Sher View

On haircuts and debt settlements.

2010-03-01T20:24:00.000-08:00

There has been recent talk, some of it unsubstantiated press rumors, that Dubai World, the debt laden Government Related Entity of Dubai, has been contemplating, on the advice of its consultants, to consider as much as a 40% haircut on the debt and repayment of the balance over seven years with no interest. Needless to say, banks had two reactions ignore the rumor, (hard to do in the present day) or just balk as the audacity of the whole idea. Haircuts and debt repayments only happen to work, if that is the word to use, when there is literally no hope for any possibility of the principal debt ever being repaid. If the rumor was an attempt to test the waters, then the consultants need a fair dose of understanding that you hold a dialogue with the banks and do not pretend to have a conversation through the rumor mill, this always backfires.

While I am not privy to the discussions or indeed the people who are making these decisions, so what I venture our is conjecture and my recommendations may well be off the mark; yet as a three decade resident in the financial world of UAE, and an ardent well wisher for the country I would imagine a solution oriented approach is what is needed. What are the options ahead for this debt settlement?

In the first place we must be clear that the entire extent and complexity of the Dubai World debt is not entirely public and in similar vein neither is the possible cash flow profile over the next few years really known to the general public. Thus, if a seven or five year repayment is suggested it goes without saying that the cash flow projections will have to match this settlement profile. Keeping this in mind I would suggest the following.

1. When considering a haircut of any amount there has to be a clear understanding that this is seriously hurt the image and the standing of not only Dubai but also UAE within the financial community. Even if such an offer is accepted it will be with the gesture and lack of goodwill to provide additional funding in the future even when things are better. Bankers have a long memory and will remind you of their losses from decades back. Any haircut that is suggested has to be tied to an incentive. My suggestion would be to offer the banks a 70% settlement with the balance 30% to be strucurted as a Zero coupon bond with a long maturity and the caveat that this 30% would be exempted from payment under a formula for early payments. Thus if the 70% is to be paid say in seven years then for each year this amount is paid earlier there is a percentage of the 30% zero coupon bond that is written off. This creates an incentive for DW to pay early to get the discount. Ofcourse, the 70% should carry a new negotiated interest rate.

2. While legally there is the possibility of a bankruptcy to be considered and a financial 'guru' even said to me that there is no harm in such a route being explored and mentioned the examples of Enron, Japan Air Lines and many others. My simple response is that those were not GRE's and were joint stock companies with a broad public shareholding, DW's default will in the end be seen as a moral default of the entities behind it and this is not an option that should be even discussed.

Then the smart one's will ask are we not in a catch 22 situation?

In a sense yes, but then we have to consider long term solutions. Here is what I would do.

1. Within the UAE finance structure the Dubai Government should consider a long term Treasury Bond issuance program. These bonds should not only be seen as a monetary measure to deal with the deficit but also to restructure the debt of the GRE's in a manner similar to what many governments around the world do. US Treasuries are issued all the time and new issues retire old bonds and the cycle goes on under a long term program. It is precisely the lack of this program that has resulted in the funding of long term project needs with short term borrowing resulting in this mess.

2. The current Federal and Abu Dhabi Government assistance should also be rolled into this Treasury Bond program and perhaps even seek a tier one issuance with the Federal Government or Abu Dhabi government subscription of the earlier issues. This will bring much needed liquidity into the trading of these Treasury Bonds.

3. The UAE Central Bank to support such a program in the classification of these as investment securities rather than as simply loans to Dubai Government.

4. Set out the assessment of the cash flows of Dubai World and seek an debt retirement program which is realistic and not based upon the hope of things improving. It will mean that more detailed information on the cash flow and asset profile of the company and then to see how this can be managed to meet the obligations. With the backdrop of a Treasury Bond program the pressure to come up with three, five or seven year debt repayments will be overcome as the Treasury Bonds, through their liquidity and re-issuance programs will be able to manage a more orderly debt retirement rather than a pressured situation as we sit in today.

The reality is that any settlement of this debt has to be realistic in its scope and intent; failure to recognize the sensitivity of the situation within the financial world would have repercussions that might be hard to deal with. It is therefore vital that for the good the country's standing a positive approach is important in this situation. I am not convinced that haircuts and interest waivers is the solution, this is not giving the right message.

Is Dubai Inc's debt really $170 billion?

2010-01-19T20:06:00.000-08:00

The EFG Hermes report that suggested that Dubai Inc, implying all government related enterprises (GRE) and direct government debt could add up to between US$ 130-170 billion opens up a discussion in ones mind. The report suggests that the current known debt of $96.6 billion could be higher on account of the bilateral loans with local banks. It even cites the possibility that EmiratesNBD bank might have an exposure of $24 billion to Dubai Inc. This prompted me to check the balance sheet of the bank and to glean through the information known in the market and reported from time to time. The related party exposure shown at end of September 2009 in the balance sheet shows DH 45 billion (not dollars) due from possibly Dubai Inc as a whole, and there are deposits etc of about Dh 7 billion. I cannot therefore understand how such an assertion can me made. The entire loan book of the bank is US$ 53 billion of which just retail lending is $ 6.56 billion and then there is the trade finance and corporate lending, which when is adjusted to the over all loan book, by reason of deduction can only end up with the Dubai Inc exposure as $12 billion or so.

In addition, the local banks also have have massive deposits from the government entities and this is a major part of their float that comes to them and is a key part of the interest margin that they earn.

At the time of the Dubai World announcement in November 2009 the total debt estimated, which includes obligations to suppliers and contractors, was around $82 billion. Yes new obligations were taken with the Central Bank and the recent Abu Dhabi assistance which would not, in theory change the position of the over all obligation. Assume that of the $25 billion raised from the Central Bank and the Abu Dhabi assistance, about 75% was used to retire debt and the balance kept in reserve for operations or other maturing obligations, then even the net effect would be that the obligations would go up to US$88 billion.

How this can suddenly be considered a having increased to US$130-170 billion is baffling to me. I have always assessed that of the $82 billion about $60 billion is bank loans or bonds issued in the market and the balance $ 22 billion is creditors like consultants, contractors and service providers. A number of these creditors had either agreed or willing to agree to a reduction in their amounts in exchange for a definite payment plan.

I can buy the argument that if all the grandiose plans that were underway in Dubai were to continue at the same pace as they were in the early part of 2008 then indeed one can argue that the debt obligations of Dubai Inc would have mushroomed. Whether they would have been to the extent of $130-170 billion is a moot question. Intersestingly a couple of weeks back EFG Hermes published a report on the UAE banks and had made not any mention of the assertion that is being made today! So what information has come to light that would prompt this sort of assessment?

I am not suggesting that the research analysts at this reputable bank are being malicious but I do feel, very strongly, that issuing blase' statements is not conducive to the functions of a research analyst. After all we are not talking of an increase of say 10% which can be said to have happened in the normal course of business. In effect the suggestion is that the exposure to Dubai Inc is well over 120% more than was known to them or the market a few weeks back. This is where I think there are two options when I read such reports, a. press the delete button, or b. apply some common sense (which could be uncommon these days) and see is there any logic to this sort of thinking.

Clearly I took the second course. However, this asserts my position a few weeks back that it is time that a white paper is issued by Dubai Inc on the debts, the assets and that will clear up the air. This has, willy nilly, become a public matter through the way such reports have emerged in the media. This therefore needs a clear and coherent response from the right circles. I agree that bloggers like me can only speculate on the matter at hand, but we can use logic.

In a nutshell I find the nature of this report on the debt from EFG Hermes to be speculative in nature and I do believe that they owe it to the audience to explain themselves. Simply to assert that this could well be on account of bilateral loans from the banks which might not be reported is a rather serious accusation. I would presume the UAE Central Bank and the Auditors of the banks, all of whom are well reputed professionals, could hardly have sat by quietly eating their homous oblivious to any new lending spree in to Dubai Inc. I am in the consulting business and know for sure that new debt of Dubai Inc or most even well known companies is not on offer these days. Banks have hunkered down and just preserving themselves for the moment (not necessarily the best strategy in my opinion) but nevertheless that is how it is.

Ofcourse when the year end balance sheets come out in a few weeks time we will know for sure what the final verdict is. Till then I will reserve judgment and simply say that this report needs validation, and EFG Hermes may have got this one wrong.

Dubai World: Debt Trading

2010-01-17T22:45:00.001-08:00

In mature financial markets debt trading is a normal activity and provides depth and liquidity to the market. It allows lenders to lighten their position, add on new better spread business and indeed creates a secondary market that is conducive to the financial system. Generally debt traded is securitized paper, i.e. bonds and notes, and there is niche market for syndicated debt obligations, or bilateral debts. It is this second market where the bulk of the trading is done on a bi-lateral basis and the scope and coverage of debt varies from sovereign debt, both of a good quality and troubled debt, to corporate debt. Some astute operators actually make a good amount of money in dealing with this debt.

The report, whether press speculation or not, that some of Dubai World's debt is being traded now comes with mixed feelings to me. In normal circumstances I would agree this is a healthy thing. At the worst it suggests that some of the debt holders are getting frustrated with the progress on the restructuring of the debt. However, as the report suggests, for the moment it is smaller players, i.e. smaller international banks, who are getting rid of their positions, and this is something I would have expected much earlier. Indeed, in the period between Nov 25, 2009 and December 14, 2009 (when the Sukuk was paid) there was allegedly a good amount of trading in the secondary market.

I had in a previous blog mentioned what I would do if I was handling the Dubai World crisis, (not that I would be asked), and I would just relate that to this piece of news now. What is needed most of all is that Dubai World puts into place measures for confidence building and these would include seeing that are the real issues that are holding up an agreement with the banks. I imagine banks wanting interest servicing and structuring of the new debt to be linked. The report that the debt is offered at 70% of face value is a bit troubling because it might suggest that the negotiations may be surrounded by talks of a 'hair cut' on the principle amount. If indeed the debt is traded out then this complicates matters and a new creditor has to enter into the negotiations, who may either negotiate harder or just be adroit in his position; and we all know it just takes one bad egg to spoil an omellette. I believe that at this stage there should be no talk of 'haircuts' on the principal debt it unnecessarily bargains a short term gain for a loss of reputation that cannot be afforded to be lost.

I also would think that this debt trading is perhaps a signal from some lenders to simply complicate matters by throwing in the towel, cutting their losses and letting a new set of players deal with this. All this would mean further delays.

On the other hand Dubai World had asked till April 2010 to agree new terms with the lenders, so in a sense there is time, and yet in the scheme of how the world is that is not a great deal of time. So for the moment my own guess is this debt trading is a signal for all parties to hunker down and come to a broad agreement as quick as is possible, which will then allow time for the documentation to fall into place. I am sure that in the end there will be a successful resolution to this matter and as much as it it needs time it also needs focus and clarity on the broader issues that one has to deal with.

I personally feel in the current situation the news that the debt is being offered for trading cannot be all that good. However, it might be just the news that is needed to get things moving forward.

Dubai World: Some free advice.

2010-01-12T22:38:00.000-08:00

Not being an insider, or otherwise in the know of what is happening between the lenders and Dubai World I am in a sense handicapped as to how to approach the issue of offering some unsolicited advice. At the outset therefore this attempt may well be scuttled as 'un-needed' but being a well wisher of Dubai and the UAE and conscious of the delicacy of the matter I am venturing forth with some advice.

Some of the biggest names in the business world have fallen on hard times, this is part of the financial history we know, and any study of them and their successful come back is based on one truth; an acceptance of the situation and the embracing of a high degree of humility to steer through the crisis. Because one whetted the appetite of bankers eager to lend and in a sense were in control of the situation is now a matter of the past, today its a different set of circumstances and counting friends is as important as cultivating new ones.

If I was Dubai World here is what I would do:

1. Seek a quick and equitable solution with the banks. Make this a priority above all else.
2. Given them the true picture of the health, or lack of it, today and show them the plan over say a five year period of how things are likely to change. Build scenarios, from the conservative to the most optimistic; the truth of what will happen lies in between.
3. Seek their advice where they offer it, and most importantly LISTEN.
4. What Dubai World needs to achieve is to fix the mismatch of its borrowing from the short term to the longer term, but this needs to be matched to a plan and not a simple roll over in a vacuum. Bankers need to know when they will be paid and how?
5. Do not take any confrontational stance, avoid words like 'standstill', 'rebates', 'write offs' and 'discounts'.
6. Do not threaten to seek bankruptcy this is no more an option given that everyone has expressed a public stance of solving the debt issue and remarkable progress has been made, some, ofcourse, with the support from Abu Dhabi.
7. Remember always, and this also applies to banks, that when you negotiate do not put people in the corner, then they act irrationally. A good negotiator keeps the other party in the center of the room so they can see all the exits and options,
8. Make it clear that there can be longer term repayments and these will need the support of the banks if they want to be repaid and allow for accelerated payments if the better, more optimistic scenarios start to unravel.
9. Given the recent two months of focus on these issues, this is no more an issue that ONLY concerns Dubai World, it effects the UAE and indeed even the region. This is the test of credibility and commitment.
10. Always remember that not all banks want this to be a battle of brinkmanship so it does not do good to walk the tight line each time.

For those who think that all the money went into a endless pit in the sand they too must realize that there are assets; land and other assets that Dubai World owns elsewhere. Yes the land is impaired in value, but it has some infrastructure on it and land may go sick for a while but it never dies. Eventually these land values will recover and this is a matter of patience, all that is needed is to realize that when you nurture confidence and do things to build confidence then this helps the recovery process. The world will not remain in a perpetual state of recession and this is also true of Dubai.

It was mentioned somewhere in the press that in January 2010 we would see progress on the restructuring talks between the banks and Dubai World. It is important that this process continues and information is made more available that indeed such meetings may well be going on. But get the news out that there is a dialogue; a much better message then people guessing what is going on.

Over all we must remember that indeed this a matter that can be resolved, the banks want it resolved and so does Dubai World. It is now a question of finding out what will be the meeting place of this resolve. This is a much better place to be in than neither side wanting to negotiate, yet there has to be give and take. The circumstances dictate that and demand that. Pride, on either side of the table should be put aside, as must the opinions of lawyers who may prefer to be pit bulls wanting to fight rather than legal counsels assisting in an equitable solution.

I believed that the Sukuk that started this whole saga would be paid and it was. I also believe that a restructuring will happen, even though at times it might seem everyone has hit a brick wall and tension will heighten. The truth is that everyone knows too much is at stake for it not to happen.

Dubai's Media Gambit

2010-01-10T19:44:00.003-08:00

Dubai has announced that it is merging some of its media handling assets, like Brand Dubai, the Dubai Press Club etc, all into a new form and structure. This perhaps does, in one important sense, clear up the confusions of what each media unit did on their own. More importantly, till the last quarter of 2009 the general perception was that Dubai did handle the media better than most in the region. However, in my opinion their handling of the Dubai World debt issues was appalling and fell way off the mark, more so very uncharacteristically of the way Dubai handled other issues in the media. Indeed, the press in general does have the propensity to move people, companies and countries from 'darlings' to 'devils' in nano seconds and not even worry about the accolades they showered a few months back are now being replaced by journalist jibes.

Dealing with the media is an art, and in the ever proliferating world of media platforms, it requires speed of action and clarity of position on the subjects that crop up. Keeping silent at times is a virtue, but keeping silent in a crisis is a crime that the media punishes with the ferocity of lion going for the kill. Once having decided to speak, and needing to speak, it is important that the message is consistent, coherent and has clarity. Crisis management techniques are fundamental to this process of handling the media, one cannot just believe one has the gift of the gab. Yes the gift of the gab and a good presence can impress once, twice and perhaps if lucky a third time, then when it begins to wear thin the facade begins to peel away and the media then look for substance.

This substances comes from a proper media strategy and the use of think tanks to postulate the responses that can and should come up through the evolution of a crisis. "What if" scenarios are discussed at length, and often with people from the outside. There is no point in listening to an employee ramble on about how great everything is, because frankly the media does not buy that each time; one needs to have a broad input into the process. Twenty years back when I was dealing with an internationally explosive story, which stayed in the media for a good two years, I always made sure I met the critics more often than I met the supporters. In 1992 I was asked by a leading financial paper if the bank I ran had a problem, and I answered ofcourse we have a huge problem, and then explained to him how I believe as the CEO of the bank we will navigate through it. I guess the sting of his story was gone because he expected me to 'deny' there was a problem.

What Dubai is doing is in essence a good thing and a fresh start in handling things better with the media. It will need thought on many aspects of this process and I do believe they should, even at the national level, consider encouraging a think tank to be formed and to listen to them. I am no media expert and while have written extensively for 25 years on the region I still find it fascinating how in a crisis everyone gets paralysis, almost as if one wonders what is going on. I also believe we who are living and working in the Arab world have to stop saying the world press is unfair with us. This is life! We have elected to be part of the global system and benefit from globalization and with it comes the mentality of 'trial by press'.

Yes the international press has been harsh on the current debt crisis issue, and I have spoken against them, but I also believe we have to present our point of view, take responsibility for where we messed up or were not on the ball, and then move on with the strategy we have carefully framed. We must also cultivate our well wishers even if at times given the nature of journalism they will be critical of things. Perfection is terrible it cannot have children so why be sensitive to a few paragraphs that do not compliment what we have done.

The feeling I have is that while on paper this media management consolidation is a good thing and it will be interesting to see how it all unfolds in the manner in which a strategy is formulated and then rolled out. I am not a huge fan of big splash advertisement campaigns, they only make the media buying company rich, but rather believe in channels of media that are encouraged into a dialogue, like a forum in the media format itself that brings focus to the issues and has healthy debates. I think this is a good gambit that Dubai has played and it will now be important to see its results. As a first step it would help if they started a weekly media breakfast briefing, which should be off the record, and then bring in also people who comment and focus on the issues on the region and engage in healthy discussions with them.

Media management is about networks, cultivating them, nurturing them and honoring them in the long term. The biggest mistake to make is to think the media needs us, no we need the media, and this is why the pen remains more powerful than the sword.

Burj Dubai: Symbol of Vision

2010-01-03T18:00:00.000-08:00

On Jan 4, 2010, the main Sh Zayed Road, alongside which the Burj Dubai is situated, will, from late afternoon, witness a bumper to bumper traffic jam as people will rubber neck to see the 800 meter tower be unveiled to a world that held its disbelief for some six years. While the events of 2009, especially the last quarter, may have dampened the spirit of inaugurations, there is going to be no holding back as the ceremony marking its opening will commence. In the area around the tower those fortunate enough to be invited to the event will leave just about as much space as a taxi packed with hippopotamus will allow. Emmar Properties, the owners of this symbol of modernism will carry the pride of their work, hopefully also acknowledging the hard work of thousands of laborers who toiled to make this dream happen.

Yet, more than the adroit steadfastness of Mohammed al Abbar, who heads Emaar, the vision of Sh Mohammed bin Rashid al Maktoum, the Ruler of Dubai and Prime Minister of UAE, will be showcased. Indeed that vision may have been scaled back by the setbacks of Dubai World, but there will be rejoicing that Emaar did the impossible, not only for the vision of Dubai but for the UAE. At the same time the media is ofcourse looking at the future of the economics of such a grandiose tower. Admittedly such iconic buildings are not built to make money by the truck load, but more to act a beacons of progress and development. Indeed the Empire State Building took 19 years before it became profitable, and indeed did other such iconic towers take longer to break even. These buildings were built to become symbols of attraction and this is what Burj Dubai would also be for some years before it turns to be entirely profitable.

However, it remains to be seen if the cheer of such a launch will rub off onto the the depressed real estate market within the country. I am perhaps the optimist who refuses to see the glass empty, but there is no merit in the argument that there is an over supply looming in the horizon. While domestic population in Dubai may shrink by as much as 10% over the next two years, we should not forget that this shrinkage happens at the lower end of the job scales. While indeed 40,000 additional units on the market will create over supply conditions I do not see anything wrong with this as its time that greedy landlords also appreciate that an oversupply does mean that the rents will come down. This means the cost of doing business will indeed come down too. I also believe financial constraints, project delays and the general uncertainty in the market will mean that these 40,000 units will be phased into the market at a slower pace. People are worried that only 70% of the new units will be leased out, but then this is fine, as it allows a better balance to the market where leasing rates went out of control.

When the search lights and strobes will unveil the tower we will also notice the contrasting styles of Nakheel and Emaar. While the Burj Dubai will remain the icon in Emaar's cap, it has to also be credited as the one developer in the UAE who has actually delivered. The main feather in Mr. Abbar's cap will be that Emaar has delivered more completed real estate in the country than anyone else, and indeed this is something that they should to proud off. Yes some may argue that it may have over extended itself but we must acknowledge that it was no mean feat to build a 800 meter tall tower and the many other projects it completed. The question now will remain whether this alone will act as a watershed to commence the recovery of the real estate market?

While the financial press will do its utmost to spoil the party with the oft repeated remarks about the looming $22 billion debt of Dubai World, my own sense is that now a restructuring is pretty much on the cards. The twin effect of the Burj Dubai being open and the debt restructuring being completed will be positive and reinforcing. There will be differing views on whether the extravagance of having the world's largest tower was a necessity or not. This is now irrelevant as the concept of Burj Dubai was at a time when all things big were being considered and somehow the necessity to be in the Guinness Book of Records was paramount. Soon after the Burj Dubai was announced Nakheel, Dubai World's subsidiary, decided they needed a tower even higher, not to mention there were some private developers who secretly also craved the same idea. If nothing else the recent slowdown and the problems that have come with it have dampened those spirits with good reason.

The vision of equally tall towers popping up on the Dubai landscape will now be into the future and perhaps a very distant future. I personally hope that this will be considered the last of the 'tall ones' as other than satisfy ego and to be an icon there is no immediate need for another 800 meter tower. Dubai already has a few architectural icons and there is indeed no need to more to that list. Someone asked me about the vision for Dubai that was unveiled from 2003 and then refined at times is still intact or not?

The idea of being the entertainment capital for the region and the metropolis that competed with the best of the world is perhaps never wrong to conceive. I suspect the grand scale that was planned was being implemented too rapidly. Yes projects like Dubailand, Al Bawadi (a few kilometer strip of hotels) and the grand plans of Nakheel are either slowed down or perhaps will need to be chopped up. The exuberance of development was such that some ideas were just not financially practical but were being touted around with the glee of a child in a candy shop. Underwater hotels, revolving towers (one in which each floor revolved), designer labeled towers, theme parks that could perhaps attract a handful of people being compared to the likes of Disney all were welcomed in the enthusiasm of creating something new and something on a scale bigger than life. Anyone who questioned the economic viability of the ideas or the pace at which all this was happening remained the unheard voice. Projects like theme parks and massive residential complexes will be on the back burner for some years to come and this is a good thing. First the fundamentals have to be restored, the idea of the grand has to be replaced with the practical and as the financial system adjusts to the new realities it will also bring a more durable strength to the system.

Does this mean the vision of Dubai will not happen?

I would rather say it will not happen in the three to four year period but more as a part of perhaps a 20 year plan. There is nothing wrong with this dose of realism. I remember in the early 1990's and soon after the first Gulf War, Sh Zayed road was popping up as the new development area. A prominent businessman from Abu Dhabi decided he will be build the Holiday Inn Crown Plaza and everyone wondered what was going through his mind. As others followed suit and buildings started to come up analysts questioned whether there was a viable future for these buildings on Sh Zayed road. Yes it all seemed before its time and today too one can say some of the projects were before their time and some perhaps a decade too early. I believe the vision was not wrong at all, but the speed of trying to realize it all created pressures that were just too hard to handle, especially when the global downturn happened.

In this sense the opening of the Burj Dubai will mark the end of an decade of exuberance and show that the new decade must now be one of repair and consolidation. Yet in the landscape of the country the landmark will become, like the Burj Al Arab was for over a decade, a symbol not only of pride, but identification with an element of success that will be seen with either envy or admiration.

Banking Report: Analyzed

2009-12-31T01:10:00.000-08:00

The EFG Hermes report on some of the banks is interesting by all means, while not aimed at a credit assessment but more at stock performance, it nevertheless presents a balanced view. While there are some notable exceptions in the report I have seen, like Mashreq and Union National Bank (my former bank), it does make the point that the current financial woes are not as bad as they sound. The 3rd quarter performance of the banks was better than expected and judging by the analysis the banks that appear as laggards in their analysis are not on account of credit issues but more management style and focus in terms of the economic segmentation they pursue for earnings. While I am a traditionalist who would not rely on inter bank borrowing to fund the loan book, I concede in the ten years I have been out of managing a bank a great deal has changed. While back in the 1990's international banks panicked at the slightest political trouble in the region, the trend since then has been more mature and banks do not cut lines at the slightest of whims as they used to back then. Thus inter bank funding is more stable and can be seen as a factor in funding the loan books of banks, even though I was surprised that some banks from the sub continent got over cautious through the recent Dubai World crisis and while not cutting exposures to the country did have a 'wait and see' policy.

Indeed it was interesting that their analysis of the Dubai Inc (a loose word to describe all the debt of Dubai Government and the GRI's) is spot on in mentioning that while the numbers seem significant, even to GDP, there are two aspects that need consideration, a) the surplus cash flow of the good companies can be used through the parent structure mechanisms to help the weaker ones. and b) there are a number of assets that are eventually available for a sell off or privatization, (though they don't make these two points-that is how I read it). The current restructuring is a major element of this conundrum that needs to be solved and for this I would urge the Dubai World and the government to set a much faster pace to come to a settlement with the banks on this issue.

While the financial press have made a big deal, even today, about the support that has come from Abu Dhabi and hinted about it not being available in all circumstances (see today's FT) they forget that no support can be a carte blanche and has to be discussed on the merits. Interestingly yesterday an Abu Dhabi official spoke to Moody's Investors, as they have reported, and discussed that they have more than twice the reserves of the whole UAE public sector debt (assuming even the GRI's) in just one entity, to which if you add the Central Bank reserves and the other assets held by UAE entities the situation is more than comfortable. This is where I get so frustrated with reporters than they miss the big picture. Abu Dhabi thinks of the country as a whole, and eventually will be there to stitch things up, perhaps at a cost but it will be done.

The analysis of the banks in each of the cases is interesting. It is heartening to note that banks like EmiratesNBD and National Bank of Abu Dhabi still figure out as the strongest and the impact of either one of them of the current situation is minuscule. EmiratesNBD with a captial adequacy of near 20% and a provision of 95.5% of loans actually stands out better than Moody's would have us believe just two weeks back. None of the banks in terms of their capital adequacy numbers or coverage for non performing loans seem to be a problem. It is highly likely that into the mid of 2010 we may find over provisions on most of the balance sheets, which I strongly advise the bankers not to move back into profits. This will offset some of the need for higher provisioning on the general commercial and personal lending portoflios that may have suffered through the slow down.

In the end the macro economic scenario will play an important part. Higher liquidity, small to medium sector finance availability, and better respositioning of the asset-liability mismatch, which plagues all banks in the region, will ensure a stable to better year ahead. Significant in this process will be the following factors:

a. Better GDP performance.
b. Stability on the issue of the debt restructuring.
c. Middle market performance being better, i.e. trading, retail and services.
d. A steady real estate market, which while overburdened with supply will still gradually get over the panic stage.
e. A greater awareness of UAE position as a regional hub for business.

While I am not predicting major new avenues of business income for the banks in the year ahead, i.e. IPOs etc, I do feel that they will protect their market share better, hoping a better corporate and government sector performance will offset a weaker personal debt performance in the year ahead. Banks who manage to address the asset-liability mismatch early into the year will find themselves lighter on their feet and more nimble to take advantage of a recovery.

In terms of safety of the banking system I have the least of worries. No Bank incorporated within the UAE has ever been allowed to go under. (BCCI was not UAE incorporated and interestingly according the Sept 2009 Liquidators report of that failed bank 81% of all creditors have been paid, which must be some sort of a record as normally failed banks struggle to pay off 40-50%). I am positive of this that the UAE cannot and will not let a bank fail, to which is added a better regime of regulatory control and a more mature management in most banks.

How do I see the year ahead for the banks? In a nutshell: stable to better performance, dealing with the recent past bringing cheer with each successful settlement or restructuring and in terms of safety pretty much at the top of the definition of 'prime quality'.

What happens Next: Part B

2009-12-28T02:46:00.000-08:00

Just about the time I had posted the last blog, I read about a prominent World Bank official speak about Dubai and the future. Indeed I endorse the views of the learned World Bank official, especially on a number of issues. Most importantly the feeling that the debts that are maturing in the year ahead will be met and it would add that it is unlikely that the fiasco that was caused by abrupt announcements will happen again; all the more because lenders and the borrowers are in discussions.

However, some underlying anomalies within the economic system need to be corrected, and while this may take time, the building blocks needs to be put in place surely soon. One of these basic steps is to consider these measures, obviously in more detail than a blog can narrate, and then take a concerted view on the matters. I do feel that the economy has, since 2001 become highly skewed in two directions:

a. The private sector contribution to the GDP being an abysmal 13% imply that either government or government related entities were fueling the pace of the GDP growth. The result was that sectors like Hospitality (Jumeriah Group), and Real Estate (Nakheel, Emmar, Dubai Properties and others) were the dominant players and hence in a sense creating a huge concentration of rapid growth in the semi public sector or public sector hands. While as an impetus to start things off this is not a bad idea at all, but at some stage the diversification of this process into private hands through IPO's should have been considered.

b. The development cycle was being fueled by a high debt level, as most of the real estate developments involved infrastructure build out and the pace of planning outstripped the resources needed, resulting in a scramble for debt to fuel the engine. This was at no time seen in a broader perspective perhaps even considering inviting the private sector into a utility model to build the infrastructure, as is done in a number of countries.

This propensity of concentration in the sectors mentioned and the leveraging of the debt has to go through a process of de-leveraging and privatization. Ofcourse both these avenues pose some unique problems.

De-leveraging can only work with liquidity and appetite available for restructuring the loan profiles of the current debt, and this seems to be under way. However, privatization in the current market has to be put on the back burner. I personally think that this is somethign that should be given thought to.

Here is what I would do.

Announce soon after the debt resconstruction that the privatization is an option and to float mezzenine funds to take equity positions in some of the assets with a clear idea that within say 24 months the privatization will occur. This wll give the market the confidence that is needed, redress the private sector contribution to the GDP and most importantly decouple the existing situation. Yes it sounds simple, but it is actually something that needs planning and can be done selectively. eventually the government or GRE's can own about 30-40% of the entties and sell off the rest. I suspect the cash flow from these would be ample to redress the existing situation.

I believe some assets are perfect for this strategy, i.e. the hospitality sector, while others may have to be repaired and their timing of privatization may well be in the end of 2 years from now. But the intent itself, if made public, brings about the interest in the private sector, demonstrates a will to take structural measures to fix things and most of all shows the world the way out of the situation.

2010: What happens next?

2009-12-26T01:40:00.003-08:00

After the turbulence of 2009, human nature expects the new year to be one of positive difference. If 2008's ending weeks were tinged with the hope that the GCC economies would survive unscathed 2009 proved them wrong, as the Al Gosaibi debt issue, the Dubai World surprise and the general battering of UAE credit ratings by rating agencies brings 2009 final days with a gloom that focuses ofcourse on the hope all will be well. Yes I have mentioned the silver linings that accrue in this over cast moment of the regions financial landscape. While we can all hope for the best, there has to be a concerted effort to put into place the elements the will change the financial topography for the region. This does imply what are the likely events or processes that will change the economic outlook.

Here is a mind map of what perhaps will happen.

1. The Dubai World Debt.

Indeed this has been and will be the prime issue that the financial and media world will focus upon. It is crucial to the well being of the economic system for the region, and most importantly, it is where the confidence of the financial community can be best restored. I believe it is important that the banks and lenders agree to the restructuring of the Dubai World debt, whether through their negotiations with the company or through some prodding from the government, both Dubai and the Federal government. Indeed, Abu Dhabi assistance is already implicitly tied to the lenders agreeing to a restructuring and thus I do feel bankers and lenders will not be so short sighted as to scuttle a settlement merely to get brownie points. I believe there might be a few hiccups but in the end the settlement will be hammered out and a restructured debt will provide the breathing space to improve the repayment capacity down the road. I believe also that a successful deal with the lenders will allow either Abu Dhabi, Dubai government or the Federal Government, or a combination of them all, to be more forthcoming about their plans in a restructured environment.

2. Oil Prices.

The current bet is that an oil price hike would slow down the recovery in the US and Europe and hence derail any recovery that we have seen thus far. My own opinion is that a better economic performance from India and China will bring in a higher demand for oil, and a gradual up tick in the US and European economy will also add to the demand side of oil. I foresee a $15 increase, on average, for the price of oil in 2010, with a possibility in the summer for even a higher spike based of inventory management and constraints in stockpiles. Added there could be tensions between Iran and the West that could well add to the upward pressure on oil prices. The political dimension to oil prices is hard to follow and while most predict Iraqi oil production improvement could well keep a lid on oil prices, my own feeling is that we are a bit complacent about oil prices and it could well be a benefit for the region adding to the reserve pools of the sovereign wealth funds.

3. Increased Government spending.

I do believe Saudi Arabia, UAE and Qatar within the GCC, and Iraq and even Iran, outside the GCC, will be investing more into infrastructure, health and education. The first two countries have already announced major plans for power, railway and roads and health care upgrades. These are massive investments which will become the base of economic recovery for the region. Though it may well be that the fruits of these spending programs may not show up immediately there is no denying that it will set the stage for the decade. UAE's announced investment into nuclear based power generation already promises to benefit the region and indeed the US and European suppliers of technology.

4. Revenue Leaders.

If property was the revenue leader for the region in the past decade it is clear that new revenue leaders will emerge. I feel the service industry and the trading sector will come back into the limelight, with tourism becoming a new major revenue earner for the region. The model of an enabling economy in the UAE, through which the service and trading sector can thrive has been a tried and tested model and all we have to see is the return to those values as the prime drivers of the economy. In addition the attention that has been put into creating tourism as a destination driver for UAE there is the promise that this could well be the new bright star for economic performance. Countries like Oman who have a very rich tourist content will also begin to play this card more effectively, resulting in a broad based attraction for the region. I also feel in some ways manufacturing will become more important as more electric power is available in the years ahead, allowing the strategic advantages of the region coming into play.

5. Financial Performance.

I do believe banks will continue to be burdened in their performance through the effects of the past two years. There is alot of clean out of these balance sheets and that may well be the focus for the years ahead. I know that banks are in better shape than our rating agencies would like us to believe, but their focus on asset management will be more crucial then trying to get run away performance numbers each year. I also believe banks will have to change the way they compensate their senior staff as some bonus schemes only implied that the more risk they took the higher their bonus. I do however feel that the stock markets will do better than they have recently and while the maturity of these stock markets is still doubtful with true depth and two way liquidity still down the road attention towards superior performance compared to other markets is on the cards.

I do feel in addition some important steps need to be taken for the year ahead. Paramount to this would be the setting up of a 'think-tank', perhaps sponsored by the banks, to bring in the mind power to frankly and openly discuss the issues that face the economy. I also believe that people within the UAE government also recognize that there are many here, both Emirati and expatriates, who may not agree with some of the ways things are handled, but their sincerity and care for the country should not be questioned. I believe a broader base of discussion is what will improve the understanding.

Yet we have to understand that there will always be the cynics, like some of my banker friends who call me to tell me how bleak things are, and there will be the over enthusiastic admirers who will pretend there was no problem. Perhaps the truth is squarely in the middle, and this is perhaps why I ask for balance, not hysteria, for understanding rather than idiocy, for patience rather than panic, and most of all, when in doubt 'ask' do not 'guess'.

My single line call for 2010: 'Will be an anxious year, with more reasons to cheer than weep."

The Silver Lining.

2009-12-26T00:38:00.001-08:00

Telling someone that one is based in Dubai, or the UAE, these days is tantamount to admitting that one is under the strains of a financial system that is groaning under debt and piles of newspaper analysis, which range from brilliant to pure junk. While there is not doubt that the fall out from Lehman Brothers in the US in September 2008 took a while to be understood in UAE and the Gulf, especially in terms of its possible impact. This was certainly the case of most countries in the world who felt the US economic problems were isolated and their global impact would be marginal. How wrong we all were, as it was often said when the US economy sneezes the world economy catches a cold; in this case this is not a cold, this is full blown bronchitis.

Dubai perhaps was in a state of denial as to the impact that was seething below the surface, with prominent officials making upbeat statements right into the face of the storm that was approaching. But enough of the dissections of the situation. I believe that this situation has caused some benefits that might well be ignored by people. I believe these are the silver linings on the clouds that need to be seen and pondered upon. I list them in no particular order of preference.

1. Governance and transparency will become the watch words of the coming decade. The UAE as a whole, and Dubai in particular, has, reading between the lines, realized that the maverick ways of doing business will not just work from here onwards. Yes they have a wonderful vision but with that vision a sense of clarity and focus are to remain paramount. A greater adherence to critical reviews and financial planning will be the result of this. I believe, at a Federal level, the UAE will want to monitor how their financial system, and more importantly the quasi government entities conduct their business will be under more closer review and oversight.

2. Dubai will need to go back to the basics. Traditionally the soul of Dubai's economy was the commerce generated by the trading houses; it is this sector that was ignored in the rush to become a metropolis of high rise buildings. It has been the trading hub that Dubai gained its reputation on and this is where the superior infrastructure in terms of ports and facilities will come into play. As demand grows in the Sub Continent, Iran and Iraq the service ability of UAE and Dubai will become of paramount importance giving the traders the traditional advantage they have held for so long.

3. Dubai's underlying story has not been shattered, it has been ofcourse seriously dented, and the repair work is going to be on the back of a restructured financial position, focusing back to the enabling economy model that allows businesses to thrive and do well here. The financial hub, the technology hub and the trading hub status will come back into focus. While pundits predict that properties will remain subdued, I anticipate from 2010 a 5% annual rise in property prices, on average, through the next 6 years. While this may seem minuscule to the dizzy levels of a couple of years ago, so be it. Some smart Germans even announced they will proceed with their development on the World Islands, perhaps aware that when in 3 years time they complete construction they will be walking into a recovery.

4. The focus of a more Federally driven economy will be the key aspect to consider. This is indeed good and this crisis has brought focus back to one nation and one economy as a model for moving forward. This cannot be bad for the economy and its future, and I do feel all these statements about political compromises are really humbug. This new economic focus on a Federally driven economy will actually benefit Dubai in more ways that one, mostly by allowing the integration of the infrastructure covering areas of public transport, power generation and perhaps eventually ports management.

5. UAE position within the GCC as the most favored place to do business from has not been compromised in this crisis. On the contrary they have not gone an blamed the excesses of foreign property developers and indeed have held their words even against their own plans. Quite simply the floor fell of the real estate market and whether this was the reason the debt implosion happened or because of a world wide financial contagion will always remain open to debate.

6. Finally the business laws and financial management of the system will become more streamlined. This will be a welcome step for the business sector. It might be a teething process but it is clear the regulation and over sight support by a sound business judicial system can only mean well for all.

Indeed there will ups and downs in the process. The first and most pressing issues will be the restructuring of the balance of the debt of Dubai World, which the bankers and lenders eagerly await into the new year. I tabulated, from the public media, maturity profile of the debt in Dubai, and the UAE and it is interesting to note that if banks were to consider around $ 12 billion to restructured from a 2 year maturity profile to a 5 year maturity profile then indeed the pressures what seem so immediate will be released. At the end of the day this breathing space is needed for the positive economic fundamentals to come into play. The service sector remains strong and indeed the tourism industry has actually performed remarkably better than expected. These are the silver linings we are missing, and while pulling out the check books and putting money into real estate may not be the first thing that comes to mind there is no doubt that not being a player in this economy is not the right thing to do.

Yes Dubai, especially, must cut back on its long term project plans and make them fit the needs that they realistically assess, and side by side phase the development from here on. They must also realize that a fair amount of the splurging of the past years was indeed wasteful and even at times questionable. This is why the return to basis is so vital at this stage to be emphasized by all and sundry.

The Dubai World debt puzzle.

2009-12-21T02:17:00.000-08:00

I get accused these days of being a Dubai 'fan', all the more strange since I hope I have been pragmatic in my advice to both sides. Yes there is not denying that I do love the UAE, it has a great deal what is good and when it has needed improvement I have spoken out, not as a cynic but as a friend who means well. I have been a banker for a major part of my life, and have viewed banking and bankers from a close distance this past ten years.

As Dubai World announced its intention to restructure its debt, even though getting to that stage may well have been a comedy in its own right, I wondered about what bankers were thinking. Indeed, some claimed they were under the 'impression' that the Dubai government was the ultimate guarantor of the loans; a silly argument on two accounts, a. the documentation for the loans never state that, and b. the decree that set up Dubai World clearly states that the government would not in away guarantee the loans or obligations of Dubai World. So how come this sudden myopia on the part of the bankers.

Bankers are forgetting their heydays of lending, and this was like a wild spree. A European banker had the gall to say to me that they did not know the extent of the obligations of the Dubai World, and had they known them they would not have lent money! First of all if I had to choose the most ridiculous statement in this whole saga that would surely be my choice. You expect me to believe that banks piled on $26 billion of debt and did no due diligence, did not ask for financial statements, did not check the news back then where every month banks were announcing new lending syndicates, and my European banker friend was tucked away in London reading the Financial Times and signing away loan approvals. Banks have risk management departments, credit committees and legal minds that are keen to know the interconnectedness of each entity around the borrower and indeed the relationship, in legal and contractual terms with the shareholders.

But then when a bankers bonus is determined by the number of assets he writes onto the books of the bank, and the bonus is paid soon after the loan is booked, why should he really be worried about all the details? Were the bankers negligent in their lending? Perhaps in a sense yes; after all if they did their homework some of the lending could have been curbed based on the 'concentration of risk' argument, where the leverage piled onto Dubai World, even in the bright days was remarkably more that what the Dubai government itself was borrowing.

My banker friend also suggested he did not know what were the assets of Dubai World? Then the simple idiotic question comes up as to what was the basis of them lending? I can understand bankers wanting to know what is the value of the assets today, after the impairment in the market place, but to claim at that time bankers did not know what assets were covering their loans really sounds totally out of place.

I believe that while Dubai World may have been careless in its pursuit of glory or possessed with and abundance of wishful thinking that people will buy into their dream in droves, or a mixture of both, it does not absolve the bankers of their loss of reason. Yes corporate governance and all is fine, but this is all about asking the bankers and lenders to be clear of what they did wrong. I am surprised the financial press, who normally are good at pointing out who messed up are giving the bankers a bit of a free ride. But then every saga needs a victim and somehow the bankers want us to believe they were duped into this huge lending.

This is certainly not the case. The banking world does not work this way. The details on lending applications, especially of this size, run into volumes of analysis, opinion and credit and risk assessments . If these were not done then frankly these banks should just have to bear the brunt of their mistakes and at best agree to reschedule the debts and wait out the recovery.

Around the Debt Table

2009-12-20T01:37:00.000-08:00

One of the crucial lessons of banking is that when you lend someone say $1 million you, as a banker, have a commanding position with the borrower, but when you lend him $26 billion, as is the case of the Dubai World bankers, then frankly speaking you cannot afford to take as tough a position as you may seek. As dismal as that may sound, Dubai World, Dubai and the UAE also have a reputation they want to protect and ofcourse heal the recent acrimonious display of relations with lenders and bond holders. Armed with a new bankruptcy law, administered by some of the best western legal minds, does mean that creditors of Dubai World will have to get used to the legal formalities of such laws in the case of debt recoveries. The litmus test that will apply in such reorganization applications is that a) the company made its best efforts to convince the creditors on its reorganization plan, b) the plan provides relief to the company to reorganize itself and implement a plan that c) provides the economic possibility of a recovery better than say a fire sale would at the present.

If this test is met then the judges will be inclined to allow the company the time and the patience to meet the objectives of the plan and something the creditors may well have to swallow. Indeed, UAE entities will be penalized over the cost of new borrowing should this be the route taken.

However, my call is that when the bankers sit around the table with the company and its advisers there has to be a sense of balance that they will have to gauge. Its all fine to be publicly emotional about the whole sordid episode but we are dealing with huge sums of money and bankers cannot, and should not, let their ego's into the way. I would suspect if the plan is workable, and this is reasonably demonstrated in such a meeting then banks could agree to a restructuring of their loans in a manner which allows them interest payments and a defined structure for the future repayments of the principal amount lent.

On Dubai World's side, just because the recent legislation gives them negotiating clout does not mean they wield it. Some of the best deals break down when people get stubborn over what in the end are minor issues. Dubai World should, in my opinion look at some of the assets it holds and assure the banks that there is a plan for the sale of these assets and to satisfy them that their entire lending did not go down into a bottomless pit. Yes the land bank held by Dubai World's property arms is seriously impaired, but realistically speaking real estate may get sick from time to time but it never does really die. If the wait period is say 5 years under a restructured plan then there is a high chance that some of these impaired values may well recover, while not the to dizzy heights of two years back, but certainly well off the bottom that we saw a month back.

Dubai`World will have to also think more pragmatically and let go those plans that do not seem feasible at the moment. There is no joy in hanging onto a master plan of a project when it is highly unlikely for it to materialize in the next few years. What bankers and lenders need assurance is that the realities of the market situation are recognized and there is a willingness to cut the cloth to that size. I do know that some bankers will remain adamant about being repaid in full, perhaps buoyed by the recent news that in talks in London senior Dubai officials said repaying all the debts in full was an option. However, testing that will through the bankruptcy court is not a wise choice. I would always say that sometimes a bad settlement is better than a good court case.

I do feel that bankers are well advised to hammer out a balanced agreement and assist in the restructuring of the company. This is really the way forward that gives enough elbow room for everyone to move forward and has the best chance of being in a position that is better then where things stand today.

UAE Bashing- time to stop it.

2009-12-16T18:26:00.001-08:00

Since the last week of November 2009, and after Dubai's surprise, but badly handled announcement about Dubai World, it almost became a fashion to indulge in some Dubai Bashing. So much so that the rating agencies, for whom I have scant respect, jumped in and turned the Dubai bashing sentiment into an all out assault on the UAE. Pundits who just a year ago were queuing up for invites to the latest launch of a real estate project were suddenly become experts on who felt they have to join in the assault. I am not suggesting a conspiracy theory in the media, but simply pointing out that it seems its fashionable to run down UAE and Dubai because that is what sells newspapers. I fully admit that there are problems and yes there is a need for transparency and accountability of the situation and a great deal needs to be done to bring back confidence to the system.

However, it is deeply irritating that when the good news has come out, the bond that was the subject of such concern has been paid, and most importantly Abu Dhabi and Dubai have shown that there is a supremacy of the Federal system, resulting in the $10 billion assistance from Abu Dhabi to Dubai, all this good news is not being presented in the right light. A senior correspondent of a class A European newspaper asked me, in a rather sinister way, as to what was the price Dubai will pay for this assistance. Even though whether the assistance is a loan, or indeed an asset purchase, frankly who cares? The bottom line is a crisis has been averted, and some measure of confidence has come back to the market place.

Rating agencies have found more reasons than one to continue to make it sound like a contagion. I wonder what did they know that was new now compared to a year ago? Did they not know of the debts of Dubai World? Had they not in their review process and due dilegence with banks, when granting the ratings, discussed these issues? So they say the standstill suddenly brought home the vulnerability of the situation; it highlights how weak their research was in the first place.

It is time to look ahead now. I know that the financial system has been tested in this crisis, and more importantly the country's political will as one nation has been tested and this came through with flying colors. I have been resident here for close to 30 years, and have often spoken out about matters that have needed improvement. I have not been candid and blunt because `I am not some journalist who might want sensationalism to promote my name, but someone who really believes that in the past 38 years UAE has grown to be a fabulous place to live and work. Its a safe place, with a great infrastructure and people who have been more welcoming then others. Yes there are tons of issues that need to be resolved and this is where the focus must shift.

I was asked what was the lesson learned from this crisis.

I would say if there is one thing that is not need is a system of governance, at the Federal level, whereby debts of each of the emirates and their GRI's can be monitored. I was taken aback that Dubai World, on its own was allowed to pile on such a colossal debt, much larger than Dubai's own debt. I believe that this situation should never be allowed to happen again. I am not concerned with the politics of the situation, it is in a sense, a risk even a rich nation like UAE cannot afford to take. Indeed this crisis will pass, and I say this with knowledge and confidence that there will be support from all quarters within the country to resolve the problems of Dubai World, and there will be a clear process to ensure it never happens again.

Lenders must also be made to realize that they have to carry part of the pain in this. I asked a well known journalist who has been writing about this matter every day as to why hasn't the carelessness of the bankers been questioned in this lending? I never saw one hard hitting piece on this subject, it was almost as if only the borrower was being blamed for the excesses. I believe that while the new arrangements for Dubai World have, in the longer term created the means for the repayment of the debts to take place, there is a need for bankers and bond holders to also agree to a restructured debt. This is the pain of lending and it is time that all parties understand this comes with the territory.

The Wolves need to back off.

2009-12-13T23:36:00.000-08:00

When the crisis of credibility and debt was unfolding in Dubai and the region, I had commented that this crisis has one benefit that it will make the UAE think like a nation and not as individual city states. Irrespective of the rumors of assets deals between Dubai and Abu Dhabi, the bottom line was, in my eyes, that an adherence to a one Nation concept was all the more important to all parties. Since September of this year this has been the message of one people and one nation. It was in this light that the announcement today of Abu Dhabi's $10 billion support for Dubai has been made. Yes it leaves one wondering why all this drama if the end the Sukuk maturing today was going to be paid in the first place. I have all along said the public relations side of this episode leaves a great to be desired and I am sure all parties have learned from it.

I now have to smugly look at my friends in Moody's and other rating agencies and wonder where their argument that support from government to commercial entities is 'questionable' stands? In the parlance of the real world will they admit they jumped the gun and became over cautious, will they step forward and correct what has been done wrong in the downgrades and the review notifications? I suspect not, because rating analysts hate to admit they are wrong.

For Dubai indeed this is a bitter lesson learned, in terms of its relations with debt holders, the media and indeed the manner in which crisis is handled. However, I always say if the end has been satisfactory then all said and done it works to the better of all. Yes there will be questions over access to new credit lines, and there will be the rumor mill wanting to know the background of the 'deal' between Abu Dhabi and Dubai. Frankly, as someone who has lived here for three decades and followed all this carefully, I believe that the good of the country has been restored. Yes Dubai needs now to do a proper public relations exercise, not those glitzy statements of the past, and get some serious repair work underway. While the debt has been paid today, the damage still needs to be repaired and this is where the hard work must go.

While the credibility of UAE has been restored, there will be a number of doubters out there, and these will need to be talked to, engaged in discussions and a manner of governance brought back to the forefront that will bring confidence and support for all that is being done from hereon. I do believe that all parties who care for this country, both UAE Nationals and seasoned expatriates should now speak out and talk of measures that will be needed to restore confidence in the system. Today an important brick has been laid, more work has to be done from here on.

The Night of the Rating Agencies

2009-12-11T01:42:00.000-08:00

The rating agencies have in rapid succession changed their position of Dubai and UAE entities, almost like in famous night of the generals from World War II, where former darlings fell from grace.. Suddenly the very story they were selling so well a year ago is being shot down by them in their supposed zest for 'caution'. In what clearly seems a case of jittery nerves Moody's has down graded three UAE based banks citing the over all financial situation over the Dubai World debt to be the reason for caution. Interestingly they say this when on November 29th, 2009, yes just about 10 days back, they said that UAE Banks rating were on review and then do not explain the reasons for the downgrade other than some prosaic general statements. I know a Moody's spokesperson will say yes the result of this review is the downgrade yesterday of EmiratesNBD, Dubai Islamic Bank and Mashraq Bank.

To us who are familiar with rating processes one has to see what happened since the rating review was announced and the actual rating was downgraded. Ratings are not the whims of financial analysts, as indeed Moody's, Fitch and S&P are finding out being sued recently by CALPERS, one the largest public sector pension funds in the US. I would suggest readers see http://zerohedge.blogspot.com/2009/07/calpers-lawsuit-against-rating-agencies.html where transcripts of the actually filed complaint appear.

Frankly since the 'intention to ask' for a Standstill on Dubai World debt a number of positive things have happened and have been over looked by our friends at rating agencies and in sections of the financial press.

Before I go further let me be clear I am not suggesting that there are no issues with the $26 billion debt of Dubai World or there should not be questions asked that need answering on a number of other financial commitments in UAE. This is indeed a normal and healthy process, provided all parties engage in constructive discussions on these matters.

Here is how is see why the panic is not being seen in balance.

1. Dubai Government did not ASK for a 'standstill' it said it was its intention to discuss this with Dubai World bondholders and debt providers. Till today NO formal written request has been made asking for this 'standstill'.
2. Governments and companies all over the world use the media to convey to its bondholders such intentions for discussion especially as there are hundreds of bondholders, all the more so in a traded market. The wording of Dubai's press disclosure may not have been politically or financially soothing in the choice of words, but it has been a modus operandi for bond issuers to use the media to engage in a dialogue.
3. The recent panic two days back about DEWA bonds suddenly being due for payment due to a Moody's downgrade was resolved in 24 hours with the bankers holding the bonds, which mature in 2036, agreeing to continue with the terms of the bond as issued indicates that there are banks who are prudent enough to understand that rating agencies cannot be the ultimate arbitrators of investment decisions.
4. I find it appalling that the DEWA news of resolving the issue has not received the same front page focus in the financial press, perhaps because it does erode the sense of hysteria that has been generated. I have always asked my friends in the media to be fair and balanced.
5. The UAE Central Bank at the beginning of the crisis made it clear that it not only guarantees the deposits of the banks but also will stand by the financial system. It also arranged a special tap facility at 50 basis points over the interbank rate for all banks, domestic and foreign branches, in the UAE for any liquidity support. Perhaps my friends at the Central Bank should send a copy of this announcement to the Moody and S&P offices.
6. EmiratesNBD being downgraded is perhaps the biggest surprise to me. Its Tier one capital ratio on risk a healthy 12.1% or more. In addition its Tier 2 capital ratio is a very robust 19%. The banks balance sheet as at Sept 2009 shows its strength as a $ 80 billion bank with substantial liquidity and prudent lending policies. Dubai Islamic Bank was downgraded a punishing two notches when there is no clear reason for such a drastic move other than the analysts perception that things were still bad, ignoring that a substantial part of the problem is being addressed.
7. Putting major entities in UAE, including Abu Dhabi, on a downgrade review clearly shows how little these rating agencies know of the region.

I am not disputing an agency's right to review or downgrade, but please give me something sensible and substantial to chew on rather than the flippant words of a young man too over worked or over partied in Dubai's social scene. It was good to see my friends in Abu Dhabi not to be too perturbed by the likes of Moody's ratings, I bet many smiled and said 'business as usual'.

I have a simple question to ask? What happens to these rating agencies when the bond is paid off? Will they have the guts to say they got it wrong? Or will they then say well there are long term issues?

Moody's Cheap Shot.

2009-12-09T18:45:00.000-08:00

During my banking days I often met with rating agencies and always found them to be a rather pompous lot who 'researched' alot and often were judgmental to the point of sounding like pontificating pundits. They performed an important task for the financial markets and while generally did a decent job, but once in a while they messed up in royal style. Moody's downgrade of Dubai Electricity and Water Authority (DEWA) is based on Dubai government's "recent decision to explicitly segregate its direct obligations from those of its GRIs, following which a decision was subsequently made to pursue a debt restructuring for Dubai World'.

Moody's conveniently sets aside Dubai's assertion that it was never a guarantor of the liabilities of Dubai World, this was stated and known to all Sukuk holders, while Dubai government does seem to suggest that as a shareholder it will support the restructuring of Dubai World. Admittedly, as I have said before, the public handling of this matter was far from elegant, Moody's downgrading of DEWA and then going over the top and downgrading companies lilke Mubadala, TAQA, and other GRI's of Abu Dhabi Government is perhaps clearly evidence of their lack of understanding the risks in this market. In addition the biggest surprise of all is the assertion that Etisalat, the Federally owned largest telecommunications operator, is also slated for a downgrade review.

Moody's baseline credit support for GRI's is based on whether the governments who have substantial interest in the GRI will lend it the support if it is needed. Thus these down grades imply that Moody's feels that Abu Dhabi Government may not be able to or willing to support the likes of TAQA, Mubadala, Etisalat and others. This truthfully suggests that somebody at Moody's has not done their homework, Abu Dhabi has the financial means, liquidity and will to support any of the entities that have been named in the review for downgrade of Moody's. DEWA is a large utility company and Moody's downgrade triggers a payment of $872 million and not $ 2 billion as is being reported in some sections of the financial press. It must be stressed that the particular sukuk in question was not guaranteed by Dubai government and was against the billings inflow of DEWA.

Moody's is not being entirely fair in its massive across the downgrades of all the entities it named in its recent press release. Ofcourse, one is prone to wonder what their motives were in a situation where such reviews while acceptable for say Dubai World or entities directly effected by the debt resturcturing attempt, certainly do not warrant the same of the other entities named. This does remind one of 1997 fiasco when Moody's downgraded Hanover Re (one of Europe's largest re insurers). It transpired that Moody's has issued an unsolicited rating on Hanover Re and then asked them to formally apply for a rating, which Hanover Re did not accede to. When Moody's demanded payment for the unsolicited rating and Hanover Re refused, Moody's downgraded the company causing $175 million losses to the company in the stock price. In 2005 Moody's was subpoenaed by a court in the US and only in July 2008 it sheepishly admitted that some of this officials, who they conveniently called 'independent financial advisers' had engaged in unethical practices and that it had corrected the problems for the future.

The 'issuer-pay' model for fees of Moody's is highly questionable as it asks the issuer of securities to pay for the rating that it issues and is a subject matter still under serious review by regulators. It also gives Moody's the power to not only negotiate high fees but also hold companies whose paper it rates to ransom, as was indeed was the case of Hanover Re. The Securities and Exchange Commission in the US in July 2008 issued a scathing report questioning the practices of rating agencies and pointed out Moody's in particular. When nine employees openly questioned Moody's own ethical practices in 2007 they were 'downsized' from the company and Moody refused to comment on the 'internal matter.'

I am not suggesting any conspiracy theory but rather the lack of proper analysis, or depth of knowledge on this matter.

My simple consideration now is that that these ratings that have been put on review for downgrade, i.e. Etisalat, Mubadala, TAQA and many others in the UAE, clearly do not deserve such a harsh treatment. So I wonder why Moody's would take such an nonsensical and rash step when a person familiar with UAE, and especially Abu Dhabi could easily explain that for say Abu Dhabi alone the daily revenue of oil alone is over $140 million per day, then add the investment income, and income from services, and the list goes on. I am sorry to say but the boys at Moody's you got this one wrong and it would be wise to wipe the egg of your face and get your act right. But then I better be careful they might downgrade my sukuk's, glad no one issued one in my name.

dubai and the press

2009-12-08T17:58:00.001-08:00

Currently the financial press is littered with stories about Dubai and its current woes. In the plethora of articles from Hong Kong, to India, and the West, soothsayers are predicting the end of Dubai's glory days. Indeed the botched public relations attempt by Dubai was not only lacking elegance but also spat into the face of the financial community almost demanding a 'standstill'. Yet we live in a sad world where in moments such as these analysis that is objective are drowned in the moment of sensationalism. I am not suggesting that the urgent $26 billion debt restructuring of Dubai's world is a mirage, but I do feel that understanding defaults and quasi government debt is a little more complex then just being hyped up about it all.

But lets see the context. It is not as if Dubai is the only economy that is having to respell the word debt in one hundred different ways. Companies, public sector enterprises and indeed governments all restructure debt, sometimes by issuing new debt at other times by negotiating new terms on existing debt. So why be so surprised that Dubai has asked for some concessions and understanding? Yes admittedly it has done it with a blend of arrogance and naivety but lets move on from that and concentrate on the issues at hand. Are debt holders of Dubai World so sure that enforcement of claims will give them a better reward then cajoling the shareholder of Dubai World, which is the government itself, to put some meaning into the word 'support'.

There will be some pain through this process, and indeed for debt holders they too should know that the document they signed for the debt nowhere uses the name of the Dubai government as a guarantor, so now suggesting that there were implied guarantees is wishful thinking. It is another matter that Dubai World can ill afford to 'default' on the debt as the repercussions for Dubai and the UAE, if not the region, will be enormous. Analogies with meltdowns in the past, and references to the 'last days of Rome' are all sensationalist penmanship, and do nothing to provide merit to the discussion in hand. I have always argued that Dubai needs to create some medium term debt to replace the short term nature of its borrowings and this mismatch needs to be adjusted at the earliest.

As Dubai will tone down its 'Las Vegas on Viagra' sentiment and scale back some of its ambitious plans, there will also need to be understanding within the financial community that strangling the chicken does not always mean every one will get a meal as the wolves that tear the chicken sometimes leave nothing for anyone including themselves. The state of the financial press is such that is not even willing to see the broader picture. Dubai is a part of the UAE, and beyond the Federal Reserves held by the Central Bank, there is a huge cache of funds with Abu Dhabi entities who, as I calculate need only to give 100 days if their revenue to pay off all of Dubai's debt! Yes it is not forthcoming like a spigot turned on, because quite frankly it would be too rewarding for bankers who now claim they didn't know what and who they were lending too. If push came to shove, irrespective of the supposed political intrigue, UAE can and will act as one nation.

Some articles have claimed that there is not hope as the total public sector debt of Dubai is equivalent to its GDP. I conceded this was the case as of today indeed, but then the total debt of the US government is 90.4% of its current GDP! Why is this financial press so paranoid about the failure of the US system? In the 30 years I have been here not one bank has ever gone insolvent, and i mean a bank incorporated within the UAE. Yes I have long argued that some projects planned and being executed within Dubai would never really have a decent return on investment and some projects were about ten years before their time. But we must not forget that ten years back when a six lane highway being built between Abu Dhabi and Dubai many thought it was way over the needs of the time. Even today in this recession we see its not really an empty highway.

My point is simple, yes Dubai may not have held up to its much celebrated PR machine status, but then while these problems may well be real, there is a need for balance. Dubai government must bring to the forefront its own faces, not those of expatriates and hired guns to deal with the issues. It must also sincerely and truthfully explain what went wrong and seek substantive discussions about the way forward. The press for its part should remember that sensational stories have an expiry date which is usually one day. Look ahead, educate, explain and suggest the way forward.

Can Dubai survive the Debt crunch?

2009-12-05T21:18:00.001-08:00

Dubai's dream of progress and prosperity may well have been dented but its not a failed dream. In the context of the world economic crisis the crisis that Dubai faces is not as monumental as is being suggested. Dubai Worlds obligations are listed at $60 billion but these are obligations to contractors, suppliers, and indeed bond holders and debt providers. A number of contractors and consultants have only recently indicated that they would be willing to take a haircut on their receivables, some suggesting as high as a 35% reduction in exchange for a payment plan. After all, the logic goes, that these contractors benefited with robust profits from the same clients in the good days and indeed are more accommodating as the times get rough.

Over the weekend Bond holders of the $4 billion Sukuk were adamant that given they have 25% of the Sukuk holders on their side they can negotiate tough to force a payment of the bonds. Failure to have this 25% might well mean that Sukuk will be restructured, and even if an enforcement is done there are complex legal issues concerning Sukuk's which, frankly, have not been tested in a court of law before. Interestingly, if Dubai government, as the shareholder of Dubai World, did want to pay this Sukuk off, then even it runs the risk of being accused of causing losses to Sukuk holders who sold the bonds after the initial announcement of the standstill, since the standstill announcement came from Dubai government and not Dubai World itself.

Paying this Sukuk is possible and if the restructuring or extension to May 2010 is agreed by more than 75% of the holders then the current issues will subside to some extent. If not then I do feel that the resources to pay this $4 billion bond will happen even though may leave many of us wondering why the whole drama happened in the first place. I suspect that when the Dubai Government announced the 'standstill' it was felt that the market would take this news positively as the government was stepping in. This clearly backfired and the market took the news they didn't like most and made a meal of it all. If I was a bond holder and a principal shareholder being the government was initiating a new plan for repayment I would rather go with it then to rely on the assets of this particular Sukuk (in this case Nakheel's land bank which is highly deflated at the moment). But lawyers and bankers do not always make the best decisions in such moments.

However, we have to look beyond to how Dubai can survive this debt crunch.

The issue that needs to be addressed for Dubai is essentially $26 billion of debt for Dubai World, which is like a fly in the ointment at the moment. In essence the Dubai story is not over simply because a recovery in the region will bring focus back to the essential element that everyone asks. Where would you like to be based to do business in the Middle East? The answer is always going to be Dubai because of the investment it has made in the infrastructure, connectivity with the world, its airports and ports and most of all the UAE as a whole is a pretty safe place to be in. Yes its property market is dented, some believe taking as much as three years to repair itself, but its position as a financial hub, a tourist stop over and a traditional role as a commercial hub are not effected in any severe sense.

The most important thing Dubai must do is initiate a seven to ten year bond program, some of it supported by the government itself, and thus plug the gap between short term obligations and long term cash flows. To do this their handling of the current Sukuk crisis is important and will set the stage for restoring the dented confidence. Yes support can come from the Federal Government, as it has recently, or the Abu Dhabi controlled entities (as the recent $5 billion placement shows) and once goodwill is restored the ability to restructure may not be all that hard.

Interestingly, my banker friends tell me, prior to the November 25th standstill announcement discussions with bankers on an over all approach were going very well. Infact some even felt that an over all restructuring of the debt was a foregone conclusion. Indeed a bad public relations gambit backfired it all and focus on a smaller piece of the debt became paramount. Now the task ahead is to get back to the same level of confidence that was there three weeks back and build from there.

In the realm of a three year period the over all position of Dubai will be considerably better, even though we only look at the GDP as an indicator we forget that a substantial part of their GRE holdings are overseas and these can, in a global turn around, be crown jewels can can be sold off for a sizable profit. I believe the return to the enabling economy model where commerce, tourism and services will become the rock bed of the recovery that is highly possible.

The Dubai World Debt: A perspective from Dubai.

2009-12-01T23:38:00.000-08:00

In moments of crisis, especially financial ones, bankers tend to seek the shortest distance to the source they think can pay them off best, and ofcourse, with the least of hassle. While I have offered my perspective on the way the Dubai World matter was handled, or mishandled, I may have come across as rather 'soft' of the bond holders and the debt holders. While some may suggest that Dubai Worlds handling of this debt saga is more akin to the way someone might be handling their credit card debts but shuffling around payments to keep every card issuer happy, they have, till yesterday, actually failed more on public relations side of the story.

For bankers, on the other hand, they have found an unlikely ally in the media who have questioned why the Dubai Government or indeed Abu Dhabi do not step in. Both miss a crucial point. If support, financial or in the shape of explicit guarantees, comes from these sources then it should be the choice of Dubai government rather than something the media or the bankers cajole them into. Yes Dubai World could be seen as a public sector company of the Government of Dubai, but this merely makes it a stakeholder, and while generally governments do prop up such companies in times of stress, this propping up is not necessarily done through guarantees, but more through restructuring and financial support as a stakeholder rather than as guarantor. Indeed banks are seeking more the goodwill of the government, but rather than asking them to help out it is being implied that they must do so.

What Dubai Government is saying is really that the distinction has to be first made of the capacity in which this help is sought. In doing so it is distancing the call of the media for some sort of government led financial support in the form of a pay up, with actually saying that the government as a stakeholder is helping in the restructuring of the companies in question. This has to be, in my opinion, a first and important step to move forward with the solution of the problems for the long term. Only after these steps are exhausted then Dubai must make an independent judgment on how to deal with the systemic risk that an non-resolution of the problem effects Dubai's other companies and the economy.

Indeed while at one end of the spectrum some may argue that the credibility of Dubai has been hurt to the point where bankers may not be so forthcoming to new commitments, the fact remains it glosses over the inadequacies of the bankers own assessment of risks during the hey days. While Dubai cannot simply argue 'why did you lend so much to one company' it still does bring home the truth that bankers assumed that lending to some entities in Dubai as akin to lending to the government. Dubai government has not told the bankers you are on your own now, but have asked them, without being too clear, that Dubai World will restructure itself and to do this it will engage with all parties concerned to come up with a plan. I believe the statement of disclosure of the debt, and the problem segment of the debt, was a huge first step in the right direction. It is this that we have to focus upon rather than the sensational elements of this story.

It is sad, that unlike the US where there are 30 year treasury bonds issued by the government, there are no long term debt instruments available in the market to match long term funding needs with the demands of a long term development program. Eventually I believe that once the restructuring is considered and banks and bondholders have assessed the merits of the situation, Dubai should consider a longer term bond program. However, how they handle the Dubai World issues will be instrumental in the way forward for this strategy to work.

The Dubai World saga.

2009-11-30T20:19:00.000-08:00

The story of Dubai World and its debt is turning into a soap opera that it really does not deserve to be. Some simple facts are being ignored from all sides, and suggests that we are all either naive or simply hoping that somehow the realities of a debt burdened company will simply change by 'talking' our way out of it. There are some essential media mistakes that indeed Dubai government officials have made and made it all the more difficult to handle then it really was.

The way I see it is that bond holders and lenders always knew that they are lending to a government owned entity without the explicit guarantee of the Government of Dubai. Whether their argument that being a shareholder of Dubai World they didn't need the guarantee to be explicit is really worthy of being tested in a court of law is still to be seen. As a former banker I am clear in that being the sole shareholder of the company doesn't mean you have guaranteed all the debts of the company, even though it may place moral responsibilities on you, strictly from a legal point of view such a guarantee is never explicit unless stated in the debt documents. This the bankers and the bond holders knew when they lent the money, even though they may argue their 'assumption' was that being a Government Related Entity (GRE) the risks of lending were less.

On the flip side of the coin, government officials who are stating that such lending to Dubai World is 'not guaranteed' may well be stating the legal position very accurately, however, they are missing a crucial part of how banks and lenders will see this statement. They will assume therefore that statements in the past three months of support for Dubai World and other GRE's were not meant in the spirit they were and with the current statement of disengaging the debt from being a government obligation, while legally correct, actually limits Dubai's ability to raise debt in the future.

This is where the much admired PR machine of Dubai has totally failed. In the first place what was the need for the 'standstill' statement on November 25th? They should have first had discussions with the bond holders and agreed a 'rollover' or 'extension' and then AFTER an agreement on the matter or otherwise made a statement. Secondly, when all the uproar is going on, why should a government official go on TV and state the obvious 'the government has not guaranteed the debts of Dubai World'. This is known to the bond holders, why say it again?

I am asked often about what I would do in this situation. Well first I am not fully aware of the all the financial matters within Dubai World so I am venturing a guess of a strategy that I believe will work, and perhaps will be excused not knowing the exact asset details that Dubai World. But in essence this is what I would do.

1. Dubai Government to state that yes it is the shareholder of Dubai World and given it is taking a more direct oversight of the current situation it is going to issue a White Paper on the status of Dubai World. It should then commission this study.

2. The Government along with Dubai World management should issue a statement of its total assets and assume they are, as some reports suggested in the past US$75 billion, then state how much of that is impaired with the current global financial situation.

3. Given that a major problem has been the mismatch of funding to the projects it should then offer a new program of debt which would be in chunks of three years, five years and seven years. The longer term debt could be supported by the Government of Dubai, or specific assets, or a combination of both. All short term debt holders then be convinced through a proper dialogue to participate in the longer term restructured debt, and where possible seek support from regional long term fund providers, be they from Abu Dhabi, or Federal Bodies, or even GCC banks.

4. Consider a selective program, stated now as an intent, to take some of the parts of Dubai World public through IPO's and in some cases with the recovery of the world economic situation, to even consider selling them off to repay debt.

5. Create a single platform for communication on the debt issue and related matters to avoid statements from all over the place.

While this all may sound simplistic, but I believe these steps will be better than what is the situation today. Lenders will be happier to have a true dialogue with the stakeholders rather than talking through the press on these matters. I do believe that as confidence is restored through these steps the over all picture will improve exponentially and restore much need confidence back to the system.

Dubai World: A spin that is hard to follow.

2009-11-29T18:05:00.000-08:00

Dubai's debt woes have captured the world news attention, with articles written by people who are familiar with the region and the issues, and some obscure journalists who would be hard pressed to find Dubai on the world map. My three decades of experience living in UAE, and almost all of it in the financial sector, as a participant and observer, has taught me that in many cases the depth of the problems may well never be known, but in equal measure the efforts going into the solutions are always clouded in a measure of secrecy.

Yet globalization and the presence of international media has made it more difficult to not tell the extent of the problems. Some weeks ago when it was revealed that Dubai World alone had $60 billion of debts, out of possible $82 billion of total Dubai debt, I did balk at the number for two reasons. In the first place how could a company with the size of DP World have acquired such a huge debt, totally disproportionate to the overall debt of Dubai and more importantly, who were the silly bankers who had not only opened the tap of finance to that level but perhaps opened the floodgates to lending money to one entity?

It would seem that someone advising the Dubai government might well have thought that since the majority of the debt is in one entity lets isolate it from the other good parts of Dubai and hence proposed a 'standstill'. Interestingly the standstill concerns mainly the $4 billion of an Islamic bond maturing on the December 14th 2009. From what I gather is that perhaps only 15% of this bond is held by hedge funds from Europe and some from the US, or perhaps tax havens, leaving the chunk of the bond to be held by local banks, investment companies and private investors from the region. While preferential treatments of bond holders are not possible, my guess is that a two tranche payment of this bond will be a solution that might be proposed.

Alternatively, a new short term issue will be put together in the next week allowing local and regional banks to fund it, and use those funds to retire the old bond thus allowing perhaps 60% of the old lenders to roll into the new structure and thus saving face. This new bond/lending may well carry the express backing of the Government of Dubai, which unlike the chunk of the $60 billion is really not guaranteed by the Government.

Interestingly Abu Dhabi had, over the weekend, said it was there to help and support Dubai and will 'pick and choose' its support, thereby indicating that there is a dialogue of substance going on between the two neighbors. It was also a neat way of telling bankers that their follies of the past cannot be bailed out at will by simply creating crisis. We have to also remember that Abu Dhabi has always been very sensitive to the issue of defaults and has, more than Dubai, seen things in a Federal light rather than just about their own Emirate. I would therefore say that through the Central Bank and Abu Dhabi based banks there will be support coming in, even of in bits and pieces. The difficultly will be to know exactly what amounts and when they will be available.

As for Dubai World, it has perhaps learned a harsh lesson in public relations. One government official told me privately that it was hoped the announcement that actually caused all the nervousness would have been seen positively that now the Government of Dubai was going to reorganize DP World and all that was being asked for was time to do this. While that may well have been the intent of the move, the only thing that stuck in the minds of the banks and the financial press is that an obligation was 'not going to be paid' on time.

Dubai World, while a combination of real estate, capital markets and venture capital assets, has borne the brunt of the real estate meltdown, still has assets that could, in a recovery, be worth a substantial amount of money. Its largest and most publicized acquisition was of P&O for about $7 billion, and its port management operations are in the top three in the world. The impairment of the real estate portfolio and the lack of cash flow from it may well be where the bulk of the problems lie. However, with revenues of over $3 billion and a net profit of $ 800 million, bankers will have to see how this revenue can pay off the huge debts in the future. Yet it would seem that a selective sell off, rather than a fire sale, can bring in the cash to deal with a major chunk of the obligations.

However, the problem has been that most of the debt has been short term and it has been supporting long term assets and it is this mismatch that has caught DP World off balance, especially as the financial crisis of last year dried up not only liquidity but appetite of bankers to lend. Indeed a stable real estate market will help matters but so too will the scaling back of some of the real estate projects this company wanted to do. It will need to go back to the basics of its logistic and port management business, at which the company has proved itself to be very good. As for the huge pile of debt, this will need to be restructured and not by announcing standstills but by engaging in hard negotiations with the bond holders and debt holders for a restructuring that is realistic and well backed into the realm of a five year plus debt.

As a PR exercise DP World or the right people in the government should come out and admit that the way the matter was handled last week was not elegant. At the same time the current discussions in resolving this matter of the standstill should be revealed more openly and a degree of engagement and transparency brought to the table. I am personally confident that a solution is on hand, and it may well be a combination of Federal, Abu Dhabi and Dubai initiatives backed by the banks who have been at the forefront of resolving this matter. I also suspect that the financial markets also realize that the international impact of this embarrassing episode do not warrant the hype that has been created. Importantly the next two days are important we then the country goes into the National Day holidays, perhaps an opportune time for Abu Dhabi to emphasize that the country's unity and financial strength is more important and perhaps the act of this might well be a solution to the current issue.

Dubai's Debt Surprise

2009-11-27T13:08:00.000-08:00

Almost thirty years back if someone had told me that a financial event in the Emirate of Dubai would shock world markets I would have smiled, sipped my tea and wondered what the person making such a statement was smoking. Three decades on, and with highways, a Metro, the tallest buildings in the world and an assortment of what were commonly called Dubai's crown jewels, Dubai had become, till the mid of last year, the choice economy to comment upon. Yet suddenly, with perhaps the worst timing possible, a terse announcement of a major Dubai conglomerate asking the banks for a 'standstill' on its debt, Dubai became the center piece of not only a financial crisis around the world but also the whipping horse for the financial press. The fact that the Dubai Debt Crisis has become a talking point is not a surprise, after all the US governments debt is also worrying at times through our civilizations financial history, however the way all this has been revealed has been more of a shock. The following reasons for this stand out.

1. Why publicly ask for a 'standstill', when the English financial dictionary has more subtle words like 'roll over', 'extension' and 'renegotiate' that are available to soften the impact of what is being asked for?
2. Why time the decision a day before the local markets will be closed for an extended holiday and the international markets going into Thanks Giving?
3. Why not explain the connection between a tacit Government announcement a month back that the debt would be met, and also the arrangement $5 billion of fresh debt the very day an old debt is being placed on 'standstill'?

Indeed the questions are many and the answers have been few. The fact that the episode, if I may call it that, has not been handled elegantly is an understatement. Yet analysts will be wondering where do we go to from this juncture? I believe a few explanations may shed light on this bizarre handling of events, given that a debt of almost similar size maturing on November 30, 2009 was successfully rolled over, why a debt maturing two weeks later has been so badly managed?

A. I believe that proper advice from seasoned bankers was not taken and had it been so then the possibility of a debt roll over was more easily possible than such a blunder. If the intention was to financially protect the assets of DP World then when the Sukuk was trading at around 65 it could have been a better time (about eight months back) to simply ask for a 'standstill' or a retirement of the debt and save over 55% of the $4.5 billion bond value (it was set to mature at 115). So I do not believe the intention was to 'default' but more likely to get some breathing room.

B. If the intent is to get breathing room then the fact that the committee managing Dubai's financial matters has been recently restructured (only a week back), they could have gone to the banks and bond holders and suggested that as the new committee gets a grip of things time is needed so a breather is requested and an extension is necessary.

C. It would well be that a distinction is being drawn between direct Dubai Government debt and the debt of Dubai owned corporations who do not have explicit Dubai Government debt insurance or guarantees. While this is a dangerous course to take in the current environment it does nevertheless stress that the point has been made and might well lead to the Government then 'stepping in' to retire the debt and in effect negotiate with the banks that a retirement should be followed by fresh debt against the full faith of the government itself. This is a tricky path given that the very faith that backed this lending has been dented by the way the 'standstill' was handled.

D. The fact that another US$ 5 billion is on tap from the second tranche of the US$10 billion bond offering (of which the first $5 billion was placed the same day of this dreadful announcement) indicates that there is a possibility that this will be tapped immediately to cover the DP World bond needs by December 14, 2009.

All these routes all may well put some badly needed band aid on the wounds to the reputation of Dubai, but for the long run it will be clear that Dubai will need better advice of how to handle already frayed nerves of bankers and bond holders. Will there be enough goodwill left on the table for all parties to carry the trust forward is a matter that will be tested in the coming weeks and months. While the debt seems large and perhaps unmanageable, the truth is that Dubai had the goodwill to have steered through these waters. Now bankers feel that goodwill was cast aside in large measure not by what was needed to be done, but how it was done.

Yet I would be optimistic for this being resolved simply because at some level parties within the UAE will stop seeing this as Dubai's embarrassment and realize its an embarrassment for the UAE as a whole. It is at this level that the matter can best be resolved and I suspect this will be the way this will be solved.

The Recession: A year on.

2009-09-20T00:09:00.000-07:00

A year back, Lehman Brothers, the icon of Wall Street and all that it stood for, came crumbling down, in almost prophetic fashion ushered in the worst economic recession that the world has ever seen. The event was not the crash of Wall Streets premier bank, but it was perhaps the proverbial straw that broke the camels back. Economies around the world felt the economic tsunami that ensued, wave after tidal wave of what was bad news. The GGC economies, who had on the back of their liquidity, weathered previous recessions of global proportions without more than a sneeze, suddenly realized the interlinking of economies was perhaps more closely knotted than one would have imagined in the past.

The issue is what does it feel for a recession to be one year old? Well in large measure some people would say 'miserable' while others, who are prone to seeing the forest rather than count the trees, would say well 'value was created'. Indeed, its all about perspectives and its not like the world came to a standstill, even though belts were tightened and a difference emerged between those who hope it will all go away, and those who did something about it. China and India shrugged off the recession with remarkable ease, Germany and France has shown more grit than was expected. The United States has been a bit of a struggle but the stock markets are off their bottom levels, the impending collapse of some banks has been averted and in a sense there is evidence that things do have the thinest of hopes for a better recovery.

As bizarre as this may sound my guess is that the slide in the market will be arrested now and we may begin to see signs of a gradual recovery. It is more likely that this recovery will be slow with some stops and starts. In the context of the GGC and specifically the UAE I feel a little more optimistic given that liquidity levels have improved and the banks are beginning to see they have a more positive role to play and this will translate into a better economic performance. The recovery will not be euphoric but more cautious and this will be good for the overall health of the economy.

Rachel Alexandra: A filly that was born to triumph.

2009-09-07T20:32:00.000-07:00

I am usually writing about social, political and economic issues, so why would a 3 year old filly called Rachel Alexandra capture my attention? Well for one, I have always loved horses and owning 56 of our own I guess makes the point, but more importantly I have loved those stories of triumph against impossible odds, and this Rachel Alexandra brings to us.
I have watched every single race this filly has ran, You Tube will testify to that obsession, and when she took on the big boys at Saratoga for the Woodward Stakes, I stayed up till past 2 AM to see her run. Two days later I see the video clips and the enormity of her victory dawns on me.

Calvin Boral is a great jockey, one who understands her well, but in the Woodward Stakes, perhaps seeking the safety of the rails he moved Rachel Alexandra towards them early in the race. Half way through it was apparent that the ruse was not working, as Rachel dug deep into mud and slush and it seemed that she would finally be beaten. Then 400 meters from the end as the two other bigger and stronger colts closed on her, Rachel found not only a second or third breath of air, she found the deep courage within her and suddenly you could see her hindquarters found that extra gear of power and stretched as she was in those closing moments, Rachel Alexandra brought a new meaning to the word determination.

To me it was Rachel who wanted to win the race more than Calvin Boral, her jockey, she wanted that race and she won it, irrespective of the quicksand of mud and slush she had to trample through. I believe if she has been on the outside of the track her victory would not have been a head only, it may well have been a few lengths.

I have photographed some amazing horses, Escape Ibn Navaronne (Arabian World Champion Stallion) Bess Faizah (Arabian World Champion Mare) Pysche’s Ambergem, and Marraaj, and to me getting the beauty and spirit of the horse matters a lot. Estishama, who we fondly call Esti, has been a pleasure to capture in the desert settings, trotting off with another mare.

Now I would love to capture the essence of this horse, Rachel Alexandra, not in her role as a racehorse, but in her role as a testimony to her will, her spirit and determination. This horse speaks to us, this is not only a journey of victories, as much as they matter to some, it is a testimony to the character of a horse that just wants to be the best and not in a race machine style but with the sensitivity and heart that I would love to capture in a photo.

Sizzling Summer Ending

2009-08-24T03:34:00.000-07:00

Though from a weather perspective the summer in Dubai was not as severe as previous year, even though mid day temperatures were scorching, evenings were bearable and even the odd day was pleasant. On social scene the question most asked was about the economic situation and when did one expect the down turn to reverse, even though it was reported that events were not as frequent on the social calender was a year back, there was nevertheless, amongst us long time residents a sense of relief. Relief that the glitzy and plastic side of Dubai has suffered from the economic downturn and now those who love and appreciate the city for could actually enjoy it.

Dubai and the region has been in for some bad press for while, and this is obviously the media loves to garnish its readership with, and fine with that. I am however, also of the opinion that some of the noise has come from people who themselves were the beneficiaries of boom and now having either extended themselves out too much, or not finding enough honey in the pot are the first to condemn all that went wrong with the place. Yet let us seek some balance in the argument and we will find that economic ups and downs are the feature of any economy, but never before have I seen so many rats abandon a ship so fast, assuming it was sinking. Well the way I personally see it this was a much needed clean up of the economic and social scene.

I have spent the past week speaking to bankers, tour operators, hoteliers and people who have a good lay of the land. Here is my impression. No doubt to expect the market to go back to dizzy heights of 2007 is wishful thinking if it was expected to happen in a few months. However, there is a general consensus, especially amongst property people, and I am talking of those who are truly in the know, that the bottom seems to have been established on property prices. Bankers on the other hand are seeing a welcome return of liquidity and some banks have even opened their fists enough to show that selective funding is going on. Tour operators, and especially the cruise ship boys, have indicated that their order book for the winter is filling up and there is an inherent demand that is coming back to the market.

Hoteliers are having a more torrid time as business travel seems to have shrunk and with a world wide recession the 'business travel' dollar amount has come down significantly on a global basis. While occupancies may be a struggle to achieve, I do suspect hotels are being a bit stubborn about their rates causing some of their own grief. As we know the hotel business is about putting heads on the pillows in the room and at some stage turn over versus the average room rate needs to be balanced out.

My gut reaction is that the worst seems over, and as confidence returns, the Dubai Metro soon carries its first paying passenger and indeed people come to realize the that the fundamentals for the long term are valid a better 2010 would seem on the horizon. The charm of Dubai to the sub continent and the Arab world has not diminished and on the country level all that Abu Dhabi is doing to show its capability to weather the storm abodes well for Dubai and the country as a whole. I do predict that as suddenly as someone turned of the light on exuberance it will be almost as sudden when suddenly everything will light up and I feel a scramble to buy value in a market where not long ago people were exuberantly crazy enough to pay ridiculously high price.

The summer has sizzled past us, and as the winter approaches there is more good news on the horizon than bad news. The social scene is more likely to find a mature balance and everyone will have realized that as difficult this sounds there is still alot of fun things to do.

Dubai: Deflation path to Recovery

2009-08-18T18:34:00.000-07:00

Sitting on the inside, watching the economic crisis is not more a secluded exercise. This economic meltdown is a world wide episode, with ramifications that have not been quite fully understood, especially by the actors who are expected to bring about a change in this scene we stare at. As the global crisis has unfolded its own unique economic tsunami the effects of it have manifest itself in each country in a rather different way. While focus has remained on the United States in terms of the sheer size of its economy, large consumer economies like China and India has been better placed to absorb the tidal waves given that there is a basic level of consumer demand that does need fulfillment.

Dubai has received a great of attention from the world media, and understandably so; during the boom years it was the darling of the media world, and as it is learning, in the down days the same writers who showered accolades are the first ones to throw eggs. This does not mean that the entire negative press is not without foundation, but more like exaggerated to the point of sensationalist fear. For the record yes the recession has hit Dubai hard, and understandably so as it had the most grandiose of plans in the region. The debate rages over the size of its financial commitments and what it will do to revive the economy.

I would say three decades in the region, two of which were in banking, gives me more perspective than a reporter who perhaps would think of a story over a month at best. First of all Dubai has been what I have always called an 'enabling economy', whereby it has created the infrastructure for private sector to thrive. Though, understandably, over the past decade over zealous government officials donned the entrepreneurial hat and goaded the government to become in effect the biggest business conglomerate, having the disadvantage that it pushed the cautious private sector to the sidelines and yet having the advantage that government funding would ensure completion of the grand design. We must remember it was not the real estate sector that caused the problem it was a combination of financial issues within the banking sector and the effects of the global economy that started the downward spiral.

To explain this further one has to appreciate that in middle to late 2008 there was widespread speculation and debate that the UAE will delink the Dihram from the US dollar, a fixed rate that has been unchanged since 1970's. This speculation drove through most of the early part of 2008 substantial funds from Hedge Funds in Europe and elsewhere into the banking system in the UAE expecting a delinking will mean a stronger UAE Dihram. This did not happen and when in September or so last year the UAE Central Bank made its position public that there was no such delinking on the cards, billions of dollars playing this trade and sitting in the banks here too flight. Ofcourse in a sense the hedge funds had their own problems brewing with the sub prime crisis and a stock market that was not entirely comfortable.

The problem would not have been more than that it seems had some fundamental errors not taken place. So lets say $15 billion comes to the banks here, is laying in deposit waiting for the delinking, the delink does not happen the money leaves so no big deal. However, our clever bankers, and I was one of them a decade back, had lent a substantial part of these funds to domestic borrowers, so when the delink did not happen and the funds went back almost every bank was caught with their loan to deposit ratio (which is normally 80-85%) suddenly find they had more loans on their books then deposits to fund them. Well established banks with loads of liquidity were caught with a ration of close to 135% on loans to deposits. Given that international banks were stuck with their own problems even the inter bank market was struggling to fund the banks here.

The timing of all this was smack in the middle of the meltdown happening thus closing the door to the one thing that could have made this crisis less dramatic; the access to liquidity. If the banks had not been so exposed then in a nervous market more monetary moves to increase liquidity in the banking system would have given the buffer to soften the blow. This is what happened in India where huge amounts of liquidity were pumped into the banking system to make sure the consumer did not panic.

This does not mean the real estate crisis would not have happened. I am only arguing that it would not have been so serve and more importantly one has to then question was the rationale for the development model for Dubai wrong? I do not believe the model was wrong, but two things needed adjustment that just did not happen.

1. The size and scale of the development was not tuned into the sustainable demand levels.
2. The role of private sector should have been the bigger chunk of the development cake rather than end up making government owned companies the biggest competitor to the private sector.

I am often asked a question about how long this recession will last and how will Dubai come out of it?

In the first place the recession is a global event and while France, China, India and Germany have shown signs of weathering the storm better, the chances are that towards the fourth quarter of 2009 the financial elements needed for a recovery will be in better shape. This deflation we have seen globally, and in Dubai, was needed for two reasons, one to slow down an over heating economy, and secondly to bring some value back to the process of development. I believe that consumer confidence will stabilize towards the end of this year and net investments will begin to show an increase in the first quarter of next year. Yes this is totally contrary to what some leading bank researchers are saying that we have another 18 months of hardship, but trust me I know that crowd well, they are the same researchers who a year back were predicting some very exuberant predictions.

The way Dubai will come out of this is actually simpler than it looks. While the current funding of Government Bonds of $ 20 billion as a first step forward Dubai has a good collection of companies it can privatize, from airlines to hotels and property companies too. The question is the timing of such privatizations and whether this is the route to take. I believe the enabling element of Dubai's economy means in the region it is the best suited in terms of ease of business and infrastructure to be the place of first choice for regionally based companies. I believe a spending spree in Iraq on account of rebuilding the country will commence early next year, this backed up with a higher oil price will bring stability to the region and a demand led economy will emerge, but gradually. UAE and Dubai are best positioned to take advantage of the support role it will perform and this is where there base of the demand side of the equation will come to the economy.

This does not mean that the government of Dubai should not rethink their role in the economic model. I think they should go towards being more an enabler and privatize some of the business concerns, perhaps with the timing of the first offerings to be in the early part of next year. There should also be a revisit to some of the more grand projects and these should be put on the back burner and bring back the confidence that with some projects shelved the expect financial load will be substantially less. As I said to someone the other day "You can still plan to do all you wanted but just don't do them at the pace you were trying to.'

Iran Imploding?

2009-06-17T22:24:00.000-07:00

Iranian politics is as much about what the people in the street feel and express, as it is about the bizarre behind the scene politicking and the power play that makes Iran the strange enigma that it is. To simply view the election fraud as limited to what President Ahmadinejad manipulated misses out some key aspects of undercurrent of why such a massive election fraud was done in the first place. It simply could not have been the fear of a Reformist election victory since in 1997 and 2001 Reformists did come to power. The fact that Ayatollah Ali Khameni the Spiritual Leader intervened into the election process and clearly supported Ahmadinejad before the election and was quick to endorse the fraudulent results the day after the election might hold some of the clues as to whether a internal coup is under way in Iran.

Previously Khameni has accepted Reformist governments and in both terms of office of these governments he balanced the reformist impact by appointing ultra conservatives to the Judiciary and the Media ensuring that the reformist governments were reined in and not as effective as they would like to be. At the start of this election campaign a shift started to appear as the important elements of the clergy, especially from Qom were expressing statements that they would not support any of the candidates. For these very conservative clergy from Qom, who have supported every conservative candidate in the past elections, to say they will not support anyone was simply the politically correct way of saying they do not agree with Ahmadinejad's policies.

Keeping in the that the former President being the head of the Assembly of Experts, a power group from the parliament who advise the Guardian Council was supporting the Reformist Mousavi in the election and is known not to have a great relationship with Ali Khameni could well hold the reason why this election was allowed to be rigged and why the Grand Spiritual Leader is taking sides so openly.

Unlike his predecessor, Ayatollah Khomeni, Ali Khameni has ambitions of protecting his vast business and political interests within the country. He also wants to ensure that his son Mojtaba, has a role in the political future of Iran and it is strange that for the past year conservative media close to the clergy have been portraying Ali Khameni as 'Ali of the Age', almost giving him a special place in history and perhaps making a subtle reference to Imam Ali, the First Shia Imam who passed on the reins to his son Hassan. Whether or not Mojtaba has the standing or the support to take his fathers place is moot, but one thing is clear that Ali Khameni does wish to protect his business interests and a Reformist government with Rafsanjani heading the Experts Assembly and the clergy in Qom not happy with the way Ali Khameni has blindly endorsed the reign of Ahmadinejad all indicates that this current situation in Iran is as much a battle for the survival of Ahmadinejad as it is of Ayatollah Ali Khameni.

It is thus not surprising at in some of the street demonstrations there have been calls to also reform the Iranian system to ease power, which is absolute, from the Spiritual Leader back to the elected government. Had the Ali Khameni not taken sides the issue would have been easier to resolve by asking for an impartial inquiry and dependent on the results a re-election. Now, ofcourse, the lines are being be drawn harder by the day. The arrests and the nature of the reprisal by Ahmadinejad and his supports to the demonstrators and voices of disagreement shows that the hard liners are fully aware that the stakes are high. Mousavi supporters and his political machinery are being careful not to let the demonstrations spill over into violent clashes giving the State apparatus to impose curfews and a full scale crackdown.

The worlds response has been rather muted, calling it Iran's internal affair. This is a convenient side step if I may say, because events in other countries are not seen as 'internal affairs'. If the world does want to see the rule of the ballot box then Iran's current situation does call for the condemnation of the election fraud, and the end to the repressive measures being used against opponents of Ahmadinejad. There cannot be two ways about it and this is a matter of political and human ethics and not one of diplomatic niceties.

As far as the effect on the Middle East, it is clear that a 're-elected' Ahmadinejad will feel more vindicated, even if in his own eyes, about his past policies and may continue his policies of the past four years. There is a highly unlikely possibility that Ahmadinejad may try and become a reformed man and deal with the Middle East and the West differently to show his political acumen and in a way deflect attention from his crackdown on the reformists opposing him. His bet will be that the West accepts the dictates of political realities and if he can soften his position on some key issues he may find Washington and the West will be happier dealing with a devil they know, and who is trying ti change, rather than see further turmoil within Iran. I am afraid that with time this might well be the outcome of the situation as it seems the current impasse will not be resolved by a recasting of votes, unless ofcourse the powerful Guardian Council has a change of heart and signals that the clergy will not support Ahmadinejad. I would call this the Qom effect, where it has become clear that the Qom clergy, who unfortunately command more spiritual importance than political power, have abandoned Ahmadinejad.

Whether Ali Khanemi can come to realize the precarious situation the country is in with is partisan policies is another matter. Perhaps the pressure from the clergy itself may allow him to save face by leaving matters to the Guardian Council to decide and play more of the spiritual patriarch that he is supposed to be. This will be the only solution to the current problem, unless ofcourse the reformist tire of the demonstrations and the lack of progress and resign themselves to another four years of Ahmadinejad.

Winning the peace

2009-06-01T18:56:00.000-07:00

The Pakistan military has been scoring some much needed military victories against the Pakistan Taliban in the region of Swat. Indeed the ferocity of the Pakistan army has been boosted by discovering bodies of Pakistani soldiers with their throats slit bringing about an attitude to yield no quarter to the Taliban. In a sense this does mean that the Taliban and the Pakistan army have now started to carry grudges and there are reports of Taliban being meted out a bit of their own medicine in terms of the harshness with which they are being dealt.

However, the Pakistan military is being asked to reverse the tide of the Taliban given that the Taliban gained control not because of the military failure but due to the spineless of the current government in Islamabad. The tricky question is that winning ground from the Taliban is one thing but winning the peace is another. I feel there are two major threats to the current series of victories of the army.

Firstly, the Taliban may well be giving up strategic towns like Mingora and others in the Swat valley, but lets not forget some of these Taliban are fading into the country side in smaller bands and mingling with the population. While this is not that easy its never the less an army of zealots who can feed of the population without necessarily having the contraptions of a standing army.

Secondly, the Internally Displaced Persons, or IDP, as they are being labeled, are more restless than before as they seek to go back but to their destroyed homes and start to rebuild their lives. A failure of the Government and the international donors to Pakistan to deal with the pressing issues of these people will result in a back lash that the country can ill afford to witness at this stage.

The military is not equipped with the mindset to seek the quick rehabilitation of the IDP's and the government is woefully inexperienced to gather the resources to rebuild the infrastructure and the homes destroyed during the fighting. Historically the government machinery is not geared up for the quick response that the situation demands.

If long lasting goodwill is not created with the displaced people of the Swat valley then clearly the battle for the hearts and minds of the people will suffer an irreparable setback. The Taliban's tactics of revenge attacks in the cities of Peshawar and Lahore have not won them any friends in the country and the government should not consider this as enough reason to be winning the war against the Pakistan Taliban. On the contrary it is a matter of urgency that the Swat Valley towns should be rebuilt and essential services restored showing that defeating the Taliban is only the first step to building the confidence of the people in the government.

However, in terms of the Taliban roll back one has to not rejoice too much considering that the Taliban tactic is that after a major defeat they lie low and regroup, usually taking two to three years before they come back into the forefront. Thus to say a military victory will have rid the country of the Taliban menace would be too optimistic. The strategy has to be clear that while the Taliban burrow down over the next couple of years, the government and all other positive segments of society should accelerate education, economic reforms aimed at the grass root level and widespread engagement of the people in the areas at risk to the next Taliban encroachment so that the Taliban cannot feed of the dissatisfaction of the people.

Obama's Open-Minded Middle East Solution

2009-05-12T19:32:00.000-07:00

Washington Post discussion

The Current Discussion: Are Israeli Prime Minister Netanyahu and President Obama on a collision course over Iran and the Palestinian problem? What would be the consequences of a breach between the United States and Israel?

One of the assurances that Israel has always had is the unwavering support of Washington, both when Israel is harmed and when it acts to harm others in response to its own perception of threat. President Obama, it would seem, is taking a slight detour from this established principle of U.S. foreign policy; keeping Israel as the cornerstone of U.S. policy in the Middle East, but effectively seeking a dialogue with Iran and at the same time wanting to push both Israel and the Palestinians to work out peace. While on the face of it there is nothing new in this approach, look at it in the rhetorical context of how past American administrations have handled Middle East policy. President Obama's approach is more open-minded and more interesting. His call to lead the world through example and deeds rather than simply by bullying has resonated well with many countries.
The Israeli position, as much as it professes the need for peace, takes as a starting point that peace must meet Israeli demands, which of course include the immediate cessation of all nuclear activity by Iran and a dismemberment of Hamas in Palestine. Yes, Iran must stop any activity related to the procurement of nuclear weapons and open itself up for international monitoring. But by the same logic Israel, too, must come clean on its own nuclear weapons, which it does possess, and to come to an agreement with the IAEA on how it intends to dismantle its own nuclear arsenal. If the logic is that it needs them for its defense, then clearly other countries, be they Iran or Mongolia, can make the same argument. As for Hamas, we often forget that it was elected into power. While it does resort to violence, which it too must renounce, the fact remains that its political future must be decided by the ballot box and not by pressure from abroad.

President Obama will face the wrath of many of the hawks in the U.S. State Department on his foreign policy initiatives as he tempers threats with dialogue in the Middle East. While it may not win him friends on the right of the political spectrum, it will certainly bring back fairness to the attempt for peace on the region. The chief complaint for the past three or more decades has been that the U.S. government has never really been balanced and fair in its handling of the Arab world, especially when it came to the issue of Israel. I am not suggesting that President Obama will or should abandon Israel, though the sad truth is that when he does ask for moderation in U.S. support and seek fairness and dialogue, many will assume that Israel has been abandoned.

Israel's preferred solution for Iran would be to first bomb their suspected nuclear sites, as they did with Iraq in 1981. But the world is different place than it was then. It is also well known that after Pakistan acquired nuclear weapons capabilities, Israel drew up a contingency plan to use Sri Lankan airbases for which they had operational rights, to see if they could disable Pakistan's nuclear capability. The fact that all this never happened does not mean that Israel was never planning such moves. It highlights the underlying mindset of how Tel Aviv would wish to resolve things in the Middle East. Obama has a sincerity of purpose and a resolve for showing the way without force which his predecessor grossly lacked.

While people might assume a U.S.-Israel falling out with the new Obama policy, that's highly unlikely. Strains will appear, but a complete breakdown will not happen. It would be helpful if Israelis also understood that the constraints of world policy are complex. While peace in the Middle East is of paramount importance, there is a need to consider a strategic peace effort which is good for all, not just for a few. The consequences of these changes in U.S. policy will at worst mean a sulking Israeli Prime Minister and at best a realization that the road to peace in the Middle East does not only lead through Tel Aviv. If anything, it goes through all the capitals of the Middle East.

The Talibanization of Pakistan

2009-04-27T03:09:00.000-07:00

When the Swat deal was done by Mr. Zardari and his rather ill informed government, I had written that this form of appeasement does not mean that the Taliban have been stopped, it only implies that they have discovered the formula of continued expansion. Thus their recent entry into Bunner district, a few rocket throws from Islamabad, comes as no surprise; indeed friends tell me more black and green turbaned youth are visible in Lahore then every before. Its almost like a Fifth column infiltrating society and given their religious accent know that opposition to them will be minimal and when needed the Taliban form of law 'Nizam-e-Addal' (System of Justice) will be meted out.

I recently saw a wonderful movie, Khuda Kay Liye (For the Sake of God) which portrays exactly the challenge we now see in Pakistan. While US statements that they would not wish to see Pakistan be held hostage by the Taliban are all fine and sweet rhetoric, the truth is that as the majority of Pakistani's do not want the Taliban in their own midst, it is they who must speak out. The People Party of Zardari and the Muslim League of Nawaz Sharif have never had an agenda of support for the Taliban and they combined hold the maximum public vote. It is therefore logical to assume, rightly, that it is these two political parties who have to speak out against what the Taliban is doing.

Well where is the solution then?

First with the Taliban spreading to Bunner, the Pakistan government should tell them the Swat deal is off, and it should establish its own effective rule over the Swat valley, and then if America really wants to help, a major program be started to rebuild roads and hospitals and schools (yes the Taliban destroyed 160 of them) which will create jobs and let people see that their future is in prosperity and not in black turbans and rocket propelled launchers. It is the lack of economic opportunities that has driven people to the hard liners who have stepped into a vacuum of ineffective government and in the process created a promise that the Taliban can guarantee security for the people better than the government.

Secondly, if the US really wants to help they must understand that missiles fired in Pakistan cannot help the eradication of the Taliban. If nothing else in the shrapnel and the dead bodies, mostly of innocent civilians, lies the very proof that the Taliban carry from village to village telling people that the 'Infidel Americans' and their 'Stooges in Islamabad' are their enemies. The hunt of foreign fighters and the issues now within Pakistan of a Pakistani Taliban are entirely different and while may be connected through some moral umbilical chord, are really a distinctly different set of circumstances. The Al Qadea want to get even with the US, the Pakistan Taliban want to take over Pakistani society through what I call 'social subversion'. While their aims may eventually be the same the battle grounds are distinctly different.

Finally, I do feel that the Pakistani ISI needs a complete overhaul, better still it needs to be disbanded and a new structure be created that is truly nationalist as opposed to religiously motivated. The damage that General Zia has done to the Pakistan Army remain deep and he must still be beaming his toothy smile that almost 15 years on and he still has his pet organization pulling the invisible strings of government.

For those who will claim that the issue of Pakistan is about Islam miss the point. Islam is not a religion about violence or coercion and its tolerance through the ages is well documented. The Taliban have no credence to claim any sanction under the name of Islam, because simply put what they advocate is not Islam, but some hybrid creed developed in the caves and villages of Afghanistan by a half blind mad man, Mullah Omar, whose understand of Islam could be put on a postage stamp and still leave room to spare.

This is indeed time for everyone in Pakistan to speak out against the tyranny of the Taliban and if we could have a million man march to restore the judges why cannot we have a 10 million man march in Pakistan to denounce the Taliban. Let them hear this message that their creed cannot be in a country which was founded on modern principles of Islam.

Obama Must Bring Middle East to the Table

2009-01-24T05:45:00.000-08:00

Obama's biggest mistake would be failing to bring the warring parties in the Middle East to the table. While the Arabs must also show their willingness to trust Obama, and be willing to allow him the time to settle down, they will also have to moderate their position if they want peace. On the Iraq front the conditions for a substantial U.S. withdrawal, even if incomplete, is more likely then ever before. Afghanistan will be a bigger challenge as confrontation has never worked in the long and checkered history of the country, and I am not sure that the Obama camp completely understands the complexities of that tribal land.

The Israeli government has given him the first real test of his foreign policy acumen. This adds to the Bush Blunder of Iraq and Afghanistan, where Obama has already made clear his position of disengagement, albeit with a slightly different approach. While in Iraq he would favor a quick withdrawal, in Afghanistan he would want to build up troop strength to overcome the resistance and 'bring peace' to the country. While policy action on both Iraq and Afghanistan are more within Obama's direct purview as the commander in chief of the U.S. Armed Forces, the situation in Gaza is more a test of his diplomatic determination.

Political observers in the Arab world may be banking too much on the Obama administration, hoping it will immediately seek a withdrawal of Israeli forces from Gaza and an end to the hostilities. This might be more a result of military realities. But dealing with the political carnage and the lack of trust in the U.S. as an honest broker in the Middle East are the more pressing issues for the Obama team. The expectation of the Obama administration is not to take sides, but more to be fair and even-handed in its dealing with all parties. Whether the issue is Gaza, Iraq or Afghanistan, the world expects the U.S. to restore confidence and be willing to make hard policy choices to bring peace.

On a broader canvas of foreign policy initiatives, Barack Obama will have to re-engage in serious dialogue all of the world actors whom Bush has spent eight long years alienating. Bush created a world where it was assumed, for example, that all Muslims were hell bent on destroying the United States, one in which the onus was on every Muslim to prove he or she was a 'good Muslim.' This clearly is a distorted view of the Muslim world, and it is one of Obama's most serious challenges. It will not be an easy task and there will have to be serious effort on both sides to find trust to engage in a new social set of principles. The 'War on Terror' will have to be replaced with a 'War on Intolerance', anger will have to be replaced with understanding, force will have to be replaced with empathy and most importantly, all must understand that a disjointed world is not in the interest of humanity.

Barack Obama has won the presidency. In the next six months, he has to win the right to be called a world statesman.

Senselessly Barbaric

2009-01-13T23:12:00.000-08:00

The ferocity of the attacks by Israel, its use of white phosphorus on civilian populations, its total disregard for women and children dying in Gaza all indicate a rabid barbarism that has not been seen in modern times, all the more as Israel tries so desperately to take the moral high ground on this issue. In the first place it was Israel who on Nov 4, 2008 first raided into Gaza killing Hamas fighters in the raid, and thus broke the ceasefire, there had been no rocket attacks at that point since the last ceasefire. It is convenient to claim that eight years of rocket attacks have caused this invasion is nothing but a spin. While it was acknowledged through the six month ceasefire Hamas has made efforts to stop rocket attacks into Israel there were the odd rouge attack which, even the Human Rights Watch said were hard to stop.

When Israel reinforced the blockade of Gaza on December 19, bringing down the supply trucks to a mere 70 trucks that were allowed in, instead of the 500 hundred a day needed to sustain the population of Gaza, the ceasefire had effectively ended. Irrespective of this technicality, and even assuming the Hamas are entirely to blame for the attacks and the collapse of the ceasefire, how can collective responsibility be set onto the entire population of Gaza? Of the 900 killed the actual number of Hamas fighters are a small percentage, so much so that after the incident of Beit Zaitoun where 30 women and children were killed in a missile attack on a building where the previous day Israeli troops had herded the families in on grounds of it being 'safe', one can only assume that war crimes would be an appropriate word for the way the Israeli army has conducted itself.

The question of the conduct of the war cannot be justified merely on grounds that the Hamas started the war, this is a misplaced logic as it assumes therefore Israel is absolved of any responsibility of the way it conducts the military operation. Israel cannot simply say because of the rockets it attacks it is now morally acceptable to kill women and children in Gaza. Once Israeli spin doctors realized there is just so much that can be blamed on the rocket attacks they changed their tune to say Hamas fighters are using women and children as human shields. This is such a weak and feeble argument that international observers have scoffed at the mere gall of Israeli commentators to even suggest this.

When in an article for Postglobal I used the word 'genocide' I was told it was was using terms that were no appropriate. Perhaps I can concede that, but I would need to know then what is the current horror described as? I am not asking for explanations of what Hamas did, I know they have not been exemplary citizens of the world community. I am asking has Israel lived up to its claim that it takes care 'not to target women and children.'?

World reaction has been appalling as far as the governments of the world are concerned. The people with conscious have spoken up, in the streets of Europe, the US, and Asia, but where is the voice of governments. The Arab League is as good as a society of eunuchs who cannot even condemn the Israeli action without worrying about what the Americans will tell them. As for the US government the measure of ethics has been long since discarded and its shocking that President elect Obama has not even spoken up about the Israeli action. Clearly there is more hope, perhaps misplaced, on him changing the tone of what is happening than anyone else.

For the Arab governments, the Egyptians are playing honest broker half hoping that Hamas is weakened to the point where it is ineffective, in the process ignoring the carnage on the streets of Gaza. The rest of the Arab world is caught up in their own issues or at best ignoring them and none of them have seriously told the US to exert pressure on the Israeli's to stop military actions in Gaza, or atleast end them against civilians.

To consider an enduring peace as a possibility is now all the more difficult as the people of Gaza have suffered to an extent where their hearts are hard and the neglect of the world has become all the more obvious. I merely wish to ask if, whatever the reasons, in a war 40% of the people killed were women and children and this was in Europe, or American or Israeli families had suffered this way would everyone have been quiet. Where is the conscious of the American media which questioned the Mai Lai massacre in Vietnam, where soldiers were convicted for shooting down women and children.

http://palestinianvoice.files.wordpress.com/2008/03/gaza_mother_dead_children.jpg

This is the image that we need to remember.

The Gaza Genocide

2009-01-09T18:27:00.000-08:00

The Israeli President, when recently asked about Israeli's response to rocket attacks by Hamas, said that when would it become disproportionate, after ten rockets, hundred rockets or a thousand rockets. Well its therefore normal to ask the question when will the Israeli Defense Force understand that they have killed one, two, ten, or a hundred children too many and then they can say the objective of silencing rockets will be achieved. I know many readers will find this offensive for me to say, but quite frankly for Israeli's to allow their government and army to kill so many civilians in Gaza is pure and simple genocide. I am not for one moment saying that Hamas firing rockets was fine, in my eyes both acts of violence are wrong and misplaced. However, it has always seemed to me that Hamas have been always shooting these rockets more to bolster their own image amongst their own people rather than really inflict any serious damage on Israeli citizens, considering not one person was killed in these attacks. The issue of who started this war first will never be resolved and it can be traced back to decades if not centuries. The issue is that both sides need to understand that innocent people are dying and there is not other way about seeing this.

As for the outcome of the Gaza invasion there will obviously be a weakening of Hamas, perhaps even their removal from the power structure, and they may return to more underground tactics. However, it is still not clear whethere Hamas has been marginalized enough by the current invasion for Palestinians in Gaza to actually reject them. Perhaps if the effect of the invasion was actually dead Hamas fighters rather the children and civilians then perhaps the ensuing discomfort of a military occupation would make Gazans realize that indeed the problem is the Hamas. However, at the moment the Israeli overhanded brutality has meant that Gazans relate their suffering directly to the Israeli invasion and not the actions of the Hamas. Eventually a stalemate will be achieved when Israel will realize the Hamas fighters they went after actually got away, or were not as badly effected as hoped for and then perhaps an honorable withdrawal will be done.

A wider war is not possible mainly because the Arab countries have either feebly condemned the invasion or in the case of Hosni Mubarak's Egypt and the Palestinian Authorities Mahmmod Abbass actually blamed the Hamas for their own political motives. If the string is drawn to when the rocket attacks started then yes Hamas is to be blamed, if the string is to be drawn further back then Israel, and to some extent Egypt's, controlled blockade of the Gaza strip are perhaps the starting point for this round of conflict. Either way, the issue remains that a wider war cannot be possible given Israel's military might, and the Arab leaderships inability to even agree to switch off the oil tap for one hour. (not that oil embargoes bring any solutions).

A Hamas defeat? Well on one side one could argue that how do you militarily defeat an army that tends to dissolve into society when it chooses too. This is not some large standing army with armored tanks and planes. So in the sense of a military defeat of Hamas its more likely that they will be weakened and perhaps politically out flanked but defeated seems a bit hard to see given the nature of this movement.

Overall the Palestinians and the Israelis have a sorry story to tell for themselves. Decades of conflict, and not a single step worth mentioning towards peace for their people. While the Palestinian leadership lacks the courage to carve a new deal with Israel based on realities, Israel continues to be an occupier in most of the territory to seized in 1967 and its recent actions in Gaza are shameful and a war crime. So in a sense both sides will continue to behave like criminals and the world leadership doesn't have the conscious or the will to tell them otherwise.

The Mumbai Massacre

2008-12-04T10:02:00.000-08:00

The taking of any life, according to my personal belief, is a cardinal sin, and neither war, nor 'jihad' nor anything can justify this to me. The Mumbai Massacre, the 9/11 incident, the killing of Palestinians, Iraqi's, Afghans and anyone in the world all fall within my definition of senseless murder. It is sad testimony that in this day and age we cannot sit across the table and sort things out and have to resort to this mayhem. The Mumbai Massacre will be tainted by many different connotations but none of these will bring back the people who died and their only fault was to be there at that time.

Sadly the terrible incident will be colored in the light of the tense political relationship between Pakistan and India, and people will forget that Pakistani's too face the wrath of this terrible mayhem and any Pakistani who had a sense of empathy will feel the pain of what the Indian nation has gone through. It is a time to heal and it is a time for people to educate themselves on the scourge of this hate that is falsely using the name of Islam, which actually is a very tolerant religion, to spread hate and death.

Terrorism does not have a face and it does not rely on the conveinence of borders, so it does not matter if one or all of the attackers in Mumbai were Pakistani or from wherever. These same people could just as easily have attacked a hotel in Karachi as they did in Mumbai. What people have to understand, appreciate and act upon is a common sense of loss and bring about an understanding of why these people have such hate and what can be done to deal with it.

Indian reaction internally will test their dogma of secularism and indeed some Indian Muslims will become the target of a form of internal exclusion and suspicion that will fall upon them. It would be in the interest of peace that such recriminations are not directed towards the Muslims, Pakistani or anyone in general terms. This was not a communal, religious or state act, it was the work of some misguided people who have been led to believe that their means are justified for the ills they feel they have suffered.

Underlying these sort of events bring about the urgency for people to settle their differences and bring about peace in their communities. People have said this is India's 9/11, I hope India does not react in the way the US acted when the 9/11 act happened to them. It is not the solution that would achieve anything, and while the people behind such an attack should be brought to justice it also implies that a better understanding of how to tackle the mind of these youth is needed. I have argued, even in my book soon to be published, that the battle that is going on is not on battlefields or a war for land, it is a battle for the minds of the next generation of our youth. It is here that we have to win the argument.

UAE and the Global Financial Crisis

2008-11-12T07:07:00.000-08:00

The financial markets around the world have taken a massive beating, but certainly not the first and certainly not the last. However, as with all such situations of extreme volatility the human mind loses perspective and we begin to forget the context and scope of what exactly is happening. I lived through the Stock Market crash of 1987 and was then trading in the financial markets and saw, one Monday afternoon, everything go red on the screen. It was ofcourse scary to say the least but in months the market had gradually crawled back to not only its former levels but then took off on a barraging bull run through the 1990's. Look at a stock market price chart of the past 30 years and that evening when my heart stopped still is only evidenced by a small jagged little line going down to then rise and leave a small tick mark. I call it the tick mark from the ultimate teacher of financial wisdom; the market itself, which told me I learned something.

I will share what I learned. Crises will come and go; not long ago the Asian Contaignation was seen as the Arrmageddon the financial system as we know it, today people have to stretch their mind to remember what it was. The current crisis is a combination of silly deregulation of the mortgage markets in the US and the abandoned lending of the banks to people who could not afford what they were buying. However, what took the toll was when banks wanted to switch these mortgages into securitized paper (called sub prime paper) and this ofcourse was bought by banks. When accounting rules did not allow this paper to be not marked to market the banks suddenly realized they were holding onto to something that was not that valuable after all. (A dummy version of explaining this). The ensuing concern on the worth of the banks clearly began to hurt their profits and in essence made the world stand up and wonder what was really the true worth if the financial system.

Just prior to the adjustments that took place in the market values, the banking system had been leveraged to around 11 to 12 times the equity base needed to support it. Typically this leverage is around seven times and thus a correction was overdue in any case. Now you will wonder what all this has to do with the UAE market or indeed the GCC market?

Indeed there is some interdependence of financial markets and what happens in New York will have an effect on UAE, Singapore and in small measure to some small Balkan country too. The question is what should be the extent of this impact?

First of all the UAE and GCC banking systems exposure to the sub prime market was negligible in consideration of their size of the domestic banks. In addition none of the local banks were in anyways involved in heavy overseas lending. Yes property markets were a bit over heated and prices has rocketed up and to some extent the argument of supply and demand was being using too often to justify over 100% returns on real estate. Yes there is a strong demand for housing, and my estimate is that this is about 38,000 homes currently needed with an additional 12,000 per year for the next five to seven years. Yes loads of projects have been announced but those nearing completion and fullfiling this demand are few.

Secondly the real estate market had moved up on the back of speculators who chose to put down 3 to 5% on a property and then flipped it to another investor till finally the end user was paying over 40 to 60% more than he could have by buying direct from the developer. So in essence alot of paper profits were being created for middle men who didn't do more than merely be at the right place at the right time with their check book ofcourse.

Thirdly those investors who are serious and hold property for longer than a few weeks or months have the money even today, and for them an opportunity has been created.

What is likely to happen? First I believe people will realize that the market is being talked down more than it should. Second there is no doubt some prices had gone up too much and the greed factor for the developers was too much. These people will have to realize that construction prices have come down and at the same time their is a need to price the projects better and the sales prices too. I foresee developers who will look for say 20% maximum profit and target the end user there is likely to me more joy than headache.

The financial system of the UAE is strong and UAE, especially Abu Dhabi has the firepower to remedy any glitches in the need for money in an instant. Yes the will to do so has to be there, and this is ofcourse going to be tested from time to time. For the moment and based on my experience here it is highly unlikely that UAE will be allowed to have a financial crunch of any sort, not because of the words that can be said but because of the financial resource available to correct things.

I am not suggesting a wild spree of rising prices should occur again but as normalcy has returned to the market, value has been created. Those with strong nerves are more likely to have a better time than those who look at the doom and gloom.

What a change.

2008-11-04T23:28:00.000-08:00

Less then ten years ago we would have said a black American US President was a 'no way' and that the US was not ready for such a step. With the amazing election of President Barrack Obama history has been made, but what is phenomenal that he never once played the ethnic or the race argument in his election campaign and instead concentrated on the issues of the war, the economy and the need for change in American society. From a virtually unknown junior senator he moved to forge the nation forward with a conviction that was infectious and a passion that was calm and his message was consistent. We have to also admire the man who picked off two formidable opponents, first Hilary Clinton for the nomination of his party and then John McCain in a style and way that saw them fall apart.

In this sense Obama was the voice of the young, and the unheard came to the fore with a crescendo that was deafening. He was gracious in his arguments and focused in his temperament allowing John McCain to even speak down to him in the debates, showing for once that while McCain wanted to feed off fear, Obama fed of the message of hope and bringing together an America that has challenges which were the result of the fears that both Bush and McCain, almost by default, were surviving off.

In a world where world statesmen are in short supply Barrack Obama for once has stepped forward and also claimed that role not only for himself but also now sets the stage for America once again to restore respect and dignity in the community of the nations. Indeed this is the moment where not only history is being made but he has offered a rare ray of hope to all, whether you are an American or not..

Zardari:Is this charming?

2008-09-25T08:15:00.000-07:00

President Asif Ali Zardari is not new to meeting public figures, he lived in the shadow of the Late Benazir Bhutto for long, and indeed he is not new to meeting western women. Thus I see his opening remarks on meeting Sarah Palin a feeble attempt to be charming. Well initially! Complimenting her on looking 'more gorgeous in person' is perhaps right from the book 'The Game' but still acceptable to woo a woman who could be a heartbeat away from the White House one day. But then when asked by the cameramen to shake hands again his comment, 'if they keep insisting I might hug you' was lame, uncalled for and frankly totally out of order for the President of a country. I am a very liberal man, perhaps more than most Western men, but then wearing the mantle of a Presidency asks for people to bring some dignity to the position you hold.

I can see that Mr. Zardari sees himself as the champion of the fight against terrorism and this is where he and Sarah Palin might have alot of rhetoric to share. However, my former school mate, Asif I mean, has to understand that the problem of violence in Pakistan is a mixture of Taliban, Al Qadea and the lack of respect for the tribal system. I belong to that tribal system and I know a fair amount of how people of the Khyber Agency see things.

I am often then asked how to deal with this problem in the North of Pakistan? My solutions may not be complete but they will be certainly better than what is on offer at the moment. In the first place I would take a page from the book the British wrote about respecting the tribal system and working WITH it to control trouble. This would mean strengthening the Jirga (tribal councils) system and putting money into the tribal chiefs hands with the following deal; we will support your system if you have no taliban and no al Qadea in your region. If we know they are there then we will stop supporting you. The Pakhtun system is based on honor and respect and with the Pakistan and the US armed forces making incursions into tribal regions the traditional chiefs have lost face, power and respect in their own tribes. Yet they form the basis on which the society is knit together.

Yes the task is more difficult given that the Al Qadea and perhaps the Taliban have used money and religion to consolidate themselves in the tribal system, yet they have not got enough control over the populous of tribes who need to build their respect and trust into the tribal chiefs. While this will not solve the problems immediately but it will release the army from fighting the tribal people and deploy to protect more of the border.

However, all this may be too much for a new President to appreciate and understand for the moment, but then being in the job one either learns or just stumbles. What ever was discussed later between Palin and Zardari I cannot see it being highly enligthening considering her view is right wing hawkish and Zardari's view seems to be 'formative and lost'. I hope for the sake of Pakistan that the learning process of being diplomatic and charming is not all what we see from a President. We would want to see wisdom and leadership, not high school attempts at charm. The interesting thing is that what I would remember of Asif is that he can rise to the occasion, meeting Palin was certainly not one of them.

Sarah Palin: A view from abroad

2008-09-16T01:45:00.000-07:00

When an unknown person pops up on the political stage, especially one that figures the center stage of the US Presidential election, we can either applaud the stroke of genius or wonder what the hell happened here. In the case of Sarah Palin, the emotions from the outside are neither, they are more like a total disbelief that a person who has governed a state where there are more elk then people and who prides herself to have 'pitbull' fighting instincts can be placed a heartbeat away from the most powerful person on Earth.

Thanks to the internet, the media and ofcourse seeing her in her first interview I have wondered to myself, do I want a woman who has not political sense of the world, (i.e. Bush Doctrine question drew a blank), has never met another head of state, and really doesn't have clue where perhaps the continents are to be the Vice President of a country that has made it its business to be in every backyard of the world; simply no way. Sarah Palin and the impending 'statetrooper-gate' matter clearly shows this woman carries her grudges, rewards her friends (five appointees who were school friends and takes her fights public. What seems dangerous is that she has enough people who will cover for her, take the fall for her, and judging by her body language and speech, this is one nasty woman in the neighborhood.

Now how would Sarah 'pitbull' Palin perform on the world scene? First of all she may be ignorant of the Bush Doctrine but she is cast too much in his mould. and therefore will have a propensity to continue to use force as a means of international policy. Second, since she seems to pride herself as someone who doesn't give up an argument it is more likely that her interface with world leaders will not be entirely pleasant. It is one thing to be intelligent and argumentative, but given she seems almost in grade one of international politics being argumentative may not be the wisest thing to do.

It would seem that the Palin factor will appeal to the hawks in the Republican party, but whether the Hillary supporters will shift from the Democrats to support a mediocre political lightweight remains to be seen. There is so far little substance to the striking looks of a woman who could perhaps be the most manipulative figure in US political history. I also suspect more will be revealed of the woman who pretty much sees herself as the lone sheriff in the old West town. The scary part is she will shoot before she looks, and that is where the problem is. Someone once said 'never put your mouth into motion before your brain is in gear'. It would seem that might be a word of advice for Sarah Palin.

Asif Zardari: President?

2008-09-06T05:35:00.000-07:00

I went to school with Mr. Asif Zardari, at Cadet College Petaro, and last saw him briefly in Abu Dhabi when he made his first trip there as the spouse of the newly elected Prime Minister of Pakistan, Benazir Bhutto. The brief visit was at the Intercontinental Hotel in suite and it was awkward since he had just assumed an importance that he bubbled with and I was looking at someone who we never did take very seriously as classmates. That he had political ambitions was obvious as he dabbled in college politics even briefly being part of a take over of the college in 1971 when General Yahya's government collapsed and some cadets thought a military college deserved some egalitarian politics. I recall walking in to the office if the Principal and demanding the ring leader and his friends hand back the college, amongst the ringleaders was Asif too, but once the leader had been subdued Asif understood it was not to be.

We remained friends and I would say one thing over the years I admired that he looked after his friends, especially those who were 'loyal' to him, and this was in keeping with the politics of Pakistan. His wife, the charming Benazir remained more in contact as I had been in UAE and so was she in and out of the place. We met a few times, talked politics even exchanged a few opinions about her trials and tribulations. I always thought of her as very intelligent and charming and indeed engaging, however to this day I have wondered if she sincerely did improve the lot of the people of Pakistan or whether she tried but was working in a system where things are hard to change. Yet her myopia was interesting when she visited me the last time at my home in Abu Dhabi, this was years back, we did argue when she refused to admit that her ministers or party members have been corrupt. It was perhaps a sore point with her, but I would concede on balance she seemed to have had a better hope for Pakistan then others at that point in time.

Her death was indeed a loss and I did, or tried to do my duty of phoning in a condolence two weeks after the funeral. I never got to speak to Asif, and one of our common friends actually had the cheek to suggest that now 'Asif's political career is rising I am not surprised you are remembering him'. But then that is how Pakistan has become one contacts politicians because one wants something. For me the welfare of the country is all I want. Which brings one to the what Mr. Zaradari will do as President.

While I do not know him given he decades since we studied together, I am constrained to see his profile from the media. My guess he will get carried away, forgetting the role of the President and in a sense he may at some stage forget the Army does have a say in matters. He will wheel and deal his way through alot, and in many cases get away with it, but the biggest legacy he will have to face will that of whether he can rise about the corruption, or the temptation of it, whether he can be bipartisan, whether he can do what is good for Pakistan rather than what is good for him, or only his political party or indeed external powers.

I want Asif to succeed, not for his own good, but for the good of the country, and if in that process he gets a measure of success rubbed off on him great for him. However, the reality is that he seems to have wheeled himself into a position where the political process has little faith him, he has broken his word a few times already and most of all will he now restore the judges? In effect this is not a test of Asif Zardari, its a test for the system.

McCain-Palin: wool over the eyes

2008-09-04T20:45:00.000-07:00

If I was only listening to the words from both Sen McCain and Gov Palin talking about Washington and how they will change Washington I would have sworn these were Democrats talking of changing eight years of Washington politics. Actually this is the biggest wool over the eyes attempt by the McCain-Palin camp to pretend that they are part of the people who will change eight years of mismanagement in Washington. It is almost as of McCain is trying to disown the Bush years, and in this way by putting aside the legacy he and Palin are running the risk of being in the mid stream of Republican politics and shedding them to be party less. Lets face it the McCain economic plan is exactly the same as that of the Bush years, so the current pain that is hurting American people is the same economic policies that McCain has embraced.

Gov Sarah Palin is ofcourse a surprise and while initially the gambit has paid off and the 'Palin who?' response was fed with her unique style of speech the reality is that she didn't say a word about universal medical care, education or the economy, actually showing how weak she is on these issues. The reality remains that the likes of McCain-Palin have never had the poor on the agenda and now try to review their mandate with rhetorical speeches; weak on substance, and emotional triggers. At the end of the day McCain played his prisoner of war (we are talking of the one over 35 years ago) card and Palin played her 'hockey mom' card when in reality none of her kids play hockey. Once the euphoria of all this dies we will find that Palin will actually be a liability even though she is being portrayed as an ideological heiress to the George W Bush without the liability of having been associated with him. The issue remains that she does not have the experience for the job and her handlers know (all politicians have handlers who tell them what to do) that there is just so much mileage you can get from stage craft.

If the American people buy this drama then indeed they have the wool pulled all the way over their face, perhaps down to their knees.

End American Alienation

2008-09-04T19:43:00.000-07:00

The Current Discussion: In their campaign, should Barack Obama and running mate Joseph Biden advocate a clean break in U.S. foreign policy, or should they rely on continuity and experience?

The past eight years of U.S. foreign policy have been perhaps the worst ever for the image of the United States. I am not supporter of either Democrats or Republicans, especially when it comes to foreign policy. The U.S. policy towards other nations has been one of dictation, coercion and feeding off the fear that is being bred within the U.S. domestic policy. The war on terrorism has been made such a priority that upon its pretext two countries were invaded resulting in more than 5,000 U.S. deaths alone (many more than the 2,800 who lost their lives in the 9/11 attacks.) After seven years, the man they seek is still at large, Iraq is a mess and unfortunately the U.S. image in almost every country is at rock bottom. It has become such a farce that the U.S. policy makers (and indeed the fellows in Homeland Security, too) do not know friend from foe, and a criticism of U.S. policy has been equated with being an enemy of the U.S. There must be a departure from this policy of alienation that the present U.S. administration has engaged upon.

So what should Obama-Biden do on foreign policy? First deal with the world fairly, and fairly means ALL parties are treated fairly. Bring the Palestinian question to the forefront, open a sincere dialogue with Iran, disengage in an honorable way from Iraq and Afghanistan, and most of all stop propping up governments that are unpopular (Musharraf is gone, though I suspect now 'General' Zardari will be the vanguard against terrorism in Pakistan.) Let the world see that actually most Americans are actually great people. The U.S. is the only true superpower left, which brings a responsibility to show leadership in world affairs, not hegemony. All these things that have to be done to fix things will be difficult, but they have to be done to make the world a better and safer place.

What will the hawks say about terrorism? Terrorism is a threat that has been made bigger than life; more people died in road accidents in the U.S. than by any other violent acts (42,815 in 2002, of which 4078 alone died on the roads in California, according to Fatality Accident Reporting System and the IRTAD.) Does this mean we wage a war on automobiles? More than 35,000 people each year are killed in the U.S. by guns and another 65,000 are injured, and yet there is no noise about this being an epidemic. But the war on terrorism has been pushed into such a major problem that the broader picture has been ignored.

The U.S. has to lead and it has to assume a responsibility to lead with fairness, a problem-solving attitude and statesmanship that has been frankly absent on the world scene. It is time to bring this all together; it's time for Obama and Biden to step up and do it. There cannot be another way forward because confrontation has never solved issues. While this may sound too aggressive, all I can say is that we have seen a major failure of U.S. foreign policy and it is now time to fix it.

Al-Qaeda – the United States' Invisible Foe

2008-06-09T19:55:00.000-07:00

The Current Discussion: CIA Director Michael Hayden says al-Qaeda is more or less defeated in Iraq and Afghanistan. Should the Bush administration take credit? How much?

When wars are fought with an adversary who is largely invisible, how can one make the assertion that the war is over? CIA Director Michael Hayden says the war against al-Qaeda is over –“more or less.” Now if ever there was a wishy-washy statement, that is one. The question now is, is it “more” or is it “less”? The entire gambit of media output coming from the Bush Administration on Iraq, Afghanistan and indeed the al-Qaeda is so distorted and mixed up. At the time of the U.S. invasion of Iraq there was no al-Qaeda in Iraq. In the ensuing months, as the management of Iraq literally fell apart under the worst public management ever done by Mr. Paul Bremen and others, an insurgency against the U.S. flared up. This was, and is, a domestic movement, nothing to do with al-Qaeda or others. While some attacks have been attributed to and even claimed by the al-Qaeda of Iraq, this was largely a splinter element. Thus, to defeat the al-Qaeda is not consequential in Iraq. What is consequential is the larger issue of managing the country and bringing about order in a country where insensitivity to the aspirations of the people has led to the worsening of the situation.

In Afghanistan, while the al-Qaeda may well have existed and, perhaps, still do, the issue of law and order is more complex. I have no doubt that while the Taliban were hated by the people, the fact they reinstated order and stopped the internal civil war is what the Afghan people remember as more important. Hamid Karzai has had a tremendous task on his hands. Whether he can restore order has to depend on his handling of the tribal and social fabric of a difficult country – hopefully doing it without foreign troops propping him up.

I have always argued that the underlying problems of these societies have to be resolved, not just through cosmetic changes at the top or on the surface. This means bringing economic well-being to a broader spectrum of people, accepting that the aspirations of each might be different from what the U.S. may want. Yes, al-Qaeda may well be a matter of concern for the U.S. Administration, but one has to understand that within these societies the issues are much larger and more acute than they might expect. One has to admit that mismanagement of these societies was going on well before the U.S. intervened. However, if the purpose of the intervention was to make things better, this has been a total failure and the result is clear – we’ve allowed a destabilized society to be exploited by all factions in this invisible war.

Internet No Automatic Revolution

2008-05-22T20:35:00.000-07:00

From my Postglobal piece

http://newsweek.washingtonpost.com/postglobal/anwer_sher/2008/05/internet_no_automatic_revoluti.html

The Current Discussion: Egypt has detained a number of its citizens for using the social networking site Facebook to organize anti-government protests. What online sites are most effective in influencing politics -- and is the impact positive?

In the context of Egypt, the government’s reaction to the use of sites like Facebook to influence politics within the country forms a broader pattern of media control. In essence Facebook, Hi5, and other social networking communities do get the wrath of governments on the basis of alleged erosion of 'social values'. This is a delicate subject for most of the emerging world, but I am not entirely sure that Facebook, per se, is known for being a platform for political dissent. For instance, the entire protest against General Musharraf's handling of Pakistan’s Judiciary, while absolutely high-handed, has not been reflected in places like Facebook. Yet blogs, other internet sites and even email e-blogs have become more effective mainly because they remain more targeted.

As far as the internet media is concerned, it’s becoming more powerful, especially with the ease of net traffic and of course more flexibility in content presentation. However, in a number of cases even the more serious political platforms on the internet have questionable effectiveness as instruments of direct change. Burma, Tibet, Iraq, the Arab World, Israel’s behavior and American insensitivity to world opinion – all have figured in various prestigious platforms. The result has been that while people may end up being better informed, I am not sure they are willing to do much more about it than perhaps an occasional protest email.

Take the example of PostGlobal itself. While there is no doubt this forum has a respected readership, there is perhaps, judging by some reader comments, a tendency to only read the headline and the first paragraph and then leave a comment. (To use my last post as an example, some readers felt I was asking only the Arabs to accept Israel, when I was additionally arguing that Israel has to stop its inhuman treatment of the Arabs and even quoted Amnesty International.) So on balance, the situation is not as simple as saying that if it’s on the Internet, it will influence opinion. It is more likely that it will shape some opinions, but unless the leadership or the audience that needs to act is really going to take serious note of the media on the net, I would argue that it will still be some time before we can say that Internet-based opinions matter. Perhaps this is because of the fractured nature of the Internet, and because I can hardly see General Musharraf, President Bush or Hosni Mubarak waking up each morning and reading the hundreds of blogs out in cyberspace.

Nevertheless, for those who care and do understand the writers’ complete arguments, there is a case that it can provide the basis for interaction and perhaps eventually action.

An Orphaned Tibet

2008-05-21T06:45:00.001-07:00

The Current Discussion: Protests over the Olympic torch relay have led to a crackdown in Tibet. Is Tibetan independence a lost cause? If not, what should its supporters do to win it?

Tibet's plight is not just about the sadness and loss of country that Tibetans feel - it is a constant reminder of the lack of a moral stance that countries have on this issue. World riots over the Olympic torch merely highlight the world's enthusiasm for showing they do not agree with the Chinese government. This is a message that is not getting to the governments, which continue to behave as if there is no problem with Tibet. There is no second thoughts about the fact that Tibet was invaded by the Chinese, albeit decades ago. There seems to be a suggestion that since the takeover of Tibet happened so long ago, it might as well be considered a lost cause.

The upcoming Olympics raise China's profile and hence the urgency to show the world that not all agree with how the Tibetan issue has been handled by the community of governments. While calls for its boycott are equated with the boycott of the Moscow Olympics over the Soviet invasion of Afghanistan, most athletes and governments don't really want to create a fuss over the continued Chinese occupation of Tibet. However, there are different faces to this protest; perhaps taking part in the Olympics but boycotting the opening ceremony. Imagine the Chinese televising the opening ceremony, with only the Chinese team in attendance?

Realistically, the Tibetan cause is lost in terms of pressure, sympathy or action from any of the governments that can exert even moral pressure on China, not that such moral pressure work on the mind of the Chinese leadership. However, it is obvious that people around the world do care about the Tibetan issue; this is where the current protests come into play to try and raise the interest in this lost cause. Tibet has no strategic value for the Americans, British or the French, and perhaps their need not to offend China far outweighs their moral responsibilities here. In a sense, the current protests around the high-profile Olympics are the last chance for people who support the Tibetan cause to do something about it. If they fail, the issue will recede back to being a footnote in the newspapers and in our minds.

Arabs Must Accept Israel

2008-05-21T06:07:00.000-07:00

My PostGlobal piece http://newsweek.washingtonpost.com/postglobal/anwer_sher/2008/05/arabs_must_accept_israel.html
The Current Discussion:Israel celebrated its 60th birthday last week. Will it survive to celebrate its 100th?

This may sound shocking coming from a Pakistani living in Dubai, but the reality is that Arabs must learn to accept Israel in their midst. While a great deal is said about Iranian leadership and Hamas wanting the destruction of Israel, if we move beyond the rhetoric, the country is there to stay.

Israel has come so far, irrespective of the controversies that surrounded its creation and its position on the Middle East political map. It will indeed make it to its 100th birthday. What will affect Arab perceptions of Israel is the way the country conducts itself. Yes, there are acts against Israel which are violent, and there are acts by Israel that create the conditions for violence to gain steam. But the issue of forcibly taking Arab lands is real: part of the inherent problem lies in claims that since an Arab farmer does not have proof of land ownership, the State of Israel can then take it.
I am not suggesting that violence on the part of the Arabs is an answer, but there is enough liberal thought on both sides to acknowledge that both have done wrongs and that these need to be stopped and then corrected wherever possible. There is a consensus among most NGOs that Israel's track record on human rights in the Occupied Territories is appalling; its surprising that a people who suffered the Holocaust at the hands of the Nazis could themselves treat people with such indignity in their own lands. This is of course not a reason to wish for an end to Israel, but more an appeal to the voices of reason on both the Arab and the Israeli sides, to bring about tolerance, acceptance and fairness into the equation.

Thus, the question is not whether Israel will make it to its 100th birthday, but in what manner will it conduct itself as it does so? In a 2004 report on Israel, Amnesty International claimed:

"…abuses committed by the Israeli army constituted crimes against humanity and war crimes, including unlawful killings; extensive and wanton destruction of property; obstruction of medical assistance and targeting of medical personnel; torture; and the use of Palestinians as human shields."

People will suggest that I am ignoring Arab violence against Israel. I am not. I am merely asking critics be fair and look ahead and see that it takes two hands to clap. I wish Israel well, as I do all its neighbors.

Love

2008-02-15T18:42:00.000-08:00

http://newsweek.washingtonpost.com/postglobal/anwer_sher/2008/02/stronger_love_for_troubled_tim.html

Stronger Love For Troubled Times
The Current Discussion: For Valentine’s Day, this question: What is the future of love?

Although our moderators asked this question in the interest of lightening up the debate, it comes across somewhat like asking as to the future of global warming, or the future of the U.S. economy. Perhaps our approach to life, love and happiness is too stunted to consider the esoteric elements of life anymore; is it in earnestness that we have commercialized Valentine’s Day and Christmas?

I am happy to report that at the most basic level, the future of love is there to stay, though in what shape or form is a matter of conjecture when it comes to the perspectives from which we approach it. But then truly love is, in its essence, a process, composed of a myriad of passions which bring a procession of expectations, joys, laughter, intimacy and much more to our heart, with the occasional heartache, too. To a jilted lover, love then is masochistic, to a newly loved it’s a joyous moment promised forever. In either case love between humans will remain, and for as long as humankind exists. Love is without a true gender; it is in its form nothing else then the process of loving through the expression of emotions. How society becomes more tolerant will dictate the more varied expressions of love, some to the dismay of many who would oppose same-sex marriage.

Love is, in the end, the process by which you realize your best in the other person. It’s an act of giving, and even though at a societal level we are faced with more cliched hatred then ever before, there is a higher probability that at the personal level love will sustain and perhaps in these troubled times grow stronger. I hope we as humans will not forget to love. As I once wrote to my wife, in a poem:

I have stepped forward
I have capitulated
And if this love were to annihilate me

Gladly shall I be its servile servant
For a soul surrendered to love
Is better than servitude to angered aloneness.

Hijab Politics

2008-02-15T18:40:00.001-08:00

From my PostGlobal contribution

http://newsweek.washingtonpost.com/postglobal/anwer_sher/2008/02/hijab_politics.html

Hijab Politics
I come from a tribal family from Pakistan and was brought up to respect the religious wishes and inclinations of all people. This meant that my mother and sisters never wore the veil, and even when my mother visited the tribal areas for the first time in 1942 and wanted to wear a veil, my father told her she should not wear it if she did not wish to. My uncles and aunts were initially shocked by my mother turning up in a sari and no veil, to which my father replied that religion was a personal matter.

Thus, all the noise in Europe over the issue of the veil seems to me a bit overblown. I personally do not believe that the veil in modern times is necessary, and as societies modernize and educate their people they will realize that the issue of a veil is more to veil one’s intentions rather than a simple cover up. In equal measure, I agree that Muslims in Europe and America can modernize and not necessarily Westernize. Yet when such societies are put under siege, with media pressure to abandon what they think is important, there is a tendency to drag one’s heels and avoid change. The freedom-loving sense within me says that if in a democratic and free system one religion is allowed to practice its beliefs, so must the others.

I feel a personal sense of disappointment that the Turkish parliament has decided to change a secular tradition in Turkey, but that feeling has to be weighed with the fact that this was an act of parliament and not an arbitrary decision by a mullah. Although as secular democrats we may find it as a loss to our ideals of freedom, we must also accept that this seems to be what the Turkish people voted for. In that sense, accepting it is vitally important, as is the hope that if indeed the people did not want it then the rule will be dissolved through the action of future parliaments. What is important is that the veil is not imposed, but is a matter of choice.

The issue of the veil is more contentious within ostensibly Christian countries, where Muslim minorities may wish to wear the veil (as was the case in France) and laws are passed to take away that individual choice. In UAE, where I live, there are Christian churches on land donated by the government and there is a freedom given to the various faiths. I do hope that other Muslim countries, especially Saudi Arabia, will eventually adopt the same attitude. Throughout history there are examples of coexistence that stand out, i.e. Spain under the Muslims. Passing laws that are targeted against religions never works, as we have seen in history, and in the same vein all that the Turkish government has done is granted the freedom of choice to women to either wear the veil or not. I would hope that in the long run, the veil will not be imposed but will continue to be a matter of choice. Choice is, after all, the premise of any democratic system, however we may disagree with it. Thus, to me, forcing women to wear the veil is also wrong.

America's economic barometer

2008-01-29T19:34:00.000-08:00

http://newsweek.washingtonpost.com/postglobal/anwer_sher/2008/01/us_an_economic_barometer.html

America's Economic Barometer
The Current Discussion: If countries around the world are doing so well economically, why are they still catching a cold when the United States sneezes?

In a more interdependent world, we simply can’t ignore the economic wellbeing of the world’s largest economy. A further slide in the U.S. cannot remain an isolated event. The U.S. dollar remains the major reserve currency, with all the major commodities being priced in U.S. dollars – so it is hardly surprising that the weakness of the U.S. financial system will have international ramifications.

A major fall of the U.S. dollar or its stock market will more than likely affect other economies as their financial assets in U.S. markets contract. That spells trouble for economies, as their asset base is mostly denominated in U.S. dollars. However, one has to admit that the economic landscape is changing in large measure as other economies are expanding, and while they would be affected by a U.S. slowdown it does not mean a compete breakdown will occur. The emergence of China and India as two major economic players, not far from becoming major economic powers, implies that the economic balance is changing. However, these markets are more likely to attract capital investments into their manufacturing and service sector and not their stock markets, mainly because it is hard for them to compete with the efficiency of the U.S. market.

However, the immediate impact of U.S. stock market changes is more a barometer to which other markets react, as is the case today. However, in the GCC (Gulf Cooperation Council, i.e. the rich oil producers) generally the economic performance is relatively immune to a U.S. recession, even though their stock markets do have knee-jerk reactions. The question remains: in a world where globalization seems to be the direction of economic progress, will the woes of the U.S. dominate economic performance? Perhaps for some time to come the financial impact will be there, as the U.S. dollar remains a major reserve currency and perhaps the largest financial market. However, as other markets mature the direct impact will be minimized (though never really absent) as the impact of globalization will also mean that other economies like Europe, China and India will also be able to impact global economic performance.

Dear Candidates

2008-01-05T21:56:00.000-08:00

My contribution to Washington Posts Postglobal site

http://newsweek.washingtonpost.com/postglobal/anwer_sher/2008/01/dear_candidates_equal_attentio_1.html

Dear Candidates: Equal Attention to the World’s Problems
The Question: The U.S. starts to choose a president this week. If you could send the candidates one message, what would it be?

What the world today needs, more than ever, is a world statesman: someone who can guide the world with empathy and compassion, not guns and missiles. The world has been brought to the brink of massive destruction, and while one cannot blame American leadership for all of the problems, America must take responsibility for what it has done wrong.

The demands on your attention will be many, some born out of a moral prerogative, others born from the pressures of the commercial world and leading the world’s largest military power. While I do not expect leaders to be perfect, I do expect them to be fair on the issues of world politics.

We wish to see an American president who is willing to be brave and balanced on the issue of Palestine and Israel, to condemn the Israeli aggression with the same tone as Palestinian suicide bombers are condemned. We wish for someone who will act on world affairs based on reason and fact, not emotion and conjecture, to bring to the forefront the values of fairness that are expected within American societies. There is no doubt that America is a great nation, with some of the finest values of freedom of speech and the rule of law, but its leadership seems to have forgotten these values and these need to be rekindled into the body politic of the nation. It is this that will win the hearts and minds of the people around the world. Asking for democracy in Iraq and and Pakistan is indeed a bold statement, but to ignore China's violations of human rights especially with respect to Tibet, or to take the pressure off of Burma, all show that its current leadership seeks selective democracy.

The world ahead of us needs understanding, not an ‘us and them’ approach. American leaders need to become the 'we', with a true worldly view. At the start of this long road to the White House, which of you will embrace this vision, and more importantly which will carry it into your term of office? The world is watching.

Worst Is Yet to Come For Pakistan

2007-12-30T22:55:00.001-08:00

Original on: http://newsweek.washingtonpost.com/postglobal/anwer_sher/2007/12/worst_is_yet_to_come_for_pakis.html
The Question: After Benazir Bhutto's assassination on Thursday, what's next for Pakistan?

Benazir Bhutto's assassination is not only a terrible loss to the political process and the nation of Pakistan - it also shows how fragile the country is to the acts of militants. Her tragic death must be viewed in the context of Pakistan's political and security situation: this is clearly a sign of worse things to come.

First and foremost, it is highly unlikely that the elections will be held as scheduled on January 8, 2008. That might the rallying point for both Benazir's Peoples Party (under the leadership of Amin Fahim) and Nawaz Sharif's Muslim League to seek sweeping changes and a return to the rule of law. This is a huge blow to the U.S., as it backed her and General Musharraf and now will be hard-pressed to handle the political process in Pakistan.

Clearly Benazir Bhutto's killing shows the telltale signs of an al-Qaeda style attack. It sends two messages: one to the Pakistani politicians that they should soften their tone against terrorism, and another to the Americans that their political support will be hacked down from the top. This is a huge embarrassment for General Musharraf, because all his claims of victory against terrorism have come to naught. If nothing else, now that he is out of uniform one cannot rule out the Army seeking to remove him, either through constitutional means or otherwise.

There are already reports of violence in the interior of Sindh, where Benazir was very popular, and it would seem that the situation may get out of hand: people will take to the streets, blaming Musharraf for the failure to ensure security in the country. On balance, I would predict that with elections postponed it is highly possible that conspiracy theories will emerge that will weaken President Musharraf and amplify calls for his removal. In the light of civil strife, it would seem that a major change is more likely than ever.

I knew Benazir personally, and the few times we met and discussed politics, although we may have disagreed on issues, I never had a doubt that she was one of the most astute political figures in the country. Her opponent Nawaz Sharif now carries the responsibility of bringing reason into the country and may even suggest a joint government for national reconstruction.

The Kite Runner

2007-12-22T18:33:00.000-08:00

‘Kite Runner’ Threats Reveal Afghanistan’s Hypocrisy
(this is my post to Postglobal Washington Posts online blog where I am a panelist)

http://newsweek.washingtonpost.com/postglobal/anwer_sher/2007/12/kite_runner_threats_reveal_afg.html
and the main page is on http://newsweek.washingtonpost.com/postglobal/

The Question: The producers of the movie "The Kite Runner" had to evacuate three boy actors from Afghanistan because they were involved in a scene portraying homosexual rape. Who's at fault here: the movie producers who exposed the boys to danger, or the Afghan culture that threatens them?

I am a Pathan from the tribal areas of Pakistan, so perhaps this question poses difficult issues. From a modern perspective there is no doubt that the lack of tolerance, especially on artistic expressions, has been a matter of concern for people like me. I question whether the Afghans who have threatened the actors are suggesting that homosexuality doesn't happen in Afghanistan, or whether they are suggesting that exposing its existence is a crime. The reality is that homosexuality has been prevalent in Afghan culture for centuries, and proliferated especially during the Taliban years when contact between women and men was very difficult. In The Kite Runner, the homosexual rape is the contentious issue especially because a boy who later grows up to be a Taliban official commits it. The portrayal highlights the fact that often in Afghan society during times of war, captured enemy men were sodomized. As British officers from the Afghan wars would say: ‘Better to put a bullet through your own head then be taken prisoner.’

Clearly the reaction towards the actors is not acceptable, but we have to understand that such a reaction was pretty much expected, even though the film was made outside Afghanistan. There are a number of taboo issues for these societies; homosexuality is clearly one of them, even though a famous Pashtu poet wrote elaborate poems praising boys over men. This is indeed the hypocritical side of society, and in times such as this they will take the religious view that homosexuality is a sin – just like the Catholics and conservative Christians would react to the idea of same-sex marriages. The difference, and a fundamental one, is that here it is not the homosexuals who are being threatened, but the actors who portrayed the characters. This is where the lack of tolerance shows up.

On the other hand, the filmmakers have much to answer for: from reportedly paying the key actors only $18,000 (the going rate for a small side role in a regular Paramount movie, perhaps), to not anticipating that the response from within Afghan would threaten the safety of the actors. One of the actors, Zekaria Ibrahmi, (who plays Amir as a child) had expressed his desire to study and live in the U.S. Perhaps that wish should have been built into the contract, to ensure the actors were safe.

The sad part is that as a modern thinking Pathan, I can see both sides of the equation. While I vehemently disagree with fundamentalism and intolerance, I also understand that this reaction should have been expected – and the filmmakers should have had a contingency plan.

Sher View: Clinton Library Funding

2007-12-15T19:03:00.000-08:00

The Washington Post yesterday has raised the issue of foreign, which should imply all foreign sources, but names mostly Middle Eastern sources, and implied there was something sinister about the donations to the former presidents' presidential library. For Senator Obama to also be mentioned that the wishes to bring in strict legislation to donations for such foundations shows that both the Washington Post and Senator Obama are way off the mark. First why question donations from the Middle East only, surely the British and European donors also appear on the list, indeed why not also question US donors too, after all they would have a greater vested interest to use donations for a political cause.

Most importantly, why would someone want to 'bribe or influence' a former President of the US? I can see it being an issue funding a presidential hopeful as being a major issue, (not that US special interest groups don't do that), but why would I pay say $10 million for a lovely library to a man who is no more in office, other than out of goodwill or friendship?

Secondly this is an old issue, as far as I see it dead and buried but brought up by Washington Post perhaps to support the Obama cause, consider the Post seems to like the Obama camp more than anyone else.

Thirdly, instead of celebrating such donations as a triumph of understanding and diplomacy its being looked down up either because the source of funding is not politically convenient or sounds sinister enough for respectable numbers to behave like weekend rags. Come on guys this was not like the Middle East funding some clandestine subversive group within America.

Fourthly, the Middle East donates alot of money to alot of causes, when you produce a daily cash flow of billions and need to only spend a fraction of that money, you do have alot of people lining up for donations. If reporters want to really do their homework then do mention the donations made elsewhere by these same Middle Eastern personalities. I know from personal experience, being an ex banker, that the late Sh Zayed of Abu Dhabi alone funded two major hospitals, one airport, a whole road network system in two towns, and a rural development program in Pakistan that ran into billions. Many will find fault with that, so if he then also gave say a million dollars to an EX presidents library big deal.

Finally, political motives could abound anywhere, the reality is that be fair, name all donors, and suggest the motives from all parties, and don't just bash the Middle East.

I marvel at the ability of the human mind to take something good and twist it into something sinister.

Sher View: The deed is done.

2007-11-23T21:28:00.000-08:00

Indeed the deed is done. The General has got the endorsement from the Judges he appointed, announced the election date, and before December 1st 2007 will have shed the military uniform and seemingly all will be well. His good friend President George W Bush has said while the emergency is not something the US is elated about, 'General Musharraf has done a lot for democracy.' A truly puzzling statement. But then what Mr. G W Bush thinks of the General is not important, what the people of Pakistan will feel is more crucial.

Yes indeed the General was doing fine for democracy up to a year or so back, then the proverbial 'drunk with power' syndrome got to the man. Locking up political opponents, firing a Judge for alleged corruption without referring the case to the judiciary to try their own, and mishandling the siege of a mosque a few hundred meters from the Presidential residence in Islamabad all started a response from the General that has not made sense. In an interview to BBC the General tried to justify his actions and asked 'you think I just went mad in the last few months?'. The truth is Yes sir you have gone pretty mad. Here is why.

Building democracy by tearing up the constitution, locking up over 3,000 lawyers and human rights activists and rewriting the rules to protect your position is NOT Democracy. Interestingly Benazir Bhutto in championing 'democracy' cut her deals, then the general reneged and she did a hasty U turn and now might well contest the election as the sole main political leader if Nawaz Sharif is not allowed to contest the election. Under the new rules Mr. Sharif has to be personally present to file his nomination papers, so it is likely he will convince his Saudi hosts to let him return. Perhaps this was one of the reasons General Musharraf visited King Abdullah in Riyadh to either ask the Saudis not to let former PM back, but is more likely that he was trying to ask them to get Mr. Sharif agree to not demand the general's removal as President if he, in return, is allowed to return.

The Americans have again got this wrong, as if their main purpose is to fight terrorism and restore democracy then the way forward is rather simpler than backing just the General and Benazir Bhutto. They should engage in a contact with Mr. Nawaz Sharif and indeed the religious political parties in getting them to agree that Washington will support a full free election in return all political parties must agree to reduce violence within Pakistan. This is also in the interests of all the political parties, as terrorism within the country takes the political initiative away from the party leadership. Ms Bhutto and General Musharraf, now out of uniform, will not be able to deal with terrorism on their own.

If full and free elections are held and all parties are allowed to contest then this is what is likely, Sind province will go to Benazir's political party, Punjab to Nawaz Sharif, the North West Frontier Province to the MMA (a coalition of religious political parties) and Baluchistan to the Baluchi nationalist parties. Only the PML of Nawaz Sharif can deal with the groups who will win in NWFP and Baluchistan, and it is in these provinces that the problems of militancy and terrorism exist. This is why I have always argued that the country needs a government of national reconstruction where all parties are encouraged to form a collective government. Backing only one or two horses in this complex race will never be a fruitful bet and hence the dialogue has to be more broad based.

For the US hence the option has to be a neutral encouragement for free elections after they have had contacts with all political parties. It would seem while there will be legal and political resentments to the generals 'election' as the President, there is a chance that if free elections are allowed and all are allowed to participate then perhaps the chances are that this sordid deed will be buried in the need for national interest.

Sher View: Counting the General's days

2007-11-20T11:42:00.000-08:00

Through interviews given in the presidential palace in Islamabad to carefully selected foreign journalists, President Pervez Musharraf of Pakistan has been valiantly trying to present himself as a champion of democracy and free media. To underscore that point, the veteran general has been donning not his army uniform but has appeared in mufti – smart charcoal-grey suits, and sober shirts and muted ties. Of course, those televised images were mostly seen by foreign viewers, and not by his fellow 160 million Pakistanis. The indigenous media remain muzzled – which is to be expected in light of the fact that the general has suspended Pakistan's Constitution and pretty much imposed martial law. Pakistani journalists have been kept away from their president.

To his credit, Mr. Musharraf has kept a straight face through these interviews. His phlegmatic visage notwithstanding, he must surely know that his days in office are numbered – that the end to his rule may come as early as this weekend when John Negroponte, the Deputy Secretary of State of the United States, arrives in Islamabad to give President Musharraf the news that Washington is unfastening its embrace of the general. Of course, the encounter will be preceded by some due diligence on Mr. Negroponte's part; in fact, he has already been in touch with elements within the current administration, and with members of the civilian opposition. By the time Secretary Negroponte relays the unwelcome news to President Musharraf, the scenario for political succession would have been tidily worked out.

Such a scenario may include the return to Pakistan of Nawaz Sharif, the former prime minister whom Musharraf overthrew in a bloodless coup in 1999 and bundled off to exile to Saudi Arabia. When Mr. Sharif gamely tried to return home some weeks ago, he was not allowed back into his own country. There's little question in my mind that the U.S. has not been talking with Mr. Sharif. Unlike his political opponent Benazir Bhutto – who was prepared to make a Faustian pact with Mr. Musharraf in a power-sharing arrangement under which he would continue as president and she would become prime minister – Mr. Sharif not only wants Mr. Musharraf to relinquish Pakistan's presidency but also leave the army altogether. (The general said yesterday that he may do the latter but not the former.)

My political and business sources tell me that the chancelleries of Europe have been open to the idea of a return by Mr. Sharif. Indeed, some European leaders have privately encouraged the Bush Administration to widen its dialogue with Pakistani constituencies beyond Ms. Bhutto and her Pakistan People's Party. They have emphasized that she does not – yet – have support from the street; specifically, Pakistan's students have not rallied to her cause. It's nice to have lawyers agitating in her behalf, but let it be noted that the Pakistan's agents of change historically have been students: Generals Mohammed Ayub Khan and Yahya Khan – both military dictators – were forced to yield power only after protests led and manned by students became so massive that the "voice" of the street could not be ignored.

General Musharraf has shown few signs of acknowledging this history. I can't blame him, of course – after all, who wants to raise intimations of one's own political mortality? What the general did not say in his media interviews has been at least as important – if not more – than the predictable words he uttered. He did say that his political rival Ms. Bhutto was under house arrest to "protect" her from terrorist attacks. But he neglected to mention that Imran Khan, an iconic hero of cricket who turned to politics, was being manhandled and arrested under Pakistan's draconian anti-terrorist measures. Mr. Khan's crime was to lead a student protest against the imposition of the emergency, which is normally the right of any person under a democracy. Could it be that General Musharraf is scared that the charismatic Mr. Khan will be the rallying figure for the country's youthful population?

General Musharraf would do well to study his own nation's history. Almost three decades ago, Benazir Bhutto's father Prime Minister Zulfikar Ali Bhutto appeared on national television when faced with rising protests against his increasingly dictatorial rule. With arrogance that was barely concealed, he said that the seat of power he sat upon was much stronger than people imagined. In less than a month after that speech, General Zia ul-Haq – then chief of the army – deposed him in a military coup.

As I watched President Musharraf's interviews from my vantage point in Dubai, I could not help but think that while the general talked of saving Pakistan he seemed to be oblivious to the fact that it needs saving from his own authoritarian actions – actions that clearly don't have an agenda beyond political survival. Indeed, his assertion that national elections have been historically held in Pakistan came across as scarcely credible in view of the fact that the polls were conducted under the barrel of the gun and emergency powers of the army. History may not be the general's forte, but surely he must know that one of those elections – in 1988 – was held when General Zia was killed mysteriously in a plane crash. Military dictators don't necessarily retire or fade away in Pakistan. And while I certainly don't wish General Musharraf ill, it wouldn't be hyperbole to say that his termination as president could come with extreme prejudice.

The general is cornered. His tough-talking interviews are not going to placate the protests against him. Perhaps what Imran Khan was trying with the students causes the most concern to the military, and it is not surprising that he would be dubbed a terrorist – not because he was planning terrorist acts but because he was igniting the fuse General Musharraf's army would worry most about.

While the protests continue – accompanied by a chorus of threats from Western capitals about cutting aid – General Musharraf himself must be worried about that his political slippage. The idea of him stepping down is now not only an anathema but would be political suicide from his perspective. Though he has tried to play down the situation by promising elections, and even saying that he would relinquish his army post but remain president, he must dread John Negroponte's forthcoming visit. Under the circumstances, how warm will Mr. Musharraf's hospitality be to his hangman?

President Musharraf could simply ignore Mr. Negroponte's "advice" as the meddling by a foreign power in the domestic affairs of a sovereign state, albeit one that traditionally has been a geopolitical ally of the United States, and one whose partnership is central to Washington's war on global terrorism. Mr. Musharraf rules under the Provisional Constitutional Order – in effect, a military diktat to sanction the emergency – and he and his friends are putting immense pressure of the judges of the provincial High Courts of Pakistan's four provinces to take a new oath of office. This would reinstate the High Courts, allowing the federal government to keep the nation's Supreme Court suspended. This, the general hopes, will give him some legitimacy beyond the dubious provisions of the Provisional Constitutional Order. Reports have been pouring in that each of the judges of the High Courts are visited a number of times a day to pressure them into taking the new oath.

Secretary Negroponte recognizes that there can be no return to even a semblance of normalcy in Pakistan while General Musharraf is still at the helm. This would be the ideal time for one to be fly on the wall of the Pakistan Military Headquarters where the Joint Chief of Staffs must be meeting. It is not beyond imagination to think that pressure from within the army must be mounting on General Musharraf to step down, and allow the smooth transition to civilian rule. Indeed, there's the precedent of General Aslam Beg in 1988 arguing an identical point; it would not be unlikely to see some of the Corp Commanders – the equivalent of the joint chiefs of staff -- trying to impress this position on general Musharraf. This is all the more possible considering that the general has claimed he allows "full democracy and expression of views" by his army officers.

If, as expected, Mr. Negroponte makes it clear to General Musharraf that the US position with respect to him has changed, it would mean not only a change in Pakistan's governance. It would send a strong signal that will allow a change – whether from internal pressures of the army or as a result of America wanting to be an honest broker for democracy – allowing an interim government where a return to democracy will be possible. It is also possible that since two of general's closest advisors are his former military secretary -- now heading the Inter Services Intelligence -- and his wife's relative -- who heads the Military Intelligence -- the chances are he could be fed information he wants to hear rather than what needs to be heard by President Musharraf. In other words, the general and his cabal will all be living in a fool's paradise.

While the general may feel he and his cabal have the situation under control, it is clear that having promising elections but keeping politicians either locked up or in exile can hardly be salutary to President Musharraf's cause. Nor will such continued condition be perceived as a sane act of a man supposedly committed to the fashioning of a democrat system in Pakistan, however daunting the task. Perceptions do matter in the daily life of individuals and institutions, and of nations. Right now, General Musharraf's army is seen as hostage takers of the country rather. President Musharraf would rather have himself and his uniformed caudillo be seen as brave saviors. And while he can dictate governance for the moment, unfortunately for him Mr. Musharraf cannot reshape perceptions that are solidifying that the time has come for him to leave with his dignity – and neck – intact.

Sher Value: Oil to score a century!

2007-11-20T11:40:00.000-08:00

Crude oil prices will, most probably, breach the $100 per barrel mark, and perhaps by an easier stride from the mid nineties where it stands perched today. However, there is more to the issue of oil prices than just watching it in the nervous nineties, its perhaps the most fabulous story on commodities. Between 1999 and 2006 the price of oil moved from $10 to $60, and between 2006 and now, the end of 2007 it has moved from $60 to $96, and for once none of these increases can be blamed on the OPEC or any political or economic maneuvering of the oil cartel. To put this rise in perspective assume a country exporting 2 million barrels of oil a day in 1999 was earning US$20 million per day, and today the same country is earning US$192 million per day!

To understand this phenomenal rise we have to look at the massive demand for energy that growth in India and China have been witnessing. China’s demand for oil has more than tripled in these seven odd years. There is little evidence that this global demand will slow down and a world recession, while possible, will have to be quite severe to bring this engine to a halt.

As OPEC ministers meet in Saudi Arabia it is not only clear that an output increase is not on the cards but surprisingly some members are arguing that perhaps it is time to dump the dollar as the reference pricing currency. While a continued fall in the greenback value will hurt the purchasing power of oil earnings, and the market will price in ‘compensatory increases’ for the price of oil. This is partially responsible for the recent up ticks as oil inches towards the 100 mark.

However, the price of oil is not only about demand and supply, but also is related to future demand and future supply. As demand has been growing we have to remember that oil reserves are growing at less that .75% per year. In the past two decades new reserves have been discovered at the rate of about 3% per year. What this means is that if oil demand has grown by an average of 12% a year over the past decade then new reserves have only been created at one fourth that level clearly implying that into the future there will be serious supply constraints. While high oil prices will spur on new oil explorations, the cycle of discovery to actual oil production does take a few years to achieve.

Long term economic modeling will suggest that a recession on a world wide scale may perhaps be the best thing to calm things down, the simple truth is that the engines that are pumping away in the emerging markets, and consumer led demand will be hard to reign in. The US was consuming 16 million barrels a day in the 1970’s and today its consuming 22 million barrels but the growth has been elsewhere. Try and imagine if every Chinese and Indian move to own an automobile, scary thought right?

Sher View: Pakistan: a fragile moment.

2007-11-14T09:05:00.000-08:00

After a jet lagged appearance on Riz Khan's talk show on Al Jazeera International, I have had time to reflect a little more deeply on the situation in my country. To say these are precarious times would be an understatement; Pakistan is perhaps at its most fragile moment since its independence in 1947. It is blatantly clear that self interest, which has been the hall mark of most of the nations leaders, be they in uniform or not, has begun to unfold in a sadistic soup of side deals, broken promises, exiles and finally the show of the power of the gun muzzle through 'emergency powers'. 160 million souls have now been again imprisoned behind the shadow of a political intent that is clearly only serving the handful who have decided to determine what is best for the country.

Sadly this attitude and apathy is not confined to Pakistanis only; the United States and others have taken the position of a rhetorical slap on the hand of a general who has gone mad, while hoping their political contriving with just one political leader might be the solution. In the backdrop of this the country's former Chief Justice, with perhaps the record of being the only Chief of an apex court to be dismissed twice in succession, has forgotten his oath to uphold law and taken to supporting a political rather than a legal position.

As emails pour in from observers and friends from abroad wondering why Pakistan is trying to commit political suicide there is a lack of solutions. As the general promises elections one can only wonder if these elections, if and when they are held, can mean anything with an election commission that will partial or indeed with only one political party being a serious contender. It is all the more baffling to note that in the middle of this turmoil an extremist insurgency continues in Waziristan and Swat where militant Islamists have raid their own flags, torn down Pakistan's flag and essentially declared their own Emirate. If the general wanted to combat extremism there is no evidence that he has moved against those elements who clearly have committed treasonable acts and even more surprisingly the former Chief Justice has not felt it worthy to condemn what is clearly an act of treason.

Interestingly the view that some might feel, in the West, that between General Musharaf and Benazir Bhutto there is perhaps a possibility to curb 'terrorism'. In the first place home grown militancy is not linked to Al Qadea, but more a knee jerk reaction to Musharraf's failure to deal with the causes of the resentment within the masses. There is no doubt in my mind that unless a broad based return to a truly democratic system does not occur the political and social will to deal with militancy will not emerge. It is clear that even the religious political parties do not want militancy like that in Waziristan but this is something that has not been understood by General Musharraf and his minders.

It would seem that as this political stalemate continues, even though a placating promise of an election might be some ray of hope, the reality is these are all truncated solutions. There is not enough people power on the streets to topple the general and perhaps only Imran Khan, cricketer turn politician understands that unless the students do not take to the streets the only hope is that the generals comrades in uniform either convince him to back down or take the measures to be a true obundsman for the country and bring some change to the system. Yet will the politicians promise in return not to go back to corruption and nepotism which seems to have been the hallmark of each civilian government. This is, as I said, a fragile moment and its time for Pakistanis to think of the country and not themselves.

Sher View: The General Totters

2007-11-08T15:44:00.002-08:00

Being in the boots of General Pervez Musharraf is not one of the things many Pakistanis would desire, particularly right at this moment as he implements the suspension of the Constitution and imposes total military rule -- against the warning of the Bush Administration -- in one of America's longtime allies in the volatile South Asia region.

Faced with a possible Supreme Court judgment that would have gone against his Presidency, a controversial deal with former Prime Minister Benazir Bhutto, the bundling off of another former Prime Minister Nawaz Sharif, and the rising pressure of militants in his own backyard, clearly General Musharraf was and is a cornered man.

For the past year or so the military strongman clearly lost his touch, if not the political momentum: his handling of the firing of the Supreme Court Chief Justice and storming of the Lal (Red) Mosque barely 200 meters from the Military Intelligence Headquarters were more than mere embarrassments; they showed that the General did have a conspicuous chink in his armor.

While he tried a political foxtrot in the last few months favoring Benazir Bhutto to return in exchange for an amnesty on possible convictions against her on corruption charges -- presumably with an understanding from Ms. Bhutto that the General would remain as the President -- it was becoming clear that the General was not politically savvy about what he was getting himself into. His handling of sending Nawaz Sharif back into political exile in Saudi Arabia -- the country that had guaranteed Mr. Sharif not returning to Pakistan for at least ten years -- clearly showed that the General was picking his favorites among which political opponents would be permitted to come back home from abroad..

What happens next?

The Bush Administration -- which gave Pakistan more than $10 billion, mostly in military aid, since General Musharraf seized power in a bloodless coup in 1999 -- is scarcely pleased with what the General has donem It is more likely that the Europeans will take economically effective steps against Pakistan’s regime. The Americans will have to balance things given that Musharraf will use the martial law as the necessary weapon he needs to go after the militants of Al Qaeda and Taliban. With press freedoms curtailed or restricted, and military force rather than para-military rangers fighting the militants, his bet will be for quick results if Mr. Musharraf wants some semblance of acceptability in the White House again..

While it is possible that there will be mass political rallies against him in Pakistan -- a land of 177 million Muslims of many persuasions -- it is highly unlikely that General Musharraf and his generals will be as tolerant of street demonstrations as they were during the uproar over the Supreme Court Chief Justice's firing. Benazir Bhutto will perhaps come out of this politically for the worse, finding her deal with the General scuttled. And even though she was acquiring some kudos for speaking out against terrorism after the attack on her convoy upon her return to Pakistan from her exile in Dubai,, she will be hard pressed to prove that democracy was really her sole motive for returning to Pakistan.

The martial law and the General’s sudden about-face actually will favor Nawaz Sharif, who in exile with the Saudis as their "guest," is going to gain the most from this turn of events. It will help him all the more since it seems that the United States had pressed both the General and Benazir Bhutto to come to some understanding; I am told reliably that some American officials urged Musharraf not to undertake any discussions with Nawaz Sharif.

In the street politics of Pakistan this is a huge dividend that Mr. Sharif can encash as and when he wants.

It is possible that General Musharraf acted to pre-empt any dissension within the army ranks. With the November 15th court judgment expected against General Musharraf's presidential election, it is possible his generals were getting uncomfortable about his personalization of the political challenges before the country.

It would well be that the martial law might have staved off any possible attempts by nationalist inspired Generals within the army. One of the most difficult aspects to fathom will be the reaction of the command line generals who have not always felt comfortable with performing martial law duties. Even though since the times of General Zia ul Haq -- one of Mr. Musharraf's predecessors as army chief and president-by-coup -- the army was highly politicized, it cannot be guaranteed that these generals will follow the edict of a President and Chief of Army Staff who seems to be battling more for his life than for his country.

For Pakistan and the region this is a precarious and fragile moment, and martial laws may not be the solution. While dealing with the militants may seem easier by comparison, there is no doubt that the political drama that is unfolding will not end so easily.

General Musharraf has merely written out the first act of a drama the Pakistani public is well versed in, but as with all such dramas the audience has no loyalties. Sadly enough, with Ms. Bhutto'’s political juggling and Mr. Sharif fuming in Saudi Arabia as a "guest," the chances are that General Musharraf will have to have a head-on clash with political forces within the country and most likely within the army.

Only the next few weeks will tell us if the General has truly tottered and fallen. Until then, this past weekend's troubling developments will remain a precarious tangle in Pakistan’s sad political history of military meddling, Islamist maneuverings, and the shredding of the social order.

America may well lose a key ally in the region in its war against global terrorism. It is difficult not to despair about Pakistan's prospects. It is even more difficult bot to despair over the incipient possibility that America's enormous economic, military and political investment in Pakistan may well have been for nought.

Sher View: The General Totters

2007-11-08T15:44:00.001-08:00

Sher Value: Alternative Energy

2007-10-31T02:39:00.000-07:00

Back two decades ago there was a consensus that when oil prices were consistently above US$ 30 per barrel the move towards alternate energy would be spurned on to reach a commercially viable solution. Now with oil in the mid $80 range, and in my opinion set to eventually cross the $100 mark, it is surprising that alternate energy is not the hottest topic on the scene. Indeed a lot has been done in the past two decades and perhaps now we can see a major effort forward towards solar and other alternate forms of energy emerging on the market.

In the US work is underway for a 550 megawatt solar thermal generation plant in the Mojave Desert, which will provide power to over 400,000 homes. In addition Spain, Morocco, India, Iran and others have solar power generation projects underway, which produce anywhere from 30 MW to 354 MW of power. While such power plants will not be the suppliers for huge industrial consumers they will take the place of valuable conventional power generation. Just imagine if all the homes in UAE could get their power needs from alternate energy.

We also have to consider that sooner or later the use of nuclear energy will be a cleaner and more efficient way of mass power generation in the future. Thus it is not far from conceivable that in the coming years perhaps countries like UAE and Qatar will consider nuclear power plants to replace the conventional energy generation. This will mean that the current myopic view of nuclear energy will have to change, and with the right safeguards should actually be encouraged.

It is also clear that with the current concern for the environment and global warming the impetus for alternate energy sources will gather pace. It is inevitable that we will have to consider a wide variety of generation needs, and indeed the government should consider incentives for those businesses who deploy clean, safe and efficient alternate energy systems.

The current predictions are that solar power generation will become more efficient and while today it would cost 15 cents pr Kilowatt hour it is estimated that within a couple years, and as more systems are deployed, the cost will come down to 7 cents per KWh, making solar energy very competitive with the oil and gas fired traditional power generation technologies.

We are at the point where alternate energies can be sustainable and to do this we need to create an encouraging atmosphere and this where a major effort towards legislation and financial support should be considered. This is the right way forward and nothing could be more positive than an oil producing country to also embrace the idea of solar and other alternate forms of energy. Interestingly, UAE is making a commitment to go Green and also is one of the countries listed as the most suitable for generating solar energy. Lets do something about this.

Sher View: Thinkers on Iraq.

2007-10-23T19:00:00.000-07:00

I was recently fortunate, thanks to the brilliant organization skills of my friend Pranay Gupte, to meet with some of the delegates that attended the Festival of Thinkers in Abu Dhabi. While I am not personally prone to large 'festival' type functions where presumably 'thinking' would be the order of the day, I prefer the smaller five to six people around a table conversation, I was nevertheless quite fascinated that people were, rightfully so, concerned about the Iraq war and the region. I felt genuine concern for what is happening in the region and most of all there seemed a resonance of searching for a way out of the 'mess Mr. Bush and Co' have created.

After over 34,650 violent deaths in Iraq in 2006 alone, (averaging close to 100 per day) one has to wonder what indeed are the benefits of this entire episode. But calling it an episode would be a blatant understatement, and indeed one without any remorse or feeling. Iraq is a tragedy on a scale that will haunt Arab politics and, more importantly, the social fiber for decades to come. Beyond the bombed and mutilated bodies there is a bigger price to pay for a failed state. If Saddam Hussein created the failed state of Iraq through his ruthless dictatorship, the events after the invasion of Iraq have taken the concepts of a failed state to an art form.

Iraq's embroiling mess of blood and tears and endless tragedy is also a failure of Arab Leadership, who have silently watched the piecemeal destruction not only of the Baath political apparatus but the dismantling of society to the point where life for the common Iraqi is nothing but painfully fragile. While US policymakers have recently distracted the debate to Iran and its possible nuclear ambitions, which God only knows are well founded or not, the reality is being forgotten that an unstable Iraq is in nobody's interest, and least of all Iran's. However, Iranian leadership misguided as it is also is propped up more by American pressure to remove it than by its own 'wise' policies. So long as Ahmednijedad can stand up on center stage and be seen as standing up to the US, the system within Iran cannot change him for a more moderate leadership; that is how Iran works.

I was asked often, 'how does the US solve this mess?' I do not have an answer, I have some wild guesses, but clear cut answer through the smoke of gunpowder and killings is always next to impossible. I will, in respect to the illustrious names who asked me that question venture a guess.

Iraq needs stability and it needs Arabs to provide the stability. This means that the Arab leadership should consider, with US encouragement, the creation of an Arab or Muslim peace force to go in and replace all American and their allies in Iraq. In addition a format for a large government of national reconciliation be 'nominated' by the Arab League, to stir Iraq through this transition phase. This is the only possible solution till the domestic situation can be calmed down to the point where a modicum of stability and peace comes to the war torn country. This allows the US a withdrawal from the region, allows both the Arabs and the Iranians to take a stake in the stability and peace in their own backyard and atleast sets the path for some possibilities for peace.

Sher Value: Thought and Action

2007-10-22T20:10:00.000-07:00

As the ink on these pages begins to dry out, hundreds of delegates to the Festival of Thinkers will have commenced the proceedings of the gathering, which brings together Nobel Laureates, powerful media personalities and people who have made a difference. While the Festival of Thinkers conjures the image of a hall full of people sitting in exaggerated poses, hand under chin, contemplating and pondering, the reality is that it sets a wonderful stage for bringing together people on a platform from where if nothing, understanding will emerge.

We do live in a fragile world, where issues from global warming to man made political disasters are threatening large populations of humanity. There is a greater effort being made to destroy what humanity has rather than build something for the future. It is therefore all the more important that efforts like this Festival serve not only as a platform for bringing people together for discussions, but also to move the mind set into action, into creating concrete accountable action plans for change.

Today there are hundreds of alliances and foundations for bringing change and welfare to humanity and earth, and they all are carving out a nice, positive role. What we need to consider is to move the envelope of experience further out, and think of such a platform as the Festival of Thinkers to become the aggregator of these alliances under a banner of ‘humane thought’. Such a collective will serve a huge purpose to aggregate alliances, charities and foundations to bring about structural changes in the body of society and economic and eco systems to allow for sustainable recovery. The most vital element today is coordinating the efforts of so many noble minded alliances and charities into a concerted policy of action .

Some years back I recall with the earthquake in Pakistan there were tons of agencies, charities and foundations pouring in aid, and resources to help in the earthquake devastated areas but it cannot be over looked that a large number of these relief efforts were actually duplicating themselves, causing actually a waste in the system of care. The Festival therefore allows people of a diverse range of cultures, educations and attitudes to sit together an work out an agenda of social change which will be followed up and not merely left behind on the delegates tables to be cleaned out the next day.

We live in a world where we need understanding, compassion and empathy. We need to understand why we have, mostly in the past 100 years, undone the quality of life that our future generations could have enjoyed. We have to pause at this moment and create the synergy that is needed between thought, business and compassion. Our model of tomorrow cannot be politically utilitarian; neither can it be economically and socially myopic because the results of these will be catastrophic. A Festival of Thinkers must create an idiom of thought which will force us to make a difference.

Sher Value: Good Business or Bad Business?

2007-10-07T19:58:00.000-07:00

Living in an ever shrinking world we are no longer isolated from the events that happens miles away. The famines of Africa, the effects of the Tsunami, the plight of children around the world, are all now in our face, and thanks to some TV channels, 24 hours a day. This is truly the ‘nano-second’ age and in such and age there are two options; either do something, or simply turn off the TV.

Over a decade ago, as a young CEO of a bank I was asked as to the reasons the bank supported causes like the WWF, the Arabian Leopard Trust, MSF and many others, and I recall saying if business cannot accept a social agenda for the betterment of people and earth then its not good business. I recall it was around 1992 when I had said that and most other CEO’s called to tell me I was losing the plot of running a bank. Perhaps plots are meant to be lost, perhaps we need a vision to make a difference.

Both Dubai and Abu Dhabi have launched high profile drives to raise money, and more importantly, awareness, to causes that concern the human condition. While Dubai had started a program of care towards education around the world, Abu Dhabi has taken up the challenge of a broader format, and in both cases the response from the public has been over whelming. I read somewhere that the US government spends over US$ 1 billion at the Pentagon a DAY! Now factor that into health and education around the world and instead of swords we create pens and clinics, I have no doubt the world will not only be a better place but a safer place.

So then why is the message of ‘good business’ so hard to get, because simply put it is putting your profits into social good which in turn brings you more expansion as the market place becomes better and vibrant. Perhaps because the near term gain is more important, cutting down forests for a profit seems better to some then perhaps creating forests that will replace what we mow down.

Indeed man has wrecked more havoc on man himself than nature and in it bad business, has never played a glorious role other than to further its own cause. The resulting impact has been that only now the big business companies are beginning to become ‘energy companies’ rather than simply ‘oil companies’ and with oil at $80 a barrel alternate energy and clean energy becomes an item on their agenda.

Then there is the bad business of governments, where conscious is abandoned for gain, where India’s oil minister signs three oil explorations contracts with the Burmese military junta the same day the streets are filled with Buddhist monks being shot at, where the issues of climate change are pushed aside into the rubbish pile where other agendas of social change lay buried. Good business and good government are getting together to make a difference and that’s the good news.

Sher View: Burma is India's Litmus Test

2007-10-05T20:08:00.000-07:00

India has always celebrated its successes, as indeed would many countries, both in its domestic and foreign policy, around the principles of democracy, secularism and Mathama Ghandi's principles of non violence. While India today boasts of its secular ideals, and perhaps rightly so, it has sadly betrayed Ghandi's adherence to non violence in its support for the military Junta in Myanmar (Burma). On September 23, 2007 as demonstrators were gathering in Rangoon and other cities, Indian minister for oil was in Myanmar signing three agreements on oil exploration and quite blatantly ignoring the uprising of the monks without making a single reference to the trouble on his return home.

Today India runs a trade surplus of US$400 million with Burma, largely made up through the export of military hardware and ammunition. Faced with growing influence of China with the Myanmar regime, India, ten years ago, commenced it policy of engagement with the regime in Myanmar. While China, being a non democratic country can be expected to do no better, but India? Interestingly the Indian press and public support the pro democracy movement, a fact that the Indian government continues to ignore.

India cannot go on sitting on the sidelines and ignore the role it must play in bringing about change in a country where guns and ammunition supplied by New Delhi are mowing down peace loving Buddhist monks. It is time for a change in policy and it is clear that unless China and India do not change their policy on Burma, the chances are that there is little than the world community can do to help the pro democracy movement. While changing perceptions and policy is China are next to impossible, India on the other hand as a conscious to answer for, a conscious that seems woefully lost on its own leadership.

Sher Value: The Pressure of Growth

2007-10-02T20:38:00.000-07:00

Growing an economy and expansion are the hallmarks of a successful business model and indeed in this sense the UAE has set a wonderful example. As skyscrapers move even higher into the stratosphere, and new hotels pop up with the regularity that is almost predictable there is a perceptible pressure for services building up. While this is inevitable that service standards do suffer through an expansion phase of an economy, good planning should, generally speaking, rid one self of the complain of bad service. However, the adherence to quality is more a buzzword and it is becoming appalling to see how a lax attitude has come into some of the service sector, to the point where the customer does not matter.

A 30 day wait to get an internet connection in the Jumairah area, a 15 minute hold on the phone to make a claim, a 10 day wait to get the simplest information back from a bank, or indeed a 30 minute lapse for a cup of coffee changes the meaning of the phrase ‘instant coffee’. There is no denying that growth in the country has stretched the resource side of the market to the point where it is more than strained, but then where were the planners, the trainers, the human resource specialists all planning for the boom?

There are three distinct phases of the process; design build and operate, and it is at the latter part of his process that the model is beginning to fall off the seams. What is surprising is that this is happening at all the scales of the economic spectrum, so bad service is as common with the major telecom company, as it is with a coffee shop on Sh Zayed road. Why isn’t anyone doing something about it? Well simply put the business is already too good, so if a few customers go to bed complaining about things then so what as there are enough waiting in the sidelines. This is indeed the worse possible thinking in a situation like the one we are currently faced with.

Here are my suggestions; stop all Quality Awards immediately because companies that have already won the award have little interest in quality and the ones who have not won it really seem more caught up in making money rather than being ‘good’. Secondly it is high time that a customer care system is put in place to deal with complaints and please given them enough operators so that phone is atleast answered.

The country is on the cutting edge of the financial and service sector and needs to compete and needs to renew its pledge for service. This can only be achieved if there is a clear cut recognition that we currently have a problem of deteriorating service and attention to detail and this is hurting the image of the country. Too much has been invested into the country for a brighter future to let a bad service at one point of contact with clients to tarnish that image. Things need to be fixed and fast!!!

Sher Value: An elegant end.

2007-09-25T08:27:00.000-07:00

Just when we thought we are going to be in for a long fight the tables turned neatly with the announcement that Borse Dubai and Nasdaq had arrived at a settlement where by after the purchase of OMX, Borse Dubai will swap all the stock for a stake in both NASDAQ and the London Stock Exchange. In a sense it clearly shows that the spirit of compromise was there on the side of Dubai and that its interest in OMX was not so much about controlling all the stock but to consider viable investments, irrespective of the size of the shareholding. From Borse Dubai’s perspective that is important is that with this deal they get 20% of NASDAQ shares and 25% of LSE stocks, which are significant shareholdings in the exchanges.

The announcement has barely hit the airwaves when there was noise about the ‘implications’ of this deal on ‘US security’. Some have argued that this is reminiscent of the DP World’s take over of P&O which resulted in 6 US ports being owned by DP World and what followed was an over exaggerated drama on security and others aspects. In the end the 6 ports management was sold off to other operators allowing the P&O deal to continue. Senate Banking Committee Chairman Christopher Dodd called for a ‘careful review’ to ensure that there are no security implications from the deal whereby Borse Dubai owns 20% of a US stock exchange.

I find politicians to not only be naïve but also seriously myopic. The honorable Chairman Dodd should ask for the foreign holdings report from the US Treasury department, and indeed he will realize that a 20% stake in their stock exchange is the least of the issues. Foreign Holdings of US treasury debt have increased by 50% between 2003 and 2006. In addition more than half the US current account deficit is funded by foreign government purchases of US Securities(US$448 billion in 2006). Between China, Japan and the Arab oil producing countries they hold 60% of US securities and any decision by them to reduce these holdings will cause a serious damage to the US financial system.

NASDAQ is a US$ 4 billion market cap company, hardly the sort that would cause a national catastrophe if 20% of NASDAQ is owned by Borse Dubai. Indeed as President Bush said a review of the deal is needed and Democratic leader Nancy Pelosi call the deal as being different from the ports deal and more a ‘marketplace’ issue and nothing else.

The hawks in Capitol Hill should be careful about raising the hysteria level too much on what is a simple financial transaction. Let me assure you that a 20% stake cannot do any harm to US security as it does not even give the new shareholder the power to appoint a doorman at the exchange entrance. The vulnerability of the US financial system is through the foreign holdings and more a result of economic weaknesses, as indeed a continuing slide of the US dollar makes the investments for foreigners less attractive. So stop worrying about friends buying some stock.

Sher Value: OMX bid

2007-09-18T03:42:00.000-07:00

In the long history of bidding wars, the OMX issue will eventually go down as just another bid. However, the detail in the fine line is always difficult to read; quite simply NASDAQ, the US exchange, bid $3.7 billion for OMX the Nordic exchange. A few days later Borse Dubai bid $4 billion all cash for OMX, in comparison to the partial cash, partial stock deal of NASDAQ. I am no rocket scientist but clearly the Borse Dubai deal is better, but the surprise is that the management of OMX led by Magnus Boecker have seemingly thrown in their lot with the NASDAQ bid.

First of all the rules of any bid are that the management of the company does not take sides. Secondly, it would seem that the NASDAQ proposal is for Mr. Boecker to the chairman of the combined company that will be created by the NASDAQ-OMX combination. Mostly importantly, the NASDAQ bid also assures the senior management will be given generous pay rises which are built into the plan that NASDAQ has submitted for the combined company.

In the most lenient analysis one cannot escape the fact that management is being bribed by the offer, and clearly it is in their interests to work against the Borse Dubai bid for the company irrespective of the merits of the case. The Wallenberg family, who own 10% of the OMX stock have also joined the fray with comments indicating that the NASDAQ bid might actually be higher when analyzed compared to the Borse Dubai bid! This I must see because the NASDAQ offer in August included a swap of stock of 0.502 stock of NASDAQ for each OMX share that are ofcourse susceptible to the vagaries of the stock market. Nevertheless to say that $3.7 billion is more than $4 billion is not the sort of thing that one’s math teacher will be very proud off.

We also have to consider the argument that a transatlantic link up for OMX is better than a link with the markets in Dubai. NASDAQ’s bid comes on the heals of its failed bid for the London Stock Exchange, and increasing pressure from changes to the way securities are being traded in the US, i.e. the proposed Goldman Sachs ‘single dealer platform’ which will drive exchange driven benefits more into a seamless electronic trading environment. But then this could all be an ego trip for Bob Greifeld, the CEO of NASDAQ who loves to battle; just consider the recent move to block LSE from issuing new stock to funds LSE’s proposed take over of Borsa Italiana.

Compare the conduct of NASDAQ as it battles at home, goes nasty after a failed bid for LSE and then basically is offering silver spoons to the management of an exchange it is trying to take over.

In contrast for OMX the opportunities that come from joining one of the most dynamic financial plays of modern history cannot be under estimated. In the first instance the liquidity that comes from the Gulf and through Dubai is phenomenal and through my days as a banker I know that fund managers love investments coming from this region. What OMX will find is a new doorway opens to them, rather than enter portals into the US market that are frankly well traversed and over valued. Yet I would close on the note that NASDAQ doesn’t fight clean, but were it another other competitor than Brose Dubai, who don’t like ugly battles, the chances are Bob and Boeckr would find themselves fighting legal battles for what is essentially a pay off to management.

Sher Value: Inflation Monster

2007-09-08T20:46:00.000-07:00

We all, without exception, love growth, it symbolizes that we are doing something positive and the benefits of our policies and hard work are bearing fruit. However, as most economists will tell you, growth comes with its challenges and pitfalls. Some of these can be faced through good fiscal and monetary policy and others can be dealt with in terms of a strategic framework, while not all risks from hyper growth can be mitigated, there is little denying that a good framework is usually a good thing to have.

UAE has been experiencing phenomenal growth, with oil prices having averaged close to US$ 60 per barrel for over a year, a massive expansion in the real estate sector, the growth of banking, hospitality and services all abode well for the future. With growth, usually comes the competition of money seeking those goods and services which become more dear resulting in inflation. Classically, the best way to fight inflation is to have a proactive monetary policy, where indicators are watched and action is taken prior to inflation becoming a chronic problem for growth. Central bank regulators usually balance the needs of economic growth by a variety of measures, the most common and perhaps effective, being the use of interest rates and money supply to either spurt the economy on or rein in too much money supply.

However, for the UAE its linkage to the US dollar creates a unique set of issues, most of which being that while domestic growth has been robust, the UAE Dihram has slid by over 15% last year against the Euro alone on account of the UAE Dihram being pegged to the US Dollar. In addition, while not explicitly stated, UAE interest rate policy closely reflects the movements in the US interest rates creating a dichotomy.

Take the current situation, the US needs to get out of a credit crunch and hence has to make lending easier and provide liquidity to the markets by lowering interest rates. UAE on the other hand had to rein in money supply and curb inflation for which it would typically increase interest rates! While it is commonly stated that a delinking for the US Dollar would reduce the value of UAE’s exports (mostly in dollars) and its investments, (also mostly held in dollars) these adjustments would be notional and allow the UAE to either let its currency float (not recommended by me as it needs active monetary management) or to adjust the peg against the dollar. Ideally, I hae argued that the UAE should create a basket of currencies and adjust its rate against the basket on a regular basis. This will also mean that the UAE Central Bank will have to play a more active part in issuing longer term treasuries to soak in the liquidity and redeem them when it needs to provide liquidity.

UAE, as an economy, is dynamic, robust and becoming more integral to the world capital markets and it has to move away from reactive financial management to a more proactive model. Growth is a great story around the dinner table and something we have to be proud of, but inflation is a pretty stubborn customer that could upset the apple cart.

Sher Value: Labor Issues

2007-08-28T19:51:00.000-07:00

Over the past week Al Jazeera International has being running a program on the issues of migrant labor and while investigative and issue provoking the recommendations are more implied than clearly stated. Indeed for the GCC countries issues of migrant labor are becoming important and this is an issue that the media, especially in the West seem to be catching on to. This does not suggest that all matters related to labor are fine, but in my opinion, if you are to discuss an issue the please also recommend what can be done to improve things.

I do feel that labor conditions will be a major issue within the realm of the media and various interested parties in the next few months. On the back of this attention there are some who are not making distinction between state sponsored exploitation of migrant workers and the breaking of laws by private companies. I do believe that GCC countries are concerned about labor issues and I know from being here in UAE that this is a matter of concern to the government. Over the years a number of measures have been taken to improve the situation and I understand that in the coming months the scrutiny on labor camps will become more focused.

However, a large number of the abuses start before the migrant worker has even arrived here. Many workers will tell you of the huge amounts of money they pay agents in their home countries prior to them even getting on the plane. In many cases, if not all, the agents are charging the worker for services, i.e. health checks, tickets, approvals and the visa cost, for which the employer in the GCC country has already paid the agent.

Thus the worker arrives into the country to work with a huge debt burden on his head, at times equal to a full years wages. This is perhaps the most pressing stress on his mind and results not only in depression but in many cases an acceptance of some harsh conditions knowing that he has not other option. There are a number of measures that need to be taken by all countries to fix these issues. Here are some of my recommendations:

Create an intra-governmental NGO comprising of GCC countries and countries from where the major work force comes. This NGO will be empowered with bringing about changes in laws on both sides that will help the workers.
Impose punitive fines and punishment on employers and agents who violate the laws, and this should be transparent and without exception.
Enact minimum wage legislation immediately.
Create a special insurance and pension fund for workers to which governments and employers will contribute, with the aim that when the workers retire they have a meaningful financial investment.
Improve the living conditions for workers and make it mandatory for companies to bring care for their workers.

It is important that these measures are enacted immediately and done so in a fully transparent manner. The problem is that the intent of the government is there it just needs to be given more teeth.

Sher Value: Bringing Meaning into the company

2007-08-20T20:57:00.000-07:00

As I am planning to join the ranks of motivational speakers I am doing a fair bit if research and some interesting pieces of information are, ofcourse, popping up. However, the more I am digging into the heart of corporate culture and as a consequence, the nature of humans in management I believe some startling revelations surface.

In the first place examining 15 corporate mission statements for companies in the region I was shocked at the way each has used words that either they don’t understand, or words they preached but never really implement. Superlatives such as ‘excellence’ ‘quality’ ‘care’ and others are dropped with such continuity that it is almost as if the proponents of those words in the vision statements of companies want to believe them also.

When one observes the business leaders of these companies with such super vision companies sooner or later, usually before the 15th minute, they have either contradicted themselves or, more commonly, contradicted the very vision statement that they have so eagerly professed on glossy 300 gram paper. In a few cases if one were to refer to the vision statement of the same company as the business leader of the company and without telling him or her you quote from their own vision it is more likely that the business person will not have picked up you were referring to their, not your, vision statement.

Why does this happen?

A variety of reasons but principally a great deal of them believe in the management hype but not the content of the message. In a great number of cases the vision statement was either drafted by a wordsmith from a public relations company or by the coterie around the business leader without the rank and file of the company being involved. In some disastrous cases the by lines of the corporate brand were developed by a marketing and branding company who really have done nothing other than play with words.

The ethos of a company has to be reflected into the communication strategy and not that first the brand tag lines are ‘invented’ and then ‘owned’ by the company. Great companies learn to deliver what they promise, and deliver day in and day out without exception. Companies like Jetblue airways, the low fare airline that created a buzz, have a work ethic that seeps from the top down which shows the care they put in. David Neeleman, the founder and Chairman of JetBlue Airways flies each week on the airline so he can speak to the customers and he lead question is ‘what can we do to improve things?’

More importantly the company operations team each month will deconstruct each delay and examine the reasons for it and what could have been done for the passenger to improve things. The airline has the second best punctuality record of the airlines in the US. The policy on arrival is that within 20 minutes the baggage should be in the hand of the passenger. ‘Give him a 45 minute wait after a one hour flight and that is the last thing he will remember.’ Neeleman knows most of his employees by their first name and drives himself, no fancy cars and a drummed down lifestyle.

Lets learn.

Sher Value: Escrow Law: adeeper look.

2007-08-05T19:11:00.000-07:00

Last week I have established in my mind, unequivocally, that the new law on escrow accounts is indeed in the best interests of the buyer and the market conditions for sure. There are a few refinements to the law, which can be handled through procedures that need to be considered and this is a practical way to see a good law being implemented.

Under the proposed law payments will be certified by the consultants and then the accountants and finally approved by the Land Department. The edict is that the Land Department will approve the payment within 7 days, however, there is no provision in the law to cover the delays. Under current FIDIC procedures, which govern contracts, the employer has 56 days from the day the contractor submits the bill to pay the contractor. In the event that there are delays in this the contractor has the right to claim. These 56 days were determined based upon the time it takes to verify the works, and the documentation of the billing, and hence there never was a chance that a third party (i.e. the Land Department) will check and approve the payment. This means that any delays by the Land Department could most certainly result in a payment delay claim from the contractor. How is this resolved?

Another more crucial element is when there is a dispute between the contractor and the client, then the position of the escrow account and the procedure actually complicate the matter even more. How does then the payment situation resolve itself as under the law as passed there is no provision for the payments to be suspended in such an event.

Interestingly, the banks who are to be the recipients of the escrow funds have suddenly jumped on the issue and some have said that they will have to charge to maintain the escrow account. From what I see in the law the banks have nothing to do in terms of verifying the payments or making any undertaking for the payments. I heard a few developers tell me that banks have suggested a 2% fee for maintaining escrow funds! I think this is totally shameless as banks are not required to do anything extraordinary under the law and I do not see why they should suddenly becomes scalpers in this situation. Indeed I would argue that banks are already holding sale funds that they receive so I do not see any difference on their lives.

One aspect of the law needs to be tightened up is the fiduciary responsibilities of the escrow agents as this is where comfort will be driven into the system. I also feel if escrow agents are specialized accounting and legal firms, as is the case in say the US, then indeed the need for the Land Department to confirm payments does not arise. I am sure these aspects are being looked at and the law will be further refined in its operation.

Sher Value:Finally a voice for the buyers.

2007-07-30T08:20:00.001-07:00

Dubai’s Law no 8, issued in October of last year, but promulgated only last week by its publication into the Official Gazette, brings to the forefront a major development that favor the purchasers of homes. This is a change for a large number of the developers who have been selling off plan units but not linking the payments to the construction schedule. The result of not linking the payments to the construction process has meant that some developers have larger sums of money than the comparative work on the construction itself. For this class of developers the new law will change the way they have been operating.

For those developers who had been linking the payments from the end buyers to the progress of construction the adjustment to the new law will not be an issue. While a few procedural steps have been introduced in the new law, one of he procedures are onerous. Interestingly contractors will like the new law as it will ensure that within seven days of he approval of their bill they will be paid, reducing the risk of delayed payments.

On the face of it the law makes no exceptions for the large developers like Emaar and others who are partially government owned and have established a good track record. In addition, the law does insist on the release of the final 10% after one year and only when all the buyers have registered their units. This does pose some problems as a large number of end buyers do not register their units and rely on the sale and purchase contract as the basis for further sales. I would suggest to the authorities a few clarifications to the law.

I would suggest that provision be made that if a developer is registered with the Department once he would not require re-registration. I also recommend that developers be rated by the Department indicating the number of buildings or projects they have successfully completed and delivered; thus the buyers will know what a 3 star developer is better then a 1 star developer. I would also recommend that provision for the final ten percent be changed to be on either all the units being registered or one year which ever happens first.

The impact of the new law will emerge in the coming weeks. My suspicion is that the speculators who have been buying plots in the past with the intention to flip them will feel the first pinch of the law. On the whole the long term effect of the law will be positive and bring much needed confidence to the market. It must be clear that the law suggests by inference that should a developer build with his own resources and after completion of the building offer completed units for sale the provision of the new law do not apply.

My verdict: a Good law and was much awaited.

Sher Value: Management Ethos

2007-07-22T20:24:00.001-07:00

These days it doesn’t take much for someone to spot a well run company from a terribly run company; all you need is good eyesight. As I move into helping my wife create a new angle to management training by using horses to learn management skills, because horses never lie, I am noticing more things. My vision was always good to spot management practices, but then sometimes we miss out the small detail, and it is there that difference lies.

My case in point of good management manners comes from Dubai Holding, and its many subsidiaries, and I have had the pleasure to visit, on a number of occasions its Chairman and many of its rank and file management and staff. Did you notice they ALWAYS walk you to the elevator and will say their good byes there, even if it’s the Chairman or a manager of small unit of this giant company. Now that is a fascinating management habit, it warm, it’s engaging and most of all a great habit to have. I am told that then they have internal meetings, after the meeting is over everybody, and I mean everybody, will collect their own litter like coffee cups etc and put it away and tidy up the meeting room. No one leaves the room till this is not done. I think this is such a refreshing approach to management, team building and camaraderie that it is almost bespoke and is the hallmark of a company destined to achieve a great deal more.

I have also seen many other companies who could learn from these examples. There are numerous examples of bad management practices too. You walk into some offices and you feel that air of management neglect. The place reeks of it, people’s hollow smiles, and the silent fear are all visible. One has no option but to stand back and evaluate how a company that cannot take care of its people progress. I often have argued that before we are about being in a business we have to first accept we are in the people business.

Many companies have got this wrong, they will under pay, mistreat and allow the worst sort of politics and practices to come into the office environment and then they wonder why people do not work for the company with zeal and enthusiasm.

I am indeed impressed that a huge company like Dubai Holding has developed a management ethos that is so powerful and visible from the outside. It is all the more important because being what Dubai is all about it highlights the management ethos that almost becomes a trademark of its own. Indeed some of the best management practices are rooted in a sense of humility and sincerity. One has to hope now that others will notice and emulate this example of good management. The dividend of this is unseen and unmeasured but trust me its perhaps the strongest item on the balance sheet of the company: Management Ethos.

Sher Value: Class Actions-A Matter of Business

2007-07-15T20:25:00.000-07:00

One of the amazing things about the promotion of capitalism and free economy is that even what are ostensibly service sectors get into the act of making money. Back in the 1960’s the idea of a class action suit was to reduce litigation costs and to bring some equity into the claim process should the class action be successful. It was a bold legal principle meant to champion the cause of the under privileged and the poor who could not afford a battle against a corporate giant.

Fifty odd ears on and class actions have become a business; some banks also have created private equity funds that back the legal and associated costs of class action battles. The result is that mushrooming of court dockets with class action cases some of which have little to do with justice than with the issues of commercialism.

The case of the case against Wal-Mart, Dukes versus Wal-Mart, filed in 2001 indicates how an employee, Betty Dukes, who was reprimanded by a female supervisor for prolonged lunch breaks, brought a $11 billion class action suit against the company on the basis of alleged sexual discrimination at work. Seven years later the battle continues with major funding backing Dukes s the idea of preying on a corporate giant is appealing to many; irrespective of the merits of the case.

Class action lawyers are not the sort of folk I will have for dinner, (does that mean I have violated some right of theirs), not because I question their social or legal skills, but simply because its too predatory a practice for me to accept. I am all for the underdog, I am all for justice, but can I accept the fact that most class action lawyers will take close to 60% of the settlement in cash. In some cases we find that some of the plaintiffs end up with ‘coupon settlements’ where all they get is coupons to buy more of goods and services from the defendant company, while the lawyers, nit surprisingly, have walked off with most of the cash settlement.

The expansion of this phenomenon has developed two aspects, one is where lawyers are trying to establish international jurisdiction of US courts for class action cases and secondly a move is under way to expand class action norms into the European legal system. This is a dangerous trend as it makes a mockery of what were essentially legal principles to establish fairness and equity. There is talk of bringing class action cases against a number of countries over issues of labor law and other human rights issues. While I am all for fair treatment of people I do have a major problem with American lawyers taking such aggressive positions ignoring their own track record. Have forgotten that some of the ‘Black Code’ laws of the Southern States in the US were formally abolished only about a decade back. Perhaps there is an argument for a class action case against Mississippi for allowing the Jim Crow laws and the Black Codes to continue so far into the progress of human history, and why not file that case in New Delhi? But then this is business not justice.

Sher Value: Take Over Fever & Diversification

2007-07-14T22:42:00.000-07:00

The news is all over the place, a stake in EADS, Barneys under bid, Bank stakes being claimed and the list is getting to be endless. There is a plethora of equity and acquisition deals being done from the Middle East into the Western markets. The deployment of overseas investments representing money leaving the Arab world for investment abroad just this year alone has been estimated at US$40 billion, and probably does not include the reserve transactions from public sector strategic investments. It is estimated that the Kuwait Investment Authority, KIA, according to one public source, has reserves of US$213 billion, and indeed a great deal of this was rebuilt after the devastating impact of 1991 political developments in the region. My personal guess, and I emphasis only a guess, is that the reserves of the GCC countries are perhaps more than $1.2 trillion and perhaps represents the largest singular segment of investment buying power in one region.

Indeed there are a number of countries who singularly have a higher Gross Domestic Product, GDP, than the entire GCC bloc, but it's the financial reserves, especially when related to the population and the investment opportunities within the region that count. Even though the real estate and infrastructure of the region has been expanding at what seems a break neck speed, in the larger scheme of things we have to accept that the growth of financial assets and financial reserves has been more robust and consistent in the past decade than anything else. This means that financial assets and their accumulation is far outstripping the growth in say the real estate sector.

What this does mean is that even though the strong liquidity in the market will continue to fuel the real estate expansion, in addition to other elements of diversification, the need for liquidity to go overseas will be a major drive of the investment philosophy and it is something that cannot really be avoided. The acquisition of financial assets and companies is a normal behavior of this strategy.

As much as targeting mature companies in business conditions where they are either undervalued today or are likely to be great investments over the horizon the strategy again is really akin to stock picking. However, there is an argument to be made of going into economies where the business case is more of an emerging market, where companies may not have emerged into the limelight. I believe both India, and China, and other smaller economies have a number of companies who would be ripe for acquisition and actually be propelled onto the world stage through modernization and proper systems and business positioning. This is where the marvel of capital and expertise can best be applied, keeping in mind the impact of these emerging economies is massive and ignoring them would be a vital mistake.

Sher Value: Conservation and Construction

2007-07-04T08:53:00.000-07:00

As the week came to an end, for a long time Gulf resident, the news of Oman's Arabian Oryx sanctuary being closed off and losing its Habitat status with UNESCO was a sad event. Once this sanctuary, largely supported by the Government of Oman and PDO (Petroleum Development of Oman) boasted of close to 400 Oryx, today has dwindled to only four pairs of breeding Oryx, as a result of a number of factors, ranging from poaching to mismanagement. This is clearly a case where the intention to do good was always there it was just managed in the wrong way.

For those who know me are aware that I have always advocated conscientious development and this implies the need for sustainable development and most importantly to preserve the natural resources of the country and the region. Indeed, natural reserves like Al Maha are having populations of Oryx that can be developed into sustainable herds, as indeed the program that Abu Dhabi under ERDWA has launched for sustainable sanctuaries. These are important programs and they need careful planning and support.

While there is a propensity for people to believe that because the government has a great deal of money public and corporate funding is not needed, the reality is that we do need the corporate level to be involved in these efforts because if nothing else they increase awareness. In addition, as we continue with the construction boom, we also bring a much needed awareness to the issues of conservation and environmental impact. Admittedly in the past two odd years I have seen the authorities to get really strict about environmental impact of projects a great deal more needs to be done.

As we go off reclaiming land from the sea, and tearing down yet another sand dune we have to be aware that we are dealing with a very fragile environment and steps we are taking today will have profound and perhaps irreversible impact on the environment and the flora and fauna of the region. Call me a traditionalist but I did enjoy, not too long back, the early morning drive, only 10 km from the city to see gazelle and watch them in their habitat, and today that land is being torn down by bulldozers, indeed with the gazelle having been relocated. But we do need to say a lot more about what is being done to balance the needs of construction with the demands for conservation.

Indeed, a lot is being done about it, but a lot more needs to be said about it. It is here that awareness is important and this awareness has to come from the corporate sector and that is the best way forward. I would like to see more companies step up with campaigns for the environment and what needs to be done to save it. This is the way forward and we have to consider it with seriousness. In the same measure it would be good for a more public profile to be taken by the government on the issue of conservation.

Sher Value: Competing Interests

2007-06-24T19:37:00.000-07:00

After sending off my book to the publishers the mind plans the next one; hence a book about Dubai has been a work in progress. One of the things I used to marvel at was that Dubai was creating an enabling economy, where the government sets up the infrastructure and private business flourishes creating services income for the government. Indeed, in some areas an element of aggregating competition has happened and government owned entities have been competing with the private sector. This has been all together healthy; up to a point. Now I am afraid its all getting a little too unbalanced.

In the past two years one of the major concerns seems to be the emergence of the government or semi government companies becoming competitors with the private sector. There is on the one hand a good feeling that the government is supportive and confident enough of the economy to be an active participant. However, there is a propensity for some officials to actually consider its role to be actively competitive with the private sector. As someone said that what these public sector companies are doing is to take the model from the private sector and expand it to a much larger size, re-brand it and launch it as their own.

The result is that the private sector is feeling squeezed by the pressures that come from this strategy. Some will argue that instead of the enabling model the competition that has been created is cornering the private sector to the point that their new business formations is declining. A leading retailer told me the other day that a public sector entity has been approaching foreign franchises to enter into retail franchising and felt that this was likely to create a monopolistic trend that cannot be healthy for the market.

By all means there is no doubt that the government here has been extremely supportive of the private sector and that is why this alliance has flourished. I strongly advocate that balanced competition is good but head on competition between the public sector and the private sector is likely to be counter productive. The answer is that the public sector should become a 'co-investor' with the private sector, thus taking equity positions of up to 40% of the private sector businesses and this is where the synergy works best.

This will ensure that the entrepreneurial spirit of the private sector remains intact, public sector financial strength works to create expansion, and most importantly brings together a synergistic sustainability to the market model. Thus the public sector companies should be setting up private equity operations rather than companies that compete. Just the rumor that a major public sector hotel strip is considering to enter into the theme park and attraction model creates competition that makes existing private sector developers wonder what they were doing for the past three years developing alliances in what is a very difficult market.

Sher Value: Arab Media Assets

2007-06-17T13:29:00.000-07:00

I have long been attracted to the media, perhaps the fact that having written for newspapers and magazines for over two decades one develops a certain perspective about media. Yet any discussion on business and politics will inevitably talk about the role, and more importantly, the power of the media. In the same stretch there is growing recognition amongst the business circles of the Arab world that being a media player is an important element of business presence. Walk through the aisles of any magazine section and you will be hit by the plethora of magazines, many in Arabic, that are being published from the region. Admittedly there is a huge invasion of fashion and glitter on the magazine stands, and of late business magazines are also making their presence felt.

However, as we all know, or some don't know, its not about just publishing a magazine, its all about distribution, voice, content management and consistency. Why is one magazine better read then the other? What drives content? Who is reading? Who should be reading and the questions can run into a ream of A4 size paper. When we consider the broadsheet papers and then the visual media the media picture and the role of Arab Media in this gets, pardon the pun, fuzzy.

My friends, particularly my American friends, are puzzled that I would recommend Al Jazeera International as a fantastic, and yes independent minded, television channel. A well known journalist friend of mine has been trying to subscribe to it in New York without any luck, given that he is told it's a 'terrorist' channel its impossible for the major content distributors to 'carry' it in their bouquet. Whatever happened to the land of free speech? Anyways, the point being that even a good channel like Al Jazeera, who boast the likes of David Frost and Riz Khan in their stable of anchors, cannot get the distribution into the market where its needed most, USA, then folks we have a problem.

It is interesting that aside from these more profiled issues there is a bigger issue within both the Arab media mind and the world at large. I keep bumping into business folks who want to start a newspaper, yes indeed. Its like they all congregate at some obscure café, drink the same coffee and come out wanting to own the next broadsheet newspaper from the Middle East "which will change the world of media as we know it." But I keep telling them we need to get content right, its not like print and presto you have circulation! I know this may be offensive but can aggregated content be all that good? Where is the journalistic voice from the region? Do I want to read what an editorial view from Baltimore is when I have not established my own editorial view on what is happening in my backyard?

I am all for media expansion, and ofcourse an indigenous media. However, any choreography of such a strategy has to expand to distribution into the US and Europe, and this is always going to be a function of getting some top class content into the paper. The other alternate is to buy the media companies in the West, a strategy that is painfully slow and exorbitantly expensive. For the moment: Improve our media content.

Sher Value: Consumption and Consumerism

2007-06-11T19:51:00.000-07:00

I am amazed at the consumerism that surrounds us, in a sense its pervading and encroaching, sometimes resulting in consumption to excess and at others shaping our unique and personal definitions of luxury. Buying a car is as much a necessity as it can end up being a luxury, the difference being the price tag. In contrast buying a number plate for Dh 1.5 million (US$360,000) to put on a car that cost one third of that sort of stretches consumerism to absurd luxury; no different than the fellow who paid US$ 40 million for a 8,000 sq foot apartment in New York. This is where you do not take your cost accountants because they will either jump from the apartment terrace or let the car with the expensive number plate run them over before they can figure out what the whole deal was about.

Expanded onto the global matrix consumption and consumerism are becoming perhaps the crucial linchpins in defining our relationship with our environment over the next century. How are the products we consume produced and how is their production effecting the environment? Who influences our choices of consumerism? What is the role of free choice as opposed to engineered choice (advertising)? Who influences what is produced and how is it produced? Where does necessity stop and luxury begin? How do our material values influence our relationships with other people? How do poorer and wealthier nations adjust their needs and demands in the context of consumerism? Is there going to be a point at which the world will stop and realize that the resource footprint needed to sustain our growth consumerism is just not sufficient?

In that rather benign paragraph are questions that perhaps we need to pin next to our computer screen. These are the questions that will compel us and haunt us over the next few decades because in those moments we will be making decisions that will shape the way the world will be. While there is a tendency to blame over population as the cause of pressure on the resources this is not entirely true as the impact of wanton consumerism is also taking a heavy toll of the resource base.

The impact of this consumerism on the way our children are being brought up is frightening. There is a specific marketing slant that is added in today's marketing that targets the children early enough to convert them into the consumerist mentality. The kids market is huge and products and foods geared only for kids is evidence of this. Consumerism has reached a level where on the one hand obesity is as urgent and issue as tackling global poverty is an issue. Isn't that strange that in this day and age we can take one excess and one deprivation and at both ends of the spectrum have a major problem.

It is time that our global priorities are looked at in a refreshing way. We need to reassess what is essential and what is wasteful, and while some may harness the aid band wagon as a means of redressing necessary and urgent care in continents like Africa, the more important change has to come in structural building blocks being created and inefficiencies removed. However, underlying any attempt to fix what is wrong has to be our approach to consumption and consumerism, without changing that we are caught in a trap where only we are tightening the noose around our own necks.

Sher View: Labor conditions

2007-06-05T20:38:00.000-07:00

(the following was posted by me in the G2K forum which is a closed end forum but thought i owuld share it)

I can see the world concern about how workers are being treated in UAE (and Dubai) and its becoming an issue of debate. While at the outset I would say there are a large number of issues concerning this and indeed in a number of labor camps the conditions are deplorable. However, the conclusion that nothing is being done about it by the government is also wrong. I am surprised people who have lived here and been in the region can make sweeping judgments.

I have in my weekly piece for the papers argued that a number of provisions of the labor law need to be changed the most important that would allow workers free movement from job to job without the statutory 6 months ban. ( a provision of the law that is misused alot) and I have also been vocal about bringing in minimum wage regulations. But after 27 years in the region I cannot draw the conclusion that it is a policy of the government to exploit the workers.

The law is very clear on a number of issues and last years inspection of a number of labor camps resulted in fines and even orders to close the camps and make new camps where living conditions are better. There is a government effort I believe to build a massive labor housing colony with all facilities, and the aim will be to close all privately owned labor camps (then the liberals will complain free enterprise is being trodden upon). My guess is that in the next few months companies violating the regulations will be hit hard.

However, I am sure the former Ambassador to the region (this was in response to a comment from a former British ambassador to Kuwait) is aware that a large part of the problem is in the home countries of these workers, where agents, (their kinsmen) charge then exorbitant amounts of money to get them 'selected' for a job in the Gulf. The exploitation is also from the companies who seeking more profits will bring in people at the lowest rate and put them in the worst conditions. I think that the entire chain has to be dealt with and this is what is important.

On a humorous note I am always amused when my Western friends start championing such cases, excellent, considering it took them 150 years to abolish slavery in the US, and for my British friends it was only 61 years back when tea estates owned by British companies in Assam, Ceylon (Sri Lanka) and India employed child labor. (by the India has the largest child labor force in the world and NO LAW enacted against it. As of now there are pending actions against a major confectionery company and a tire company for knowingly allowing child labor in the cocoa and rubber plantations respectively (only on April 15, 2007 a one year extension has been given to remedy the situation).

For the record I am from Pakistan and am all for the campaigns against child labor, and also want exploitation of labor to stop, but lets support those who are bringing change and lets be FAIR. (go after the companies who exploit, not against societies who are trying to change it).

Sher Value: Teach your children well.

2007-06-02T20:00:00.000-07:00

Investing in education is investing in our own future, and indeed bringing up our children with the right values is extremely important. This is all the more important when it comes to teaching them business values and become and integral part of the economic scene. A great deal has been done for the education of these young people to learn the practices of business through education however there are some important values that need to be learned in the broader experience of life.

There has been a timely announcement of the Makthoum Foundation for Human Development, which carries to the aim to improve the most important raw material to any business model: PEOPLE. This is where the importance of what I would call "Life Values' become important and how this will integrate into a wider model for the next generation to understand what their responsibility is; the most important of which has to be nurturing of good values.

One matter of concern to me remains the life values that some of the rich and middle class children are being taught or picking up in the country. This is the consumer value as opposed to the productive value that these young men and women are picking up. Let me give you an example.

In many societies the value taught to young adults is that if you want something then earn it. This could mean a part time job or running errands etc. However, when I see 18 year old kids wearing US$ 400 caps that they have bought off their father's credit card it does cause me a problem. These kids are learning to consume before they have learned to produce and I confess that I had the same mentality that if one can afford it then why not give it to the kids. I have changed in that respect by realizing that this is not the way to make business leaders out of the young people.

The position that the country has attained on the world scene is phenomenal considering the short time span in which all this has been achieved. This implies that in the years ahead the attention that the business arena here will receive will be unprecedented, some of this attention may well be unwanted and ofcourse the manner in which the values of the business community will be projected will be crucial. There has to be a concerted effort to bring an awareness into society that the right values are handed down to the next generation of business leaders. I know there is the best of education coming into the system but the values that need to be considered are broader and need awareness from all quarters.

It is important that Dubai is also know for the excellent business values that it brings to the business world and these need to be understood and appreciated by all parties. Perhaps there should be a best practices award for fairness, ethical business behavior and most of all an adherence to business and humanistic values.

Sher Value: The World Under Debate.

2007-05-20T19:02:00.000-07:00

Call me a cynic but in my long career of finance and speaking and attending conventions I learned some pretty easy lessons. The more flamboyant the proceedings the chances are little will be done post conference; the longer the speech the less the action, and the list goes on. The World Economic Forum in Jordan, perhaps faces the challenge of not becoming another Davos summit, long on rhetoric and short on delivery. As someone once said that what people carried back from Davos was always a good story.

However, the challenge for the WEF at Jordan is remarkably different; it happens at time when, as clichéd as this may sound, the Middle East, along with the extension to Afghanistan and Pakistan, are perhaps at their fragile worst. While the Gulf States have a great story to tell, and one they must shout out, the proverbial apple cart of good tidings can be upset in one harsh political (or military) tug. While the view from Washington may well be that the issue is primarily of terrorism and democracy, many insiders realize its all about developing the opportunities for the human capital to improve their lot.

If Davos has failed to move beyond being a debating platform where promises were made, and perhaps broken, the WEF at Jordan is taking on the task of making some bold announcements, especially for the region. The test will be to keep these promises as the undernourished and starving are watching the developments, perhaps clearly aware that time is running out. There has to be a political settlement to all, and I mean all, outstanding political issues in the Middle East to allow for any sensible economic model to be rolled out. One cannot have disjointed solutions which can be derailed by political events and the carnage we have seen for the past few years repeated.

While the summit is known as an economic summit, the reality is that the convergence of the different pressures and trends within society, political or social, cannot be cast aside. If there is a message that needs to be put forward is that leaders of the region have to act, enough of sitting back and seeing the dividends of hard work being shoved into a net of inequalities and indifferences. Its time to overhaul the system and as Sh Mohammed bin Rashid stressed, become competitive to survive and grow. There has to be a comprehensive long term strategy that delivers, and delivers effectively. It cannot be any more that a minority of the people share the dividends of growth, and it seems that there is an emerging leadership that is seeing what strategies have to be adopted not tomorrow but for the next 25 years to employ over 70 million odd people. Its time to get real and that is what the summit must stress, and to do that ACT! The soap opera of human development has to end and the hard truth has to be molded for a better future for humankind, failure to do so will mean a catastrophe that will not be easy to comprehend.

Construction Week Article: Completion Schedules

2007-05-20T18:59:00.000-07:00

One of the most frequent questions I am asked is what is happening in Dubai and the UAE in terms of all the construction. Yes indeed, I once described Dubai as Las Vegas on steroids (without the gambling). Walk through a construction site, or a project managers office and you will see the sheer magnitude of what is happening. Indeed it would seem that not only it is like its all on construction steroids but indeed a large dose of it.

Then when will all this construction be finished and is it all happening within the time frame that we anticipated?

Here there are a few issues that need to be clearly understood. If you believe the media hype then good for you, in the real world there is a great deal of engineering needed from planning infrastructure all the way up to the build and completion of these projects. You cannot cut and paste a building from the drawing board on the site, (wish it was that easy). The challenge for these projects is the following:

Infrastructure: Indeed there is a lot that has been said about this, but from where I sit there is no doubt that the infrastructure capacity exists for the development underway. The issue is getting that infrastructure out to the different and diverse range of projects that are out there. In one sense a large format framework plan has to be agreed with the utility companies covering the next 10 odd years and then projects should be announced.
Phasing: When projects are announced the PR machine makes it sound like everything will be built in two to three years, when in reality the project plan is phased over 10 odd years. The result is a set of expectations in the marketplace which are out of sync from the reality from day one.
Capacity: If I was to take all the projects announced as of today and plot them against the resource capacity currently available there is no way these projects can be completed within even 5 years. Only those projects who have contracted the resources and locked in the prices have a decent chance to be completed on time.

What this does imply is that over the next few years a number of projects will have to be realistic about their completion schedules and by the sheer weight of market force adjust to this reality. A prominent contractor told me just last week that with all that is planned and under construction the resources do not exist to put it all together in this time frame. When I asked how many more resources are needed, his crisp response was that it would mean tripling the labor force, doubling the plant and equipment and most important have a robust supply chain for building materials that can sustain the build process for a 4 to 5 years building spree.

This is not an easy process especially considering that planners keep announcing new projects which are adding to the pile of ‘to do’ list. There is a way to do all this faster but it will mean compromising on the quality and the delivered product and perhaps in some cases this might already be happening. What is essential to consider is the construction management and the people putting the whole process together. I have seen people with no experience of construction trying to develop very complex and difficult projects with project management budgets that just do not make sense. The end result will be delays as mistakes will be made during the build process.

Looking ahead I do believe that developers will be more realistic about the completion schedules of their projects. I also suspect that developers will announce a wider phasing plan for the projects and confirm completion dates once the project has gone into post contract phase.

Sher Value: The Challenge for RTA

2007-05-12T19:57:00.000-07:00

The Road and Trans[port Authority, or RTA as it is fondly called, has managed to be in the news from the word go; not a surprise in a city where perhaps the challenge to private and public transport will remain the number one issue for the next decade and more. Indeed the forward thinking of Dubai has meant the establishment of a separate authority for handling the critical aspects of transport within the city. At the heart of any strategy has to be the positioning of a comprehensive transport system that can carry the massive growth within the Emirate into the next many decades.

The announcement of the Light Railway project, or Metro as it is now known as, is an important aspect of any strategy into the future. However, the strategy has an essential element missing in the transport conundrum; the link to Sharjah and the Northern Emirates. Any analysis of Dubai peak traffic pattern will show that a major portion of the traffic comes through from Sharjah and Ajman into Dubai and onto Jebel Ali. As plans stand now there is no link towards Sharjah this defeating the purpose of a Metro system where it is needed most.

Some may argue that the strategy is that Sharjah residents will drive to the Rashidyia station and then connect to the Dubai Metro system. Nice idea in theory but try and think of someone living at al Khan area in Sharjah; why should this person drive to Al Mulla Plaza then South to Rashidyia to get on to the system? In country where commuters have become lazy expecting a two stop solution for a single route journey will simply not happen. Test it, ask your neighbor to walk 100 meters at four in the afternoon! I rest my case.

The second important element of the RTA strategy is to impose a toll, SALIK, on Sh Zayed Road with the intention that the more commonly frequented entry points onto Sh Zayed Road would be tolled thus moving traffic on to the secondary and tertiary road network. This is a good idea if the alternate exists, but this does not completely make sense if the alternate system is not up and running. I would imagine that once Dubai Metro was functioning on Sh Zayed road then it makes perfect sense to have a toll to reduce the number of cars on the road, but in the present circumstances its just a license to print money.

There is no denying that the job before the RTA is a gigantic one but it must consider some assistance from the private sector and allow some secondary mass transport solutions to be made from the private sector. This could be in the form of connecting load lines of APM systems and other light mass transport connections that assist the RTA. Once the entire system is in place then by all means we can consider the introduction of a toll on any particular road. Till then, my advice for whatever it is worth, hold back.

Sher View: Killing the Golden Goose

2007-05-07T23:58:00.000-07:00

The proverbial golden goose has been killed, stuffed and served on a number of occasions through history. The principal reason the goose gets stuffed each time is that greed is always driving force and this is where someone has to point out what is going wrong. Whether the forces of free economy will be balanced out with prudence is a question that is still open.

Here is where Dubai has to be careful and it might be important for some reflection.

1. A five star hotel on Sh Zayed road has decided that it will charge DH 50 for valet parking (previously was free) and to make matters worse had blocked off all parking places around the hotel in any case. Brilliant! If matters were not bad enough with a bottle of water (Dh 0.50 retail) being sold for Dh 20 (astronomical profit), now if I go to the hotel to meet someone and have a bottle of water the total visit will cost be DH 70 (almost US$20) and then we wonder why is it getting expensive.

2. The Road & Transport Authority (RTA) has also got into the act and now wants to charge for the use of Sh Zayed road through a toll tax. Brilliant idea!! By all means this should be done but ONLY when there is an alternate for the commuters, i.e. enough buses, and ofcourse the Dubai Metro to be operational. How can there be an toll on the road when the alternate is not there for people to use?

3. Hotels have gone insane. A hotel room for US$ 500 is normal and this time around it is just simply crazy. Perhaps the announcement that 40,400 new hotel rooms in three years are coming on will scare hoteliers; NO way... they actually pushed up the rates perhaps feeling lets make more money while the sun shines and the golden goose is cooked to 'well done'.

I do love UAE and indeed Dubai, and these are examples meant to highlight that killing the golden goose doesn't help anyone.

Sher Value: Low Bid Syndrome

2007-05-07T07:57:00.001-07:00

Just over a decade ago I was invited to speak at a conference on
Quality and I made a point that upset the organizers and point that
was not received well. The fact it was made in sincerity and earnest
was ignored by critics and perhaps a decade on we can talk about the
subject. We live in what I call a 'low bid syndrome' where in the
search of the lowest, and therefore cheapest, price we ignore quality.
My point has been how can a system espouse quality when the system is
based on the lowest bid getting the contract?

While I do believe where the bidders are on an equal footing then the
lowest bidder getting a contract is all the more reasonable, there is
a propensity for some project owners to take the low bid syndrome to
the extreme. This applies to the area of human resources and
specialist areas where corners are cut and usually the result is that
quality suffers. We need to break away from this mentality and if we
are to create a first class economic and business model then we have
to understand the quality comes with a price. So often the right
person is not hired because his price is higher than we think he or
she is worth and we forget that top class people come with top class
pay packets.

UAE is poised at a fundamentally different position to what was the
case over a decade ago. Today they compete as a business location with
the best in the world and are executing projects that are landmarks in
their own right. You cannot make these iconic projects with the low
bid syndrome in our mind. In our quest for the best we have let the
media agencies decide on the clichés but now it is time for us to
deliver the promise that we make and to do that means that there has
to be a mind shift about this element of the process.

Why is it necessary? It is simply because if we want to foster quality
then that is the only way forward. We must also realize that as the
success of the country has achieved new milestones so too has the
attention of the world media focused more the country and this implies
both good and the not so good things the media will pick up. One
cannot simply say that this is the way we do business as now we
attract a clientele from around the world and with it comes the
attention that is normal. Our quest for quality must continue and
while I can say it doesn't have to be expensive to be quality and
tasteful it doesn't have to also be cheap to the point of ridiculous.

Sher Value: Billionaire List...SO What?

2007-05-07T07:55:00.000-07:00

Around this time each year the much celebrated Forbes list comes out
and with it come a huge pile of trivia related to these billionaires
and their lifestyle. Some of it makes for interesting reading and to
be frank some of it ends up being downright disgusting. The top seven
on the list (891 on the list) have a combined net worth more than the
GDP of the GCC countries. The youngest is 23 (ranked 488) and the
oldest is 98, with a vast number of billionaires being those who
inherited their fortunes. What is more interesting is the way they
vary in their lifestyles and the spending habits of these
billionaires.

An Indian billionaire (5th on the list) owns a $128 million home in
London's posh district, while Warren Buffet, (2nd on the list) has
singed off 85% of his $52 billion worth to designated charities and
still lives in the same home he bought 30 years back for $31,500 (now
valued at $700,000). Buffet recently auctioned his Lincoln Town Car
with its distinctive number plate "Thrifty" to raise money for
charity. What stands out is that there are more billionaires in India
(over two dozen) then there are in the entire GCC! Interestingly the
top two on the list, Bill Gates and Warren Buffet have signed off most
of their net worth to charity, and while someone may say its to save
tax I wonder if really tax is a consideration when you have over $50
billion in personal net worth.

Part of the problem with these lists is that while some people are
there for the obvious business worth they created, like the Michael
Dells, Bill Gates, Warren Buffets and Paul Allen's of the world, there
are a number of billionaires who do not disclose enough to make the
list, or keep their worth secret enough that Forbes cannot verify it.
Does this explain the low number of billionaires from the GCC, (only
three from UAE)?

However, what matters is not what you have but how you show it, and
this is where some of the disgust shows up. I have indeed no problem
with wealth and especially if it's hard earned. Yet one can notice the
difference in how this wealth is spent in different billionaire
circles. The Gates foundation (which has joined hands with Buffet to
create financial management to make the foundation assets grow) is
doing an incredible amount of work in area of health, and poverty
alleviation through creating sustainable structure of charity.

I am not sure that billionaires are really ready to pitch into causes
that matter. Of the 891 billionaires only a handful of them are known
for their philanthropy and yet would go to great pains to show of
their wealth. Want me to prove it? In UAE there are 59,000
millionaires in dollar terms, lets create body similar to the Gates
Foundation in Dubai, and each of these 59,000 millionaires donate
$100,000 to this cause, (the three billionaires from the country would
have to be ten times higher) and lets make a change. I would like to
see how many emails do I get for this? I promise in return that I will
put my time and my banking expertise to create and endowment out of
this which will benefit society and select a board of trustees to
manage it. So lets see how many respond, if even 20% respond, I will
eat humble pie and apologize for thinking that wealth and charitable
endowments don't go together.

Sher Value: Texas to Dubai

2007-05-07T07:53:00.000-07:00

Halliburton, arguably the worlds largest energy services company has
caused a storm in a teacup in the US by announcing that its Chairman
and CEO, David Laser, is moving to Dubai, where part of the corporate
head office is also shifting. While the legal and corporate head
office will remain in Houston the 'close to business' reasoning has
been argument for the move, prompting a whole host of criticism from
US political circles, many of whom interestingly espouse long speeches
on open world trade. The political heat did seem to lose some of its
teeth through the weekend when Halliburton announced it would actually
be hiring more people in the US as well as indeed in Dubai.

Halliburton, a company that started out in 1919 as the New Method Oil
Well Cementing Company by a certain Mr. and Mrs. Erle P Halliburton,
has not been free from controversy and media attention. Apart from the
political figures who have graced its corporate offices, including
presidents and vice presidents, the company has never been far from
controversy, whether it be selling oil technology to both Iraq and
Libya during the 1990's (when it was banned to do so) or the highly
controversial 'Tehran' office of a company called HPS (with a similar
logo to Halliburton) and offering Halliburton services to the oil
sector, Halliburton catches the limelight, either way, time and again.

But relocating offices and being close to the business is an argument
commonly used by many companies and it would seem that Nokia's
announcement to open a corporate office in the United States and it
would seem a major uproar has been caused in the States by political
circles for mileage. Indeed, what American circles are learning is
that Dubai has been more forthcoming in welcoming the move and the
ease of entry into the Dubai business scene is a huge plus for the
Dubai government. After all it was only a year back when the Dubai
Ports deal in the US caused unnecessary controversy and comment on
what was effectively a business deal.

While the critics will point to Halliburton's controversial recent
history and argue that in the face of investigations and fines perhaps
Halliburton will find being in Dubai away from the media attention may
be conducive to business. Either way the beneficiary of the move will
be Dubai with an estimated 13,000 employees, most of whom will be
relocated here or new hires from other regions brought in, the move
will boost not only the image of Dubai but also the economics of the
market place. In the wake of the move there is a likelihood that other
smaller companies who do regular business with Halliburton and its
subsidiary KBR, will also consider beefing up a presence in Dubai, not
forgetting that KBR is the largest single contractor working in Iraq.
Guess it will all be good for business.

Sher Value: Has Dubai's PR Budget Paid off

2007-05-06T19:58:00.000-07:00

Traveling around the United States is an experience, especially for those who will engage and listen; a vast country of diversity in every aspect. Living in Dubai means that in most conversations with the educated elite in the US one gets an interesting perspective of how the average well educated US citizen sees Dubai. My discussions have been with a diverse people from a PhD in Physics to eminent doctors and leading business and even Public Relations gurus. Here is the bottom line of how I see Dubai's PR exercise in the US has panned out.

In terms of the Brand Dubai is concerned there is instant recognition through an number of interesting channels of instant correlation; the Burj al Arab, Emirates Airlines, the horse racing especially the Dubai World Cup. The much publicized DP World episode while in the minds of people does not really provide clarity to audience and more often I was asked by people 'explain Dubai to us' almost in the same breath in which they talked of DP World and the ports deal.

Yes Dubai's spend in Branding has begun to pay off, but in terms of 'explain Dubai' or the real substance of the public relations side of things is concerned it would seem there is much more to be achieved. I have engaged in discussions with some of the best PR minds in the business and it is obvious that for Dubai they must consider a US perspective on getting their PR message into the general public and not only concentrate on select groups. This boils down to strategy, and it would seem here in lies the need for some strategic thinking. Someone has to address the issues not from what Dubai needs, but more importantly what PR strategy is best for Dubai and brings about an acceptance in the minds of the people about the positives of Dubai.

I am of the firm belief that the general public would be in awe and acceptance of the strategy that Dubai is following in its business and social agenda, but that message is not getting into the realm of the general public in the States and perhaps also in Europe. There is that mysterious void in the minds of these well traveled and very smart people here when it comes to Dubai; they know a good about its brands and the general hype and then nothing more. Sure National Geographic writes an article and here and there something crops up but then what happens? There has to be a consistent policy of educating the US about what Dubai is about, bringing out the stories that matter, bringing out the human interest angle and engage in a dialogue with the people.

In a sense the first part of brand Dubai being recognized is well underway, its time some depth was brought into the process. This is where a deeper and well thought out strategy is needed. This is and must be an integral part of the strategy ahead.