Invest Bank of Sharjah had reached a critical point of collapse with lack of liquidity, capital, profits and massive loan losses and needed to be bailed out surreptitiously on a Friday afternoon today, 14 Dec 2018!
Hundreds of bankers will be fired as the clean up begins and expect more bank mergers over the next several months.
Since Sharjah Govt is taking a majority stake hence, previous public shareholders (65%) will get wiped out and current top Emirati shareholders like Al Mazroei and Al Hosani and 2 privately held companies will lose their power and tons of money.
More billionaires just lost a lot of money in the UAE!
The banking mergers that have occurred recently in the Middle East are not a sign of strength or consolidation.
These mergers are happening under secrecy with an intention to hide the rapidly rising losses along with lack of liquidity which is what makes the Middle Eastern banks more scary than anywhere else in the world because we simply do not know how bad the problems are.
Finally, we can proudly claim that we have reached an "aha" moment that we have been predicting since 2015 with respect to banks in the Middle East.
This is just the beginning of a massacre in banking in the Middle East since there is absolutely no liquidity in the markets and below you will see how many businesses have collapsed just in the last few weeks and won't be paying back anything to these banks.
Such losses have been occurring since 2015 and the damage is so severe that multiple banking mergers are happening and now the first ever bank bail out has happened. More are yet to come.
There are 2 banks with shareholding by Qatar one of which is United Arab Bank with whom Invest Bank was expected to have a merger since the past 2 years.
However, due to the ban and crisis with Qatar the merger cannot happen any more.
Which is what accelerated the crisis and this external catalyst led to the first ever Middle Eastern banking bail out today.
Government of Sharjah to acquire stake in struggling Invest Bank
News about one has showed up in the media yesterday since it cannot be shoved under the carpet.
Over 20 supermarkets of Al Manama supermarkets have shut while the owners have fled the UAE after 40 years.
Estimated losses are rumored to be around 400m-500m dirhams.
Several shops have shut in Yas Mall, Abu Dhabi and across all malls in UAE.
Supermarket chain Manama shuts outlets after owner ‘flees’ UAE
Real estate and all asset prices are plunging as are the stock markets. Dubai stock market has been the worst in the world for the last 5 years and has dropped over 50%.
We are also expecting lot of turmoil between USA and Saudi/UAE Jan 2019 onwards.
There is a race going on between major corporations on who will collapse first in the Middle East.
Let's see who is next!
If anyone has any more information or anecdotes to contribute for the benefit of everyone, we request you to leave a comment below. Thank you in advance.
Wow, it looks like things are heating up in your part of the world. Will it tip the scales and lead to a similar unwinding in the West? I am amazed that we hear so little of the events you write about in the western press, even in the 'alternative' media.
ReplyDeleteWhat happens to a society when the financial dominoes fall? Your scenario paints a picture of collapse with no end in sight. Where do things even out with new values getting established? How low will we go?
....
DeleteIf you see what's happening in Venezuela or Zimbabwe or Iran and Argentina, hyper inflation, breakdown of society, looting, maddening crime levels, no jobs whatsoever, currency collapse, expatriation of nationals in thousands, that is the worst.
But even expatriation won't suffice because today no one can travel elsewhere and look for a job, those days are gone. Comiing months will get a lot worse. UK just stopped citizenship program, Singapore, Malaysia, Kuwait, Oman and many more won't allow any more work permits.
Hence, countries are raising barriers effectively banning work permits, closing inward immigration and ejecting expats and non nationals.
Future is very very bleak for all around the world which is why those countries that align with China (like Philippines) will do well and others will keep dying in a slow death like scenario and demand for products of all sorts will keep dropping (cars, houses, diamonds, retail and FMCG goods, travel etc) until it can drop no more and takes the life of the companies that produce them.
Billionaires will suffer the greatest since they are the only ones who bought all those stocks, bonds, large tracts of housing, major companies etc.
This does not mean others will not suffer but the arrogance and power of the super wealthy will reduce and is reducing when we hear major billionaires running away from so many countries or put in jail or filing bankruptcy every single day somewhere on this planet.
Dear Andrew,
ReplyDeleteThanks for visiting and for your comment.
Things are going to get a lot more worse in the Middle East especially the ones who built those tall glitzy towers who have no one living in them.
In terms of the West, we need to isolate things a bit, all will get worse and are already showing symptoms of slow death since around 2008.
Germany (some major banks merged or shut, major super market chains closed and decline in population hence the bringing over of refugees leading to social mayhem). Same in Sweden, Greece, Italy etc. Basically across EU except who won't allow refugees.
UK (cannot catch a breath, banks are in the dumpster, retailers, almost all are in dire straits, drug stores too, shipping as well, car manufacturing too and much more). Just look at their currency, used to be 4.00 in 70's, 3 in 80's, 2 in 2000 and now at 1.30 levels. Their real estate collapse will take them down since Russians, Arabs, Indians are all hiding their wealth in UK which will be frozen and all new buyers have plunged while everyone is selling. Next step is major rise in sales leading to slowdown every month since there are no buyers at those hefty prices.
Canada (currency in dumps, 40% down since peak, rising unemployment, terrorism and crimes, even racism has gone to extreme levels in Canada which is very sad to see, real estate has begun the collapse over last 9 months, much much worse to come in the next 12 months).
USA (terrible in jobs and retailers, don't care what Trump says about unemployment, people have 2-3 jobs just to survive with no savings and millions have moved backwards in the last decade), only thing keeping US going is that foreigners still use USD for trade and US is insulated in aluminum, steel and oil and doesn't need to import).
Australia is same like Canada so is NZ. Economies are bad hence crime will rise and property will keep sliding like their currency with no decent jobs around.
Overall, every country will be different as the dominoes collapse.
Because whoever is insulated (low imports/exports, self reliant, low reliance on foreign students, foreign workers, self sufficient in food, oil, commodities etc) will be do better.
Not many countries come in self sustainability except China and Philippines and to some extent Russia.
America is trying its best to stop importing but if factories are getting built due to pressure from Trump then demand of goods will remain high and hence this is self destructive for Trump as well as America as their reliance on foreigners and imports remains high.
Interestingly, despite tariff tantrum of Trump since Jan-Mar 2018, Nov 2018 was the highest trade deficit in years for US. this may come down a bit but will remain elevated. This is not good for stability for America at this point of time in world relations where Trump spews venom against every single country daily instead of using talks and diplomacy!
I have predicted this since 2014 and have documented it as well. Need to make a post on it. Dominoes are falling exactly as predicted.
There is no bounce back so don't look for a low. We will keep going lower and lower.
Part 2....
DeleteAlthough US is trying to reduce the risk but it is impossible not to have a economic breakdown in Saudi and global oil prices because Saudi is caught in between the fight of China versus USA and will collapse if they continue to side with USA.
Now when things are extremely bad globally in almost all economies, then gold and silver is stuck at same levels since 2012 and gold declined from USD 1900 to USD 1,200 levels because world is in crisis and USD has perceived high value than other currencies. High USD so low gold price.
This indicates, gold and silver is just an investment tool like a company's share or bond and does not carry much value in times of extreme distress that too globally. Therefore, you do not have sufficient investors nor demand nor volumes and bulk of gold is stored in vaults, so prices won't move unless the USD collapses.
In the end, expect oil to decline, gold and silver to remain similar levels until USD collapses.
Hope this helps.
manoj bhai, whats your call on xommodities like gold, oil and silver
ReplyDeleteHello dear,
DeleteThis is a very complicated answer.
I was right since 2014 until 2017 that oil will drop below USD 30 and never rise above USD 60 until Trump showed up in Saudi.
This worked until Trump made a visit to Saudi in May 2017, after that 5,000 princes, royal family members were arrested in Nov 2017 and bulk of their assets taken and in a return deal with Saudis, Trump made the price of oil rise until now.
Last few years, geo political control factors have taken over the price of oil rather than demand/supply, oil discoveries, vehicles sold or new technologies like nuclear fission, electric vehicles, climate change etc.
Therefore, oil price has inherently become unpredictable due to it being determined by political factors but will remain weak because gas is the future not oil.
Having said that, I expect oil to drop below USD 30 again in the next few months with over 80% chance of success.
Reason being China has signed 5 oil agreements last month which begin oil delivery in Jan 2019 and I expect Saudi to mention that they will accept yuan within the first quarter of 2019. Once they do, it seems likely that gold and silver may rise and oil price will drop.
Hence, I would keep an eye on what Saudi will say or do in the next few months to determine the price of oil. They hold the geo political key to the petrodollar system that provides strength to the USD.
Saudi has once mentioned already in Oct 2018 in writing that they will use yuan as a tool to hurt the USA. But million dollar question is when?
Overall, gold and silver will remain at same levels like last 6-7 years but could display volatility in the months ahead. In terms of extreme crisis, these metals don't carry much value although people argue that gold is 10,000 years old and indestructible and what not, but ask the people in Africa or Venezuela or Zimbabwe or Iran, they cannot use this gold for anything when there are years long crises.
Hence, gold's demand is declining and risk of holding physically is rising due to inability to take it across borders, taxes etc. Except a few hundred millionaires who store it in their vaults no one sees the daily usage of gold or it's utility, it's not easy sellable, it's not easily divisible, it cannot be exchanged even for a loaf of bread when a crisis hits because the person who will accept gold cannot sell because gold jeweler refuses to buy without receipts and multiple lab tests which are not possible in times of crisis. Hence, gold is not a practical investment at all.
Gold and silver only work in steady times, not in times of extreme events like we are seeing today. So if things are extremely good like they were in 1980's and 1990's we saw gold below USD 300-400 previously gold remained USD 20-50 for several decades.
If you go back in history and see gold prices around World War 1 or World War 2, it never moved, same is the situation today. (Tip: I would not trade these because there is no volatility hence no chance of making money.)
Until 1972 when oil embargo hit gold remained low (again when Saudis were involved in the oil embargo) but spiked due to fear and then remained elevated due to loss of USD value. Again in 2009 there was fear so it spiked due to perceived loss of USD value.
Until USD collapses, you will not see gold rise. When that happens, is now in the hands of Saudi.
Your content is high on drama but low on facts.
ReplyDeleteHello scared anonymous living like a slave in Dubai who has sold his soul for the sake of money,
DeleteNobody put a gun to your head nor invited you to read anything on this blog.
Anybody without a brain is not welcome here neither are their brainless comments.
You are asked to shoo away and never come back here, ever again.
Nobody needs your ignoramus comments that do not add value to anybody.
And learn a very important lesson in life: Never shoot the messenger.
Thank you,
Please share your email ID Manoj
DeleteYou may reach me on voiceofthemarkets@protonmail.com
DeleteIt is also available by clicking here: https://voiceofthemarkets.blogspot.com/p/contact-us_1.html
Thank you.
Dear Mr Manooj,
ReplyDeleteThank you for a detailed analysis on financial markets around the ME and more speifically on UAE.
Please can you shed some light on Iran emergance as a new leader in the region given its importance with China and how far east and south Asia would benefit from OBOR.
Thank you
Dear Mr Abdulrauf,
DeleteThank you for visiting and for your question.
Iran is a beautiful country with tremendous potential but due to rivalry with Saudi/Israel/USA it is currently paying the price for lack of business and crushing of the soul and opportunities for the Iranian public which is truly sad and heart breaking.
Iran continues to remain the rising star of Middle East despite the media news.
For the last several years, Iraq is under control by Shias and significant Iran influence especially in business and military.
In addition, Syrian leader Assad is a non Sunni and is supported by Iran as well as Russia.
Iran and Russia together have finished ISIS which is why you do not hear of them since last year because they are all mostly dead or gone back home. We must thank Russia and Iran for that.
Iran need not do anything to rise. Opposite nations are fighting among themselves and giving more power to Iran unknown to them.
But business will suffer for everyone in ME because Trump cancelled the 2015 Iran deal. The primary beneficiary of business of Iran nowadays are Qatar and Oman from where all goods go to Iran plus via trains from China of which Huawei arrest in Canada is a prime example.
Iran's power will keep rising as you will note that both Qatar and Oman have dealings with Iran and Qatar even opened their embassy while Oman never closed it. Oman is opening banks in Iran too.
Entire Far East and South Asia (who are friendly to China) are seeing billions in investments from China which will create jobs, stability, demand for imports from China and create solid long term infrastructure. There are all sorts of opportunities in OBOR and South Asia due to solid fundamental sustainable growth despite what stocks or biased media may suggest.
However, India and most of Africa are not a part but in Africa, China has invested over USD 1.5 trillion in the last 10 years which is great but still causing problems in South Africa and Zimbabwe who have seen a lot of American underhand intervention due to which their currencies and safety are in trouble.
OBOR is a game changer and creates investment opportunities, growth, jobs, stability due to less crimes across entire Asian region. Whoever opposes OBOR will not benefit and will realise their mistakes 10-20 years from now.
It is perhaps the only growth engine for the world today with spending in trillions because thanks to tariffs of Trump business is slowing worldwide and to a very small insignificant extent in China as well because demand and spending on OBOR will replace whatever decline China sees if at all.
Due to OBOR China will create demand for it's bank lending, contractors, heavy machinery and all sorts of exports due to consumer spending in those participating nations.
Almost every country wants to be part of OBOR, this project eventually will connect Canada and USA by rail to China after 15-20 years.
Spain, Iran, Pakistan etc are already connected and London will be connected soon by rail (if not already operational) to China. This provides time and cost savings both for everyone.
Let's hope that peace shall prevail in the Middle East and everyone lives happily with each other because fighting Iran and Turkey cannot be beneficial to anyone. No matter what happens, Iran is a rising power and others in the region must accept it.
This is what the US Congress reads and thinks about Iran: https://fas.org/sgp/crs/mideast/R44017.pdf
Here is another excellent read on Iran's rise: https://www.newstatesman.com/world/middle-east/2018/02/how-iran-s-rise-remaking-middle-east
This is Philippines who did detailed analysis on benefits of OBOR for Philippines and the projects globally and I am sure you can see a lot of benefits from this analysis. http://www.fsi.gov.ph/chinas-belt-and-road-initiative-implications-for-the-philippines/
Hope this helps.
Haven't read a more absurd and innately naive piece of crap in quite some time. I work in a bank and know for sure that the said bank continues to be net lender in interbank markets. Further, it was a common knowledge in banking that Sharjha govt was planning to come in as strategic investor. Mr. Nathani peddles negativity and can spin anything basis the pre-scripted agenda of its handlers. Such a waste.
ReplyDeleteHahahahahaha to the anonymous banker who is causing the banks to collapse. Congratulations.
DeleteNot 1 investor believes garbage coming out of the mouth of greedy banksters like you.
Did someone hold a gun to your head to come here, read and then comment if you dislike it so much?
Do you have courage to write like this on NY Times or FT or any other major media page who speak of bank bailouts or money laundering and breaking every single banking law by all banksters?
How did you get a job in a bank in the first place?
Did they not train you in school to provide some data and facts when having a debate?
If Sharjah Govt was going to be a strategic investor then why over the last 2.5 years there were rumors of a 3 bank merger?
And why is there no news in the media of this "strategic investor" into a privately held public listed company?
What kind of banker says it is not a bailout when a privately held bank is taken over by a Govt? What do you call it in English language? "A celebration of wipe out of all investors"?
And why is Sharjah Govt scared to disclose the amount invested or percentage stake taken?
Hide much? Lie much?
Are people like you busy looting the Govt and speaking on the agenda of your handlers which is why others seem like handlers to you?
Nobody wants you here. This blog is not for crooked banksters, money launderers and selfish advisers like you.
It is meant for investors (and intellectuals) and to give them honest advice and show them the truth which hurts banksters like you like a razor blade.
Not meant at all for lying corrupt money laundering banksters like you who cannot give 1 honest advice to clients and choose to hide the facts and operate on inside information and suck your masters for a few bucks while cheating and lying to all your clients all day long.
This is a private blog targeted to UHNW investors and people like you should stay away unless you have something useful to contribute.
Thank you.
I must admit you are sore loser.
DeleteAre you addicted to this blog?
Get over it! Move on, Get a grip on yourself. Narcissistic immature troll.
How else should I say it except in plain English: DO NOT COME HERE. YOU ARE NOT WELCOME HERE.
Look at yourself in the mirror any day and you will know what a retard looks like!
Get educated yourself first before educating others. haha
Why do you keep coming here if you have no understanding how this world works except ad hominem attacks which is the definition of a coward and psychopath.
Told you stupid banker to shoo away and yet you come back again and again.
Remind me to scold you like your mom did when you were 3 years old and never listened to her.
What does it matter to you if top clients want to listen what we need to say about banksters like you and expose them?
People like you should be arrested and put behind bars for destroying millions of lives and blowing up the life savings of so many.
At least we are doing everyone a favor and exposing banksters like you and what is coming ahead.
Now go and do what you do best: destroy other people's money.
I know your identity so do not come here again. Not one investor wants to hear your arrogant comments.
Don't expose more about your tribe of banksters who harass and destroy the savings of so many every day.
I will give you the privilege to show everyone how a senior banker in UAE treats others and thinks of investors so they can learn their lessons and NEVER KEEP ANY MONEY with banks managed by arrogant banksters like you in the UAE.
Thank you.
Thanks for your information. I truly believe that no one can predict what's going to happen in the next few years.I feel that the Best Thing To Do Is Stay Put In Modern Agricultural Industry. What's Your Say Manor? ?
ReplyDeleteHello dear,
DeleteThank you for reading and for your question.
Most people cannot predict about the future but someone like us can make a good guess based on fundamentals, market dynamics, economics, politics and related events and past market experience.
Agriculture is ok only for self survival else it is not really a good paymaster. One can do farming in any country and see what the cost price versus sale price is and make an assessment if a particular item is viable.
It's not very simple because there can be bans like Trump has done or many countries can place bans on exports if they have a crisis or import duties may be levied.
Hope this helps.
Good morning Manoj,
ReplyDeleteRead your article regarding the ME economy. All that has happened in the past is proven and you can speak of it with conviction. However, as the owner of Sheeba General trading, I have never been contacted regarding our store closure. I would love to know how you came to the conclusion that we will be shutting down in May 2019? Such false allegations/rumors makes one question your credibility and authenticity.
Not sure why my name shows up as anonymous but my name is Mikky Jethani.
DeleteGood morning Mr Jethani and thank you for clarifying.
DeleteWe were provided this information through one of your employees.
We sincerely regret if this information about Sheeba is inaccurate.
Our intention is not to spread any rumors but share accurate market information in advance.
We wish you all the best and much success,
Thank you.
Hello Mr Jethani,
DeleteWe never put individual business names but this time we made a mistake. We should have not put things in public domain that have not happened.
We sincerely apologize if this caused you inconvenience or damage to your reputation.
We have now deleted any reference to your business and assure you that we do not intend to hurt anyone or spread any rumor.
We will ensure that we never put any individual business name unless it is confirmed by the owners or the event has actually occurred.
All employees may note that Sheeba Store is not closing, as per the owner himself.
Thank you very much for updating us and providing your side of the story.
Thank you and best wishes,
Dear Mr. Manoj,
ReplyDeleteIt is quite disheartening to read your article. I have been in UAE for manyyears and I have see it grow and struggle and grow again. However, I have great faith in leadership as I see them very focused on development and truly believe in making this country great. As you have stated, this is not a UAE phenomenon alone as other countries are also going through their own challenges. I am sure, the U.A.E government is consulting with the best and would be taking the right steps, but just to take this conversation forward, what do you think should be the next steps the government should take to move the economy in the right direction?
Hello Sir,
DeleteThank you for reading and for your very important question which I have been waiting to hear from anyone for a long time.
I personally spent over 2 decades in the one of the best cities in the world (Dubai) and it is indeed one of the best cities in the world.
However much I love it, the business and trade and finance that brought Dubai into the global limelight (not real estate and tourism) has seen declines that I wish upon no other city in the world.
We have made a post on this subject and given advice to UAE. It was on Aug 7, 2018.
We predicted this perfect storm in 2015 and advised our clients ever since then that the game is over for Middle East. We have written evidence of that and our clients admire and appreciate me for that prediction.
Why Property Prices In Dubai Will Keep Falling For Years
https://voiceofthemarkets.blogspot.com/2018/08/why-property-prices-in-dubai-will-keep.html
While I agree with you that in the past Dubai and UAE always bounced back but the situation in 1999 and 2008 (prior recessions) was starkly different than it is today.
You will read about currency declines, highest decline in price of oil for the longest period in history, multiple civil wars, bans etc since 2014.
The only way around for UAE Govt is to take the currency of South Africa, Russia, Angola, Nigeria, Iran, Pakistan etc up by 200% or more tonight.
And take price of oil up by 100% tonight.
As well as end ALL the civil wars in ME tonight.
Plus remove all bans, trade sanctions with all neighboring nations tonight.
If they can do ALL 4 tonight then we will see business roaring after 6 months. If even one remains, then there is no chance of recovery.
Other countries are having the similar issues but it is worse in ME because they deport or ban every person who loses their job. That is why they are in the worst possible situation.
Also, they must depeg their currency else their reserves will finish.
I have not even mentioned what Trump is going to do to ME in the next few months since Saudi/UAE have been having many issues with US for a few years including the price of oil, oil trading in yuan, issues with Iran etc.
Now America is removing their military support to Saudi and UAE by removing Patriot missiles and just sent a destroyer after a year long absence for the first time in decades and has removed many diplomats from the region. UK, Canada etc have active travel alerts issued for the region including UAE.
...Part 2....
DeleteThe reason other countries like Singapore, Europe, Australia, Africans, Russia, Malaysia, India, Canada etc are slightly slow in a decline is because they can reduce the pressure by depreciating their currency which helps them recover to some extent by more exports or more inflows etc. Which UAE cannot, hence UAE and Saudi keeps declining fastest. Hence, my advice/solution to depeg.
I personally believe since 2015 that there is absolutely zero hope of any recovery and it will get so bad that ll expats will need to leave since it is not their country of citizenship.
But some will always survive who do not have kids (and can somehow continue in their jobs or business) or are very wealthy with more than USD 3-5m in their cash savings or are simply retired.
Most (except laborers) do not have a chance of savings nor success. There may be some rare exceptions but I am speaking of over 99% of the workers including locals.
All these are external catalysts over which UAE has zero control hence hopes for recovery are nil.
In 2008, I was one of the largest buyers of investments in UAE and we profited very handsomely. Because situation was very different and there was hope because it was an internal issue not multiple external issues.
Dubai always grew based on trade and finance since 1980's (lot of oil money from other states was passing through Dubai or invested in Dubai). This allowed bank investing etc to flourish like Geneva or Singapore. In 2008, trade and finance was hurt but for a very short while and they made tremendous efforts to focus on tourism. In 2002 they started real estate which also was a success.
They did a short term focus to revive the economy in 2008 with more reliance on tourism. For short term it is fine, but now it is 1 decade and they rely just on tourism and some real estate but no trade nor finance which has mostly evaporated to online or other countries who have cheaper currencies. Plus they have serious issues with Iran, Qatar, Libya, Yemen etc who had parked billions in UAE but all is now gone.
Which is why many traders, banks and wholesalers have moved out and all free zones are desolate. This is sad but due to internet and the currency problems they cannot undo it. Hence the conundrum on how to grow further?
Real estate, trade, finance, banking, and due to unrest even tourism is slowing. Multiple airlines have closed Dubai and hotels and restaurants are not profitable much.
About "best" consultants, I am involved in the world of consulting (and I have advised them many a times personally) and know the knowledge levels of these consultants. Except for the ones who fly in from abroad to do some large deal of bonds or some major acquisition like Fly Dubai or Etihad etc they are the most pathetic consultants you will ever meet who are based in the ME. The best of the people have left Dubai in the last 5 years.
The Govt knows about the crisis which is why the fees and fines have gone sky high for the first time in such a nice and what once was a very wealthy city.
Part of the reason is that Dubai accepted the EXPO 2020. In my humble opinion they should have never accepted it. Due to this deal, they were forced to introduce transparency in business and start accounting books for VAT, bank data sharing with other countries, multiple entry visas, clarity on taxes and hikes in utility bills etc as sources of revenue. This caused much damage to their "tax free status" and a lot of business withdrew or simply disappeared.
I wish them well but I see no hopes unfortunately and you will agree with me after Jan-Mar 2019 even more than today.
Hope this helps provide a perspective.
Thank you,
While I do not want to comment on the geopolitics, depegging the currency, while might seem like a silver bullet, could cause chaos. With a very heavy expat population who depend on the certainty of the currency have leveraged multiple times and have transferred funds to their home country to meet their financial obligations. If the currency was to be depegged and "re-value" (I didn't say devalue), this will create such a uncertainty that it would shake the confidence and have people fleeing. We see examples of runaway currencies like Zimbabwe or Venezuela.
DeleteI agree with you. Because it is a VERY difficult choice to make. I made a lengthy answer below and request you to read it.
DeleteWe cannot compare to Venezuela and Zimbabwe because they never reached the levels that UAE achieved in a short 20-30 years.
Depeg can be done and linked to a basket (like Kuwait has done) or even linked to Yuan which is the only currency that has appreciated on a 10 or 20 year time frame.
It also makes sense because any country who needs to peg must peg with the country with whom it trades the most which is China in case of the UAE.
http://www.emiratesnews247.com/countries-uaes-top-five-trading-partners/
UAE has been handing over oil concessions, bringing Chinese traders and businessmen, tourism, banking and yuan agreements so it can peg it to the yuan instead.
The question is: does the country want to go bankrupt with extremely low trade (thus making it irrelevant) and lose their reserves due to lack of trade/finance as well as low oil savings and deplete their reserves to unheard of levels.
Or, do they wish to bite the bullet, go with yuan and get more Chinese investments and face the wrath of the Americans now rather than few years down the road.
China will not trade with UAE or Saudi unless they accept yuan, that is a given and will support them if they do.
What most people do not know that until 5 years ago, Jebel Ali FZ port was the king of the jungle in Africa and the ME.
In the last 5 years, 5 new ports have come alive around the region and are growing massively. Sohar and Duqm in Oman, Gawadar and Karachi in Pakistan, and one in Sri Lanka. All these ports are pretty much under the control of Chinese so they will not use Jebel Ali as much (despite being the world's largest factory nation) where trade has been dwindling because JA does not belong to the Chinese.
Chinese President visited UAE for this reason but UAE refused to make any deal on JA.
This will only become worse for Jebel Ali slowly.
Let's hope things improve however it seems extremely unlikely. Time is of the essence and we are really running short of time.
Dear Mr.Manoj,Thanks for removing name of Shobha Developer from your post as reported information wasn't 100% right. Always nice to read your views and will appreciate if it takes utmost care of accuracy !
ReplyDeleteThat was a major blunder at my end to have placed news that was speculative and inaccurate based on unconfirmed rumors from terrible sources.
DeleteIt is not at all usual to place such news on this blog that have not been not confirmed. My sincere and humble apologies.
All references to individual companies have been erased.
Any inconvenience or damage caused to your reputation is sincerely regretted and was definitely not the intention.
Have never written such an apology in my life and promise that will never do so again.
With due apologies again.
Thank you and best wishes.
Having lived in Dubai for more than a decade, and having loved living there, I can only wish the UAE the best.
ReplyDeleteDo you think a greencard like system in the UAE, stopping short of citizenship (coz I understand the complexities that that would involve), however giving more permanent rights of residence to the expat population, might help quell the decline?
For one, it would add a larger and more permanent base of people to fund govt revenues.
Will it help in other ways too? Also how exactly will a depeg help?
Hello dear,
DeleteThank you for your questions and comment.
Qatar has started a Green card like system before anyone else in the ME but it is only for folks who have lived for 20-30 years or more. Oman has been issuing lot of passports to expats lately.
Aside from those two, no one has started a Green card like system because it is not feasible any more:
1. Because unemployment of locals is straining the relationship with the state.
2. I believe there should be no green card system because everyone comes to ME on a 3 year visa and they must leave after that. That is how the "Kafala" system works. But people make a mistake of asking for longer stay. The reason a 3 year period, now 2 years, was chosen, was to bring managers from abroad, make them train the locals and then leave. Since money was a lot and was free for the locals, the system worked until now, Since money is finished so expats must accept that their 2 year stay is over and must leave. Their reluctance to leave is their problem not that of UAE. UAE owes nothing to Syrians, Egyptians, Indians or Pakistanis etc who came to work and do not wish to return. They brought them to work and now work is over so they must leave. Same is the case now in Singapore, Malaysia and all others and no need to even mention Trump's USA.
3. Because of religion. There is Shia Sunnia conflict going on for the past 1,400 years. This is not going away in 2018, thats for sure. Plus Christians, Jews, Hindus etc all ask for their religious symbols and places of worship which have only been forthcoming reluctantly. This is what scares the Govt that if they give citizenship, tomorrow people will ask for religious places and day after they will ask for democracy and other rights. Hence, they are unable to make a move forward.
In short, not going to happen. Especially because money has finished and now it is not worthwhile to save in any job nor save or make in a business for those expats in the UAE/GCC.
Wait until oil hits USD 30 in 2019.
About the depeg, there have been major noises for depeg in the UAE in 2006 and around 2012. Both times, it did not happen. It is a VERY tough decision to make because the ramifications are so huge. Which is mostly antagonising their prime benefactor, the USA.
I correctly anticipated after predicting the start of the crisis in 2015 that in 2015 and 2016 all UAE and GCC entities will borrow a lot though bonds and loans and by 2017 onwards borrowing will come to a halt, which it has, due to the risk of downgrades by ratings agencies. While reserves will keep dropping due to the necessity to defend the USD peg.
Unless they depeg they will need to deplete their reserves which also have finished as far as cash is concerned in 2017 (they have paper assets like buildings and shares but hardly any cash left).
Fortunately, Trump made a deal in late 2016 and made oil rise to USD 70 plus which gave GCC a bit of moving space in 2017 until last month. But now it appears the deal is again off after the Khashoggi crisis so oil is plunging (wink wink Trump) and touched below USD 50 already today.
They have a major dilemma, whether to depeg or not.
Part 2....
DeleteBy depegging they can release the pressure on their imports and exports. Exports are struggling because no one buys being the most expensive place on Earth plus duties. Since they don't manufacture anything so imports are also struggling because they re export 98% of all imports.
Depeg is like a discount on their currency that South Africa and Russia and Brazil and and Turkey and India and even Singapore can do to ease pressure on exports and make it cheaper. But GCC cannot due to the fixed price to USD.
So the same pencil sold in UAE for USD 1 is available for USD 0.50 in South Africa and USD 0.40 in Russia and USD 0.65 in Singapore. So where would mass buyers buy it from?
Have not yet mentioned oil in yuan which also is linked to the depeg and in my opinion must happen simultaneously.
It is very complicated matter and multi faceted and this lengthy answer is also not thoroughly sufficient.
The Govt's have a choice, let their reserves hit zero and continue the peg to the USD OR depeg/accept yuan for oil and hope for peace and stability in the years ahead and bite the bullet and face the crunch now like Spain or Iceland did in 2008.
The longer they wait, lower the reserves and hence lower their resilience because this world is undergoing a global depression thanks to Trump's ridiculous tariff wars and the pain in the future will be even worse.
The old model of getting expats to work for excess money has come to an end and there is no easy solution or transition to the new paradigm purely because every single country is focused on creating jobs for their own citizens so they are unable to accommodate citizens of other countries.
Same is case for exports, every single country wants to export. So my question for the last 5 years has been? If everyone wants to export, then who will import?
We live in a world of very tough choices for the last decade or so and this is one of them for the UAE and GCC. One way or another they need to tackle it else their economy will keep shrinking and more issues will arise as the world keeps evolving. Time is of the essence.
We appreciate removal of the inaccurate, unwarranted, baseless information regarding Al Ahli Supermarkets.
ReplyDeleteThat was a major blunder at my end to have placed news about your company that was speculative and inaccurate based on unconfirmed rumors from unreliable sources.
DeleteIt is not at all usual to place such news on this blog that have not been not confirmed. My sincere and humble apologies.
All references to individual companies have been erased including yours.
Any inconvenience or damage caused to your reputation is sincerely regretted and was most definitely not the intention.
Everyone concerned may please note that Al Ahli Supermarket is in good shape and has a sound business, further to our communication with the owner's representative.
Have never written such an apology in my life and promise that will never do so again.
With due apologies once again.
Can you throw some light on the situation of Qatar
ReplyDeleteQatar and Oman are the only countries that one can say are doing reasonably better than the other 4 GCC member countries.
DeleteEntire Middle East is in turmoil.
Last week when Qatar left the OPEC that was a good decision to protect future interests of Qatar (but bad for the ME brotherliness) and align more strongly with the USA.
Business is bad in Qatar also due to multiple factors, population is tiny at less than 3m, jobs are hard to get, currency peg is a problem but the biggest saving grace is that Qatar has solid reserves and FIFA related spending is strong and no major budget cuts have happened. Payments are delayed but are within reason. Their bank mergers were ok to keep the system afloat. At least they were not bailed out.
Even then, things in ME will never be the same again and situation will keep deteriorating unlike 10-20 years ago which were the best days of the Gulf. Cost of living will remain highest which will hurt trade and banking and tourism.
Ratings are stable for Qatar which is the strongest point. Oman was just today downgraded to junk status just like Bahrain and Kuwait.
Many companies in Saudi and UAE are also junk now. But not the Govt's.
Unfortunately, due to high cost of business and high cost of living, most businesses just cannot survive including in Qatar.
Today's decision by USA to withdraw US troops from Syria is not a good decision for the ME, because USA has pulled out diplomats from various countries, several G7 countries have travel alerts on the region, Patriot antimissiles have been pulled out of Kuwait. Most EU and US businesses have pulled out or are pulling out across the region. But Qatar is the "best" one amongst them all, relatively speaking. But cannot say for them the same when comparing to nations globally any more.
Future does not look getting any better so let us hope for the best.
https://www.gulf-times.com/story/615767/S-P-revises-outlook-on-Qatar-to-stable
Dear Mr Manoj,
ReplyDeleteDo not worry about some people who throw stones at you . Please do not reply to them as this blog you have is for information only . Yes your sincere apology to the Sheeba store in bur dubai shows that you will do so wherever required . But please continue to get us news from the middle east as there is a large diaspora of asians connected with the middle east and wish things will slowly get back to normal soon.
I also request you to elaborate on OBOR as i have clearly not understood it and its implications to the world economy and will countries like India also benefit from OBOR ?
Hello Dear Sir,
DeleteThank you very much for your kind support and appreciation.
Yes, anyone can mistake but whats surprising that it slipped through here for the first time and we issued an apology and deleted it.
But we still expect many super markets to collapse shortly like Geant, Hyperpanda etc have done in UAE already. Latest one is Al Manama.
Middle East turmoil is unfixable and whoever lives there, we suggest them to leave or continue to face no savings, jail time for silly reasons, heavy fines, low incomes and very high stress.
But of course, we don't expect many people do that (or understand and appreciate our reasoning behind it) because they do not wish to go back home but we pray that they will get the sense to follow our advice or face the dire consequences.
We personally know of 2 suicides in the last 2 years besides the ones we hear in the media. What makes us feel sad is that we personally had warned their families to ask them to leave but they did not. We did not know them directly but their families are close friends.
We predict oil to go below USD 30 imminently and this will create havoc. Now Trump has removed his army from Afghanistan by half and entirely from Syria. This is all aimed towards GCC plus oil price decline will make it worse only for GCC.
In terms of OBOR, it is going to improve trade wherever it gets connected like Iran, Pakistan, Europe, Russia, ex Soviet states etc.
What it does is that it make it cheaper to send goods by train and saves time by at least half or more. It also creates a lot of jobs due to this train network and makes remote inaccessible areas to prosper by being connected to the much larger factory towns or urban cities thus offsetting any problems China is having with America to a large extent and helps create buyers for the largest factory nation in the world that is China..
OBOR is a game changer but will only help Oman and no one else in the side of GCC because it bypasses the entire GCC. Oman will benefit just because both new ports of Duqm and Sohar are being supported by China.
India has been objecting to China's rise (for geo political reasons) to it's own economic detriment so she does not stand to benefit because Pakistan is also benefiting immensely and is a very critical part of both OBOR and oil supply to China.
2 main opponents of India will benefit a lot which is China and Pakistan. Calcutta is a part of the shipping route with Sri Lanka so lets see if India ever benefits.
India objected to China bank and OBOR and has even objected to join Pakistan corridor even though China agreed to remove the name of Pakistan from the project name. So it is all India's fault that they do not wish to live in peace with China as the solid rise of China continues unabated.
Imagine, China adds the GDP of entire India or UK every 3-4 years. While the trade of OBOR since 2013 is equal to twice that of India's annual GDP in less than 5 years just from OBOR.
Very interesting but this article just showed up today. OBOR is not even 20% complete and the benefits are in trillions to the world economy.
Engine of growth: Trade turnover across China’s ‘One Belt, One Road’ exceeds $5 trillion since 2013
https://www.rt.com/business/447240-silk-road-thousands-jobs/
China wants peace, more trade, stability and growth for all and some large players like India and USA seem to dislike it because they need wars to make the politicians and the corrupt richer which is most unfortunate.
Hope this helps.
Thank you.
I have several Chinese friends. They are very nice, talented and hard-working. There is however a difference between the Chinese people and government. The Chinese regime is mercantilist. Trade should be a win win situation. With China it is always a win-lose situation. China wins and the other party loses. Please google for "OBOR Debt Trap"
DeleteYour experience makes you opinions about GCC accurate, but I believe your opinions about partnership with China are too optimistic.
Hello,
DeleteThank you for your comment and I do appreciate and respect your views.
If you look at Govt and people perspective, there is no country who is not dependent on trade or mercantilism.
We have come to depend upon trade since trains, cars and planes got invented over a century ago.
You may check Thomas Friedman's book - The World is Flat although I completely disagree with him since I am a proponent of deglobalization which is occurring over the last decade.
I have been researching China independently since 2009 when they opened by yuan to foreigners, investing into it in different opportunities, learnt Mandarin, went to China and lived there a month because I wanted to settle down there and it is my advice to all the young children and their parents today to learn Mandarin.
If you go back in history from British Imperialism for 250 years or Spanish colonialism or Portuguese/French or now American empire, all of it is based on trade, due to trade and because of trade.
And surprise, same is for China.
Why I prefer China is because they are not hypocrites despite all their weaknesses due to their non interference in political process of other countries.
China is not perfect and neither is any one else. But China is the only option we have.
America has bombed entire Middle East, guess what for, for trade (of oil). Killed almost 3 million or more, destroyed Pakistan all the way to Syria and everything surrounding them.
If you go back 30 years, IMF and World Bank used to hand over aid to developing nations and most of it was used to line up the pockets of the corrupt elites ruling the countries around the world and interfere politically and barely any infra was built.
Do you think Pakistan or Afghanistan or Rwanda or Sudan have any decent infra despite all the loans? But their Govts have changed, corruption is sky high and pro Western interest people are always in power and poverty remains high. It is worse than a "debt trap". It's more like colonising them and destroying them from within. And when that doesn't work they simply bomb them.
Almost nothing got built and whatever was built was bombed all the way back to the Middle ages.
Was there goodwill or infra building from America?, I don't know. I believe not but maybe I am wrong for some nations.
Now fast forward to China, they have invested over USD 1.5 trillion in African nations alone, brought many together like Uganda, Kenya, Tanzania and Ethiopia, Eritrea etc after 4 decades. Pakistan has received over USD 50b. Philippines has received over USD 50b. russia and Iran have received many billions too. Portugal sold it's largest bank to China, so many other countries have done so too like stake in Heathrow airport or Thames Water. So all these nations have a choice. Shut down or get help from China!
As far as until today, China has not bombed a single nation nor desired a regime change or asked for higher taxes on the public which was always a US policy when granting aid or loans over the last 40 years.
I am very familiar with OBOR Debt trap propaganda being spread by the western media.
OBOR is a boon for planet Earth in these times of turmoil.
2/2....
DeleteAll countries who think they are being pushed into a debt trap, they have 2 choices, accept money from the only nation in the world who has it or go bankrupt and collapse like Venezuela or Zimbabwe or Sudan.
I guess survival instincts of humans kick in at that point.
I don't agree that China is bad and is laying a debt trap. America did the same for ages which is why Russia has paid off all its foreign debt and can tell America to go take a walk. Other nations don't have that luxury except China.
If China creates a global network of 50 plus countries using trains and ships to do trade, create new markets for it's exports, connect unconnected places on this planet and create peace and jobs, I don't see anything wrong in it?
India has objected to it and we know exactly how Indian banks or employment or airlines or exports or billionaires are doing? They are all at the verge of a collapse and now over the last few months, Indian Govt is finally trying to get closer to China despite all the odds (perhaps their survival instincts are kicking in, haha).
I had written a presentation (more like a thesis) back in 2013 predicting what is happening today.
I urge you to have a look: https://www.slideshare.net/mnathani/understanding-the-coming-domination-of-chinese-yuan-27356659
So far, 5 years later, I am right.....
Chinese people will eventually change their views but they have so many people, the Govt will never be able to make "everyone" happy.
However, China has a tremendous rack record of bringing almost a billion people out of poverty in the last 40 years and almost all will be out by 2020-2021 by providing them jobs.
Jobs is the glue that keeps society out of trouble and improves humanity by respecting the individuals without any bias. China is providing and creating millions of them globally so kudos to them.
Given their track record to help and support human beings anywhere in the world starting from their own, I am on their side and I believe that so will be history.
Hope this helps give you some of my perspective.
Thank you.
Informative post. Thanks for sharing.
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Hello and Good day,
ReplyDeleteThank you very much for visiting and taking the time to write a comment.
Really appreciate your compliments.
Please keep visiting.
Many thanks once again,
These are great ideas. I am thinking how much more educational benefit could result from incorporating them in virtual worlds. Here we get only pictures. If they were in a virtual world,we could go there and perhaps even observe them in action.
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