Dubai’s best way forward

Dubai wants to raise US$4 billion. Why not list itself on the DIFX? It is now an open secret that the Dubai government plans to raise around US$4 billion, in order to fund a number of new projects. But how exactly is it going to find the money? I have a solution.

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By  Anil Bhoyrul Published  May 28, 2006

|~||~||~|Dubai wants to raise US$4 billion. Why not list itself on the DIFX? It is now an open secret that the Dubai government plans to raise around US$4 billion, in order to fund a number of new projects. But how exactly is it going to find the money? I have a solution. Depending who you believe, the most likely option will be through a bond issue. Talks have been underway with a number of banks, and executives working for the government are looking at either a conventional or Islamic bond, or possibly a syndicated loan. They shouldn’t have too much trouble wrapping up a deal. Earlier this year the government revealed its 2006 budget, which showed revenues of US$21.4 billion and a surplus of US$1.58 billion. Amongst the new projects cash is needed for is the Dubai Metro, as well as a roll out of costly power and energy upgrading work. So back to the question, where will the cash come from? The simplest, most efficient way would surely be to float Dubai Holding. Why not put Dubai Holding’s shares up for sale on the Dubai International Financial Exchange? You don’t have to be a rocket scientist to work out that, given that absolute mega-scale of the work Dubai Holding now oversees, we are talking about a multi-billion dollar market value. In effect, Dubai itself would become a public company, possibly one of the most valuable in the world. And given the current pace and success of many Dubai Holding projects, I have no doubt that the shares would be lapped up by both local and international investors. Most important of all, such a listing would give a massive boost to the international credibility of Dubai as a financial centre. True, share prices in the region have been falling lately, but many observers believe that reflects a lack of international investor confidence. The nagging questions over transparency keep coming back. Can Dubai really compete with Hong Kong, London and New York as a world-class international financial centre? I have no doubt it can. But, unfortunately, what I think doesn’t count that much. What the international community thinks is what really matters. But listing Dubai Holding on the DIFX would send the clearest signal possible to the world that Dubai means business. And knows how to run a business.||**||Li Ka-shing’s big gamble|~||~||~|Billionaire Li Ka-shing is a worried man these days. The Hong Kong tycoon who owns the massive Hutchison Whampoa group has “done a Murdoch” in recent months. Over a decade ago, Rupert Murdoch bet his entire company on the launch of satellite television. It very nearly brought him down, though with hindsight was exactly the right thing to do. Li Ka-shing must be hoping for the same end result. He has staked his financial future on the 3G network – a world of videos, music, television and other forms of entertainment, all appearing through mobile phones. At first glance, he’s onto a winner. In the UK, his company 3UK has found a million users, and revenues of US$1 billion a year. Everyone’s talking about it. But not everyone’s happy about it. Worldwide, the rate of “churn” – people leaving the network, is 50%. Most of this is down to customer dissatisfaction. The cost of subsidising handsets has left the whole 3 group with world-wide losses of US$4 billion for the past year alone. And the figures will only get worse. How much longer can this carry on? At this rate, not for much longer.||**||Competition works|~||~||~|The UAE’s telecom operator Etisalat has come in for some stick recently, much of it from me. But the arrival of a second telecoms operator, in the shape of du, appears to have spurred it into action. Last week the company totally rebranded itself. Over US$300 million has been set aside for investments in Afghanistan, and there are also plans to tackle the Iraqi GSM market. Orascom Telecom better watch out. And Etisalat has made the bold claim that within the next decade, it will become one of the world’s top 20 telecom giants. That is a big ambition but, given the rate of growth in this region, certainly achievable. Etisalat already has 4.7 million subscribers in the UAE, and its quality of service is improving by the day. For many years, Etisalat has been the UAE’s only telecoms provider. It did okay. But now du is on the field, it has raised its game. The moral of the story is that competition works, and works very well. ||**||

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