Intercultural Business News

The Government of Dubai said today that it will not stand behind its wholly-owned subsidiary Dubai World, prompting fears that the company’s creditors could lose billions of dollars.

Today’s comment, from Abdulrahman al-Saleh, the director general of Dubai’s Department of Finance, effectively confirms that country does not have enough money to repay Dubai World’s $60 billion of liabilities. Deloitte, the accountancy firm, has been called in to restructure the giant business.

Last week, the state-owned conglomerate sought a six-month standstill on repaying its debts.

Shares Tumble As Dubai World Defoults On Debts

Dubai World’s borrowings include a $3.5 billion Islamic bond that was due to be repaid by Nakheel, the property developer behind the Palm Jumeriah islands, in two weeks.
 
Many creditors had assumed that the structure of Islamic bonds implied there was state backing for this type of financing and Dubai’s failure to support the Nakheel debt could have damaging implications for the wider Islamic market.

UK banks are among 70 institutions to have loaned Dubai World money in recent years as the company grew rapidly and bought foreign assets such as the Turnberry golf course in Scotland and P&O ports. Dubai’s Department of Finance said creditors will be affected in “the short term” by the Dubai World’s restructuring.

Royal Bank of Scotland (RBS) has arranged $2.3 billion of loans for Dubai World since 2007, although it is not known how much the bank could lose if the company defaults.

Read More>Times Online

The Dubai financial crisis continued to send shares and commodities falling around the world this morning, despite efforts by the emirate’s ruling family to calm the panic.

Shares were down again across Europe, although there was an air of calm in London following yesterday’s plunge. This came after a bout of heavy selling in Asia.

Today, the mood in the City is that traders are trying to catch their breath following the shock on Wednesday when Dubai World – the government-owned conglomerate that has led the dramatic growth in the emirate – asked to defer repaying some debts for six months.

Building Work Unfinished Due To Crisis In Dubai

Sheikh Ahmed bin Saeed al Maktoum, the uncle of Dubai’s ruler Sheikh Mohammed bin Rashid al Maktoum, attempted to calm the situation last night.

“Our intervention in Dubai World was carefully planned and reflects its specific financial position,” he said in a statement.

“The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular. However, we have had to intervene because of the need to take decisive action to address its particular debt burden.”

It is still unclear whether Dubai will default on some of its estimated $80bn (£48.8bn) debts, which would be a major blow to the banking sector, or be bailed out by the United Arab Emirates.

Read More>The Guardian

Emirates has offered flights from Germany to South Africa and Singapore for less than competing German airlines. Germany has demanded they increase their fares, which some say gives Lufthansa an advantage.

A branch of the German Ministry of Transport, Building and Urban Development has forced Dubai-based airline Emirates to raise its ticket prices on flights from Frankfurt to Johannesburg, and from Hamburg and Berlin to Singapore.

Other airlines from outside the European Union are affected by the action, but ministry spokesman Ingo Strater did not say which ones. Emirates has complained about the action and claims to have brought its case to the European Commission in Brussels.

Will Lufthansa Benefit From Forced Price Hike?

German air traffic law does not allow airlines based outside the EU to offer flights destined for non-EU countries at lower prices than their European competitors. Neither does European law. The action was a result of random spot checking of prices, according to Strater.

“EU airspace is liberalized, but that doesn’t apply to non-EU airlines,” he said.

One function of the Ministry of Transport, Building and Urban Development is to ensure there are no “market disturbances” or “lasting impairments” to the interests of public transportation.

Read More>DW-World

The future of Saab was in doubt last night after General Motors (GM), its American parent, said that a deal to sell the troubled Swedish carmaker had fallen through.

GM confirmed that the sale of Saab to Koenigsegg, a Swedish manufacturer of sports cars, had been terminated at Koenigsegg’s request.

The failure of the talks raises the possibility that GM may decide to scrap Saab, as it did last month when it said that it would close its Saturn brand after failing to find a buyer.

Is This Logo Soon To Dissapear Form The Streets?

Saab, one of Sweden’s best-known brands, employs 3,400 people in the country. About 3,000 people are employed at Saab’s 87 UK dealerships and 100 at its British headquarters.

 
Without the Saab sale, analysts question GM’s ability to restructure its Opel and Vauxhall operations in Europe. GM wants to raise €3.3 billion (£2.9 billion) from European governments to help to save Opel and Vauxhall after reversing a decision to sell them to Magna, a Canadian car parts manufacturer, and Sberbank, its Russian partner.

Read More>Times Online

An oil boom is under way in California’s agricultural heartland, as evolving tastes and a trend toward healthy fare have transformed a profession as old as civilization: olive production for the extra virgin market.

Gnarly trees picked by hand are being supplanted. This year, California’s olive oil production will top 1 million gallons for the first time, the lion’s share from 8-foot trees planted in hedgerows and mechanically harvested, then pressed into oil within 90 minutes.

California Aims To Break European Dominance

Growers have invested millions laying the groundwork to become a player in the global olive oil market, now controlled by Spain, Italy and Greece.

In the past 10 years, roughly 7.5 million trees have been tightly planted on 12,500 acres, an experiment growers hope will make California olive oil cheaper and fresher than that of their competitors. State officials estimate that in another decade there will be 100,000 acres of hedgerow trees producing 20 million gallons of oil to help sate Americans’ 75 million gallons-a-year thirst — 99.99 percent of it now imported.

“There’s a promising future ahead for this crop,” says Dan Flynn, head of the Olive Research Center at UC-Davis. “With the growth in olive plantings, California could emerge as a world leader in a relatively short period of time. It might take 20 years, but that’s how long it took with the other crops.”

The “other crops” are almonds and canning tomatoes, once the domain of Spain and Italy but now controlled by California growers, who have the economic advantage of producing on large-scale farms.

Read More>Associated Press