High-flying Dubai spreads investment wings abroad
Friday, 31 August 2007
DUBAI, Aug 30 (AFP): The Gulf emirate of Dubai is making headlines with a series of high-profile investments abroad in everything from aircraft builders to Las Vegas casinos, but some deals are financially risky and could even spark a protectionist backlash, economists say.
Dubai has been snapping up foreign assets in tandem with a vigorous drive to turn the thriving city state into a global business and leisure hub hosting the world's tallest skyscraper and palm-shaped artificial islands.
Acquisitions by the Gulf emirate's investment vehicles "are in tourism, services and logistics, and make sense since they are compatible with the diversification of the economy at home," said Eckart Woertz, economics programme manager at the Gulf Research Centre, a Dubai-based think tank.
"But it is a risky strategy because there is a lot of debt involved. They borrow money to finance the acquisitions," he told the news agency.
Standard Chartered economist Mary Nicola said Dubai, a member of the United Arab Emirates federation which also includes oil-rich Abu Dhabi, is looking for long-term assets at a time when its own oil reserves are dwindling.
"Diversifying the portfolio of assets also has long-term benefits," she said, although "we have to wait and see" if the investments turn out to be profitable.
Government-controlled or backed firms and investment funds have chased strategic targets such as European aerospace giant EADS, owner of Airbus, in which Dubai International Capital bought a 3.12-per cent stake, and brand names like the upscale Barneys New York retail chain, which Istithmar, another investment arm of the emirate, wrested from a rival Japanese bidder.
Despite a ban on gambling at home, Dubai World last week announced a venture in the world capital of roulette wheels, blackjack and slot machines. The conglomerate said it will pump around five billion dollars into a 9.5-per cent stake in the MGM Mirage entertainment company and half of its CityCentre development in Las Vegas.
Despite the fiasco suffered by Dubai Ports World last year when US congressional opposition forced it to offload US operations included in its purchase of British shipping giant P and O, other firms are bidding for assets that have sparked objections on the receiving end.
Dubai has been snapping up foreign assets in tandem with a vigorous drive to turn the thriving city state into a global business and leisure hub hosting the world's tallest skyscraper and palm-shaped artificial islands.
Acquisitions by the Gulf emirate's investment vehicles "are in tourism, services and logistics, and make sense since they are compatible with the diversification of the economy at home," said Eckart Woertz, economics programme manager at the Gulf Research Centre, a Dubai-based think tank.
"But it is a risky strategy because there is a lot of debt involved. They borrow money to finance the acquisitions," he told the news agency.
Standard Chartered economist Mary Nicola said Dubai, a member of the United Arab Emirates federation which also includes oil-rich Abu Dhabi, is looking for long-term assets at a time when its own oil reserves are dwindling.
"Diversifying the portfolio of assets also has long-term benefits," she said, although "we have to wait and see" if the investments turn out to be profitable.
Government-controlled or backed firms and investment funds have chased strategic targets such as European aerospace giant EADS, owner of Airbus, in which Dubai International Capital bought a 3.12-per cent stake, and brand names like the upscale Barneys New York retail chain, which Istithmar, another investment arm of the emirate, wrested from a rival Japanese bidder.
Despite a ban on gambling at home, Dubai World last week announced a venture in the world capital of roulette wheels, blackjack and slot machines. The conglomerate said it will pump around five billion dollars into a 9.5-per cent stake in the MGM Mirage entertainment company and half of its CityCentre development in Las Vegas.
Despite the fiasco suffered by Dubai Ports World last year when US congressional opposition forced it to offload US operations included in its purchase of British shipping giant P and O, other firms are bidding for assets that have sparked objections on the receiving end.