Gulf Research Council's license not renewed

The Gulf Research Council has been denied a renewal of its license to operate in Dubai "due to objections by the Dubai government to various aspects of the GRC’s work". The full press release from the GRC follows:

Title Important Announcement: GRC to Undergo Restructuring Publication Date: June 2011 Publisher: Gulf Research Center Category: Press Release No of Pages: 1 Pages

Abstract: Due to rumors circulating about the future of the Gulf Research Center, we felt the need to set the matter straight and inform our network, both individuals and partner organizations, about the current situation. To be very clear at the outset, the Gulf Research Center is not closing and will continue with all of its activities. However, circumstances beyond our control have resulted in the need for the GRC to restructure its operations. The main reason lies in the fact that the Gulf Research Center has not been allowed to renew it operating license as per the law of the United Arab Emirates. The GRC has existed and operated in Dubai, UAE under a ten-year professional license (#519601) since July 2000. The license covered the areas of social science research, publishing, translation, conference organization and consultancy work among others. Upon the expiry of the license in July 2010, immediate efforts were undertaken with the UAE Government of Dubai - Department for Economic Development to apply for a renewal. These efforts were initially blocked with no concrete reasoning. Only at the end of October 2010 were we told verbally that a license renewal would not be forthcoming due to objections by the Dubai government to various aspects of the GRC’s work. We consider none of these objections to be valid and have answered each one in thorough detail. However, subsequent attempts to resolve the situation have not been successful. We consider the decision by the Dubai authorities to be unfortunate and unnecessary. At the same time, and despite our considerable financial losses, we are fully committed to respect the legal requirements associated with such a decision. We have therefore been given little choice but to relocate our activities for the time being to our existing offices in Jeddah, Saudi Arabia, Geneva and Cambridge, UK. Members of the staff will be moved according to our requirements. Furthermore and in correspondence with this shift, it is our intention to expand both our regional and international activities. Outside of this re-structuring, nothing else changes. Please be ensured that the Gulf Research Center will continue with its work and that all existing commitments and agreements with individuals, with partner institutions and with corporate members remain in effect. Dr. Abdulaziz O. Sager Chairman

Added. Gulf News reports

The GRC is one of the few think tanks operating in the UAE and the GCC that is not directly affiliated to a government or an international institution.

Its founder and chairman Abdul Aziz Saqer said the decision was not communicated to the think tank in writing. “I’m disappointed because after I spent Dh150 million on this institute in Dubai in the past ten years, brought thousands of people to Dubai, trained hundreds of UAE students, I’m [being forced] to leave. We put Dubai on the research map,” he said.

...

The GRC was rated as number two think tank in the Middle East in the 2010 Global 'Go-To Think Tanks' survey of the Think Tanks and Civil Societies Program of the University of Pennsylvania.

Its positions have closely reflected those of Gulf governments, particularly Saudi Arabia, but Saqer said it is an entirely independent and audited entity, funded solely by him.

...

Since it was established, the GRC has built strong links with prominent think tanks around the world, and its researchers make regular media appearances on issues pertaining to the region.

Some of its former researchers have also been recruited by UAE ministries.

Lacking bailout Dubai heads into Icelandic territory

Wall Street Journal (subscription req.):

Abu Dhabi's decision last week to pump $4.4 billion into its own banks while offering no support to lenders in Dubai or other emirates in the Gulf federation may simply be brinkmanship amongst the sheikhs. But the possibility Abu Dhabi will refuse to come to Dubai's aid -- once seen as almost unthinkable -- can no longer be ruled out.

That raises the prospect of a deeper debt crisis in Dubai. And even a fragmentation of the 37 year-old federation if Abu Dhabi refuses to pump billions of dollars into the economies of poorer emirates like Dubai to prevent either a corporate default or severe downturn. The cost of insuring Dubai debt has rocketed to around 10 percentage points for five-year debt -- higher even than Iceland.
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Abu Dhabi is driving a hard bargain. Its demands are thought to include the surrender of Dubai's autonomy and the loss of control over crown jewels such as Emirates Airline and Nakheel, builder of the emirate's Palm-shaped islands. That may be too much for Dubai's ruling Maktoum family to stomach -- partly because the rulers of the two sheikhdoms are cousins. But also, because Dubai contends it was a principle of the 1971 agreement to form the federation that Abu Dhabi would use its oil wealth to support the other emirates.

Financial Times:

The cost of insuring Dubai’s sovereign debt has become almost as expensive as insuring troubled Iceland, illustrating the depth of investor concern about a default by the emirate.

The spread on Dubai’s benchmark five-year credit default swaps last week broke the 1,000 basis points barrier, similar to the spread of Icelandic bonds.
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nvestors have been spooked by Abu Dhabi’s decision this month to inject funds into its own banks, without similar support for financial institutions in other emirates. Analysts had previously hoped that the capital of the United Arab Emirates would step in to prevent a default in Dubai, the UAE’s commercial hub.

“The market’s thought process is moving from Dubai being implicitly guaranteed by Abu Dhabi to questioning the relationship between Dubai and Abu Dhabi,” said Dino Kronfol, managing director at Algebra Capital in Dubai.

Birth of a nation, 41 years ago:

Roughly half way along the highway between Abu Dhabi and Dubai, there is an interchange at a place called Semeih. ... It was here, 41 years ago tomorrow, that the two fathers of the UAE federation, Sheikh Zayed of Abu Dhabi and Sheikh Rashid of Dubai, met on February 18 1968, to lay the foundations of the state of today.

The author, Peter Hellyer, makes no mention of his disagreements with Christopher Davidson about the meeting place.

As to a bailout, Secret Dubai thinks Dubai did get one from Abu Dhabi after craftily courting Iran and Saudi Arabia for aid. It's a strategy that I and others have suggested. Abu Dhabi doesn't want its fellow emirate to be beholden to either of those.

Young and Arab in a land of mosque, bars, and opportunity

A very good article in the New York Times about life in Dubai for young Arab ex pats:

Dubai is, in some ways, a vision of what the rest of the Arab world could become — if it offered comparable economic opportunity, insistence on following the law and tolerance for cultural diversity. In this environment, religion is not something young men turn to because it fills a void or because they are bowing to a collective demand. That, in turn, creates an atmosphere that is open not only to those inclined to a less observant way of life, but also to those who are more religious. In Egypt, Jordan, Syria and Algeria, a man with a long beard is often treated as an Islamist — and sometimes denied work. Not here in Dubai.

But it's not all milk and honey. The personal stories are bittersweet.

Be sure to check out the 17 pictures with quotations. One:

Taj Maarafi, 24, is from Tunisia, and has lived in Dubai for almost two years. He works as a waiter. "I miss my life in Tunisia - but I'm not going back. I have an independence here that I wouldn't have even if I made more money back home. I'm making my own future. This is one thing in Dubai: you're not part of a family, or a group. You come here as an individual, and this is how people see you."

Secret Dubai on Dubai and the media

Quote:

Part of the problem in Dubai is that far too many senior officials have no perspective when it comes to local press versus international coverage. They have a very "village green" attitude, and will obsess over a perceived impertinence in a local rag read predominantly by Jumeirah Janes and Tecom commuters while ignoring serious social and political problems that get picked up by global heavyweights such as the FT and the Economist.

Sheikh Mohammad uses mystery shoppers

Daily Star

Sheikh Mohammad's "spies," known as "mystery shoppers," fan out across government offices to observe and grade the efficiency, competence and attentiveness of local officials. Those who receive poor marks are quietly rebuked, while those who impress move into an informal Dubai fast-track, receiving increasingly more challenging tasks, greater responsibility and more scrutiny. If they survive those tests they gradually enter the rarefied air of the Dubai high-flyer executives, the dozen or so movers and shakers who are transforming the Gulf city-state into a major regional and global trade, tourism, transport, technology and financial services hub.

This survival of the fittest produces a top-notch government elite, not one stocked with cronies and family members of the ruler - and might just be the key to Dubai's remarkable rise. While Western capitals search for an Arab "democratic model," Dubai is providing an Arab "meritocratic model" that underpins its successful growth and development.
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While much of the Middle East is burdened by a steady brain drain, Dubai has managed to cut against the prevailing grain by both nurturing local talent and drawing in leading regional money managers, traders, bankers and consultants in what is amounting to a brain regain. An ambitious young man in Karachi, Cairo, Tehran, Jeddah or New Delhi no longer instinctively sets his sights on Europe or the US. The Dubai School of Government (DSG), for example, has managed to attract three leading Saudi women PhD professors away from Europe and the US along with an array of top thinkers from the Arab world and a smattering of World Bank executives. Whether or not Dubai might offer a model matters less in this instance than what it is actually doing: keeping Arab talent in the Arab world.
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Afshin Molavi, a journalist and fellow at the New America Foundation in Washington, was a Dubai-based correspondent with Reuters. This commentary first appeared at bitterlemons-international.org, an online newsletter.

Thanks to samuraisam for the pointer.

Sheik Mo on 60 Minutes

For completeness I must provide a link to the 60 Minutes article and video on Dubai. CBS ran the segment on 60 Minutes last Sunday.

Islamic investing

In the international market of investing it's not always easy to insure that the company you are investing in engaged in a business that is consistent with your values. But sometimes it is easy to know. Dubai's investment in Las Vegas casinos may tell us a lot about Dubai's values, its revealed preference.

The Kippreport's analysis:

Dubai World is set to pay as much as $5.1bn for a slice of MGM’s leisure and gambling business. The deal will see the government-owned investor take an initial 9.5 per cent share of casino firm MGM Mirage and create a joint venture with MGM on CityCenter Holdings, a resort developer. Dubai has an option to raise its stake in MGM to 20 per cent.

The deal will immediately ask questions of Dubai’s moral right to invest (and profit) from gambling, outlawed under Islamic law. Dubai World's chairman, Sultan Ahmed bin Sulayem, brushed aside questions about the apparent conflict of attitudes by pointing out that the company had long owned a stake in Kerzner International - the owner of the Bahamas' Paradise Island casino (4,500sqm, 850 slots, 78 gaming tables the largest casino in the Caribbean).

"Through our Kerzner investment we're already into gambling, so this shouldn't come as a surprise," he told the newswire service Bloomberg. Terry Lanni, chairman and CEO of MGM Mirage said Dubai had “already crossed the Rubicon” as far as investing in gambling.

True, but the scale and profile of the MGM put morals front and center in terms of Dubai’s investment strategy. Dubai may argue it is investing in a legal business and has no intention of bringing casinos to the UAE. Critics will point out, unless the deal is a Trojan horse, intended to destroy the North American gaming industry, Dubai is now in the business of encouraging people to gamble. What next? Selling marijuana in Amsterdam or prostitution in Sydney is both legal and profitable.

At least Dubai is not allowing itself to be intimidated into altering its investment strategy to suit the preferences of others. And I do not have in mind U.S. politicians concerned that Dubai will take over the U.S. gambling industry as in the ports controversy.

Green Community leaseholders in dispute with the developer

Gulf News

More than 300 concerned Green Community residents met last week to discuss the fee hike, which will rise as much as 300 per cent for the owners of these [long-term] leasehold units within Dubai Investments Park. Fees for an owner of a three-bedroom apartment, for example, will rise from Dh10,800 to Dh30,000 this year. "People are angry and upset and wanting answers," one resident said over what has turned into a four-month ordeal. "If we get answers and the truth, we will pay it. We want our community to be number one, but we want to be paying for something that is justified."

A statement by Property Investments to Gulf News said the management fees have in the past been subsidised. "In 2005 and 2006, Properties Investment collected back from its tenants only 38 per cent and 39 per cent, respectively, of the actual costs that it incurred in maintaining and managing Green Community. For 2007, the Company is seeking to collect 76 per cent of anticipated cost, still not the 100 per cent recovery that it is contractually entitled to demand."
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The latest skirmish follows an effort by residents to have Properties Investments provide audited annual expenses at the end of each year and also a detailed budget of the next year's expenses. Both are guaranteed in the lease contract and were not shown in the last three years, residents say. Property Investments, meanwhile, said they have "disclosed to tenants through various means full management accounts for the three years in question."

I was going provide an analysis, but this comment attached to the online version of the article says it all:

Management fees are a common concept in planned unit developments (PUDs). It also very common for the owners or tenants to select a management committe who appoints the maintenance company. The residents have the right to ask why and decide for themselves the choice of management company and the services. Normally the selection of maintenance company is done by management through a bidding process. If these rules are not set right from day one, the success of the real estate ownership and assets can be put at stake. It is the owners and tenants that should be primarily protected for the real estate ownership model to be successful.
A. Ghaffar
Robbinsville,USA

In other words, if other leaseholds selling in Dubai suffer the same flaw, buyers should beware. Ultimately it is Dubai's interest to make sure leaseholders are protected in order to maintain confidence in the real estate market. Heard the expression "die Katze im Sack kaufen"? Don't buy it. It applies a fortiori to label owners meetings "illegal gatherings" and accuse organizers of engaging in "criminal activity." Is it defamation to say "I don't trust your books"?

UPDATE. Found at 10:15 pm: Properties Investment responds to questions by Gulf News on Green Community service charge increase. Choice quote:

the self-styled “Democratically Elected Green Community Residents Committee” that has put itself forward for the role seems intent on conducting itself with disregard to the law and culture of the country in which we live.

UPDATE (see CORRECTION below): Property Investments is a UK-based company. See, Who Needs Civil Society when Profits are to be Made?:

One might argue superficially that the clash between residents trying to organize and protest and the profit interests of the company can be seen as a cultural clash between mostly “western” residents with a sense of civil society (that does not exist in the UAE) and Arabian authoritarian corporate culture. The only problem with that scenario is that the company at hand, Property Investments, Ltd., is a UK based corporation!

So there you have it. The company is accusing the leaseholders of not conforming to the culture of the country where they have chosen to live. But the company itself is UK based. It sounds as if it is the company that is abusing the culture of the country for its own profit.

CORRECTION: I'll let my words stand above as an object lesson, but the Green Community website has this to say about the developers,

Green Community is a quality development by Properties Investment LLC, a joint venture company between Union Properties PJSC and Dubai Investments PJSC. Dubai Investments PJSC was founded in 1995 with the aim of promoting business opportunities, principally in the UAE. ... Established in 1987, Union Properties was floated as a public company in 1993.

Here's what Union Properties has to say about itself. It in turn is part of Emirates Bank Group; that group includes Emirates Bank which is celebrating its 30th Annniversary:

Thirty years ago the late HH Sheikh Rashed bin Saeed Al Maktoum issued a decree establishing the Union Bank of the Middle East. And when later the Government of Dubai decided to consolidate its banking sector by merging Union Bank of the Middle East, then Dubai Bank LTD and Emirates National Bank which later become known as Emirates Bank. Since then it has been a non stop drive from one success story to the next. In 1991 the take over of Middle East Bank helped propel Emirates Bank to widen its scope by becoming a leader in the retail banking sector.

Is this your economy? :: Gulf News

Gulf News bravely reports:

breakneck growth, expanding wealth and "lagging" internal auditing controls make them prone to factors which brought down Enron and Barings Bank.
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"There is general consent that fraud is acceptable and it's okay to pay commission on every deal. It's part of doing business here and is a mindset we must change."
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A culture or regime that does not tolerate mistakes is very dangerous.

The environment that's being described?: Dubai.

There's another factor that's not mentioned. Banks' nonperforming loans are routinely covered. That only encourages banks to make more risky loans. That's a disaster in the making.

Dear Halliburton, Why Dubai? :: Houston Chronicle

The Houston Chronicle:

Texas is the can-do state. But there's no denying that Dubai has become the can-do sheikdom and a potent rival to Houston's supremacy as the center of the oil business.
The move of Halliburton's corporate base from Houston to Dubai is a stark example of the industry's shift in power from North America. The company is moving closer to the oil fields of the Middle East and Africa and its big national oil firms that control financing, exploration and production.

"The business is changing," said Amy Myers Jaffe, a fellow for energy studies at the James A. Baker III Institute for Public Policy at Rice University. "Will Houston remain the center of the energy business? I don't know."

Dubai's leaders decided decades ago to invest their limited oil revenues into building roads, airports and research parks to transform the city-state into a regional business hub. The strategy has been a runaway success, leading hundreds of international companies to relocate. [Aside: Don't forget the huge Jebel Ali port that came earlier than these other projects.]
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By moving to Dubai, Halliburton's senior management is following the lead of Vinson & Elkins, a Houston-based international firm that opened an office in the city more than three years ago after considering a number of locales in the region.

The firm wanted a Dubai base from which to pursue energy-related projects, said Jeffrey Eldredge, who helped open the office.

"Nobody lives in compounds, people feel safe here," said Eldredge. "What's happening here is pretty stunning. Many of our clients are setting up regional headquarters in Dubai, and their lawyers and financial types are going to the region, so it's convenient to be there and we need to be there."

The Islam practiced in Dubai is generally tolerant and open to outsiders, and there are few restrictions on social behavior, which has made the city a magnet for young professionals from other Arab countries who want to pursue their careers without having to live by a strict Islamic code.

Women, whose choices are extremely limited in other parts of the Arab world, work in a wide variety of fields in Dubai. While many women wear traditional Muslim head scarves and head coverings, a large number also dress Western-style.
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But it is not only a luxurious lifestyle that has drawn hundreds of businesses, including large media companies and computer software giants. It also is the low taxes, the inexpensive labor costs, and the fact that the tensions roiling much of the Middle East are absent.

The city also offers state-of-the-art communications and transportation links close to the major Persian Gulf oil fields, but largely without the religious and political strife associated with the region.

And the political risk is small.

Questioning U of Connecticut's Dubai plans

Human rights questioning. brn at UAE community blog has the story.