Bahrain: So far, yet so near

Here in NYC my eyes are on Bahrain this week as it commemorates one year since deadly protests rocked the tiny Gulf Kingdom, sparking a controversial decision by Saudi-led Gulf Cooperation Council troops to roll on in and save the day. Hundreds of doctors/medics/nurses were arrested that day and given harsh sentences by Bahraini courts for treating political dissidents, the courts ruling that it made them accomplices. Reuters reported today that the Bahraini courts are now looking to drop some of those sentences. All the while, streets are still patrolled by security forces, especially in the predominantly Shia villages, and many Sunnis across the country display photographs of Saudi Arabia’s King Abdullah in offices, on their desks and at their homes, revering him as a hero for his decision to save them from Shia protesters, who Bahrain’s government claim are supported by Iran. Bahrain is home to the U.S. Fifth Fleet so all eyes in Washington are eagerly hoping for a solution — preferably one that does not involve them. The US provides million in weapons and training to the Saudi Arabian government each year.

The U.A.E.: 40 and Fabulous?

Abu Dhabi at 40 //Photo by Tala Al Ramahi (@journalist_tala)

 As some of you may know I just moved back to New York last week after living in the Middle East for much of the last 10 years, most recently in the United Arab Emirates, which is today celebrating its 40th anniversary. There is no doubt that the UAE has accomplished pretty spectacular things in 40 years, fueled greatly by the abundant oil wealth of Abu Dhabi, which holds more than 90 percent of the crude in the country, and about 7 percent of the world’s proven oil reserves, according to BP data.

Burj Khalifa // Photo by Vivian Salama

The country is home to the world’s tallest building, the Burj Khalifa in Dubai, one of the world’s biggest malls, the world’s largest dancing fountains (I must confess, the fountain is rather amazing), the only manmade island visible from space and one of two gold vending machines in the world!

Dubai dancing fountain // Photo by Vivian Salama

It is, undeniably, a remarkable accomplishment given that just 40 years ago the emirates, prior to unification and the discovery of oil, earned much of their income from pearl diving and exporting dates.

The pride of its citizens is something to be admired, and for weeks (even before I departed for the US), skycrapers were covered from top to bottom in lights of white, green, red and black, the colors of the UAE flag. Emiratis, the citizens of the UAE, wore scarves and jewelry with the colors of the flag, and cars were covered, literally, in photos of leaders past and present.

But a challenging road lies ahead for the UAE, particularly after this year’s events in the Middle East, where longtime dictators were forced out by popular uprisings. There is one clear advantage the UAE has over countries like Egypt, Syria, Libya and Yemen: it’s citizens are not poor. There are parts of the country that are in great need for updated infrastructure – roads, power lines, etc – but citizens are, at worst, comfortable thanks to lifetime handouts by the government. (Click here for my story Abu Dhabi’s Spending on Soccer and Skyscrapers Masks Slower Times at Home)

But citizens of the UAE are hungry for one thing: opportunities. Currently, foreigners make up about 85 percent of the country’s population – the majority hailing from countries on the Indian subcontinent. British/Western European, Canadian, Australian and South African expats hold many of the high paying white-collar positions, in SOME cases because they are better trained to do so, leaving few high profile jobs for the locals.

Emiratization, a policy now enforced by the government in many workplaces, seeks to boost Emirati employment whether by providing training and education for Emiratis, or setting quotas in certain sectors for Emirati employment. Ultimately the government is trying to prevent their own talented citizens from being lured to the West. But many critics believe that the UAE cannot afford to lose its foreign workers as they may have been the driving force for the country’s speedy success in the first place. In the meantime there is growing resentment among foreigners who, despite making up the majority of the population,  have few rights. There is no legal protection on property rights, and police, in practice, do not need a reason to stop, question or even detain people.

Another challenge is maintaining the “vision” set by the country’s founders some 40 years ago. Seldom was there a day in the UAE that I did not hear someone refer to the “vision.” Abu Dhabi and Dubai have set urban planning roadmaps for diversifying their economies away from oil and expanding certain sectors (services, real estate, alternative energy, etc). However, the global economic crisis dealt a massive blow to the once seemingly invincible UAE and its seemingly invincible real estate market. Slowly we’ve seen the country scale back, but its officials still maintain that the overall “vision” is intact and on track. We shall see.

Photo by Vivian Salama

Finally, a problem facing many of the Gulf sheikhdoms: succession. The country’s founder Sheikh Zayed bin Sultan Al Nahyan has been dead for 7 years now but his legacy undeniably lives on. The question is whether his sons, the current President Sheikh Khalifa and Abu Dhabi’s Crown Prince Sheikh Mohammed, can continue the vision he laid out for the country 40 years ago. Many experts I’ve spoken with believe that the vision of the two brothers has grown less cohesive, and the two have developed mini “kingdoms” – investing money in projects that are too different, both from each other and from that envisioned by their father.

The government is so private in nature (painfully so) that it’s always hard to know exactly what is going on behind the scenes. But given Dubai’s economic disaster and, more recently, Abu Dhabi’s problems, it raises a lot of questions as to who is calling the shots. The country enjoys making a splash, and it’s served them well, but if it genuinely wants to keep out of the spotlight during tougher times, it may want to adopt a more humbled approach over the next 40 years. (ie, no more $20 million hotel debut parties, ok?)

Dubai Atlantis Hotel Opening Show - December 2008

Good luck UAE. I am excited and eager to see what you have up your sleeve for the next 40 years!!

Abu Dhabi’s Economic Ambitions Held Back by Dubai-Style Real Estate Slump

By Vivian Salama 

Nov 3, 2011

Bloomberg/Business Week

Abu Dhabi, the emirate that bailed out Dubai in 2009, set out to avoid the pitfalls suffered by its Persian Gulf neighbor with a decades-long plan to replace oil revenue with industry and tourism as drivers of growth.

Now those plans need to be scaled back as companies behind some of the sheikhdom’s biggest developments cut jobs and postpone projects, said Ghassan Chehayeb, associate director of research at Dubai-based Exotix Ltd. Delays include beach-front apartments, the first office building that makes more energy than it uses and branches of the Louvre and Guggenheim museums.

Abu Dhabi Guggenheim Museum

“Abu Dhabi has to face the economic realities,” Chehayeb said. The emirate’s plan “was a little too ambitious and they’re realizing now that many of those projects might not make as much economic sense as they initially thought.”

Abu Dhabi, the United Arab Emirates capital and the holder of 7 percent of the world’s oil reserves, plans to invest $500 billion in industry, tourism and culture to increase non-oil revenue to 64 percent of the economy from 41 percent from 2005 to 2007. In Dubai, debt-fueled property speculation drove up prices and spurred development until the global credit crunch in 2008 caused the market to crash.

The Abu Dhabi government hasn’t announced any changes to the development blueprint, called Vision 2030, since it was first published in 2008. The emirate’s Urban Planning Council wouldn’t say whether the plan is on track when contacted by Bloomberg.  (Click here to read more…)

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Abu Dhabi’s Spending on Soccer and Skyscrapers Masks Slower Times at Home

By Vivian Salama - Sep 21, 2011

Bloomberg — Ramy Kaddourah got the keys to his apartment in Abu Dhabi’s Raha Beach development two years late as the boom in the United Arab Emirates capital started to wane.

“Everyone got really excited about the plans to build up Abu Dhabi, then out of nowhere everything came to a stop,” said Kaddourah, 31, who runs a local private hospital and invests in property to rent. “If this can happen here, I don’t want to imagine what’s happening in the rest of the world.”

Abu Dhabi internationally is the oil-rich emirate spending billions of petrodollars on English soccer team Manchester City, the iconic Chrysler Building in New York and London’s Gatwick Airport. Yet that image is masking pressure at home as the government supports its six neighboring emirates while financing a $500 billion development plan.

In a year that saw uprisings in almost a dozen Arab countries, citizens in the U.A.E. will head to the polls for only the second time in the country’s 40-year history on Sept. 24 to choose members of a council that will advise the sheikhs in control. In the background are deteriorating infrastructure and rising unemployment in the northern emirates and an end to the breakneck investment in Dubai and Abu Dhabi.

“We’re starting to see chinks in the armor,” Christopher Davidson, author of “Power and Politics in the Persian Gulf Monarchies.” “The bottom line is they can’t keep distributing the wealth to an ever-growing, ever-developing population.” (click here to read more…)

Gulf Rulers Welcoming Arab Democracy Anywhere But Home May Store Up Unrest

By Alaa Shahine and Vivian Salama

Bloomberg (click here to view original)

Persian Gulf rulers say they understand that this year’s wave of pro-democracy uprisings has changed the Middle East. So far, they haven’t allowed it to change their own countries.

(l to r) Bin Ali, Saleh, Qaddafi, Mubarak

None of the region’s monarchies has taken steps to broaden political participation that match the spending pledges they have offered since the start of the unrest that toppled Tunisia’s Zine El Abidine Ben Ali andEgypt’s Hosni Mubarak. Instead, the rhetoric about a new era in the Arab world, and the cash handouts for homes and social security, have been accompanied by police repression.Protests have already reached Bahrain, Oman, Kuwait and the eastern province of Saudi Arabia this year. The reluctance of the Gulf Arab leaders, who control about two-fifths of the world’s oil, to loosen their grip on power may leave more of them vulnerable to the wave of unrest that has already pushed crude prices up more than 20 percent.“What we have learned from the uprisings in general, and from Tunisia and Egypt in particular, is that it’s really a matter of when,” said Shadi Hamid, director of research at Brookings Institution’s Doha Center, in a telephone interview. “Autocracies don’t last forever.”Oman’s Foreign Minister Yusuf Bin Alawi Bin Abdullah told Arab counterparts in Cairo last month that regional leaders need “new thinking” to deal with the “Arab renaissance.” In Abu Dhabi, then-GCC Secretary-General Abdul Rahman Al-Attiyah said that “political participation has become a key demand for development.”

‘Hydrocarbon Dictatorships’

Qatar’s ruler, Sheikh Hamad Bin Khalifa Al Thani, said in February that change was coming to the region and that Europe shouldn’t support “hydrocarbon dictatorships” in return for economic benefits, according to Al Sharq newspaper. He didn’t say which countries fall into that category.Qatar, Oman, Saudi Arabia and the other three Gulf Cooperation Council members are listed as authoritarian regimes in the 2010 Democracy Index of the Economist Intelligence Unit.The region’s leaders must convert ideas about change into concrete steps that will “improve the relationship between the state and the people,” said Prince Turki Al-Faisal, former Saudi ambassador to the U.S. “We have to change words into actions, actions that are arduous,” he said in a lecture in Abu Dhabi March 21.Some countries have begun to act. Sultan Qaboos of Oman agreed last month to boost the powers of the nation’s consultative council; the United Arab Emirates announced Sept. 24 elections to the Federal National Council, an advisory body; Saudi Arabia said it will hold municipal elections in September, while backtracking from earlier signals that women would be allowed to vote.

Saudi ‘Counter-Revolution’

Those measures, though, don’t involve real transfers of power, Hamid said. Repression has been a more typical response, with Saudi Arabia as “the leader of the Arab counter- revolution,” he said. “They are fighting change tooth and nail.”Saudi Arabia’s Information Ministry declined to comment and no one was available to comment at the Saudi Foreign Ministry or the U.A.E.’s federal government or Federal National Council, in response to repeated phone calls over two days.The prospect of unrest spreading to the world’s biggest oil exporter drove the benchmark Saudi stock index into a 13-day losing streak through March 5, the longest since 1996. Crude for May delivery rose above $112 a barrel last week, the highest since September 2008.

‘Not Very Worried’

The political upheaval in the Middle East has left markets “pricing in an element of uncertainty,” said Arthur Hanna, an industry managing director at Accenture Plc.Saudi oil wealth will help it escape the wave of unrest even though unemployment is high and civil rights limited, said Kai Stukenbrock of Standard & Poor’s. “We are not very worried about that scenario,” Stukenbrock, S&P’s director of sovereign ratings for Europe, the Middle East and Africa, said March 7.Simon Henry, chief financial officer at Royal Dutch Shell Plc (RDSA), also backed the kingdom to navigate through the political tensions. “It has the resources, it has the established capability to handle some of the unrest it may face,” Henry said on March 8.One risk to Saudi stability is the succession to King Abdullah, who turns 87 this year, Henry said. Crown Prince Sultan is also in his 80s. Next in line is Prince Nayef, the septuagenarian interior minister who filled central Riyadh with police to block a planned demonstration March 11, after rallies by Shiite Muslims in the oil-producing eastern provinces.

Bahrain Crackdown

Saudi rulers offered asylum to Ben Ali, backed Mubarak before his ouster, and sent troops to Bahrain to support a crackdown by Sunni royals that has left more than 20 protesters dead, mostly from the country’s Shiite majority.The violence in Bahrain showed unrest can be expensive even when it doesn’t lead to regime change. It pushed borrowing costs more than 150 basis points higher and Bahrain’s credit rating at Standard & Poor’s three steps lower, and dented efforts to compete with Dubai as the region’s business hub.Qatar and the U.A.E. both sent troops to Bahrain to help the government quell protests. InLibya, they are on the opposition’s side, backing a U.S.-led military campaign to help the rebels fighting Muammar Qaddafi. Qatar will “look at” the possibility of providing defense equipment to the insurgents, Prime Minister Hamad bin Jasim Al-Thani said yesterday.

‘Digging In Heels’

Dubai police on April 8 arrested Ahmed Mansour, a human rights campaigner, promptingHuman Rights Watch to criticize the U.A.E. for “digging in its heels” against democratic reforms. Two more activists, including an economics professor at the Abu Dhabi branch of France’s Sorbonne university, were arrested in the next two days. In Oman, two people have been killed as police broke up protest rallies.Saudi Arabia has also led the spending spree. King Abdullah ordered $128 billion of measures, including $90 billion on house-building and home loans, that will help the economy grow 6.6 percent this year, Standard Chartered Plc estimates.“The enormity of the stimulus package will help the region overall,” as it’s too much for the Saudi economy to absorb alone, and reduce the risk of civil unrest, Said Hirsh at London-based Capital Economics said in a March 21 report.GCC spending is another reason to expect high oil prices, according to John Sfakianakis, chief economist at Bank Saudi Fransi. Saudi Arabia needs a price of at least $80 per barrel, higher than previous breakeven figures, to finance its budget, he calculated.

‘Money Lying Around’

The GCC has promised $10 billion apiece to Bahrain and Oman to help assuage protesters. The U.A.E. allocated $1.6 billion for water and infrastructure projects in northern emirates that lag behind Dubai and Abu Dhabi.Spending conceived as a way of avoiding political change may end up fuelling popular demands, said Christopher Davidson, author of “Power and Politics in the Persian Gulf Monarchies.”

“You have the people in Saudi Arabia, for example, now asking: ‘If all that money was lying around all this time, why wasn’t it used on us earlier?’,” Davidson said. “These rulers are just reacting to the events around them, and their citizens know it.”

Abu Dhabi Bankrolls U.S. Students as NYU Joins Sorbonne in “Uber-Swanky” Gulf

By Vivian Salama

Click here for original story.

Sept. 15 (Bloomberg) — When U.S. teenager Anthony Spalvieri-Kruse was considering which college to attend, he got an offer he couldn’t refuse from 7,200 miles away in Abu Dhabi.

“I’m receiving a full ride to attend, including flights and an allowance of $2,000 a year,” said Spalvieri-Kruse, now ensconced in what he calls “uber-swanky” accommodation in the United Arab Emirates. “It was pretty incredible considering that I was looking at $30,000 a year from other places.”

The 18-year-old from Kalamazoo, Michigan, is among the first students at New York University’s Abu Dhabi campus, which began classes this week. The college is being bankrolled by the emirate as it tries to underpin a $500 billion development plan by more than doubling investment in education this year.

NYU follows Paris’s Sorbonne University, which started offering courses in Abu Dhabi in 2006. Mubadala Development Co., an investment arm of the emirate, agreed last year to build a 93,000 square-meter campus for the French institution.

Of the 162 branch campuses in the world today, half are located in the Persian Gulf, with 25 percent in the U.A.E. alone, according to the Observatory on Borderless Higher Education, a London-based information service. Branch campuses differ from overseas programs offered by U.S. universities in that they usually function independently from the main school and have academic and administrative support on site.

‘Urgent’ Investment

The need for investment in higher education “is absolutely urgent,” said Rafic Makki, executive director at the Office of Planning and Strategic Affairs and Higher Education at the Abu Dhabi Education Council. “We are definitely on the right track, but we are nowhere near where we need to be.”

While Dubai, located an hour and a half across the desert, built skyscrapers and glitzy malls to turn itself into a hub for tourism and finance, Abu Dhabi is trying to become a cultural center with branches of the Guggenheim and Louvre museums and visits from the New York Philharmonic.

Abu Dhabi has the means to do it. The emirate, which spent $20 billion bailing out Dubai’s excesses, holds about 7 percent of the world’s oil supply. Under its 22-year economic development plan, the Abu Dhabi government estimates that non- oil industries will contribute half of total gross domestic product by 2015 versus about 40 percent today.

“From a fundamental development point of view the first and most important goal should be human capital development,” said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi. “It takes a long time to establish a good university. You need experienced professors, libraries, campuses.”

Closing Shop

Some U.S. universities have been and gone in the U.A.E. Washington-based George Mason University shut its doors last year in Ras al Khaimah, one of the northern emirates, citing the global economic crisis. Michigan State University closed its Dubai campus in July, six months after the bailout by Abu Dhabi.

One of the challenges is convincing students to make Abu Dhabi or Dubai their college town instead of Boston, New York or Chicago. In the 2008-2009 academic year, U.A.E. enrolment in U.S. universities jumped 24 percent from the previous year as student visas increased to pre-September 2001 levels, according the New York-based Institute of International Education.

The Abu Dhabi government plans to spend more than 1.3 billion dirhams ($350 million) on education this year, compared with 655 million dirhams in 2009 and more than six times the expenditure in 2008, according to statistics included in a preliminary government-guaranteed bond prospectus in July.

Research Spending

As much as $1 billion in academic research investments is needed per year through 2018 for Abu Dhabi to compete globally with some of the top universities in the world, Makki said.

Other colleges represented in Abu Dhabi include New York Institute of Technology, which offers a degree program, and U.A.E. University. Australia’s University of Wollongong and Canada’s University of Waterloo offer programs in Dubai.

Similar efforts have been made in Qatar, where Georgetown University and Texas A&M are among a half dozen American schools now operating in Doha’s academic hub, a 2,500-acre campus known as Education City. Like NYU, these campuses receive their funding from a government-run foundation.  (Click here to read my story on Qatar’s Education City)

The NYU campus, situated in a temporary facility near Abu Dhabi’s waterfront, will relocate to Saadiyat Island, a manmade plot by the emirate’s Tourism Development & Investment Co., known as TDIC. It’s scheduled for completion in 2013.

‘Strategic Investment’

Along with paying all costs associated with the university, Abu Dhabi will reimburse NYU for the expense of replacing the faculty staff relocating to the Middle East. Abu Dhabi has also made a $50 million gift to NYU, John Sexton, the university’s president, said in an interview earlier this year.

Of the 150 students in the first intake, about a third are American citizens and about 8 percent from the U.A.E. The rest hail from countries including China, Hungary and Russia.

Bringing NYU to Abu Dhabi “is a strategic investment just like everything else we are doing here,” Mubarak Hamad Al Muhairi, managing director of TDIC, said in an interview.

Hasnain Zaidi, 23, an Abu Dhabi native who graduated from Duke University in 2008 and now works as a consultant in the U.S., said partnerships with more universities may also convince many of the Gulf’s foreign college-bound students to stay.

“Public service, athletics, social life, personal development — none of those things was readily available at any of the options in the U.A.E.,” he said. “That’s slowly getting better, but still not completely fixed.”

Spalvieri-Kruse plans to major in mathematics and relishes the idea of classes with no more than 20 students, he said.

“Abu Dhabi doesn’t even fall in the realm of college environments most American kids consider,” he said by e-mail. “Actually seeing the town for myself totally changed things. My visit gave me the impression that everyone involved was highly invested in the success of the incoming class.”

To contact the reporter on this story: Vivian Salama in Abu Dhabi at vsalama@bloomberg.net

Google Says Censorship Not Obstacle to Its Middle East Growth

July 29, 2010

click here for original link.

By Vivian Salama and Heidi Couch

Google Inc., owner of the world’s most popular Internet search engine, said it’s not hindered in the Middle East by government-backed censorship as it seeks to ride growing opportunities in the region.

“We tend to operate in a very, very competitive industry, so users are generally one click away from changing their preferences,” Ari Kesisoglu, manager for Google Middle East, said in a Bloomberg Television interview in Dubai. “We are not censoring our own information, and we’ve never been asked to.”

Google, based in Mountain View, California, is seeking to gain ground in the Middle East, where it estimates that less than 15 percent of the residents go online. The company went public with a dispute in China in January, saying it was no longer willing to comply with filtering regulations.

“If you want to play ball in China or the Middle East or basically any other country outside, you’ve got to play by the local rules,” said Jin Yoon, an analyst at Nomura Holdings Inc. in Hong Kong. “If you don’t play by the local rules, you essentially have to mark yourself out of the market.”

China’s government confirmed that it renewed Google’s Internet license, after the U.S. company’s local venture pledged to allow regulators to supervise its Web content, the official Xinhua news agency said July 11. The move gives Google a chance to win search share lost to market leader Baidu Inc. and woo advertisers put off by its dispute with the government.

“Whatever happened in China is completely exceptional and it doesn’t result in us making any decisions globally,” Kesisoglu said.

Middle East Censorship

In many Middle Eastern countries, television programs and films cut out nudity, physical intimacy or homosexual scenes. Internet firewalls are common across the region, particularly in the Persian Gulf, where several countries ban popular websites such as Skype and Flickr. Websites that are critical of Islam or ruling political regimes are often blocked.

In August, Yahoo! Inc. purchased Maktoob.com, providing it with an entry point into a market that includes 22 countries and more than 350 million Arabic speakers. Maktoob is the largest portal in the Arab world with 16 million monthly users.Vodafone Egypt last year purchased Sarmady, a Cairo-based provider of digital content.

“Google, Yahoo, help the region and lobby the government for less censorship,” said Samih Toukan, founder of Maktoob.com. “We lobby as local people because censorship hurts us, it hurts innovation it hurts growth.”

Bloggers Arrested

Global Voices Online, an international bloggers’ network, has documented 206 cases of bloggers under arrest or threat, mostly in China, Egypt and Iran. In Egypt and Iran, online political activists have been arrested and prosecuted after rallying in support of opposition parties.

Restrictions stretch beyond the Web and films. In the United Arab Emirates, Research In Motion Ltd.’s BlackBerry smartphones may be subject to monitoring if the government is able to bring communications by the handheld devices under emergency and security rules.

Blackberry devices, introduced in the U.A.E. in 2006, are not covered by the country’s 2007 Safety, Emergency and National Security rules, the Telecommunications Regulatory Authority said July 25.

Abu Dhabi Feels Dubai Chill as Emirate Accepts Money Is Scarce

July 26, 2010

By Vivian Salama

July 26 (Bloomberg) — Times have changed for the Alimad Engineering and Contracting Company in Abu Dhabi.

Two years ago, the developer was building everything from 20-story glass towers to luxury villas. It’s now shelving projects, the latest a $12 million contract with a client who has $2 million and the banks won’t give him any more money, said Ziad Ali, whose father founded the company 20 years ago.

“When investors don’t get funding, we don’t get their business,” Ali, 24, said by telephone from his office.

If the palm-shaped islands and skyscrapers of Dubai came to symbolize the excesses of the economic boom in the Gulf, the less glitzy Abu Dhabi represented the sobriety. Yet after Abu Dhabi, home to more than 7 percent of the world’s oil supply, spent $20 billion bailing out its desert neighbor, it too is having to accept the financial crisis is catching up.

Abu Dhabi, the largest of the United Arab Emirates and home of the capital and central bank, forecast a second consecutive budget deficit this year, according to statistics included in a government-guaranteed bond prospectus released last week. Spending will exceed revenue by 84.9 billion dirhams ($23.1 billion) this year after 126.5 billion dirhams in 2009.

While the emirate, which is home to one of the world’s largest sovereign wealth funds, is sticking to its plan to invest $500 billion in industry and tourism by 2030, its property market is suffering along with Dubai, while local banks are lending less and companies are reassessing business plans.

Not ‘Bottomless’

“Nobody should be naive and think any place, whether the U.S. or Abu Dhabi, has a bottomless pool of resources,” said Mohammed Ali Yasin, chief executive officer of Shuaa Securities, a brokerage in Abu Dhabi, until he leaves the post next month. “The impact this crisis would have here in Abu Dhabi was undermined initially. Now is a time for reassessment.”

When crisis struck in late 2008, cranes in Dubai halted and unemployed expatriates fled, some abandoning their cars at the airport. Others, particularly in construction, started commuting the hour and a half across the desert to Abu Dhabi, home to more than 90 percent of the U.A.E.’s oil reserves.

Unlike buildings such as the Burj Khalifa, the world’s tallest, Abu Dhabi took a more conservative approach, putting up such projects as branches of the Guggenheim and Louvre museums.

‘Vulnerabilities’

The Abu Dhabi Economic Vision 2030 targets 7 percent annual growth through 2015 and 6 percent thereafter. The emirate won’t reach that this year, Mohamed Omar Abdulla, undersecretary at the Abu Dhabi Department of Economic Development, said on Feb. 2. A senior government adviser said in June he doesn’t expect any major revision to those estimates in the longer term.

The International Monetary Fund said on May 25 Abu Dhabi will grow 3.7 percent in 2010, while Dubai’s economy will shrink about 0.5 percent this year.

“There are some lurking vulnerabilities that should restrain growth,” Rachel Ziemba, an analyst at Roubini Global Economics in London, said by telephone. “Still, they have a strong net asset position.”

Revenue and expenditures at the Abu Dhabi Investment Authority, Abu Dhabi Investment Council, Abu Dhabi National Oil Co., Abu Dhabi Water & Electricity Authority, International Petroleum Investment Co. and Mubadala Development Co. aren’t included in the emirate’s budget. Royalties and taxes on crude oil and natural gas production from these entities are included, according to the prospectus.

The emirate’s other investments include minority stakes in Citigroup Inc. and Gatwick Airport in London, as well as a majority stake in New York’s Chrysler Building.

Earlier ‘Surpluses’

The budget shortfalls are the first following four years of “significant surpluses,” according to the bond sale document from Waha Aerospace BV, an investor in aircraft companies and part of Abu Dhabi holding company Waha Capital.

The emirate’s loans and equity investments in the country are forecast to decline by almost half this year to 36.9 billion dirhams, the preliminary prospectus said.

Other industries also are feeling some pain. Masdar, the government-backed renewable-energy company, said in June its revising its business plan in an effort to ensure the project is “economically viable.”

“We were living in good times, had big plans to build our infrastructure and some of our companies were caught off guard,” said Mohamed Berro, CEO of Al Hilal Bank, a lender owned by the state-controlled Abu Dhabi Investment Council. “It will be a challenging year here for everyone.”

Property Slump

The government in March bought assets on Yas Island, home to Abu Dhabi’s Formula One raceway, from Aldar Properties PJSC, Abu Dhabi’s biggest real-estate developer, for 9.14 billion dirhams. Aldar that month became the first company in the emirate to get a “junk” rating from Moody’s Investors Service.

“The bigger developers, they are managing to keep their projects going and access the funding they may need,” said Guy Parsons, CEO of Profile Group, an Abu Dhabi developer. “Small developers — the ones that are not government-back or family- backed — they are not getting the money owed. Developers need that cash but these days they can’t get it.”

Home prices in Abu Dhabi dropped more than 30 percent from the market’s peak in the second quarter of 2008, while values in Dubai declined by more than half, according to estimates by Swiss bank UBS AG.

Ziad Ali at Alimad Engineering and Contracting said there was once a time when his company was always guaranteed a piece of any business coming to Abu Dhabi.

For now, those days are gone. “We are all being affected,” he said.

–With assistance from Camilla Hall and Zahraa Alkhalisi in Abu Dhabi and Ayesha Daya in Dubai. Editors: Rodney Jefferson, Riad Hamade

Dubai Neighbor’s Family Feud Raises Allegations Over Iran Trade

Dubai Neighbor’s Family Feud Raises Allegations Over Iran Trade

June 17, 2010, 6:26 AM EDT

Click here for the web link.

Bloomberg/Business Week

By Vivian Salama and Camilla Hall

June 17 — An hour’s drive up the Persian Gulf coast from the glitzy hotels and skyscrapers of Dubai, a family feud is threatening to unsettle the United Arab Emirates.

The source of the spat is a power struggle between two sons of the ruler of Ras al-Khaimah, the last of seven states to join what is now the U.A.E. The elder, Sheikh Khalid bin Saqr al- Qassimi, who was stripped of the title of crown prince in 2003, alleges his younger half-brother and current heir, Sheikh Saud, helps foster trade with Iran.

“Any instability would be destabilizing for the whole of the U.A.E.,” said Christopher Davidson, a professor of Middle East studies at Durham University in the U.K. “Such instability would also open the door for further external interference, given its strategic location close to Iran.”

Ras al-Khaimah is 60 miles (97 kilometers) from Iran on the Strait of Hormuz, an artery for a fifth of the world’s oil supply. The U.A.E. is a key American ally in the Gulf and Sheikh Khalid’s allegations, rejected by Sheikh Saud, come as the U.S. and United Nations implement additional sanctions against Iran, broadening an arms embargo and toughening trade limits.

The U.S. and its allies suspect Iran’s nuclear program is aimed at building a bomb. Iran says it nuclear installations are for peaceful purposes.

Emirates’ Image

Ships from Dubai leave for Iran laden with consumer goods every day. Iran accounted for 7.5 percent of U.A.E. exports in 2008, according to the CIA World Factbook. Trade between the two countries exceeded $12 billion in the 12 months to March 20, 2008, the Iranian state-run Fars News Agency reported.

“The U.A.E. will be extremely keen not to create an image that they are trying to get around the trade sanctions,” said Amr Hamzawy, research director and senior associate of the Carnegie Middle East Center in Beirut.

The ruler of Ras al-Khaimah, Sheikh Saqr bin Mohammed al- Qassimi, 92, is ailing in a hospital in Abu Dhabi, the U.A.E. capital, escalating concerns over the future of his territory. He deposed Sheikh Khalid, 66, in June 2003 and replaced him with Sheikh Saud, 54.

The Guardian newspaper reported last week that Sheikh Khalid was preparing a political coup against his brother. Khater Massaad, an adviser to Sheikh Saud and head of the Ras al-Khaimah Investment Authority, said Sheikh Khalid poses no threat to the leadership.

Sheikh Khalid bin Saqr al Qassimi

 

“There was never and will never be any coup in Ras al- Khaimah,” he said in an interview in the emirate on June 9. Sheikh Saud was appointed by his father, with support from U.A.E. founding patriarch Sheikh Zayed, Massaad said.

Trade Zone

Similar to Dubai, Ras al-Khaimah invested to compensate for its lack of oil and gas wealth, including opening the Saqr Port Authority and the RAK Free Trade Zone, which offers companies a 100 percent tax exemption. The sheikhdom is home to one of the world’s largest ceramics companies, RAK Ceramics, which exports to more than 150 countries, according to its website.

Since being removed seven years ago, Sheikh Khalid has sought backing in Washington, telling U.S. lawmakers that Ras al-Khaimah is being used to sidestep U.S. and UN sanctions against Iran, an allegation Massaad says is “nonsense.”

U.S. State Department spokesman Philip Crowley said the U.S. was “very satisfied with our close and ongoing counterterrorism cooperation with the UAE.”

Sheikh Saud bin Saqr al Qassimi

 

U.A.E. exports to the U.S. rose by 53 percent between 2000 and 2009, to $1.49 billion, according to government statistics. Last year, the two countries signed a bilateral agreement for peaceful nuclear cooperation.

Shared Concerns

“Sheikh Khalid does not believe you can put a price on the shared security concerns of the U.S. and U.A.E. when it comes to issues like terrorism and Iran,” Jason Kinney, a spokesman for Sheikh Khalid, said by e-mail on June 15.

The federal U.A.E. government has let the succession dispute in Ras al-Khaimah harm the U.A.E.’s reputation and raise questions about its overall stability, said Abdelkhaleq Abdulla, professor of political science at Emirates University in Al Ain. The government in Abu Dhabi wasn’t available for comment.

“The U.A.E. is now paying the price because the leadership was reluctant to jump in sooner,” to settle differences between the would-be rulers, Abdulla said.

–With reporting by Nicole Gaouette and Lorraine Woellert in Washington. Editors: Rodney Jefferson, Peter Hirschberg

To contact the reporter on this story:

Vivian Salama in Abu Dhabi at vsalama@bloomberg.net;

Camilla Hall in Dubai at chall24@bloomberg.net

‘Sex and City’ Sequel May Face Abu Dhabi Ban

by Vivian Salama 

click here for story link

May 29 (Bloomberg) — Abu Dhabi is the setting for “Sex and the City 2.” Yet the movie may never be shown there.

The Warner Bros. film, released this week in the U.S., moves its high-rolling stars from New York to one of the richest cities in the world — where it has stirred anger even before the United Arab Emirates censors decide if its sexual content is unacceptable. The first “Sex and the City” film in 2008 was banned for its risque story.

Critics of Abu Dhabi say that censorship makes it unsuitable to become a cultural hub. The emirate produces more than 7 percent of the world’s oil supply and wants to attract art, music, theater and other creative industries to help its economy diversify. The film may help boost tourism at a time when the Abu Dhabi government is aiming to lure 3 million foreign visitors a year by 2012.

“In the Middle East there are three taboos that people don’t talk about: religion, sex and politics,” said Mohammed Aboelenein, chairman of the sociology department at the U.A.E. University in Al Ain, a city in Abu Dhabi. “In the meantime we want our society to modernize. It’s contradictory.”

The new film’s scenes of the stars riding camels through the desert and confronting women in face veils are an injustice to Abu Dhabi’s diversity, said some opponents.

“In most Hollywood films, Arabs are shown either as terrorists or Bedouins,” said Aboelenein.

Sex and the City 2

Arab Stereotype

The film “identifies Abu Dhabi with camels?” asked Jack Shaheen, author of “Reel Bad Arabs,” a book about Arab stereotypes in film and television. “The producers and writers of Sex Inc. grew up with these stereotypes. It’s what they know — the mythology rather than the reality.”

Critics also note that the movie’s “Abu Dhabi” scenes were actually shot in Morocco. The National Media Council, the government body that decides which films are appropriate for viewing, said that it was never approached by the filmmakers about whether they could shoot in Abu Dhabi. A spokesman, who asked not to be identified, said that any talk of a ban on the film was merely speculation when the country had not yet been presented with a copy.

Abu Dhabi television programs and films cut clips showing nudity, physical intimacy, or scenes that are homosexual in nature. The emirate bans art or music deemed offensive to Islam. Popular websites including Skype and Flickr are blocked in most of the country.

Shooting Stars U.A.E., the distributor for all Warner Bros. films in the country, has no knowledge if the movie will be released, Roy Chacra, the company’s general manager, said in a telephone interview.

Bikinis, Bars

Until recently, Abu Dhabi was in the shadow of its less conservative neighbor, Dubai, which built its reputation as a haven for foreigners looking to join the region’s prosperity while embracing more liberal lifestyles. A mere 5-hour drive from the border of Saudi Arabia, both Abu Dhabi and Dubai are tolerant to bikini-wearing beachgoers, bars and clubs.

Abu Dhabi last year provided $20 billion in assistance to its neighbor after Dubai World, a state-run holding company, moved to reschedule payment on $26 billion debt.

“Since the economic crisis, the drying up of credit, and the spate of redundancies, both expatriates and nationals have been hurt, and social tensions have increased,” said Christopher Davidson, a professor of Middle East studies at Durham University in the U.K., who is writing a book about Abu Dhabi.

Kissing Arrest  

Two Britons were arrested in Dubai for kissing in public, after an Emirati woman complained that the display of affection insulted her last November. A teenager in Abu Dhabi who claimed she was gang-raped faced a possible lashing for having sex out of wedlock and she retracted the accusation.

The emirate’s non-oil businesses will contribute 50 percent of its gross domestic product by 2015, adding about $167 billion per year, as stated in its 22-year economic plan.

Abu Dhabi has built a Formula One raceway, and is working on theme parks with companies including Time Warner Inc., Ferrari SpA and MGM Mirage. The government has invested 100 billion dirham ($27.2 billion) for a cultural district on Saadiyat Island, including new branches of the Guggenheim and Louvre museums.

To contact the writer on the story: Vivian Salama in Abu Dhabi at vsalama@bloomberg.net