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Not Yet Time to Write Out Dubai, Says Mark Mobius

The Dubai government has taken a “giant step” in the right direction, said Mark Mobius, executive chairman of Franklin Templeton Investments,which manages worldwide assets of more than $539 billion.

“The government must continue the process of being more transparent. To the degree that they (government) can continue this kind of policy, and even increase it...then they will be 
very successful.”

Mobius lauded the UAE’s recent moves such as the creation of a new bankruptcy law, as well as Abu Dhabi’s $10 billion support fund provided to Dubai that prevented the latter from defaulting on its debts.

The money will be used to pay maturing debts of state-owned Dubai World, including the $4.1 billion Islamic bond of its property unit Nakheel PJSC. The fund will also buy time for Dubai World, as it negotiates with creditors for a restructuring of some $26 billion in debts. Financial markets have calmed, with Dubai’s share index gaining nearly 32 per cent in four sessions this week, but investors are still wary about the implications of the emirate’s huge debt pile. In the last couple of years, Dubai has accumulated debts estimated at more than $80 billion, which was used to transform the emirate into a global business and tourism hub.

“Dubai’s debt is not a big concern, it has the support of Abu Dhabi,” said Mobius, adding emerging markets, including the UAE, can tap their huge foreign exchange reserves, and a substantial money supply. “If you have a lot of money suppply, a lot of derivatives and foreign reserves, you won’t have a problem getting debts paid — that’s why we we are very, very positive that Dubai would be able to solve its problems,” said Mobius.

Emerging markets he said, are in a far better position than developed economies, and expects growth to come from these markets.

“Company debt, and personal debt are much less, compared to developed economies. Enhancing all these are their very low inflation rate, which means low interest rates.”

Mobius, who has shares in Dubai’s biggest property developer, Emaar Properties, and in DP World, the world’s fourth largest port operator, is looking into opportunities in the emirate, as well as in Abu Dhabi, and other GCC states such as Saudi Arabia and Qatar. He said Emaar’s advantage is that it has “global diversification,” citing among others, the developer’s Economic City project in Jeddah which he estimated to be the size of Manhattan.

“It provides Emaar with an incredible opportunity going forward. Emaar also has prime properties here (Dubai), so if we are able to buy into Emaar at a reasonable price, from a long-term point of view, it should turn out fine.”

Overall, Dubai will continue to lead the GCC region towards greater transparency among governments and companies,” said Mobius, adding that this will bolster Dubai’s role in the region.

“Of course, there are hiccups along the way, but I think the environment is very, very good for investors.”

“We were already buying into the crisis, we feel that from a long-range point of view, there are very good opportunities.” He said the only weakness he sees in Dubai is in the area of 
media censorship.

“They’ve got to be more open...I realise the constraints, but (openness) will attact more people, more ideas.”

Mobius said companies will fare better in 2010, as markets stabilise, and the worst of the global financial crisis is over.

“Results will be very good for companies in 2010, the numbers though won’t be as good as they were in 2007 or 2008, because they are starting from a very low base. Expectations as a result, should be modified, don’t expect big percentages.”

In 2010, growth drivers will come from robust personal consumption in emerging markets, as well as the continued rise in commodities, said Mobius.

“The per capita income is going at a pretty fast phase in India and in China, that would drive an incredible consumption boom. We can also expect good results in commodities, as the upward trend will continue, it is for those reasons we are focusing on these markets.” In the Middle East, Templeton has a frontier fund rocel dedicated to investments where there are high growth potentials, said Mobius.

rocel@khaleejtimes.com