Murphy’s law is at work in the global financial and realty markets. if something can go wrong, it will. no one who is familiar with the facts of Dubai’s [ Images ] boom and its global dimension ought to have been surprised by the debt crisis that has hit Dubai World.

For the last one year, there have been far too many stories coming out of the region on real and potential bankruptcies, plans being shelved, excess capacity and inadequate demand.

The global financial crisis and the rollback in oil prices in 2008 were largely responsible for this. However, for the same reason, the moderation of the global slowdown and the recent rise in oil prices have helped improve sentiment in the region.

Lack of transparency, poor management of a financial problem and the long weekend seem to have done more to spook the markets than the real size of the problem itself.

Nevertheless, it is better to be forewarned and to hedge one’s bets about hot spots like Dubai till the global economy is back on an even keel.

The government of Abu Dhabi has already stepped in with some reassuring remarks, even if these do not fully ease the situation for Dubai.

Informed analysts suggest that Dubai World has the capability to handle a large part of the problem it faces, given the better economics of its other subsidiaries like Dubai Port World.

It is the property subsidiary, Nakheel, that has taken the hit from the near 50 per cent fall in property prices in Dubai. State-controlled economies like China can absorb the shock of excess capacity in real estate better than a more market-dependent economy like Dubai.

As for India [ Images ], the central bank and the finance ministry have made reassuring statements and it is possible that direct exposure of the banking system to Dubai World is limited.

However, there is a larger problem of stability and future of Gulf economies that India must think about. The growth engines of the region have fuelled the Indian economy for more than two decades now.

The slow pace of urban modernisation in India, especially in a city like Mumbai [ Images ], has made city states like Dubai and Singapore attractive havens for an increasingly wealthy and globalised elite.

States like Kerala [ Images ] have become far too dependent on financial inflows from the Gulf. All those with this kind of exposure to the region must hedge their bets.

While it is true that the global financial crisis and the slowdown did not result in a decline in inward remittances from Indians abroad, it is possible that the so-called “flight to safety” factor may have been partly responsible for this.

Even now, Indians in the Gulf may step up homeward remittances as an escape to safety. in the medium- to long-term, however, India must find newer sources of foreign exchange inflow and not remain too dependent on workers’ remittances.

The Toronto stock market closed slightly higher Friday as some investors speculated Thursday’s global sell-off in equities triggered by Dubai’s attempt to delay debt repayments was overdone.

the S&P/TSX composite index advanced 27.61 points to 11,464.41 after tumbling 200 points Thursday in the wake of an announcement that Dubai World, a government investment company, had asked creditors to postpone its forthcoming payments on $60 billion (U.S.) in debt until may.

Thursday’s loss was responsible for a TSX loss of 114.92 points, or 1 per cent, for the week.

New York markets tumbled Friday, catching up with the losses racked up by other global markets after being closed Thursday for the U.S. Thanksgiving holiday.

the Dow Jones industrial average fell 154.48 points to 10,309.92 at the end of a shortened session. the blue-chip index was flat for the week, up a slight eight points.

The Nasdaq composite index lost 37.61 points to 2,138.44. the S&P 500 fell 23.36 points to 1,087.27.

the Dubai announcement Wednesday stoked fears of a potential default and contagion around the global financial system, particularly in emerging markets. but a day later, investors were taking a harder look at what the Dubai debt crisis means.

Finance Minister Jim Flaherty said there wasn’t any reason for “significant concern” about spillover effects from Dubai’s attempt to delay debt repayments and “any effects would be quite mild on the Canadian financial system.”

Blair Falconer, portfolio manager at HSBC Securities Canada, observed that investors felt better Friday knowing that Canadian financials have limited or no exposure to the Dubai debt.

The Canadian dollar fell 0.09 of a cent to 94.21 cents after a flight to the greenback had sent the loonie down 1.35 cents on Thursday.

the financial sector led gainers, up 0.8 per cent. the industrials sector ran ahead 0.91 per cent.

Commodities were also weaker, but well off early lows, with the January crude contract on the New York Mercantile Exchange falling $1.91 to $76.05 a barrel. the energy sector was off 0.12 per cent.

the gold sector was off 1.83 per cent as bullion prices also gave up ground with the December gold contract on the Nymex down $12.80 to $1,174.20 an ounce.

The Canadian Press

CHANDIGARH: Finance minister PranabMukherjee on Saturday said there was no need to panic over the potential adverseimpact on the country’s economy due to the multi-billion-dollar debt defaultrisk faced by Dubai World, among the largest conglomerates in the region.

“There is no need to press the panic button,” Mukherjee toldreporters here after delivering the P.N. Haksar Memorial Lecture at the Centrefor Research in Rural and Industrial Development.

“Let us wait andwatch what has happened recently. I don’t visualise it is going to have an earthshaking adverse effect,” he said, adding the potential impact on the Indianeconomy, nevertheless, has to be assessed further.

Asked how theimpact would be on the five million Indians working in the Gulf region,accounting for nearly half the inward remittances of over $25 billion annually,Mukherjee said: “I don’t think they will be severely impacted.”

TheFederation of Indian Chambers of Commerce and Industry (FICCI), meanwhile, alsomaintained that no knee-jerk action was required over the woes of Dubai Worldand felt an intervention by the UAE government was likely.

“In viewof the fact that the crisis appears to involve some companies owned by thegovernment and that Abu Dhabi is expected to intervene, it is too pre-emptive toset an alarmist perspective,” said FICCI secretary general Amit Mitra.

“More analysis and deeper understanding needs to go into this issuebefore one can arrive at a clear understanding of the depth of the crisis andits impact on India,” Mitra said in a statement in New Delhi Saturday.

The state-run Dubai World stunned the global financial worldThursday when it announced it would need to restructure its debt, estimated at$59 billion, to pre-empt default and asked creditors for a six-month deferment.

The conglomerate has a host of companies under its fold withinterests in a wide range of businesses such as realty, infrastructure,logistics and economic zones. it operates not just in the region but across aclutch of countries including India.

The total debt of Dubai as anemirate is estimated at $80 billion.

Commerce Minister Anand Sharmasought to smoothen nerves Friday when he and some key policy makers said therewas no need to panic over the potential impact of the crisis on the Indianeconomy.

“India is a very large economy. it is a resilient economy.I don’t think some development in real estate in Dubai will have an impact onthe Indian economy,” Sharma said during a press conference at his Udyog Bhavanoffice here.

“As far as India is concerned, the housing, real estatesector and construction industry are all doing well. this is confirmed by theincreasing demand for construction materials, cement and steel,” the ministeradded.

The Reserve Bank of India (RBI), meanwhile, said it wouldmeasure the extent of Dubai World’s debt problem as well as its potential impacton Indian economy.

“We should not react to instant news like this.one lesson that we learnt from the global financial crisis is that we must studydevelopments and measure the extent of the problem and we need to study itsimpact on India,” RBI Governor D Subbarao said on Thursday.

“I haverequested my officials to study this and if necessary we will certainlycommunicate to the public about what the implications are likely to be.”

India Studying Effect of Dubai’s Debt Delay Plan on its Economy

Nov. 28 (Bloomberg) — India, the world’s top recipient ofmigrant remittances, is examining the effect Dubai’s attempt todelay debt repayments may have on Asia’s third-largest economy,central bank Governor Duvvuri Subbarao said.

About 4.5 million Indians live and work in the Gulf regionand remit more than $10 billion annually, according togovernment data. The turmoil may affect remittances, said ThomasIssac, finance minister of the southern state of Kerala, whichaccounted for about a quarter India’s migrant labor in 2005.

Dubai World, the emirate’s investment company, roiledmarkets as it sought a “standstill” agreement to delayrepayment on much of its $59 billion of debt. Dubai suffered theworld’s steepest property slump in the global recession, withhome prices dropping 50 percent from their 2008 peak, accordingto Deutsche Bank AG. most Indian migrant workers are employed inthe Gulf’s construction industry, according to the government.

“It’s quite likely that Dubai will face a severe downturnin the real estate and financial sectors and that will affectremittances and jobs,” Issac said in an interview at his officein Thiruvananthapuram yesterday.

Remittances from the Middle East account for about 25percent of Kerala’s economy, Issac said. India received $52billion of remittances last year, according to the World Bank,making it the world’s largest recipient of money from migrantworkers. China got $49 billion.

“We’re bound to see a rise in risk aversion,” Arnab Das,the London-based head of market research and strategy at RoubiniGlobal Economics said in an interview. “The Dubai situationsignifies that although the major central banks around the worldhave stabilized the financial system, they can’t make all theexcesses simply disappear.”

India’s stocks, currency and bonds fell on concerninvestors may shy away from riskier emerging market assets overlosses stemming from the turmoil in Dubai. India’s benchmarkstock index dropped 1.3 percent yesterday, while the rupee lost0.5 percent.

Larsen & Toubro ltd., India’s biggest engineering company,has receivables of as much as $25 million from three companiesin Dubai, Executive Vice President R. Shankar Raman said in atelephone interview. DLF ltd., India’s biggest property company,software-services providers Wipro ltd. and Infosys TechnologiesLtd. said the crisis in Dubai won’t affect them.

Emaar MGF Land ltd., the Indian joint venture of EmaarProperties PJSC, said the Dubai crisis has no impact on itslocal operations and its funding plans for property developmentin India are on track.

“We must measure the extent of the problem there and howit might impact India,” India’s central bank Governor Subbaraosaid in Hyderabad, India, today. “On Dubai alone, I want tosay, that we should not react to instant news like this.”

Dubai is one of seven sheikhdoms in the U.a.E. The Gulfstate had borrowed $80 billion in a four-year construction boomto transform its economy into a regional tourism and financialhub.

To contact the reporter on this story:Cherian Thomas in new Delhi at Cthomas1@bloomberg.net;Anil Varma in Mumbai at avarma3@bloomberg.net

Last Updated: November 27, 2009 19:35 EST

GORDON Brown insisted last night that Dubai’s debt crisis will not spark another global recession as shares recovered from meltdown.

The Prime Minister said: “If this is a localised problem then it can be dealt with – and I believe that is the case.

“It’s one of the things we’ll see over the next few months as the world economy returns to growth. but it’s an event that can be dealt with.”

The shock news wiped 44BILLION from the value of Britain’s biggest 100 companies on Thursday.

But yesterday the FTSE 100 closed up 51.6 points at 5245.7. Stock markets in all western European markets rose, except Luxembourg and Iceland, and America’s Dow Jones index soon pared back opening losses, closing at 10309.92.

The chaos was triggered when Dubai’s biggest state-owned company, Dubai World, announced it needed a SIX-MONTH delay on paying interest on debts.

The statement came at the start of the Eid holiday when the country’s financial district shuts down for days.

Mr Brown, in Trinidad for the Commonwealth summit, held urgent talks about the crisis with Mario Draghi, boss of the Financial Stability Board, the global banking watchdog.

But afterwards he insisted the problems in Dubai were “containable” and vowed that they would not hit Dubai’s 400million investment in the new London Gateway Port in Essex.

Mr Brown said: “Many banks this morning have said they are not clearly exposed to Dubai.”

But a shock report yesterday showed that British banks have a whopping 30.2billion of outstanding loans in the United Arab Emirates.

They have FOUR TIMES more cash invested in the Middle East than any other European nation.

France is next with 6.8billion, followed by Germany, Netherlands and Switzerland.

The report by the Royal Bank of Scotland did not break down loans specifically made in Dubai.

Dubai’s rulers hit back at their critics last night claiming their warning was a “sensible business decision”.

Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Supreme Fiscal Committee, said: “The government had to intervene because of the need to take decisive action to address its particular debt burden.”

Analysts too said stock markets may have over-reacted. David Buik, of BGC Capital Partners, said: “I do not think Dubai is going belly up.”

g.wilson@the-sun.co.uk

CHICAGO (Reuters) – Shares of U.S. casino companies fell on Friday amid concerns that a possible debt default at Dubai state-owned conglomerate Dubai World DBWLD.UL could derail a budding economic recovery that has seen investments by casinos in Las Vegas and emerging markets.

Casino operator MGM Mirage (MGM.N), which is a partner with Dubai World in the $8.5 billion CityCenter project in Las Vegas, saw shares dip 9 percent in early trade on the New York Stock exchange. the stock bounced back somewhat and was down 3.3 percent at $10.65 by late morning.

“Dubai is a large holder in MGM shares,” said Susquehanna Financial Group analyst Robert LaFleur. “If they’re in a position where they’re seeking liquidity, you have to wonder whether they’ll look to those shares as a source of potential liquidity.”

Dubai, part of the oil-exporting United Arab Emirates, said on Wednesday it would ask creditors of Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step toward restructuring.

LaFleur said, however, that Dubai World’s commitments to CityCenter are fully funded, so Dubai’s restructuring poses little risk to that project.

“It’s not like (MGM Mirage is) expecting more funding contributions from Dubai World to complete CityCenter,” LaFleur said.

CityCenter is the signature project for MGM Mirage and adds nearly 6,000 rooms to the Strip. CityCenter opens in December.

Dubai World last year sued MGM Mirage as credit dried up and CityCenter flirted with bankruptcy. the project also has been plagued by construction problems, including a number of worker deaths.

MGM Mirage said on Thursday that it does not expect Dubai World’s restructuring to affect CityCenter.

Shares of other casino operators were down a bit on Friday amid talk of a possible Dubai debt default.

“The Dubai default fears have made investors nervous in the casino sector that has exposure in the emerging markets,” said William Lefkowitz, options strategist at brokerage firm vFinance Investments.

Shares of Wynn Resorts ltd (WYNN.O) were down 2.6 percent at $63.67 on Nasdaq. Shares of Pinnacle Entertainment inc (PNK.N) were down 1.6 percent at $10.78 on the NYSE. Shares of Las Vegas Sands Corp (LVS.N) were down 3.5 percent at $15.92 on the NYSE.

(Additional reporting by Doris Frankel, editing by Gerald E. McCormick)