Saudi Arabia Suffers Lack of Working Women as Oil Fluctuates
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By William Green
June 2 (Bloomberg) -- Deep in the Arabian desert, hundreds of guests celebrate the birth of a city.
The Saudi government has flown them in on chartered planes to the northern city of Hail, then driven them for about half an hour in buses with police escorts to a giant marquee in the sand with a red carpet out front.
Inside, curtains with gold tassels adorn walls decorated with artists’ renditions of Prince Abdulaziz bin Mousaed Economic City, which the government says will be home to 300,000 people when it’s built.
After prayers from the Koran, the ceremony begins with a speech by Amr Al-Dabbagh, head of the ministry that has planned the city, who wears a formal cloak with gold trim. The audience -- all male, except for one woman -- sips tea and plucks chocolates off silver trays.
A film about the city offers a vision of the future: skyscrapers, science labs, kids with laptops in classrooms. As the speeches end, a Muzak version of “Nights in White Satin,” the song by the British group the Moody Blues, wafts from the loudspeakers.
Oil is no longer enough for Saudi Arabia, which is the largest producer in the Organization of Petroleum Exporting Countries.
Population Surge
The country’s population has more than tripled to 25 million people from 7.3 million in 1975 -- and 57 percent of all Saudis are under the age of 25. As the population grows, the kingdom’s riches must be spread among more people: In 2008, per- capita gross domestic product was less than $19,000, versus $47,000 in the U.S. and $103,000 in Qatar.
To create jobs for its growing citizenry, the government wants to build cities and diversify into new industries. “The impetus to change has grown as the population has grown,” says Howard Handy, chief economist at Samba Financial Group, a Riyadh-based bank. “They’re very focused on how to find work for all these young people.”
The proposed economic city -- 720 kilometers (450 miles) north of the capital of Riyadh -- is one of four new metropolises that Saudi Arabia is planning in the hope of creating more than a million new jobs by 2020. “Their dream is to become a major industrial power beyond oil,” says Jean- Francois Seznec, who teaches at the center for contemporary Arab studies at Georgetown University in Washington. The Saudis are mainly looking at energy-hungry industries such as plastics, petrochemicals, aluminum and steel.
Oil, Terrorists
The success -- or failure -- of Saudi Arabia’s plans could affect the stability of the whole region, which supplies the world with much of its oil and has also been a breeding ground for terrorists. “It’s a very big, populous country in a risky neighborhood,” Handy says. “It’s the holder of a tremendous amount of oil resources that are of great importance to the global economy. So everybody has an interest in its political future and the development of its economy.”
Recognizing this strategic significance, U.S. President Barack Obama plans to visit King Abdullah in Riyadh tomorrow to discuss such issues as peace in the Middle East, terrorism and the price of oil. Obama has said he intends to tell the king that “huge spikes” in energy prices would hurt the interests of both the U.S. and Saudi Arabia.
Sitting on nearly a quarter of the world’s known oil reserves, the kingdom can afford lavish dreams. As crude oil surged to a peak of $147 a barrel in July 2008, the state-owned oil and gas company, Saudi Aramco, generated as much as $1 billion a day in revenue.
Foreign Holdings
The Saudi Arabian Monetary Agency -- the nation’s central bank -- built up its holdings of foreign assets such as bonds and currencies to $546 billion in October 2008 from $98 billion in 2003. Saudi Arabia’s total 2008 GDP of $482 billion dwarfed that of every other Middle Eastern nation.
For all of its wealth, Saudi Arabia has felt the effects of the global economic crisis as oil tumbled to $34 a barrel in December before rising to $68 yesterday. The four-city project is a scaled-back version of the original plan for six new urban centers. With banks and investors avoiding risk, more than $60 billion of projects have been canceled or delayed, Handy says.
The decline in oil prices and a 71 percent plunge in the nation’s Tadawul All Share Index since its February 2006 peak have shaken confidence. Handy expects GDP to shrink by 1.8 percent this year after growing 4.2 percent in 2008.
Restrictions on Women
Until recently, most Saudis haven’t needed to hold jobs. The government provides free education and health care and levies no personal income tax. An immigrant population of 6.5 million people performs almost all of the kingdom’s menial tasks. In 2007, just 4 million Saudis worked, according to the Ministry of Economy and Planning.
Only a fraction of the labor force is female, in part because of constraints placed on women by the government’s strict interpretation of Islam. They’re not allowed to mix in public with men who aren’t related to them, for instance, and are prohibited from driving cars.
With the population growing and inflation averaging 9.9 percent last year, there’s an economic need for more women to hold jobs. “Unless you’re very wealthy in Saudi Arabia, you cannot maintain a comfortable standard of living without two incomes,” says John Sfakianakis, chief economist at SABB, a Riyadh-based bank. “That is compelling women to work.”
Opening Up Insurance
Under its octogenarian ruler, Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz al-Saud, the country has been trying to modernize its economy. It wants to attract foreign investment -- including $500 billion for the new cities -- and has opened up industries such as insurance that were previously off-limits to foreign firms.
In its 2009 Ease of Doing Business report, the World Bank ranks Saudi Arabia 16th out of 181 countries, up from 67th in 2004. The kingdom attracted $24.3 billion in foreign direct investment in 2007, according to the latest available figures from the United Nations Conference on Trade and Development, compared with just $183 million in 2000.
Seznec says two big challenges remain: improving the quality of education and advancing the status of women in the workplace. “These are the two lines in the sand where the battle is taking place between the reformists and the religious forces in the kingdom,” he says.
King Abdullah favors change, talking in a 2007 speech of the need to create a “culture of labor,” for example. He also appointed a female deputy minister for girls’ education in February, the highest government rank a Saudi woman has attained.
First Co-Ed School
And he has authorized Saudi Aramco to create the country’s first co-ed school, the King Abdullah University of Science and Technology, which will open in September.
Saudi Arabia isn’t the only country in the region moving to empower women. In May, neighboring Kuwait elected four women to its parliament.
The Saudi king and his ministers are “very logical and reasonable but are moving very slowly,” says Sherifa Zuhur, a Middle East expert at the U.S. Army War College’s Strategic Studies Institute.
“The majority of Saudi people are extremely conservative and not inclined to make any significant change.”
Saudi Arabia needs to prepare its youth for the workplace lest they become restive and more prone to terrorism, SABB’s Sfakianakis says. “These young people need to be empowered,” he says. “They can become untamed and uncontrolled if you fail to provide the right education, skills and jobs.”
Striking Oil
Since 1938, when American drillers in the eastern desert struck oil in a well called Dammam No. 7, Saudi Arabia’s economy has been entwined with those of its allies in the West.
For decades, the kingdom provided plentiful supplies at low prices: Throughout the 1960s, oil fetched less than $3 a barrel. Then in 1973, Saudi Arabia led an Arab embargo on oil sales to the U.S. and other supporters of Israel during the Yom Kippur War. Within months, oil hit $12 a barrel, sending economic shock waves around the world.
The embargo was the start of an oil-fueled boom for Saudi Arabia. As the price soared to $39.50 by 1980, the year that war broke out between Iraq and Iran, newly wealthy Saudis became archetypes of excess, notorious in the West for squandering fortunes on everything from jewels to trophy properties.
In the 1980s, global growth slowed and oil sank to less than $10 a barrel in 1986. Then, in 2003, a new oil boom gathered pace: Prices climbed sevenfold by 2008, with rising consumption in China and India stoking concerns that oil reserves would not keep pace with demand.
Record State Budget
Saudi Arabia is still living on the spoils of that second boom. In December, King Abdullah announced a record $126.7 billion state budget for 2009. The money will pay for 1,500 new schools, 86 hospitals and the world’s largest women-only university.
Saudi Arabia has hundreds of billions of dollars of reserves while its debt amounts to only 15 percent of GDP.
“It’s really well positioned to face the global slowdown,” says Abdelhak Senhadji, the IMF’s mission chief for Saudi Arabia.
Still, the country remains vulnerable to fluctuations in the price of oil, which accounted for half of GDP and 90 percent of government revenue in 2007.
“The major economic challenge is to develop engines of growth that don’t have anything to do with oil and that work through the cycle, whether the price of oil is down or up,” says Brad Bourland, chief economist at Jadwa Investment, a Riyadh- based investment bank.
New Cities
To drive growth, new metropolises such as King Abdullah Economic City, beside the Red Sea, need help from foreign investors.
The city, designed to house 2 million people and employ 1 million, will cost $100 billion to build, says Fahd Al- Rasheed, CEO of Emaar, the Economic City, a Saudi-listed company formed in 2006 to oversee the development.
In addition to a “financial island” with office towers as high as 120 stories, the city would also include what the developers call Plastics Valley. Saudi Arabia can produce plastics cheaply because of its vast supply of petroleum, Al- Rasheed says.
In the desert heat, foreign laborers from countries such as India and Bangladesh toil in constructing the skeleton of King Abdullah city, burying sewage pipes, leveling roads and building the first blocks of offices and apartments.
Thousands of newly planted palm trees flank the road to the city’s main gate, which is decorated with an image of the king. There are no signs yet of the port or the towers.
Private Investors Sought
Al-Rasheed, 31, says the total cost of building the four cities will be about $157 billion. The government expects most of that to come from private investors ranging from plastics producers to mall developers to operators of private schools, which the government hopes to lure in part with tax breaks.
Early investors include the Kuwaiti company Al Mal Investment Co., appointed to develop Prince Abdulaziz bin Mousaed Economic City, and Abu Dhabi-based Rotana Hotel Management Corp., which plans to operate a luxury hotel there.
The government will provide land and fund a few projects such as the city’s train station.
Many other potential investors, strapped by the financial crisis, may not come. “The appetite for such things is really reduced,” Sfakianakis says. “It’s not an opportune time.” With hindsight, the Saudis’ original project now seems too ambitious, he says, evoking the grandiose developments conceived during the boom in Gulf neighbor Dubai.
“There was a little bit of Dubai-ness to it,” he says. “Let’s not build one; let’s build six.”
Demand for Homes
Al-Rasheed disagrees. He says rapid population growth will create demand for millions of new homes.
And the financial crisis has helped the cities because construction costs have tumbled along with the prices of property in the region, he says.
Some foreign companies are hoping to profit from building contracts in the cities. Cisco Systems Inc. is designing the technological infrastructure -- everything from broadband Internet connections to video surveillance systems to traffic control -- for all four of them.
Cisco will invest $250 million in Saudi Arabia during the next five years, says Wim Elfrink, Cisco’s chief globalization officer. Al-Dabbagh, the minister in charge of the cities, has asked Cisco to provide the world’s fastest broadband Internet connections.
“It’s one of these countries where we see a transformation going on,” Elfrink says.
Scottish Widows, KKR
Other investors are moving into the kingdom, too. Edinburgh-based Scottish Widows Investment Partnership Ltd. last year opened an asset management outpost in Riyadh.
“There are very real opportunities here that don’t exist in other parts of the Gulf,” says Peter Dorward, CEO of the company’s Saudi unit. “The Saudi economy is bigger than all of the other Gulf Cooperation Council economies put together.”
Scottish Widows hopes to manage assets for insurers that have been granted licenses to operate there, Dorward says. He’s also looking to create a fund to invest in property as population growth accentuates a shortage of homes, hotels and offices in cities such as Riyadh and Jeddah.
“Real estate has to be an opportunity when you’ve got that sort of demand,” he says.
The housing market should continue to grow in Riyadh as the population of 4.6 million increases by 3 percent a year, says a fourth-quarter review of the city’s property market by the Chicago real estate firm Jones Lang LaSalle.
Another foreign company eying investment opportunities in Saudi Arabia is Kohlberg Kravis Roberts & Co. In May, the leveraged buyout firm named Ford Fraker, the former U.S. ambassador to Saudi Arabia, as a senior adviser.
No Alcohol, No Cinemas
Western executives who venture to Saudi Arabia enter a world bearing little relation to their own. The Saudi government bans alcohol, outlaws cinemas and forbids the public practice of any religion other than Islam.
The government blocks Web sites featuring pornography, gambling or anything else deemed to “violate the tenets of the Islamic religion or societal norms.” Adultery and homosexuality are crimes punishable by death.
Reporters Without Borders ranks the kingdom 161st out of 173 countries in terms of freedom of the press.
Even something as mundane as shopping is tightly regulated.
At the entrance to Riyadh’s Al Faisaliah Mall, a sign warns that Wednesdays, Thursdays and Fridays are for “families only.” On those days, women eat with their husbands and children in the main area of the food court; at other times, when unmarried men might see them, women must sit in a “family section,” cordoned off by a wall.
Women Segregated
As in all public settings, every woman in the mall -- regardless of nationality -- must wear a black, floor-length cloak called an abaya. Saudi women must cover their hair with a hijab, or head scarf, and many cover their faces too.
Security guards keep control, repeatedly stopping and questioning single men. The kingdom also has a religious police force -- the Commission for the Protection of Virtue and the Suppression of Vice -- which patrols the streets to ensure that women cover their hair and don’t meet with men who aren’t related to them.
Such rules make it difficult for Saudi Arabia to attract foreign talent.
“I’ve lived in 11 countries, and this is off the charts,” says a Western banker in Riyadh who asked not to be named. “It’s a dreadfully dreary place.”
After two weeks there, his wife left to live overseas, while he stayed to finish an assignment that fascinates him. He says government ministers and rich Saudi businessmen live by their own rules in their opulent homes, routinely serving guests the finest wines.
‘I Have a Nightmare’
“It’s a badge of distinction to have an open bar,” he says. “It immediately declares he’s above the system.”
For him, the idea of being caught with so much as a bottle of Scotch is terrifying: “I have a nightmare that some day I’ll be driving home and I’ll get stopped by the police and thrown in jail.”
“Saudi Arabia has an advanced social fabric with many expatriates who enjoy the standard and quality of living here,” responds Fahd Hamidaddin, general director of corporate communications at the Saudi Arabian General Investment Authority. “It’s different from other countries and is proud to be so. However, these differences have not been an obstacle to record growth in foreign direct investment flows or the rich trading history we have with Western economies.”
Homemade Wine, Machine Guns
Westerners who land well-paying jobs typically live in gated compounds reserved for foreigners. There, expats drink homemade wine and alcohol smuggled in from countries such as Bahrain, while Western women are free to wear shorts.
At Eid Villas in Riyadh, the amenities include tennis courts, bowling alleys and five swimming pools. With kids biking and rollerblading in the streets, it could easily be an American suburb -- if not for the gun-toting soldiers in bulletproof vests at the front gate or the armored vehicle with a machine gun mounted on its roof.
The soldiers are a legacy of a spate of terrorist attacks from 2002 to 2005, including one in 2003 in which suicide bombers killed more than 20 foreigners at three expatriate compounds.
In October, the government said it had indicted 991 suspected militants it considers responsible for 30 attacks. “There’s been a tremendous change in terms of security,” says economist Sfakianakis, who moved in 2004 to one of the compounds that was bombed the previous year.
Al-Qaeda
“They basically broke the back of al-Qaeda,” says Sir William Patey, Britain’s ambassador to Saudi Arabia. “I’m sure there are still people in the country who are radicalized and extreme, but the security forces are keeping pressure on them. It’s a much more difficult operating environment for terrorists than three or four years ago.”
Even so, the taint of terrorism persists for the country that gave the world Osama bin Laden and 15 of the 19 hijackers who carried out the Sept. 11 attacks.
“We are battling misconceptions,” says Ahmed Abdulkarim, CEO of Cadre Economic Cities Co., a nonprofit that educates and trains Saudi workers for the new cities. “People do not know Saudi Arabia. If they do, they’ll be talking about terrorism and bombing and Osama bin Laden.”
Saudi Arabia isn’t a hotbed of terrorism, Abdulkarim says. “There are people who have done lots of misdeeds, and they have smeared the entire nation,” he says.
Abdulkarim, who worked in Europe for Procter & Gamble, says Saudi Arabia’s image is a recurring obstacle in talks with potential foreign investors.
Resumes from Dubai, London
Lately, hiring has become easier as resumes flow in from humbled cities such as Dubai and London, he says. In the past, foreigners expected hardship money to live in Saudi Arabia. “Now these people are coming with a pay cut,” he says.
Finding good workers domestically is just as difficult, says Mohammed Hafiz, CEO of Al-Sawani Group, a clothing retailer with about 1,500 salesmen. “You face the issue of education and commitment,” he says. “There’s very high turnover.”
Hafiz is sitting one evening at an outdoor restaurant in Jeddah with about a dozen other Saudi businessmen, discussing the biggest issues confronting them. “We always had money,” says Reda Islam, CEO of Future Waves, a Jeddah-based technology consulting firm. “Nobody needed to work. We were spoiled.”
Cadre’s Abdulkarim, whose mandate is to train 200,000 Saudis over 15 years to work at globally competitive levels, says state schools are out of touch with the needs of the marketplace because they emphasize memorization over problem solving.
Islamic Studies Focus
Georgetown’s Seznec says the curriculum focuses so heavily on Islamic studies that it neglects subjects such as math and science, which leaves students with inadequate practical skills.
At advanced levels, Saudi Arabia ranks 86th out of 131 countries in the quality of its math and science education, according to Harvard University’s Institute for Strategy and Competitiveness.
While women account for 57 percent of higher-education graduates, they make up only 15 percent of the workforce. Those that work tend to be limited to a few fields: 86 percent are in education, 6 percent are in health care and 4 percent are in public administration.
Of 5.8 million people working in the private sector, only 51,000 are Saudi women.
Women face tough restrictions in the workplace in addition to having to wear a hijab. “If there is a department which employs a woman who works in a job that does not suit her nature or leads to mixing with men, then this is wrong and should be avoided,” the Saudi Arabian Monetary Agency wrote to banks last year.
‘A Man’s Country’
Working women also say they’re underutilized. “It’s still a man’s country,” says Amal Al Olayan, 34, who studied health sciences at a women’s college in Jeddah. Al Olayan began her career in 1997 as an unpaid employee at a hospital laboratory and now works in human resources for a mall developer.
“I did not do what I really wanted to do, but at least I did something for myself and my kid,” she says.
Al Olayan, who is divorced, says she’d move to England, where she spent much of her childhood, if it didn’t mean leaving her 12-year-old son, who lives with her ex-husband. Under Saudi law, the boy cannot see her without his father’s permission.
Until 2005, a Saudi woman couldn’t start a business without a male manager to handle responsibilities such as signing company checks. Since then, a handful of women have become well- known entrepreneurs, including Nahed Taher, who founded Gulf One Investment Bank in 2006 with $100 million in capital.
Supported by Colleagues
Taher, 40, spent part of her youth in Texas before earning a Ph.D. in economics at Lancaster University in the U.K. In 2002, Taher became a senior economist at National Commercial Bank in Jeddah, where she says she was the first woman in a building with 4,000 employees.
“I’ve honestly been supported all the way through -- by colleagues, by the government, by royals and by investors,” says Taher, who dresses in Western clothes and leaves her head uncovered at work.
Still, the authorities send mixed signals about women’s freedom. The Saudi Arabian General Investment Authority invited female speakers such as Ireland’s former president, Mary Robinson, to a conference in Riyadh in January. But they were required to wear black abayas.
Saudi female audience members at first were segregated by a dividing wall from male attendees and foreign women. By the third day of the conference, though, several Saudi women had moved into the men’s section and were left undisturbed.
Less Insular
Saudis say that by their standards, things are moving rapidly. “We sit in the eye of the storm of change,” says Ammar Alkhudairy, CEO of Riyadh-based private equity firm Amwal AlKhaleej. “Ten years ago, we were much more insular.”
The government no longer decrees which companies can go public, he says. Today, it’s far easier for an entrepreneur to register a business, take it public and even sell stakes to overseas investors.
For the country to meet its economic ambitions, change will have to come faster, Georgetown’s Seznec says. “There’s not enough progress in modernizing education, and they’re not allowing women to develop fast enough in the workplace,” he says. “They’re aware of this, but it’s very, very slow.”
In the long run, the king and modernizing ministers are likely to prevail over the religious conservatives who have dominated areas such as education and the judicial system. “I’m convinced the reformists are winning the battle,” Seznec says. “They’re marginalizing the conservatives.”
Financial Crisis
The financial crisis poses a more immediate threat. Hurt by low prices and a drop in output, the portion of Saudi Arabia’s GDP that comes from selling oil will fall 10.5 percent this year, according to the International Monetary Fund.
At home, people who’ve lost money on stocks and real estate are cutting back on spending and investment. Even the powerful merchant families that dominate the private sector have suffered.
“I have friends who have literally lost hundreds of millions of dollars,” says Loay Nazer, chairman of the Nazer Group, a company in Jeddah with interests ranging from public relations to health care.
Alkhudairy agrees. “Everybody has seen a ghost,” he says. “Nobody is investing; nobody is buying.”
Once this crisis passes, the government expects that its efforts to modernize will drive a boom in foreign investment. “Saudi Arabia is a country that is aggressively changing its economic landscape,” says Hamidaddin of the Saudi Arabian General Investment Authority.
Grass and Flowers
Saudi Arabia is even trying to change its topography. In King Abdullah Economic City on the shores of the Red Sea, laborers are dredging canals in the sand and planting patches of lush grass and flowers.
Guides from Emaar show visitors architects’ models of villas as large as 12,000 square meters (129,167 square feet). Prospective buyers can also tour a show apartment with a trompe l’oeil mural that depicts the view residents could have of a fountain beside the sea.
Though change seems slow to outsiders, Saudis such as Nazer are confident that the modernized society the country is striving for will become a concrete reality. “The mood here is very cautious, not nervous,” he says. “You can’t be nervous when you’re sitting on the largest oil reserves in the world.”
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団塊世代の旅行減る 観光白書、株下落など影響
金子一義国土交通相は２日の閣議で、2008年度の観光白書を報告し、了承を得た。金融危機による株価下落などの影響で、団塊世代ら中高年層の旅行需要が落ち込んでいると指摘し、新たな旅行商品の開発などが必要と提言した。
昨年10月に観光庁が発足して初めての白書。60歳代の07年度の国内宿泊旅行の回数は1.86回と、前の年度より15％も減った。回数は依然として各年代で最多だが、落ち込み幅も最大だった。
理由として「将来の生活や健康に対する不安が存在しており、消費意欲が盛り上がりにくい」と指摘。保有する株式や債券の価値が目減りし、旅行の意欲を損なったとの見方を示した。多くの会社で定年が延長され、余暇時間がそれほど増えていない点も響いたと分析している。(13:01)
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伊藤忠、米に穀物輸出拠点 米韓２社と、アジア需要に対応
伊藤忠商事は穀物メジャー、米ブンゲや韓国の海運大手と共同で米西海岸で最大規模の穀物輸出施設の建設に乗り出す。合計投資額は２億ドル強（約190億円）。中国をはじめアジアで急拡大する穀物需要に対応するため、米国で小麦や大豆などの調達を拡大する。伊藤忠はアジアへの穀物供給ルートを確保することで、中国で食品加工から流通、外食までをカバーする食料ネットワークの構築を目指す。
米ブンゲは四大穀物メジャーの１社。年間売上高は約526億ドルで、メジャーの中では３位。韓国海運大手、ＳＴＸパンオーシャンはばら積み貨物で韓国最大手。３社は６月中に新会社を設立する。出資比率はブンゲが51％、伊藤忠が29％、ＳＴＸが20％。処理能力が年間800万トンある穀物輸出施設を米ワシントン州ロングビューに建設する。６月に着工し、2011年秋の稼働を目指す。(10:02)
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ＹＫＫ、海外工場の新増設２年間見送り 開発に経営資源集中
ファスナー世界首位のＹＫＫは今後２年間、海外の工場の新設や大規模増設など大口の設備投資を見送る。金融危機が広がった昨秋以降、世界のアパレルメーカーの投資意欲が冷え込んでいるため。中国などの新興国でも需要増が見込めないとして、拡大戦略を見直した。経営資源を技術開発などに集中させ、世界景気の回復期に備える。
生産設備の増強を続けてきた中国、インド、東南アジア、中東などにも2009～10年度は工場を新設しない方針。生産設備への投資は老朽化した機械の交換などに絞り、年間100億円程度に抑える方針だ。ＹＫＫは例年、300億円程度の予算を海外工場の新設や増設にあてていた。(07:00)
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口座売買広告で警視庁逮捕の男、タイ邦人殺害容疑者だった
棚橋さんが借りていたバンコクの部屋で、棚橋さんの所持品を調べるタイの捜査員ら（昨年８月１１日、バンコク支局撮影）
インターネット上に他人名義の口座売買を目的とした広告を出したとして、警視庁が今年４月に犯罪収益移転防止法違反容疑で逮捕した男は、タイ・バンコクで昨年８月、日本人男性を殺害した容疑でタイ警察が行方を追っていた男だった。
タイ事件に関連し、岐阜県警も窃盗容疑で指名手配していたが、逮捕まで所在が全くつかめなかった。両国の捜査当局が追っていた相手は、思わぬ接点で「１人」に結びついた。
◆ネットに他人名義の口座売買広告
「銀行口座を売ります。イーバンクほか、多数」
２月中旬、警視庁の捜査員がインターネット上で書き込みを見つけた。闇サイトの掲示板で他人名義の口座売買を持ちかけており、同庁は通信履歴から、東京都内の短期賃貸マンションに滞在している男が書き込んだことを割り出した。
その時点では身元は不明。同庁は４月２２日、「氏名不詳」で逮捕状を取り、マンションに踏み込んだが、部屋に１人で暮らしていた男は黙秘。氏名不詳のまま男を逮捕した。
男の名前が明らかになったのは翌２３日。部屋から押収したパソコン用メモリーに剣道着姿の少年が映る画像が保存され、胸には「浦上」の文字。画像を見せられた男は「その通りです」と素直にうなずいた。
◆タイ警察が逮捕状、岐阜県警も追っていた
同庁で指名手配の照会を行うと、意外な事実が浮かび上がった。「浦上」は、岐阜県出身の棚橋貴秀さん（当時３３歳）を殺害したとして、タイ警察が殺人容疑で逮捕状を取っていた浦上剛志容疑者（３０）だった。岐阜県警も、刑法の国外犯規定に基づいて捜査に着手、棚橋さんの預金１００万円を名古屋市内で引き出した窃盗容疑で指名手配していた。
捜査関係者によると、棚橋さんはバンコクに在住して株投資などで生活費を得ており、浦上容疑者とは以前、同容疑者のタイ旅行の際に知り合っていた。
浦上容疑者の共犯として岐阜県警に窃盗容疑で昨年９月１６日に逮捕された友人の森宏年被告（３１）（公判中）の供述によると、浦上容疑者は棚橋さんについて「金銭トラブルがある。懲らしめる」と話していたという。
昨年８月５日、バンコクのマンションに呼び出し、２人で脅して銀行口座のキャッシュカードを強奪。暗証番号を聞き出し、森被告がパソコンで６０万円を別の口座に移したという。その後、森被告は部屋の外にいったん出され、戻ると、浴室内で棚橋さんが倒れていたといい、タイ警察はこの日に棚橋さんが殺害されたとみている。
◆偽造パスポートで出入国繰り返す
２人は棚橋さんをタイ北部の山中に遺棄し、翌日に帰国したという。しかし、タイ警察が逮捕状を取ったことが８月２１日に報じられ、浦上容疑者はその日のうちに「疑われているようだが、自分は知らない」と京都府警に出頭した。
岐阜県警の捜査員も駆け付けたが、タイ警察による殺人容疑の逮捕状は日本国内では効力がなく、浦上容疑者も棚橋さん殺害に関しては「ノーコメント」を繰り返したため、身柄を拘束できず、帰宅させていた。
その後の捜査で、森被告と浦上容疑者の２人が、移し替えた棚橋さんの預金計約１７００万円を引き出したことが判明し、岐阜県警は２人を窃盗容疑で指名手配。すぐに森被告を逮捕したが、浦上容疑者については、警視庁に逮捕された４月まで全く足取りをつかめなかった。
警視庁幹部によると、浦上容疑者は京都府警を出てから都内に移動、数か所のホテルを転々とした。昨年１２月以降、偽造パスポートでカナダや中国、韓国などに計６回の出入国を繰り返していた。
同庁は、５月１３日に旅券法違反容疑などで再逮捕。タイとの間には犯罪人引き渡し条約がないため、起訴後、岐阜県警に身柄を移し、殺害について、同県警が外交ルートを通じてタイ警察から資料を取り寄せるなどして捜査する。
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口座開設：偽造免許使用で容疑者再逮捕 邦人殺害事件
偽造した運転免許証で銀行口座を開設したなどとして、警視庁ハイテク犯罪対策総合センターは２日、東京都新宿区歌舞伎町２、無職、浦上剛志容疑者（３０）を有印私文書偽造・同行使などの容疑で再逮捕したと発表した。浦上容疑者はタイ・バンコクで０８年８月、岐阜県出身の棚橋貴秀さん（当時３３歳）が殺害された事件で、棚橋さん名義のカードで預金計１００万円を引き出したとして、岐阜県警に窃盗容疑で全国に指名手配されており、今後、同県警が殺人事件について追及する。
逮捕容疑は、０８年１０月２９日、インターネットで購入した偽造運転免許証を使い、都内の銀行で架空の人物名義の口座を開設したなどとしている。逮捕は先月１３日で、容疑を認めているという。
警視庁によると、浦上容疑者は昨年９月以降、ネットの掲示板で、振り込め詐欺に使う他人名義の銀行口座を約５０回売買し、約４００万円の利益を上げたとみられている。逮捕容疑となった口座はこうした利益を管理するのに使ったとみられる。指名手配後も偽造旅券で海外渡航を繰り返し、マカオや韓国のカジノを訪れていたという。
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イ邦人殺害手配の男を再逮捕
2009.6.2 12:14
このニュースのトピックス：窃盗・ひったくり
他人の戸籍を使って不正に旅券を取得したなどとして、警視庁ハイテク犯罪対策総合センターなどは旅券法違反や入管難民法違反（不正パスポート取得、行使・所持）などの疑いで、東京都新宿区歌舞伎町、無職、浦上剛志容疑者（３０）＝犯罪収益移転防止法違反容疑で逮捕、処分保留＝を再逮捕した。同センターによると、浦上容疑者は容疑を認めている。
浦上容疑者はタイ・バンコクで棚橋貴秀さん＝岐阜県出身、当時（３３）＝が殺害された事件にからみ、棚橋さんの銀行口座から現金を引き出したとして、岐阜県警に窃盗容疑で指名手配されている。今後、岐阜県警に身柄を移送し、取り調べる方針。
同センターの調べによると、浦上容疑者は昨年１２月３日、インターネットに出した口座売買の広告を見て応募してきた群馬県安中市下磯部、アルバイト、萩原利幸容疑者（３８）＝旅券法違反容疑で逮捕＝から、戸籍謄本や保険証を３万５０００円で購入。群馬県パスポートセンターで申請をして、不正に旅券を入手した疑いが持たれている。
同センターによると、浦上容疑者は同年１２月から今年４月までの間、この旅券を使ってマカオや香港などに計６回出国していた。
同センターは４月、ネットの掲示板に他人の銀行口座を売買する広告を出したなどとして、犯罪収益移転防止法違反容疑で浦上容疑者を逮捕していた。
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バルチックカレー：出資金返還せず 民事訴訟十数件
バルチック・システムが出資の勧誘に使ったパンフレット
バルチック・システムが出資の勧誘に使ったパンフレット
カレーチェーン「バルチックカレー」を展開していた「バルチック・システム」（東京都港区、清算中）が集めた資金を巡り、「契約通りの配当や出資金の返還がない」として出資者側とトラブルが多発している。バルチック社は「中国進出計画の頓挫による」と説明するが、十数件の民事訴訟が起き、国民生活センターへの苦情・相談も０８年度までの３年間で９１件に達している。
問題の出資金募集はバルチック社が０６年７月から約１年間行った「中国ＦＣ（フランチャイズ）オーナープロジェクト」。当時のパンフレットには「業界第２位のバルチックカレー中国制覇プロジェクト。５年かけて６００店舗を展開する」と記載されていた。
東京都江東区の４０代男性は０６年１１月、メールマガジンを見て問い合わせ、「年利８％が確定」と勧誘され１００万円（１口）を出資した。しかし、１年以上たっても配当がなく、会社側は出資金の分割返還を約束したが、０８年１０月に２８万円が入金されただけ。山口県下関市の５０代男性も０７年４～６月に計４００万円を出資したが、配当や返金はゼロ。２人は今年１月、慰謝料を含む計約５８０万円の賠償を求めて東京地裁に提訴し、係争中だ。
２人の代理人の江川剛弁護士は「説明義務違反は明らかで、もうかると確信させる文言で金を集める方法は詐欺的でもある」と話す。元本を保証して不特定多数から出資を募ったケースもあり、出資法に抵触する可能性もあるという。
０７年１月に２００万円を出資したが配当のない埼玉県和光市の４０代男性は「昨年１１月に登記簿を取ったら、２カ月前に会社が解散し清算中だった。詐欺だ」と憤る。
バルチック社の代表清算人を務める吉野幸則・元社長は毎日新聞の取材に対し、数億円を集めたことを認め、「中国に７店出したが問題が重なり、商品輸出も計画したが毒ギョーザ事件でストップした。資金集めに重大な法令違反はない」と話した。その上で「返還を求められているのは事実。今後資金調達して返金する」と説明している。
民間信用調査会社によると、バルチックカレーは２月時点で関東地方を中心に約３０店舗を展開。０７年度の売り上げは約１１億３０００万円。吉野氏によると、現在は約２０店舗に縮小し別法人が営業している。
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宇宙基本計画：人工衛星３４基打ち上げ…計画を決定
政府の宇宙開発戦略本部は２日、宇宙開発利用分野の初めての国家戦略となる宇宙基本計画を決定した。１３年度までの５年間で現行の２倍の３４基の人工衛星打ち上げを目指し、必要な資金を官民で計２兆５０００億円と試算した。しかし、予算確保については「国の財政の許す範囲内で必要な措置を講ずるよう努める」と確約しなかった。
昨年８月に施行された宇宙基本法に基づき、今後１０年程度を見通した５年計画として策定された。従来の研究開発主体から、産業振興や安全保障などの分野での宇宙利用重視に転換する。
基本計画では、現状の宇宙産業の競争力不足を指摘した上で、政府のトップセールスによる海外への売り込みを盛り込むなど産業振興に力点を置いた。また、ミサイル発射をいち早く探知できる早期警戒衛星開発に向けたセンサーの研究着手や、情報収集衛星の拡充など、安全保障分野での宇宙利用にも道を開いた。
一方、これまで「当面独自の計画を持たない」としていた有人宇宙活動については、「有人を視野に入れたロボットによる月探査」と方針転換している。
戦略本部長の麻生太郎首相は「中国、インドの本格参入で競争が激化している。計画が絵に描いた餅に終わらないよう取り組んでほしい」と関係閣僚に指示した。
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漢検だけじゃないゾ「ＴＯＥＩＣ」にも財団私物化疑惑浮上 (ゲンダイネット)
経営が不透明な検定ビジネスは、漢検だけじゃなかった！？
国際コミュニケーション英語能力テスト「ＴＯＥＩＣ」を実施する「財団法人・国際ビジネスコミュニケーション協会（ＩＩＢＣ）」にも重大疑惑があると、２９日発売の「ＦＲＩＤＡＹ」が報じている。
記事によれば、ＩＩＢＣの渡辺弥栄司会長（９２）が、親密な関係にあるＭさんという女性を顧問に登用。その上、Ｍ女史の息子が昨年まで取締役を務めていた「株式会社 国際コミュニケーションズ・スクール」が、ＴＯＥＩＣの普及業務を独占的に請け負っている。
さらに、Ｍ女史の息子は昨年、ＩＩＢＣの理事長に就任。理事を経ず、いきなりの理事長就任だった。会長は妻と別居して、Ｍ女史と同じマンションの隣の部屋に住んでいる。周囲が邪推するのもムリからぬことだろう。
この件について、ＩＩＢＣの事務局に事実関係を問い合わせてみたが、「会長のプライベートな部分なので、コメントできません」と語るのみ。理事長人事が会長のプライベートということ自体、問題だと思うが……。
「渡辺会長は官僚出身。東大法から商工省（現・経済産業省）に進み、大臣官房長や商工局長を歴任した実力者でした。当時の全日空社長に請われて、日中国交正常化にも尽力したとか。４９歳で退官後、元タイム社アジア総支配人の北岡靖男氏とともに、ＩＩＢＣを立ち上げたと語っています。漢詩などの朗読を教えていたＭ女史とは、３０年ほど前に知り合ったようです」（ＩＩＢＣ関係者）
渡辺会長は「美しい人生」というブログを発信しているが、そこにはＭ女史や漢詩への思い入れがつづられている。通産官僚時代の自慢話も書かれていて、こうした押しの強さが功を奏したのか、ＴＯＥＩＣの管轄官庁は、なぜか文部科学省ではなく、経済産業省だ。
「ＩＩＢＣは、国際的なビジネスコミュニケーション能力の向上を目的に設立されたため、旧通産省の企業の国際展開を支援する部署の管轄となったのです。決して、ＩＩＢＣの会長が通産省出身だからという理由ではありません。ＩＩＢＣの不透明な経営についてですか？ 現時点では、漢検のような違法行為があるとは認識しておりません」（経産省貿易振興課）
ＴＯＥＩＣは、高得点を取ると就職や転職に有利だといわれ、今や文科省の「英検」を駆逐する勢い。問題集や関連書籍も数多く出版される一大ビジネスだ。受検者数はうなぎ上りで、０８年度は１７１万８０００人。ＩＩＢＣのテスト受検料収入は、６０億円以上に上る。私物化が事実だとすれば、許される話ではない。
（日刊ゲンダイ2009年5月29日掲載）
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Support for dollar as leading currency
By Lionel Barber, Martin Wolf and Jamil Anderlini in,London and Kathrin Hille in Beijing
Published: June 2 2009 03:00 | Last updated: June 2 2009 03:00
A leading Chinese financial official yesterday rejected suggestions the dollar could be replaced quickly as the global reserve currency, as Tim Geithner, US Treasury secretary, arrived in China on his first official visit.
"In the short term I don't think we can find another currency to replace the US dollar," said Guo Shuqing, chairman of China Construction Bank and former head of the country's foreign exchange administration. "The US dollar is the main currency because their economy is number one in terms of competitiveness, in terms of innovation."
In an interview with the Financial Times, Mr Guo also raised doubts about a proposal from Zhou Xiaochuan, China's central bank governor, to replace the dollar with a "super-sovereign reserve currency" based on special drawing rights issued by the International Monetary Fund.
"We've had SDRs for many years but everybody knows they don't work so well," Mr Guo said. "People worry about US dollars very much because of the imbalances in the current account but that has been the case for many years - they have had a deficit in the current account since the very beginning of the 1970s."
The bulk of China's total international investment position is held in dollar assets and only 6 per cent is direct investment.
Fears that US moves to tackle the recession could undermine the value of the dollar have led to calls from senior Chinese officials, including Mr Zhou, for more conservative fiscal policy and suggestions that the dollar be replaced as the world's reserve currency.
On his arrival in Beijing yesterday, Mr Geithner called for China to make its currency more flexible in return for fiscal reforms on the part of the US.
In remarks to an audience at Peking University that set the tone for two days of talks with Chinese leaders, Mr Geithner reiterated President Barack Obama's pledge to lower the US fiscal deficit to about 3 per cent of gross domestic product once the economy was on a stable recovery path.
But Mr Geithner also named a long list of tasks the Chinese government had to address to make its contribution to a more balanced global economy.
These included expanding its social safety net, spending more on education and encouraging changes in industry structure through market mechanisms.
"An important part of this strategy is the government's commitment to continue progress toward a more flexible exchange rate regime," Mr Geithner said.
China has in the past protested when the US put it under pressure to allow its currency to appreciate.
The US dollar fell to its lowest since mid-December yesterday against a basket of currencies and the euro.
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Europe must take control of banking stress tests
By Jean Pisani-Ferry and Beatrice Weder di Mauro
Published: June 1 2009 20:30 | Last updated: June 1 2009 20:30
After months of financial gloom, summer has brought some relief. However, there is now a danger that policymakers and market participants are lulled into a false sense of security, which would be likely to lead to another negative feedback loop. To prevent such an outcome, quick and resolute action is needed. In particular, Europe must complete the job of putting the financial system on firmer ground.
If one looks at earlier episodes of large-scale macro-financial distress, a number of key lessons emerge. Japan’s experience in the past two decades, in particular, make clear that a banking system populated by zombie banks is a major threat to recovery; banking systems remain dysfunctional until losses are fully recognised and disclosed; and procrastination increases the ultimate cost to the taxpayer. Sweden’s experience shows the benefits of expediting the clean-up.
A dysfunctional banking system would represent a particular challenge for Europe, whose economies are much more dependent on banks than is that of the US. Big worries about the state of Europe’s banks remain, as current information is unsatisfactory and published accounts are not trusted. Recent International Monetary Fund estimates of potential future writedowns and recapitalisation needs have added to these concerns, as they suggest that the European Union trails the US in the recapitalisation process. Though European officials dispute the IMF figures, they have yet to produce alternatives.
In the US, stress tests have been used as an imperfect but effective tool to increase the public’s knowledge of the balance sheets of the major banks, and to identify further areas where action is needed. While the process of producing and disseminating results has proven challenging and subject to numerous caveats, what has been achieved represents an improvement over the previous situation.
In contrast, Europe’s approach to stress testing has been half-hearted at best. The European supervisors argue that assessment would and should be carried out at a national level, under an EU umbrella. However, tests would be only loosely harmonised by adopting similar macroeconomic assumptions. Furthermore, results would not be available before September, and publication (of aggregate results, not bank-by-bank data) would be at the discretion of national authorities.
This compromise is intended to preserve each supervisor’s remit, and fit the variety of their institutional status. But this comes at a high price as regards the value of the results. There is no guarantee that the test will ensure that results are consistent across countries and across banking institutions. As long as national supervisors have discretion, identical assets are unlikely to be valued the same way in all countries. Each supervisor will be tempted to pretend its banks are in good shape. As a result, the planned procedure will not elicit the degree of confidence that European economies urgently need.
We cannot wait another four months to discover that we do not yet know the true state of Europe’s banking system. Instead, a systematic European approach is needed. The respective tests should be based on common macro scenarios, common valuation rules and common stress assumptions. They should be done for all the largest European banks simultaneously and the results should be published for each bank. And there should be centralised oversight of the tests, and aggregation of results.
Admittedly, our proposal raises difficulties. As the US experience has shown, genuine stress tests require that governments stand ready to say without delay how they intend to deal with insolvent institutions – including, in Europe, those with large cross-border operations. But it is worth noting that proper stress tests would not require any formal transfer of supervisory authority from national to European level. Rather, it could be carried out by a temporary task force responsible for ensuring consistency.
Since the cost of procrastination is high, turf wars should not be allowed to block a potentially major step towards recovery. We urge European governments to act now.
This article is co-written by Peter Bofinger, Christian de Boissieu, Daniel Cohen, Wolfgang Franz, Christoph Schmidt and Wolfgang Wiegard. The writers belong either to the French Council of Economic Analysis or to the German Council of Economic Experts
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Telecoms battle sends out uneasy signals to investors
By Paul Betts
Published: June 1 2009 20:04 | Last updated: June 1 2009 20:04
As the first-quarter results of Europe’s telecoms giants showed, even the most recession-proof of industries cannot stay entirely immune to the effects of the economic and financial crisis. Some have weathered the storm better than others. France Telecom and Spain’s Telefónica fared well compared with Deutsche Telekom and Vodafone. Best not mention BT. But the pressure was plain to see.
For many of the bigger operators, emerging markets continue to represent a bright spot for growth with low penetration levels and communication- hungry and ever-expanding populations.
Take France Telecom in Africa, for example. Its chairman, Didier Lombard, has defined that continent as being to the French operator what Latin America is to Telefónica. The Spanish, of course, have a head start in their preferred region, but France Telecom has made good headway, most recently moving into east Africa.
But the jewel in France Telecom’s African crown remains Egypt in the shape of Mobinil, the country’s leading mobile operator that has been developed from scratch and therefore also without the French having to pay any of the financial goodwill that comes with an acquisition. Yet the running battle between France Telecom and its partner in Mobinil, the Egyptian billionaire Naguib Sawiris, highlights how complex and challenging emerging market investments can become.
Having been ordered by an international court to sell the unlisted portion of his holding in Mobinil, Mr Sawiris is fighting to reverse or block the decision – or at the very least to have his remaining listed shares bought out by France Telecom at the same price imposed by the court.
His plight is all the more embarrassing since it was he who initiated the process against his French partners, hoping to have them ejected so he could secure control of the Egyptian company. When the strategy backfired, he began a campaign in Egypt against the decision.
Conscious that its long-term strategy in the region depends not only on its competence as an operator but also on being seen to be a good local citizen, France Telecom has offered to buy out the listed shares of Mobinil, of which Mr Sawiris owns 20 per cent but the public also has 30 per cent. While under no legal obligation to do so, such a move represents a price worth paying for France Telecom since it would also remove Mr Sawiris. Predictably, he is resisting.
Mr Sawiris has a well-developed track record of legal bust-ups with partners in Italy, Tunisia, Algeria, Chad, Syria, Yemen and Iraq. Less edifying has been the attitude of the Egyptian authorities. Twice in the past month France Telecom has offered to buy out the minority shareholders at a juicy premium to the historic share price. Twice the Egyptian stock market authorities have given their consent after lengthy negotiation only to reverse their decision at the last minute.
The still attractive growth prospects of Egypt mean companies such as France Telecom have every interest in going out of their way to resolve conflicts. Up to a point, that is. They also have shareholders to whom they are responsible. France Telecom is one of the largest inward investors in Egypt. The Egyptian government should ponder a little harder what kind of signal the shenanigans around Mobinil is sending to other groups contemplating ventures in its country.
More is less
The conventional wisdom in the car industry has long been that the sector needs to cut capacity and consolidate. Quite the opposite, paradoxically, seems to be happening. The proposed takeover of Opel by the Canadian car components group Magna International with Russian partners simply risks de-consolidating the industry even more.
Instead of consolidation, the industry is spawning four new car companies: the new Magna-Opel group; Saab which is not part of the Opel transaction; Volvo which Ford has now put on the market; and the Land Rover-Jaguar businesses that Ford has already sold to India’s Tata.
Fiat’s alternative proposal to absorb Opel in a new enlarged international car group including Chrysler would clearly have helped consolidate the sector. But the politicians on both sides of the Atlantic appear to believe right now that de-consolidation is the politically expedient answer to the industry’s problems and that the sector can be revived with more, rather than fewer, operators.
But the Opel deal has probably only put off rather than cancelled the day of wide-scale car industry consolidation.
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Moody’s downgrades Saudi group
By Andrew England in Abu Dhabi and Abeer Allam in Riyadh
Published: June 2 2009 02:07 | Last updated: June 2 2009 09:39
Moody’s, the rating agency, has downgraded the ratings of Saad Group, the Saudi conglomerate owned by Maan Al-Sanea, to non-investment grade, a move that will enable banks to call in two credit facilities totalling nearly $6bn.
The agency took the action after bankers revealed that the Saudi central bank had ordered banks in the kingdom to freeze the personal Saudi accounts of Mr Sanea, one of the nation’s most powerful businessmen and a major shareholder in HSBC.
No reason has been given for the Saudi Arabian Monetary Agency’s decision. Saad Group has said it does not comment on speculation but it has made no denial.
In a statement on Monday the group said it was planning an orderly restructuring of some its debts as the result of a liquidity squeeze. The group said it was concluding arrangements with a leading European bank to “coordinate relationships with our international, regional and domestic counterparties to assure pari passu treatment.”
Moody’s downgraded two of Saad’s main businesses – Saad Trading Contracting & Financial Services Company (STCFSC), and Cayman Islands-based Saad Investment Company Limited (SICL) - to B1 from Baa1.
The two companies have revolving credit facilities of $2.75bn and $2.8bn respectively which are both close to fully drawn, Moody’s said.
The facilities – syndicated loans through local and international banks – have a rating trigger that allows the creditors to call in the loans if the companies are downgraded to junk.
Concerns have already been raised that a long list of local, regional and international banks have exposure to the group.
“Moody’s notes that the events of the past few days have resulted in heightened risk of default at entities of the Saad Group, if they face increased contagion from disputes originating from the shareholder (Mr Sanea),” the agency said in a note.
It said its downgrades to non-investment grade “will constitute an event of default under STCFSC’s $2.75bn and SICL’s $2.8bn revolving credit facilities.”
Two years ago, Mr Sanea, who set up Saad Group in the 1980s, bought 3 per cent of HSBC, and although his holding has slipped to less than 2 per cent since the beginning of the year he remains a top 10 shareholder in HSBC. His is also the largest shareholder after the government in Samba Financial Group, a leading Saudi institution, with 7.8 per cent holding in that bank, according to the Saudi stock market website.
The current situation had resulted from a confluence of events, Saad Group said in its statement, including the failure of companies owned by a “prominent Saudi family business and the unexpected and unprecedented regional reaction to that failure, including some action by counterparties.”
The statement did not name the company. But there has been much market speculation about whether there was any business relationship between Saad Group and Ahmad Hamad Algosaibi & Brothers Company.
The Algosaibi group is one of the oldest and most powerful family businesses in Saudi Arabia, but it shocked the financial community when one of its wholly owned subsidiaries – Bahrain-based The International Banking Corporation - defaulted on its debt last month.
Mr Sanea is married to a sister of a senior member of the Algosaibi family.
But a spokesman for Saad Group told the FT that Saad Group had no business ties with the Algosaibi group, “except on an arms’ length commercial basis.”
“Neither Maan Al-Sanea nor any related business entity is a partner or has any ownership interest whatsoever in AHAB or in any of its related entities (including TIBC),” the spokesman said. “Likewise, AHAB has no interest in Saad Group company or in any business owned or controlled by Maan Al-Sanea. Maan Al-Sanea is not involved in the operations of AHAB or its entity TIBC in anyway.”
The revelations about the two companies had raised questions about the state of some Gulf family businesses, which are notoriously secretive, about whether they had become over-extended during the oil boom and were now struggling to meet their obligations. Saad Group is one of the few non-listed Gulf companies to have a credit rating.
“These defaults are a very dark stain on the region because it shows these companies are willing to walk away from their obligations for whatever reason,” an analyst said. “There’s no transparency whatsoever why this happened.”
Standard & Poor’s, which also rates Saad Group, said in a research note last week that is had revised its outlook on the company to negative from stable because of its increased real estate exposure resulting in the reduced liquidity and geographic diversity of its portfolio. But it reaffirmed it BBB+/A-2 corporate ratings, when the note was released.
The agency said that despite net losses of about $4.4bn on financial investments, its overall asset base increased to $30.6bn by the end of 2008. Last year its reported real estate holdings nearly doubled, reaching $8.4bn, according to S&P.
Saad Group said that recent events, “specifically affecting the Bahraini banking sector, have led to a short term liquidity squeeze affecting Saad Group companies in the Middle East.”
“We are continuously striving to mitigate the effects of the limited squeeze and are also planning for an orderly restructuring of the debt of affected companies in cooperation with our counterparties and international advisors,” it said.
Bahrain has one of the region’s oldest financial hubs, which has traditionally served Saudi Arabia, and Saad Group owns Bahrain-based Awal Bank.
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Abu Dhabi investor sells Barclays stake
By Kate Burgess, Peter Thal Larsen and Neil Hume
Published: June 1 2009 21:12 | Last updated: June 2 2009 11:13
Shares in Barclays tumbled on Tuesday after one of its largest Middle Eastern shareholders announced plans on Monday night to offload its stake in the British bank, pocketing a large profit less than seven months after making its £3.5bn investment.
International Petroleum Investment Corp, an investment vehicle of the Abu Dhabi royal family, was finalising a placing of 1.3bn Barclays shares with institutional investors. The group also invited offers for its entire £1.5bn holding of Barclays capital notes in a process that will be completed by Wednesday . Both sales are being handled by Credit Suisse.
The sale of the notes and the shares, which have surged in value in recent weeks as fears that Barclays would be nationalised have receded, will startle UK shareholders who were told last autumn that IPIC chairman Sheikh Mansour bin Zayed al-Nahyan, a member of Abu Dhabi’s royal family and owner of Manchester City football club, was a long-term strategic investor in the bank. The shares have surged in value in recent weeks as fears that Barclays would be nationalised have receded.
Large institutional investors were furious that Barclays turned to Middle Eastern investors for new capital on lucrative terms without giving existing shareholders the opportunity to participate. Barclays executives defended the deal by arguing that it allowed the bank to remain independent of the UK government.
The decision by such a high-profile investor to offload its stake after such a short period may undermine confidence in Barclays, which has benefited from renewed shareholder support after the Financial Services Authority concluded the it did not need to turn to the government to raise additional capital.
Shares in Barclays fell 14.4 per cent in early London trading on Tuesday to 270¾p.
IPIC has until the end of June to convert a £2bn investment in mandatory convertible Barclays stock into ordinary shares at 153p a share. At Monday night’s closing price of 316.25p, up 18.75p, IPIC’s convertible shares were worth more than £4bn.
The shares are likely to have been placed at a substantial discount to that price, with brokers suggesting the shares were being placed at 267p. Even at this price, however, IPIC would pocket a profit of around £1.4bn on its £2bn investment in convertibles. The overall profit will depend on the price at which IPIC can sell the capital notes.
The long-term fate of Abu Dhabi’s investment in Barclays has been uncertain since it emerged recently that the shareholding had been placed in IPIC, which targets investments in the oil and gas industry. In a statement on Monday night, His Excellency Khadem al-Qubaisi, managing director of IPIC, said the group has a “high regard” for Barclays and that the decision to sell reflected its desire to invest in the energy industry.
As part of the £7.3bn recapitalisation of the bank agreed in October, IPIC also has warrants to purchase up to £1.5bn worth of Barclays shares at 197.8p, though it said it had no intention of selling or hedging that investment.
John Varley, chief executive of Barclays, said in a statement on Tuesday: ”In the period since IPIC and the government of Abu Dhabi took a position in Barclays in 2008 through their purchase of mandatorily convertible notes and reserve capital instruments we have been able to broaden our strategic and commercial relationship, and we look forward to developing this further going forward.”
The other Middle East investor was Qatar Holding and Challenger, a company representing Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, chairman of Qatar Holding, which invested a total of £2.3bn in convertible notes and capital notes. People close to Barclays said that Qatar Holding remained a supportive investor in Barclays.
Barclays is in talks to sell Barclays Global Investors, its investment management arm, in a move designed to bolster its capital reserves. BlackRock, the US money manager, approached Barclays last month about buying BGI in a deal expected to be worth more than $10bn (£6.1bn).
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GE and Mubadala venture pushes through
By Justin Baer in New York
Published: June 2 2009 02:44 | Last updated: June 2 2009 02:44
General Electric’s $8bn commercial finance joint venture with Mubadala Development, Abu Dhabi’s state investment vehicle, may lead to other regional pacts that will extend the conglomerate’s dealmaking reach even as it shrinks its finance arm, GE Capital.
The two partners, which unveiled their planned venture in July, forged ahead with a final accord even as the credit crisis enveloped the financial services industry.
While GE responded to the turmoil by trimming both GE Capital’s borrowing needs and its portfolio of corporate and consumer loans, the Mubadala agreement – and other potential deals – will free the company to capitalise on its underwriting and risk management expertise without expanding GE Capital’s balance sheet.
“I wouldn’t downplay the fact that this model has us thinking about other players,” said Aris Kekedjian, chief executive of GE Capital Middle East & Africa. “Historically, we pretty much did things in-house, with our own balance sheet. This is one example where we will leverage GE Capital’s global capacity across the industry.”
Under its accord with Mubadala, each partner will contribute $4bn in equity to the new venture, giving it access to as much as $40bn in capital. Ron Herman, a 25-year GE veteran, was named chief executive. GE and Mubadala also agreed to open the Abu Dhabi Leadership Development Center, providing management training courses mirroring the curriculum at the US company’s in-house facility in Crotonville, New York. Although the entity will focus on the Persian Gulf region, “we’ll be doing business around the world,” Mr Kekedjian said.
The venture’s pipeline includes deals in the US and Europe as well as those in the Middle East, and span opportunities from aviation and energy to bankruptcy finance and middle-market corporate loans, he said. The partners expect to secure regulatory approvals in time to put their capital to work this summer.
“We’ve got an ability to play big,” Mr Kekedjian said. Future ventures “may be more targeted, more regional in focus”.
According to Mr Kekedjian, neither GE nor Mubadala ever wavered in its plan to form the venture, even as deepening financial crises crimped GE Capital’s profit and cost its parent its triple A rating.
The state-run investment arm has continued to accumulate GE shares, and owned 65.8m on March 31.
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Turkey rejects minefield investment
By Delphine Strauss in Sanliurfa
Published: June 2 2009 03:00 | Last updated: June 2 2009 03:00
Hostility to foreign investment in a sensitive border area has forced the Turkish government to shelve plans to turn a minefield stretching along its frontier with Syria into organic farmland.
After a week of wrangling in parliament, ministers have conceded they would have to rethink draft legislation that would have allowed an international company to lease the 510km strip for 49 years as payment for clearing thousands of landmines that still claim casualties and have made it unusable since the 1950s.
Deniz Baykal, leader of the CHP opposition party, had threatened to challenge the legislation in the constitutional court if it was passed, saying the land should be used "for the unity of the country".
Turkish media linked the issue to the growing international debate about foreign investors buying up land in poorer countries to secure food supplies.
But the controversy reflects a strong nationalist streak in Turkish politics that also endangers government attempts to make progress on difficult issues of Kurdish identity, or reconciliation with Cypriots and Armenians.
"The most crucial gap in this country is the one between nationalists and globalists," wrote Mustafa Akyol, a political commentator.
Suspicion that an Israeli company would win the contract made the proposal especially unpopular - reflecting widespread prejudice as well as the genuine sensitivities of the area's part-Arab population and Syria's proximity.
But Recep Tayyip Erdogan, prime minister, painted the issue in broader terms, saying it was the same "fascist mindset" that had led Turkey to expel ethnic minorities in the past - a revolutionary statement for a Turkish prime minister. More prosaically, he went on to argue: "Money has no religion, nation or ethnicity."
Turkey faces a 2014 deadline to clear more than 600,000 mines from the 216sq km area, and had hoped its agricultural value would help fund the project.
The irony is that, with or without the landmine law, it remains desperately difficult to attract investment to one of Turkey's poorest areas, where many do not complete school, security is still fragile, and markets underdeveloped.
Diplomats and dignitaries last week inaugurated an EU-funded industrial zone to be constructed in Sanliurfa, a province adjoining Syria - but there is so far a lack of tenants.
One European diplomat said agricultural investors were deterred by relatively low margins for the cotton and wheat crops under cultivation, and by the expense of flying higher margin fresh produce to western markets.
Sanliurfa businessmen who have profited from irrigation projects bringing land under cultivation say farming is the region's best prospect - but admit that foreign investment to date amounts to one tomato paste plant.
Landowners argue over the value of the land by the border. Several would be willing to sell their property to foreigners, but most agree the mined area should stay in Turkish hands, not least because of the original owners' claims.
But if the government pays, they would be happy for outsiders to help clear the mines. Ibrahim Halil Polat, a board member at the local chamber of commerce, asked wryly: "How else are you going to clear it - send the donkeys over?"
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Israelis fear unravelling of US alliance
By Tobias Buck in Jerusalem
Published: June 2 2009 13:26 | Last updated: June 2 2009 13:26
The latest tensions between Washington and the new right-wing Israeli government are sparking concern bordering on alarm among Israeli officials and analysts, amid suspicions that the formerly-rock-solid alliance is unravelling.
Disagreement between Barack Obama, the US president, and Benjamin Netanyahu, the Israeli prime minister, has been particularly pronounced on the issue of Jewish settlements in the occupied West Bank. The US leader has urged Israel repeatedly to stop expanding its settlements on occupied land, arguing that they present a big obstacle to peace in the region.
But, speaking earlier this week, Mr Netanyahu again rejected the US demand for a total settlement freeze. He told a parliamentary committee: ”We will agree not to take any new territory, but we will not agree to freeze life in the settlements.”
The US and Israeli leaders are also at loggerheads over Mr Netanyahu’s continuing refusal to endorse the two-state solution as the way to end the long-running Israeli-Palestinian conflict. Mr Obama – along with the international community – views the creation of a Palestinian state as the only way to achieve a lasting peace in the region.
Mr Netanyahu’s apparent defiance has led to speculation among Israeli commentators that the US will step back from its traditional commitment to support the Jewish state both diplomatically and materially.
Their concerns gained fresh nourishment after the New York Times quoted an unnamed US official on Monday saying the Obama administration was considering retaliatory steps such as not vetoing UN Security Council resolution that criticise Israeli policy.
Ben Caspit, a commentator for Israel’s Maariv newspaper, wrote on Tuesday: ”America has the capacity to shut down Israel for renovations with an administrative decision or two. A series of resolutions in the UN Security Council are liable to turn us into a new South Africa. A delay in a shipment of replacement parts for Apache helicopters can ground the Air Force. Replenishing the IDF’s [Israel Defence Forces’] ammunition stocks in the event of another conflagration in Gaza or Lebanon is a matter of American good will.”
US officials, including Mr Obama, insist that Washington remains as committed as ever to Israel’s security. However, in an interview with US National Public Radio on Monday night, the US president said it was time for America to be more ”honest” with Israel.
Roni Bart, and analyst with Israel’s Institute for National Security Studies and an expert on US-Israeli relations, argues that Washington is not about to break decisively with Israel. But he insists that – unlike its predecessor – the current American administration views the Jewish state as ”just another country” and not worthy of special treatment.
At the same time, Mr Netanyahu is under intense pressure from his own coalition allies not to give in to US pressure. Yuli Edelstein, the government’s information minister and a settler himself, warned that the prime minister would not be able to muster the support of his own government should he agree to a complete settlement freeze.
Political pressure aside, Mr Netanyahu is also in danger of stoking further clashes between radical settlers and state security forces in the streets. Enraged by the government’s decision to start dismantling small settlement outposts in the West Bank, radical settlers have staged a series of violent demonstrations in the past days – attacking both Palestinian civilians and Israeli security forces.
In the meantime, there are signs that the mounting international and domestic tensions are beginning to take their toll on the prime minister, barely three months into his tenure. According to Israeli media reports, Mr Netanyahu accidentally voted against a draft transportation law proposed by his own government on Monday. He was the only member of the coalition to vote against the bill.
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Approval of US among Arabs increases
By Roula Khalaf in London
Published: June 2 2009 03:00 | Last updated: June 2 2009 03:00
Barack Obama's presidency has lifted approval ratings of US leadership in several Arab countries but a lot more effort is needed to turn the country's image round, according to a new Gallup poll.
The survey, conducted in 11 Arab countries and released ahead of Mr Obama's Cairo address to the Muslim world on Thursday, shows double-digit increases in approval ratings in eight Arab countries, including Egypt and Algeria.
Overall, however, the median approval of US leadership stood at no more than 25 per cent and a large number of respondents appeared to be reserving judgment.
Under the George W. Bush administrationapproval ratings in many Arab countries were in the single digits and often on a declining trend.
The poll confirms the assessment of analysts in the region: that Mr Obama's more respectful tone and greater emphasis on diplomacy is helping to improve US standing, but that many people are still waiting for more concrete changes in American foreign policy.
US moves towards withdrawing troops from Iraq and closing the prison at Guantánamo Bay are often cited as evidence of a changing American attitude.
The US president has also taken steps to revive Middle East peace negotiations, engage with Syria and start a dialogue with Iran. But such was the depth of disappointment under the Bush administration that many people in the Arab world remain sceptical of US intentions. Many Muslims, in the Middle East and beyond, have perceived the US-led "war on terror" as an attack on Islam.
Mr Obama's speech to the Muslim world is eagerly awaited in the region, though it is not likely to lay out the plan for Arab-Israeli peace that Arab governments have been calling for.
"Obama will deliver his message Thursday with an arguable stronger basis of support than his predecessor ever had in many Arab countries," Gallup said yesterday. "Nonetheless approval remains low and underscores the work that remains as Obama seeks to pave a new, more positive way forward."
The poll follows another recent opinion survey conducted in six Arab countries by the University of Maryland with Zogby International. It found 45 per cent of Arabs had a favourable view of Mr Obama, including a remarkably high 79 per cent of Saudis.
The survey, however, also suggested that opinion towards the US president was personal.
When asked about Hillary Clinton, the US secretary of state, 45 per cent of respondents held negative views. Moreover, 77 per cent of those surveyed still identified the US as one of the two biggest threats they faced [after Israel]. This, however, was an improvement on 2008, when 88 per cent of Arabs polled saw the US as a threat.
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Former Sudanese president dies
By Barney Jopson
Published: June 1 2009 03:00 | Last updated: June 1 2009 03:00
Jaafar Nimeiri, a Sudanese president who halted one of Africa's most brutal civil wars in the 1970s but restarted it a decade later by imposing Islamic law, has died in Khartoum after a long illness at the age of 79.
Nimeiri came to power in a coup in 1969 and was overthrown after 16 years in power, a turbulent period shaped by divisions that persist to this day about radical Islam, Khartoum's stranglehold on power and control of oil resources.
A young army colonel when he seized power, Nimeiri swung between ideologies during his time in office, survived multiple coup attempts and invasions, yet won the support of the US as a bulwark against its cold war enemies.
In common with his predecessors and successors, he presided over an ethnically diverse country riven by inequality and injustice, and had no qualms about using brute force against a shifting cast of opponents.
His greatest achievement, however, was to make peace in south Sudan with bush fighters struggling to win power, wealth and respect for their marginalised, mainly Christian region.
He struck an accord with them that held for 11 years but his greatest failure was then to throw it away, reigniting the civil war that became Africa's longest.
It is a pattern some fear could be repeated with a second north-south peace deal signed in 2005, now that Omar al-Bashir, Sudan's president, deals with war crimes charges filed against him at the International Criminal Court.
When Nimeiri came to power he presented himself as a force for change and crushed Islam-based political groups in 1970-71. Once his grip was consolidated he turned to the south, which had been at war with Khartoum since 1955, one year before independence. He rejected previous regimes' default use of repression and pushed for a political settlement - signed in 1972 - that gave the south partial autonomy. In 1973, he changed the constitution to make Sudan a secular state.
But the peace deal eventually came under strain, with southern leaders accusing Khartoum of reneging on their promises. When oil was found in the south, they were further enraged by Khartoum's attempts grab it.
The seeds of the peace deal's final destruction, however, were planted when Nimeiri sought a rapprochement with Islamists in the late 1970s in an effort to broaden his support base.
He welcomed Islamist leaders into his regime, including the charismatic Hassan al-Turabi, who turned up the pressure for an Islamic state. Nimeiri absorbed their fervour and in 1983 declared an Islamic revolution and imposed sharia law.
For the southerners, that move killed off any residual hope vested in the 1972 accord and triggered the creation of the rebel Sudan People's Liberation Army and a period of ruthless violence.
Nimeiri oversaw fewer than two more years of war - he was ousted in 1985 and fled to Egypt amid discontent in the north over famine, unemployment and corruption. In the years up to 2005, some 2m people died in the conflict he restarted.
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Ecumenical Christians Hope for Common Easter Date After 2009
By Aaron J. Leichman
Christian Post Reporter
Mon, Jun. 01 2009 08:05 PM EDT
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The Day of Pentecost was marked by Christians around the world Sunday except for those who will be celebrating the date this coming Sunday.
Because Christians of the Western tradition had marked Easter this year on April 12, they marked Pentecost on May 31 – 7 weeks after Easter. Christians in the Eastern Orthodox Church, meanwhile, had marked Easter on April 19 and therefore will mark Pentecost on June 7.
But the hope remains that that one day all Christians will celebrate Easter (and consequently Pentecost) on the same date – aside from the coincidental overlaps between the Julian calendar followed by Orthodox churches and the Gregorian calendar followed by Western churches.
“Although a change might not happen in the nearest future, there is some hope, that things might eventually change if the discussion goes on,” commented the Rev. Dr. Dagmar Heller, an evangelical pastor from Germany who serves on the Faith and Order Commission of the World Council of Churches.
Late last month, the hope for united Easter celebrations was reaffirmed during an international ecumenical seminar organized by the Institute of Ecumenical Studies at the Ukrainian Catholic University in Lviv.
All participants at the seminar – which included Orthodox, Roman Catholic and Protestant theologians from a variety of European countries – endorsed the Aleppo proposal, a set of proposals that resulted from an ecumenical consultation held in March 1997 in Aleppo, Syria.
The proposal, which Heller said “seems to be the most reasonable solution so far” to establishing a common date for Easter, takes up what the Orthodox meetings in 1977 and 1982 at Chambésy had proposed, namely “(a) to maintain the Nicene norms, (b) to calculate the astronomical data, (c) using as the basis for reckoning the meridian of Jerusalem.”
Among the norms established by the Council of Nicea in the year 325 was the date of Easter as the first Sunday after the full moon following the vernal equinox.
The Aleppo proposal has been translated into different languages and was sent to all the member churches of the WCC, the largest ecumenical churcy body in the world, as well as to the Roman Catholic Church.
According to Heller, the responses received were in general favorable.
“The Lambeth Conference took up the matter, as well as the Lutheran World Federation at its Council meeting in 1998,” she reported. “The Pontifical Council for Promoting Christian Unity responded in favour of the proposal. Responses were also received from the Ecumenical Patriarchate and from the Moscow Patriarchate as well as from the Church of Greece and from the Patriarchate of the Syrian Orthodox Church of Antioch and from several churches from the protestant side.
“In Europe also the Conference of European Churches put the proposal on its agenda,” Heller added.
Despite the broad appeal of the Aleppo proposal, many have not turned a blind eye to what they considered to be "the main problem" – "not the calculations, but the complex relations and missing of trust among different Christian denominations because of long divisions."
“The fundamental question, as we can well imagine, is not one of calculating a date or identifying legitimacy, of who has the best theoretical solution,” noted Fr. Milan
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Dedeman Invested €33 million in Gaziantep PDF Print E-mail
Published by Ozgur Tore
Tuesday, 02 June 2009
Dedeman Hotels & Resorts International opened its 22nd property in Turkey’s southeastern province of Gaziantep.
The Dedeman Gaziantep Hotel & Convention Center officially opened by the participation of Turkish Prime Minister Recep Tayyip Erdogan, Turkish Culture and Tourism Minister Ertugrul Gunay and many other authorities and prominent names of the region.
Speaking at the press conference before the opening, Dedeman Holding CEO Murat Dedeman said, “We are close to reach our target of “50 hotels in 50 years”. Dedeman Hotels & Resorts International will celebrate its 50th year in 2016 with 50 hotels in Turkey and close region.
Beside Murat Dedeman, Dedeman Hotels & Resorts International, General Director Tamer Yurukoglu, Caglar Tourism CEO Erdogan Suyur (landlord of the hotel), Tayfun Doskaya; Dedeman Hotels & Resorts International South Region Manager and The Dedeman Gaziantep Hotel & Convention Center General Manager Koray Ozturk attended the press conference.
Mr. Murat Dedeman said the hotel has 186 rooms, 2 restaurants; one of them offering mainly food from the region, one indoor swimming pool, a ballroom with 1000pax equipped with state-of-the-art audio-video equipment. Mr. Dedeman also added that the hotel is offering the most modern health club of the southeast region.
“We have started the hotel development and expansion to Anatolia by opening Dedeman Palandöken in Erzurum in 1994. Dedeman Gaziantep is our 6th hotel in South East,” added Mr. Dedeman.
According to the announcement from Dedeman in March 2009, with the acquisition of the operation rights of 3 new hotels in Syria, Dedeman Hotels & Resorts International has taken steps towards the Middle East. Dedeman Hotels & Resorts International, General Director Tamer Yürükoglu said, "Dedeman is expanding into the Syrian market by adding 3 new properties to the chain; Dedeman Damascus, Dedeman Palmyra and Dedeman Aleppo.
Gaziantep is the largest industrial city of southeastern Turkey. The opening of Dedeman Gaziantep Hotel & Convention Center will be home of businessman in Gaziantep thanks to its great hospitality and location which is next to the Gaziantep industrial zone.
Dedeman Hotels & Resorts International South Region Manager Tayfun Döskaya said at the press conference that the Dedeman Gaziantep Hotel & Convention Center, which made its soft opening in April 2009, reached 35% revPAR in April and 58% in May.
A total of €33 million is invested for the hotel and convention center. It has 30,000sqm covered area. The hotel employs 152 personnel.
After the ribbon cutting by Turkish PM, Culture and Tourism Minister and Mr. Murat Dedeman, a Gala Dinner organized at the hotel’s ballroom. Guests enjoyed food accompanied by music from Group Turkuaz and Funda Arar.
Last Updated ( Tuesday, 02 June 2009 )
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Syrian hospitality
There’s an element of theater to the moment of arrival, whether the coffee is served from a brass pitcher or plastic thermos, in the receiving room of a village home, outside a Bedouin tent or in front of a mechanic’s garage.
It was nearly dark and we were two hours from Damascus with no place to stay. Someone suggested there might be a hotel in the next town, so we hired a taxi for the 10-kilometer trip to Suweida, also known as Jabal Druze, in southwest Syria.
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Farid, our driver, inquired first at the athletic dormitory, but it was not taking guests. After stopping once or twice to ask for directions, he eventually located our hotel and then waited, despite the late hour, for the owner to arrive and personally assure him that he could accommodate us. “Otherwise,” Farid told me, “you would have spent the night with us.” The fare from Shahba to Suweida was TL 11.
Earlier that day, on the way to Shahba, we had met Louay, a high school philosophy teacher who invited us home for lunch and gave us a tour of the family farm and the Roman-era ruins scattered throughout the village. A few days later, Abu Kifah, a school superintendent, invited us to lunch in his village near Aleppo, in the north. He introduced us to the village elders, with whom we talked of religion and politics into the evening, and we slowly took our leave at noon the following day after a long breakfast with the family. Invitations in Syria are frequent, and one is tempted to conclude there is a moral obligation to accept others' generosity. Good hosts simply make you feel it is more blessed to receive than to give. In Raqqa, on the Euphrates River, we entered a shop to top up our phones. “Where are you staying?” a friend of the shop-owner asked. “Bring your bags and stay with us! . . . Come for dinner at the very least.” One never grows accustomed to such hospitality. It is humbling, as there is no way to match it. Our hosts graciously accepted our modest offerings of candy or souvenirs from home. It's not the gift that counts but the act of acknowledging -- in a material, ritual way -- the host's generosity.
Many visits, even those that last just minutes, begin with a ritual sip of Arab coffee. In distinction from Syria's version of Turkish coffee which is flavored with sugar and cardamom, Arab coffee is unsweetened and drunk -- in a single gulp -- from a cup similar in shape and size to a Chinese tea cup. Guest and host drink one after the other from the same cup. Like the greetings as-salamu ‘alaykum (peace be upon you) or ahlan wa sahlan (welcome, you are among kinsfolk), this ritual implies mutual trust and respect. As he pours the coffee, the host taps the pitcher against the rim of the cup, a subtle, macho flourish marking the ceremony with which he receives his guests. There's an element of theater to this moment of arrival, whether the coffee is served from a brass pitcher or plastic thermos, in the receiving room of a village home, outside a Bedouin tent or in front of a mechanic's garage.
Syrians are clearly proud of their culinary and agricultural traditions. Farmers in southwest Syria forego expensive irrigation and call their technique “Baal farming,” a reference to the Canaanite storm god. The rich volcanic soil, they explain, absorbs enough moisture over the winter to grow watermelon, squash and cucumbers without irrigation in the summer months. Suweida is also known for its fruit orchards and viticulture, and the grape motif appears abundantly in the ancient architecture. Not only do the Druze make and sell wine, but many homes are decorated with plaques displaying the 99 names of God as a cluster of grapes. Homs, with its large Christian community, is a wine-making area to the north of Damascus. They also make ‘araq (similar to rakı) which receives its special flavor from the local variety of anise seed. “Kurdish olives,” from the Kurdish region north of Aleppo, are said to be the best olives in Syria. Syrian sweets are justifiably famous, and pastry vendors eagerly share a taste of traditional recipes. In towns less frequented by tourists, they often refuse payment.
Syria, like Turkey, has long served as a crossroads where civilizations meet in commerce and warfare, in religion and the arts. According to artist and Professor Elias Zayat, the country's diverse cultures co-exist and interact within the unifying framework of “Syrian civilization.” “It's in people's blood, regardless of religion,” exclaims Zayat, who last year illustrated his point by organizing an exhibit of medieval Syrian manuscripts -- Muslim and Christian -- at the National Museum in Damascus. Zayat also cites the Persian, Parthian and Roman influences in the art of Palmyra as an example of the rich synthesis that has distinguished Syrian civilization across the centuries.
“This diversity is Syria's treasure,” says Nazir Ismail, another leading artist. Noting that the Great Mosque in Damascus was first a temple of Hadad and then a church before becoming a mosque in the eighth century, he adds, “You feel this richness because, for example, John the Baptist is buried there and people know and accept this.” Traveling around the country, one often hears that Syria is a country where people of different religions respect one another, where they are happy to say, “We live together peacefully.”
Damascus is a short, though pricey, flight from Istanbul. The bus takes 24 hours and costs TL 75. Another option is to fly to Antakya and continue by bus to Aleppo (three hours) or to Damascus (seven hours).
Given the low-cost of travel within Syria and the country's proximity to Europe, the number of tourists is bound to rise. For the time-being, however, Syria is the perfect destination for budget travelers looking for unconventional destinations. The most popular month for European tourists is April. Arabs from the Gulf States crowd Damascus during the summer months. The dry heat makes for a nice break from the humidity of cities like Dubai and Istanbul in August.
You need not speak Arabic to get around, but knowledge of a few words will make the trip more fun. Just smile and say hello, as-salamu ‘alaykum. Take public transportation, and rely on locals to point you in the right direction. Whether you travel alone or in a group, whether you prefer mountains, desert, souks or castles, the best thing about Syria is the human encounters.
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Russian defaulter is a threat to the nation
By John Dizard
Published: May 31 2009 16:12 | Last updated: May 31 2009 16:12
I’ve been asked by a number of FT readers if I could follow up on the ultimate outcome of a default on a bond issued by a Russian company called FLC, the leasing subsidiary of OAO United Aircraft, the Russian government’s holding company for the aircraft industry. FLC is more than 80 per cent directly and indirectly state-owned. It wasn’t just any interest payment; it was the first payment due (in December) on $250m (£155m, €177m) of bonds that had been issued in June 2008, which is pretty brazen.
I thought that eventually the Russian state would make good on the FLC bonds, not out of sentimental regard for bond portfolio managers, but out of informed self interest. So far, though, neither the parent company nor any other state entity has offered any payment or workout plan.
OAO United Aircraft (UAC), the parent, has offered two less than satisfying defences against international creditors who have shown up at its door. First, the company says, the “comfort letter” offered by UAC at the time of the issue was not a hard-and-fast guarantee. Second, the company was just as shocked as everyone else by what it alleges was a fraud committed by the management of the subsidiary, and is earnestly, thoroughly, investigating what happened.
Let’s accept, for the sake of discussion, that both points are true. The language of the comfort letter is pretty high flown, but ultimately vague. It satisfied Moody’s enough to award FLC a Ba3 rating, but then I think we all know about the value of rating agencies’ opinions by now. And, although we should presume the innocence of the subsidiary’s former management before there are any criminal convictions, it does not stretch the imagination to think there may be the occasional rotten apple in a Russian company.
Even so, the Russian state may find that stiffing the creditors of a state-related company might be very much more expensive than paying them off. Few, if any, of the investors who bought the FLC bonds did so because Moody’s said they were ratable, or because they thought the accounts were reliable and transparent. The investors did believe that the Russian state would want its controlled companies to continue to have access to the international capital markets on non-usurious terms.
Let’s say the Russian state decides to let the FLC/UAC investors take the hit. What could be the cost to the country? To begin with, the Russian Federation itself can continue to have access to the international capital markets on the same terms as it has now. The same would be true of the central bank.
However, if the FLC default is left to fester, there will very likely be a significant cost to those state-controlled companies whose international borrowing does not have a direct, unambiguous guarantee from the Russian state. The smallest effect would be on relatively independent giants such as Gazprom, or…well, there really isn’t any other company similar to Gazprom – if it is a company, rather than a sort of country within a country.
Based on my discussions with bond people, I think the greatest cost will be borne by the UAC itself, of course. Its credibility as a standalone borrower will be in tatters. That is not an outcome to be wished by the state. After all, one of the most promising sectors for Russian manufacturing development would be the aircraft industry, given its decades of expensively developed skills and capital. As I said in March, it is hard to export planes and parts when you’re being chased by bailiffs or borrowing from the industrial equivalents of pawnshops.
Then there are all those holding companies the Russian state seems to like to assemble, or the unguaranteed state- controlled banks. An experienced bond manager I spoke to has this to say: “Russia has about $200bn of total quasi-sovereign debt that would be affected to a greater or lesser extent. That would range from a few basis points for the most creditworthy standalone entities to an inability to tap international capital markets at any level for entities with opaque balance sheets whose borrowing could only be justified by state support.
“This year, there is about $3bn-5bn of new issuance that is coming from Russian state companies, a tiny fraction of what was done last year, let alone in 2007. Part of that decline is clearly due to the FLC default. They got away with the defaults in 1998 by arguing that that was a once-in-a-lifetime situation, but they can’t do that twice. $200bn is a lot of debt to refinance.”
The Darwinian sorting of credits in the markets is not going to end soon, particularly given the corporate defaults that are coming in the next couple of years. If the Russian state wants to be an international industrial power, rather than a gradually depleting energy exporter with an ageing, shrinking and underemployed population, it would do well to exhibit less opportunism and show better faith.
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IMF tells Russia to check extent of bad loans
By Charles Clover in Moscow
Published: June 2 2009 03:00 | Last updated: June 2 2009 03:00
The International Monetary Fund yesterday called on Russia's central bank to start stress testing domestic banks as loan delinquencies rise.
"The CBR does not have a full picture of the situation in the banking system, and plans for how to ensure that the banks are adequately capitalised still need to be formalised," Poul Thomsen, deputy director of the IMF's European department, warned at a press conference in Moscow.
His remarks followed the fund's annual mission to Russia, a 10-day effort to gather information and provide recommendations to the government. It is the first such mission since the global financial crisis hit Russia last August.
Mr Thomsen forecast that as the result of tighter monetary policy, non-performing loans on the balance sheets of Russian banks were set to rise sharply this year. He also expressed worries that Russia was stimulating its economy too much by running a large budget deficit this year, and projected Russia's gross domestic product would fall by 6.5 per cent in 2009.
Russia's central bank estimates that the percentage of loan delinquencies is 3.7 per cent of total banking assets as of the end of March, but experts say this may understate the problem, as bad loans are calculated in Russia differently than in most countries.
The 2009 budget has set aside Rs530bn ($16bn) for recapitalising banks, which the central bank says will be sufficient if bad loans rise to 10 per cent of the bank's balance sheets.
But Mr Thomsen advised caution, saying no one knows the full scale of the problem. "I don't think it is possible to make a reliable forecast before one has undertaken the kind of analysis we are proposing," he said.
"We want the authorities to knock on doors of the banks, rather than the other way around - waiting until the banks come knocking because they are in trouble."
He praised the government for a far-sighted policy during the current decade of saving oil revenues rather than spending them, which has given Russia
the third largest foreign currency reserves in the world.
"Thanks to this policy, Russia has room for expansionary monetary and fiscal policy to combat the crisis," he said. But he said that the "relaxation of fiscal policy" which the government plans in order to stimulate the economy was too high.
He put total stimulus policies at 10 per cent of GDP, half owing to lower than projected revenues from oil, and half owing to deliberate policies. Fund officials said such a quid pro quo was against Fund policies, but seemed hopeful the Russian credit would go ahead.
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Gazprom escalates Turkmen gas price dispute
By Isabel Gorst in Moscow
Published: June 2 2009 03:00 | Last updated: June 2 2009 03:00
Gazprom, Russia’s state-controlled energy group, has told Turkmenistan to reduce its gas export price after saying it did not need central Asian gas.
The statement marks an escalation in a dispute that has prompted Turkmenistan to intensify its efforts to find other export routes for its gas.
Gazprom offered last year to pay central Asian gas suppliers high prices to outbid rival buyers in China and Europe. But Valery Golubev, deputy chairman of Gazprom, has now said it would be unprofitable to sell highly priced Turkmen gas in Europe and Ukraine where energy demand has fallen as the economic recession has taken hold.
“Today there is nowhere to sell your gas at your price. Either review the price or the volume,” he said.
Relations between Gazprom and Turkmenistan soured in April after an explosion on a pipeline – carrying central Asian gas to Russia.
Turkmenistan accused Gazprom of triggering the blast by reducing its intake of gas without warning and threatened to sue the group for damages.
Gazprom has cut gas production by more than 20 per cent this year as demand slumped in Europe and Ukraine. It is determined that central Asian producers should share the pain of lost revenues.
Tachberdy Tagiev, the deputy prime minister of Turkmenistan, is in Beijing this week to discuss possible Chinese financing for developing the huge South Iolotan gas field that could feed a new pipeline to China.
Gazprom has urged Turkmenistan to dedicate South Iolotan gas to a planned pipeline running across Kazakhstan to Russia.
The European Union, meanwhile, has offered to finance construction of a gas export pipeline from Turkmenistan across the Caspian Sea in exchange for access to South Iolotan.
Turkmenistan invited RWE, the German energy company, last month to develop gas reserves in the Caspian Sea and seek new ways to deliver gas to Europe.
RWE is a member of the Nabucco consortium planning to build a new pipeline to bring Caspian and central Asian gas west across the Caucasus and Turkey, reducing European reliance on Russian gas.
Ukraine said on Monday it would meet a June 7 deadline to pay for Russian gas imports supplied in May. Gazprom earlier warned that Naftogaz, Ukraine’s state gas company, was insolvent.
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Toxic assets ‘bridge too far’
By Krishna Guha in Washington
Published: June 1 2009 23:37 | Last updated: June 1 2009 23:37
The Federal Reserve should not be involved in financing toxic assets that date from the bubble era, Charles Plosser, president of the Philadelphia Fed, has told the Financial Times.
“I think it is a bridge too far,” said Mr Plosser, arguing that such proposed Fed loans would expose the US central bank to credit risk and tie up a sizeable chunk of its balance sheet in long- term assets that would be hard to price and liquidate.
The Fed agreed to consider providing investors with loans to buy these assets – including bubble-era subprime securities – as part of a wider effort to clean up bank balance sheets involving the Treasury and the Federal Deposit Insurance Corporation.
His comments challenge Fed chairman Ben Bernanke’s view that the Fed can help to restart trading in these assets without unduly limiting its balance sheet flexibility or taking on too much credit risk, once haircuts on loans and Treasury risk capital are taken into account.
Mr Plosser is an independent-minded member of the Federal Open Market Committee but his doubts about the so-called “legacy assets” programme are shared by many others.
“I have reservations about the Fed intervening in private credit markets as a matter of principle. I think it confuses monetary and fiscal policy,” Mr Plosser said.
He said interventions in private credit markets involved picking winners, would be difficult to unwind, risked compromising the Fed’s independence and could delay the market’s self-healing.
By contrast, Mr Plosser is less concerned than some of his colleagues about buying government debt. “I do not think that buying Treasuries is more inflationary than buying mortgage-backed securities,” he said, while operating in the Treasury market carried fewer costs.
He said the Fed needed to focus on the medium to longer term rather than the short term, and ensure it was in a position to raise rates when it needed to in order to prevent excessive inflation.
Mr Plosser cares about the overall size of the Fed balance sheet but he said facilities involving short-term loans should be allowed to fluctuate, at least in the short term, based on market demand without the Fed feeling the need to offset them to maintain a target balance sheet size.
“We still have $500bn to $600bn to go in planned asset purchases, so I am not too worried,” he said.
Mr Plosser is much less confident than the Fed leadership that a large projected gap between demand and supply will offer strong protection against post-crisis inflation. He said this was the mistake made in the 1970s.
Real-time estimates of spare capacity were unreliable, he said. “We have had a tremendous shock to the financial sector and to the housing sector. It could lower the level of potential output even if it does not change the potential growth rate very much.”
The fact that half the market seemed to fear excess inflation and the other half deflation suggested inflation expectations might not be as well anchored as the Fed would like, said Mr Plosser.
He said the Fed had to continuously reinforce its credibility by showing it would do what was needed to keep inflation on target.
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American Idol Sillerman Dealt Elvis Default Heartbreak in Vegas
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By Anthony Effinger and Daniel Taub
June 1 (Bloomberg) -- Media baron Robert F.X. Sillerman had a great run until he tried to break into real estate -- with Elvis Presley as his partner.
The 61-year-old Sillerman -- who works out six days a week, offsetting an appetite for ice cream and cookies -- made a fortune in radio, buying up stations nationwide and selling them en masse for $2.1 billion in 1998. He then rolled up concert venues and talent agencies for the likes of Metallica and basketball star Michael Jordan and sold that business for $4 billion in 2000. A year later, he co-produced the Broadway adaptation of his friend Mel Brooks’s movie “The Producers.”
Sillerman made what may have been his best deal in 2005, when he bought television’s American Idol, the talent show that has franchises around the world and tops U.S. TV ratings.
Then, in 2007, Sillerman rolled the dice on real estate -- at exactly the wrong time. He started a company called FX Real Estate and Entertainment Inc. and took over 18 acres (7 hectares) on the Las Vegas Strip. He borrowed $475 million through Zurich-based Credit Suisse Group AG to pay for the property and start developing a resort with an Elvis theme.
Sillerman owns the commercial rights to Elvis -- and Muhammad Ali -- through another company, New York-based CKX Inc., which also owns Idol.
The FX investment turned out to be a blunder by a dealmaker who, according to business partners and friends, rarely makes them. “Bob always sees the big picture and knows how to maximize things,” Brooks, 82, says. “He’s one of the brightest people I know.”
Track Record
Sillerman has built and sold five public companies, making money for investors -- and himself -- each time.
One of those sales prompted a class-action lawsuit in 1998 from an investor who accused him of a conflict of interest when he executed a stock swap between two companies he controlled. He settled the case. In June 2007, he proposed to take American Idol parent CKX private, offering CKX holders $1.3 billion in cash, plus shares of New York-based FX Real Estate, again drawing a shareholder suit.
That deal died along with Sillerman’s real estate dreams. The Vegas project is in default. Plans for a new hotel and convention center at Graceland, Elvis’s Tennessee home, are on hold. FX Real Estate fell to pennies a share in April from its February 2008 peak of $7.88 and was delisted from the Nasdaq stock exchange.
‘Golden Touch’
A separate real estate venture -- construction of a resort on the Caribbean island of Anguilla, featuring residences costing as much as $12 million and a hotel with personal butlers -- also stands unfinished and in default.
“Some people are mad at Bob because he had the golden touch,” says William Huff, founder of W.R. Huff Asset Management Co. in Morristown, New Jersey, the largest investor in FX Real Estate after Sillerman himself. “I think there was a naive perception of infallibility,” Huff says. “Bob is not infallible.”
Huff says he hasn’t given up on the Vegas project. “There are a lot of people who are more screwed than Bob,” Huff, 59, says. “Bob never broke ground, which is phenomenal. Once you have the steel up, you’re toast.”
Priscilla Presley, Elvis’s wife from 1967 to 1973, says the economy, not Sillerman, is to blame. “I have a lot of confidence in Bob,” she says. “When the timing is right, I’m sure all this will come back on the boards.”
Sillerman says he got into something he didn’t really understand. “I’m not very knowledgeable about real estate,” he says in an interview at CKX’s 16th-floor offices on Madison Avenue in New York, where the walls are clad in maple and brushed metal. “I think I’ve demonstrated that to the world.”
Practical Joker
Sillerman keeps what’s left of his gray hair close cut and sports a mustache. A Lance Armstrong “LiveStrong” cancer wristband -- Sillerman survived tongue cancer in 2001 -- peeks from under French cuffs and the sleeve of a blue suit coat. He wears no tie.
Sillerman has trouble being serious even in serious times. He loves practical jokes and once paid a bellhop in Paris to let him into a friend’s room so he could jump out and scare her when she arrived. Yet these days he spends much of his time grimly negotiating with the banks that loaned his company $475 million for the Vegas project.
There are signs that he’s stretched. In March 2008, he took out a $23 million loan from Deutsche Bank AG on his five-story modernist town house on the Upper East Side of Manhattan, according to property records. The house has a rooftop lap pool and a bullet-proof glass atrium installed by a previous owner, S.I. Newhouse Jr., head of Conde Nast Publications Inc., according to a 1994 New York Times article about the house.
$29 Million
Sillerman says the loan was for estate planning purposes and declines to say more.
He disclosed another loan from Deutsche Bank, for $29 million, in an April filing with the U.S. Securities and Exchange Commission. It’s backed by his 29 percent stake in CKX. If CKX shares fall to $2.50, according to the filing, the loan defaults. CKX closed at $6.97 on Friday, up 90 percent in 2009 after a 64 percent slide in 2008. This loan, Sillerman says, was for investment purposes.
CKX is good collateral. Sillerman is chairman and chief executive officer of the company, which he formed in 2004 to buy up entertainment properties. It acquired Simon Fuller’s 19 Entertainment Ltd., the company that owns American Idol, in 2005, for $161 million plus 1.9 million shares of CKX. The show is based on a production called “Pop Idol” that Fuller, 49, launched in Britain in 2001. Now, there are Idol clones in 100 countries.
Top Show
The show, which auditions would-be pop-music stars, features a panel of judges that screens out contestants in the early rounds. Viewers vote by telephone and text message for winners in later segments. American Idol has been the most- watched program in the high-consuming 18-to-49 age group in the U.S. for the past six years.
“It’s the only show that can consistently bring in 24 or 25 million viewers in a telecast,” says Brad Adgate, senior vice president at Horizon Media Inc., a New York-based company that buys slots for advertisers.
That audience means News Corp.’s Fox network can charge advertisers, which include Apple Inc.,AT&T Inc. and Coca-Cola Co., $650,000 for a 30-second commercial.
Idol finalists have sold more than 42 million albums and 47 million single-song downloads, according to Billboard magazine. The fourth album by the winner in the show’s first season, Kelly Clarkson, debuted at No. 1 on the Billboard 200 this March and sold 255,000 copies in its first week.
Allen Wins
Kris Allen, a 23-year-old college student from Arkansas, was crowned this year’s winner, with almost 100 million votes cast after his final performance in May.
Sillerman profits from American Idol through his stake in CKX. Revenue from Idol advertising, merchandise sales and touring by its performers rose 15 percent to $96 million in 2008 and accounted for about a third of CKX’s $288.1 million of total revenue.
As CEO of CKX, Sillerman got paid $1.96 million in 2008, including a $1.15 million bonus, a $24,000 car allowance and other items. He made $773,230 in 2007, with no bonus, according to company filings.
Fuller runs the CKX subsidiary that produces Idol. He got a $1.49 million bonus on top of a $1.04 million salary in 2008. He also received 200,000 shares of CKX stock. Sillerman got no new shares in 2008.
Hands Off
Until this year’s finale, Sillerman had never been to a taping of Idol, Fuller says. “He trusts it’s being run smoothly,” Fuller says. “He doesn’t meddle with things that aren’t broken.”
Sillerman says his business is brands, like Elvis and American Idol. The Vegas real estate project is just a vehicle for Elvis. Similarly, CKX says it will launch a consumer product based on Ali, whose name and image Sillerman bought from the Ali family for $50 million in 2006. Sillerman won’t say what the product is. Earlier plans to sell Ali-branded shoes and apparel at retailer Steve & Barry’s LLC collapsed when the chain went bankrupt.
Paul Kanavos, a partner in the Vegas and Anguilla projects, says that if anyone can recover from the real estate wreck, it’s Sillerman. “He’s the calmest, coolest businessman I’ve ever met,” Kanavos, 52, says.
Though his net worth has fallen along with CKX and FX Real Estate stock, Sillerman still lives large. He and his wife, Laura -- a copywriter, author and poet -- split their time between the town house in Manhattan and a beachside spread in Southampton, New York. They shuttle back and forth by helicopter and take longer trips by private jet.
Bobecue Blast
Until 2006, the Sillermans threw an annual picnic in Southampton known as the Bobecue, featuring bands, booze and hundreds of partiers. Sillerman says they stopped the tradition after he decided the guest list had gotten out of hand. He asked a stranger how he knew about the party. The guest said he had heard about it from -- literally -- a friend of a friend of the brother of a friend of Sillerman’s.
“It got to be sort of silly,” Sillerman says.
Silly can be a good thing in Sillerman’s world. He once dressed up as a Turkish diplomat on the Orient Express between Paris and Venice, donning military medals and a silver turban he borrowed from his wife and speaking only through his “interpreter” -- his friend Bruce “Cousin Brucie” Morrow, a rock music disc jockey for New York’s WABC radio in the 1960s and 1970s.
Syndicating Lassie
Morrow, 71, has worked and partied with Sillerman since 1978, when the pair began buying radio stations together.
Entertainment is in Sillerman’s blood. His father, Michael, founded the New York-based Keystone Radio Network and was the man who syndicated Lassie, the black-and-white television show starring a bighearted collie dog.
Sillerman inherited the “X” in his name from his father. Family code dictated that Sillerman not learn what the initial stood for until his 18th birthday and that he not disclose the name to anyone except his future spouse. Even Morrow doesn’t know.
Bob and his brother, Michael, grew up in the affluent Riverdale neighborhood in the Bronx. Sillerman studied political science at Brandeis University in Waltham, Massachusetts. While a student, he launched Youth Market Consultants, which advised companies on selling to teenagers.
Underwear Ambush
Sillerman met Morrow in New York a few years later. The occasion: Morrow and his wife had stripped to their underwear and burst into a friend’s apartment to show off their new tans from a trip to Jamaica. They didn’t know the Sillermans would be there, Morrow says.
The two became friends and went into business together, hiring a small plane to fly them from town to town as they bought radio stations. Morrow was astonished at the boldness of Sillerman’s dealmaking. “You and I buy a couple loaves of bread,” Morrow says. “Bob buys the bakery.”
Sillerman and Morrow sold their stations to Bell Broadcasting for $50 million in 1985.
In 1988, Sillerman bought New York-based radio station operator Metropolitan Broadcasting from investment bank Morgan Stanley. He took a bank loan to pay Morgan Stanley for its equity and then hived off one of Metropolitan’s four stations and sold it to another company he controlled, Command Communications, using the proceeds to pay off the loan, according to a 1989 Wall Street Journal story on the transaction.
Huff Irked
FX Real Estate investor Huff held Metropolitan bonds, and Sillerman’s move made them riskier. “That did not sit well with me,” Huff says, and he sued.
Sillerman invited Huff to his office to talk. They eventually settled the matter. Huff says he was so impressed with how Sillerman handled the purchase that he joined Sillerman’s next deal and almost every one thereafter.
Sillerman sold the remaining Metropolitan stations to Westinghouse Broadcasting Co. for $400 million in 1989. Three years later, he started another radio chain, SFX Broadcasting Inc., with partner Steve Hicks, brother of Tom Hicks, the founder of Dallas-based buyout firm Hicks, Muse, Tate & Furst Inc., now called HM Capital Partners LLC.
SFX went public in 1993, a perfect time for Sillerman to be in the radio business. A federal law passed in February 1996 lifted the limit on the number of stations a radio broadcaster could own nationally. Broadcasters amassed stations, boosting ad revenue by reaching wider audiences and cutting costs by combining sales forces.
Buying Billy Joel
In 1997, Sillerman agreed to sell SFX Broadcasting to Capstar Broadcasting Corp., a company formed by Hicks Muse and Steve Hicks, for $2.1 billion in cash and assumed debt.
Not content to roll up just one industry, Sillerman in 1995 started a separate public company called Marquee Group Inc. that bought up agencies that represented athletes and musicians. One of its purchases was QBQ Entertainment Inc., a talent agency whose clients included singer and piano player Billy Joel, heavy metal band Metallica and the late comedian Rodney Dangerfield.
“We spent 30 minutes out of a 32-minute meeting talking about Rodney Dangerfield,” QBQ founder Dennis Arfa says. “Two days later, I got a proposal.”
Sillerman bought QBQ for $3.1 million in cash and payments of $1.6 million a year for eight years, according to regulatory filings. Arfa declined to discuss terms of the deal.
Dead’s Promoter
Marquee was one of two companies Sillerman ran that bought up entertainment properties. The other was SFX Entertainment Inc., a subsidiary of SFX Broadcasting that was not part of the deal with Capstar. The company bought concert venues and regional promoters, including Bill Graham Presents, the San Francisco promoter of the Grateful Dead, for which Sillerman paid $65 million in 1998. From 1997 to 2000, SFX Entertainment spent about $1.5 billion on acquisitions.
Sillerman made deals at high velocity. On one day alone, May 4, 1998, SFX announced five. The day’s biggest transaction was the purchase, for $100 million, of Falk Associates Management Enterprises, a company owned by basketball agent David Falk, who represented the Chicago Bulls’ Michael Jordan and the New York Knicks’ Patrick Ewing.
Falk says Sillerman initially wanted him to join Marquee. Falk insisted on being part of the more prestigious SFX. “It was like asking if Rolls-Royce would like to join the Yugo group,” Falk, 58, says.
Lawsuit
On that same May 4, Marquee disclosed that SFX had made a bid for it, too. The price, disclosed two months later, was $100 million in SFX stock. At the time, Sillerman was chairman of both companies and owned 9 percent of Marquee’s shares.
A Marquee shareholder named Herbert Behrens led a class- action lawsuit against Sillerman, Marquee and SFX, which read, in part, “The individual defendants have clear and material conflicts of interest and are acting to better the interests of SFX and themselves at the expense of Marquee’s public stockholders.” The suit wasn’t settled until September 2000, when SFX agreed to pay Marquee shareholders an additional $2.9 million without admitting wrongdoing.
By that time, Sillerman was one deal down the road. The month before the settlement, he sold SFX Entertainment to Clear Channel Communications Inc., the radio and billboard company, for $4 billion.
Sillerman’s mark on the concert business remains. Clear Channel spun off SFX in 2005 as Live Nation Inc., now the world’s largest concert promoter.
Cancer Shock
Sillerman’s seemingly charmed life took a blow in 2001. While shaving one morning, he felt a lump in his neck. The diagnosis was cancer in the base of his tongue, a surprise since he’d never smoked cigarettes -- or anything else, he says. He underwent chemotherapy and radiation treatments.
Around the same time, he helped his friend Mel Brooks out of a bind. Brooks was working on a theater adaptation of “The Producers,” a 1968 comedy about a pair of bumbling swindlers. When one of the backers, DreamWorks SKG co-founder David Geffen, pulled out, Sillerman jumped in, forming a partnership with Brooks, and becoming one of four producer groups.
“I have no idea how business really works,” Brooks says. “I made him one of the producers to watch my back.” The show ran for 2,502 performances and won a record-breaking 12 Tony Awards. Sillerman later produced Brooks’s Broadway adaptation of his movie “Young Frankenstein.”
Sillerman’s next big deal unfolded in 2004, when he bought Sports Entertainment Enterprises Inc., a defunct owner of a golf course in Las Vegas. He used it as a vehicle to purchase 85 percent of Elvis Presley Enterprises Inc., a company controlled by Elvis’s daughter, Lisa Marie.
Graceland Upgrade
Sillerman paid $50.1 million in cash, assumed $25.1 million of debt and gave Lisa Marie a batch of stock. A 90-year lease on Graceland and the rights to its name were part of the deal. Elvis lived on the 13.5-acre Memphis estate from 1957 until his death in 1977. CKX has purchased an additional 31 acres around Graceland to build a hotel and convention center.
Those plans are on hold.
Sillerman also agreed to pay Priscilla Presley $6.5 million for commercial rights to the Presley name and to pay her a consulting fee of $560,000 a year for 10 years.
Four months later, Sports Entertainment bought 19 Entertainment. Sillerman changed the name to CKX -- for content is king, plus that ubiquitous X. In April 2006, CKX bought an 80 percent interest in the name and likeness of Muhammad Ali.
Anguillan Dreams
While assembling the pieces of CKX, Sillerman made his fateful move into real estate. The ultra-swank hotel in Anguilla, a self-governing U.K. territory about half the size of Washington, D.C., was his first project. He’d been vacationing there for years and had gotten to know local officials. Around 2003, they asked him to build a golf course on the island.
Sillerman and Kanavos, his partner, then decided to also build a resort. Kanavos is the founder of closely held, New York-based Flag Luxury Properties LLC, in which Sillerman owns a 30 percent stake. Flag, which led the development, took out a $180 million loan from investors arranged by Credit Suisse.
Sillerman’s Elvis project in Vegas got rolling in mid-2007. That June, Sillerman announced a series of transactions through which he and Fuller would take CKX private, buying out other shareholders with cash and FX stock.
Andrew Baker, then an analyst at Cathay Financial Inc., said at the time that the price was too low. American Idol was red-hot, and the Vegas project was just a plan.
Another Lawsuit
As plans for the purchase went forward, in December 2007 CKX shareholder Richard Nierenberg sued, charging, “The purpose of the merger is to enable Sillerman and his associates to acquire the company and its valuable assets for their own benefit at the expense of CKX’s public shareholders.”
Sillerman says the suit has no merit. “Every transaction in America gets challenged by shareholder lawsuits,” he says.
Sillerman says one reason he wanted to take CKX private is that management had its eye on properties whose owners didn’t want to sell to a public company.
The complaint has yet to be resolved, according to CKX filings with regulators. Nierenberg’s lawyer, Joseph Rosenthal, didn’t return phone calls.
Sillerman and Fuller intended to pay for the shares with a $700 million loan, according to regulatory filings. Then the credit crisis hit, and banks stopped lending.
Defaulted in Vegas
By September 2008, Sillerman was in default on the $475 million Credit Suisse loan because the value of the Strip property had plunged far enough to violate the loan’s covenants. Sillerman’s lenders seized cash collateral in the company’s reserve accounts in January and applied $21 million of that to the loan.
Construction in Anguilla stopped, too. On May 21, Credit Suisse asked for a judgment against Sillerman in New York State Supreme Court in Manhattan for allegedly failing to pay a $21.4 million personal guarantee he made in the event the Anguilla loan defaulted, according to documents filed by Credit Suisse.
Sillerman declined to comment on the matter.
Throughout all of the setbacks, Sillerman has remained preternaturally calm, Kanavos says. “There hasn’t been a week in the last 12 months when we haven’t had bad news,” Kanavos said in April. And not once has Sillerman panicked or even raised his voice, he says.
Sillerman says his battle with cancer puts his real estate flameout in perspective. “Not everything has worked out in business recently, but I’ve got no complaints,” he says. “You only get one chance at this. I’ve been luckier than anyone I know.”
None of his many friends in the entertainment industry will be surprised if Bob Sillerman launches a new public company sometime soon -- if only to put the failure of the last one behind him.
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