estate, accounting for 7.1% of the emirate’s GDP (US$ 7.5 billion), recorded a 7.3% growth. The construction sector grew by 3.5% and accounted for 6.3% of Dubai’s GDP, equating to US$ 6.7 billion.

There was also trade growth, with a 2.2% rise in total imports and re-exports.  This year, it is expected that Dubai’s economy will expand by 3.5% and 3.8% in 2019. Last year, the UAE labour market saw over five million people in employment, including 1.4 million in the private sector.

April’s Emirates NBD’s UAE PMI data saw the country’s economy grow 0.3 to 55.1, as business growth confidence was at its highest in nearly three years; the main drivers were a recovery in export orders and strong output/new order growth, with increased government spending, spurred by Expo 2020. Expansion is also being helped by oil prices topping US$ 70.

The UAE Central Bank reported a 10.3% hike in Q1 foreign asserts to US$ 92 billion, attributable to a 51.6% quarter on quarter increase in the current account balances and deposits with banks abroad to US$ 74 billion.

Dubai Investment Company is to launch a US$ 817 million real estate investment trust to be listed on the DFM. DIC will fund 45% of the capital base, with the balance from investors via an IPO (initial public offering). Money raised will be used to finance a number of local properties and assets.

Noor Dubai listed its second US$ 500 million sukuk on Nasdaq Dubai this week following its initial listing in 2016. The five-year instrument was 2.1 times over-subscribed and brings the total of sukuk paper on the local bourse to US$ 59.7 billion.

Aramex, the region’s largest courier firm, posted a 15% rise in Q1 profits to US$ 28 million, as revenue jumped 8.0% to US$ 32 million. The Dubai-listed company expects to benefit from the boom in the GCC e-commerce market, forecast to grow to US$ 24 billion by 2020, and the fact that the global market could increase by 112% to US$ 4.9 trillion over the next five years.

Depa posted a 69.4% decline in Q1 profits to just US$ 2 million, resulting from a resolution of a long-standing receivable; revenue climbed 11.0% to US$ 111 million. The Dubai interior contractor is confident in future business, with a backlog of projects improving 6.0% to US$ 515 million.

Mashreq posted a 9.5% rise in Q1 profits to US$ 163 million despite a 5.2% fall in commissions’ income to US$97 million and a 4.0% increase in operating expenses to US$ 161 million. Total operating income was 4.1% higher at US$ 414 million.

Nakheel posted a 5.0% hike in Q1 profits to US$ 422 million as its retail, hospitality and leasing divisions performed well. No other financial details were made readily available. In Q1, the developer signed about US$ 1.4 billion worth of contracts, the largest of which was for the Deira Mall at over US$ 1.1 billion.

The country’s biggest listed developer, Emaar Properties, recorded a 20.0% increase in Q1 profits to US$ 452 million (or US$ 409 million if the impact of the Developments IPO was excluded). The revenue surge was driven by “significant progress achieved on projects under construction”, with revenue 37.3% up at US$ 1.5 billion.

Meanwhile, Emaar Developments posted an even more impressive 61.9% jump in Q1 profits to US$ 223 million, as revenue almost doubled to US$ 891 million. The real estate arm of Emaar Properties, which floated its shares on the DFM in Q4 2017, has a sales backlog of US$ 11.2 billion, equating to 27.2k residential units, due to be delivered over the next five years.

The DFM opened on Sunday (22 April), at 3082, and was 1.3% lower (39 points) as it inexorably falls towards the dangerous 3,000 level to 3043 by Thursday, 26 April. Emaar Properties was off US$ 0.02 at US$ 1.52, whilst Arabtec lost US$ 0.01 to close on US$ 0.57. Volumes traded moved marginally higher at only 143 million shares on Thursday, valued at US$ 52 million, (compared to 78 million shares worth US$ 45 million the previous Thursday – 19 April).

By Thursday, Brent Crude, having risen 7.9% the previous week, shed US$ 0.10 (0.1%) to close on US$ 73.65, with gold losing some of its luster, falling 2.0% (US$ 27) to US$ 1,318 by 26 April 2018.

Apple will start to pay the Irish government US$ 15.4 billion relating to a tax bill issued by the EU in 2016. The commission ruled that tax the tech giant paid in that country was so low that it was tantamount to illegal state aid. As there is an on-going appeal, that could take up to five years, the money will be paid into an escrow account. For obvious reasons, the Irish have been reluctant to receive any payment but have agreed to comply with its legal obligations.

It cost GKN a fruitless US$ 150 million in its unsuccessful attempt to fend off the recent Melrose takeover. Now the UK government has ruled that it will not intervene on national security grounds, after receiving several commitments from the US company, allaying any concerns raised, including not divesting the GKN’s core aerospace business for at least five years.

One argument in favour of Bitcoin (and other cryptocurrencies) results from news that the cost of global remittances rose 7% last year, to a staggering UD$ 613 billion. The World Bank estimates that in Q1 2018, the cost of sending US$ 200 was 7.1% – more than double the 3% set as a sustainable development target. The top five destinations were India, China, Philippines, Mexico and Nigeria with totals of US$ billions 696, 646, 336, 31 and 22 respectively. In some of the poorer countries remittances can account for up to 35% of a country’s GDP, whilst costs can easily touch 10% or more of the actual remittance amount. What a difference Bitcoin can make with minimal transfer costs and immediate transfer of funds. No wonder the banks are moaning but the global economy could easily double if the disrupters took over.

Nearly forty years after BA forced Freddy Laker to bankruptcy, it seems ironic that IAG, that includes the British flag carrier in its portfolio, is considering an offer for troubled budget carrier, Norwegian. The Scandinavian carrier seems to have taken over the Laker mantle for being a disrupter in the aviation sector and introducing cheap fares for international travel. Founded in 1993, it started with three planes and concentrated on short-haul flights but in 2013 decided to fly further afield and ordered 222 new jets. Within four years, it was flying 145 aircraft on 512 routes but had seen its 2016 profit line of US$ 136 million turn to a US$ 36 million loss last year, with a net debt 14 times its gross operating profit (compared to just 0.7 and 0.4 for EasyJet and Ryanair). Now the vultures are circling and, like events in 1979, are out to destroy a major rival.

From an economic viewpoint, Poland, led by Jaroslaw Kaczynski, is one of the leading states within the EU. However, it seems to be leaning away from the democratic principles that the bloc espouses, as other former East European countries test the boundaries. For example, in Hungary, the newly re-elected president Viktor Orban seems to be silencing any criticism by taking what some would consider inappropriate action against courts and media, as well as allegedly using public funds to nurture oligarchs. Romanian politicians also hope they will not be found out by continually weakening anti-graft legislation.

Now Polish democracy is being sorely tested with the ruling Law and Justice Party filling both the courts and the bureaucracy with its own supporters, as well as introducing judicial reforms that are in contravention of EU regulations. With at least three countries not playing to “the rules”, action has to be taken before the union falls apart. Three would-be autocrats are three too many.

To the outsider it seems that Tesla has a lot of catching up to do. Latest reports from the company, that posted a Q1 US$ 710 million loss (as vehicle revenue was 1.0% higher at US$ 2.7 billion), indicate that net reservations for its Model 3 stand at 450k, whilst the latest weekly production level is only 2.3k! As at the end of April gross margins on that model are still in negative territory. No doubt Elon Musk, his team, investors and customers are all hoping For A Better Day!

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