Islamic Finance: Comparison of Sukuk with

conventional Bond – An Empirical Study

Under the guidance of :

Prof. N. V. Rao

By:

• Abhishek Kekre 9204

• Linesh Kothari 9146
• Prashant Sikdar 9429
 Abstract

Islamic Banking is a system of banking activity which is consistent with

Islamic law of Sharia, the basic principle of which is sharing of profit and

loss and the prohibition of interest. This unique style of ethical banking is

growing rapidly and today Islamic banking and finance has become a

US$500 Billion with a yearly growth rate of 15 percent.

Sukuk often termed Islamic Bond is a form of Shari’ah-compliant

securitization that has been elevated to become a viable long-term

funding instrument for many of the Gulf's corporations. This meteoric rise

from being an alternative proposition to a mainstream reality is being

noticed by the rest of the world as international financial centers such as

London, Tokyo and Hong Kong are altering their laws to accommodate

sukuk and Islamic finance.

The general perception about Islamic instruments is that being ethical

financial instruments, they earn lesser portfolio returns than market

portfolio. The questions that one needs to ask are –

- Do Sukuk provide the expected benefits to investors and issuers?

- Is the secondary market behavior of Sukuk and conventional bonds

so similar that there is limited value in issuing Sukuk as opposed to

conventional bonds?

We obtained 2006 onwards data for Dow Jones Sukuk index and Dow

Jones Corporate bond index. The two indexes possess similar

compositions and structure. For both the data sets, we calculated

average weekly returns from daily returns. We then calculated percent

change in returns every week and ran ANOVA to study if the difference

between the returns is statistically significant.

From being little more than novelty investments just a few years ago,

Islamic bonds are fast becoming firm favorites for investors. The fact that

this bond would comply with Islamic edicts would enhance the

attractiveness of this instrument. Another one is a unique hybrid bond, a

“dual currency” bond. This bond offers a periodic profit-sharing payment

in local currency of the country where the project company is located to

the designated beneficiary of the Sukuk bond investor back in his or her

home country. In addition, the final payment will be paid back in dollars to

the investor upon the maturity of the instrument. This unique debt

instrument will satisfy the needs of all stakeholders. This instrument will

also appeal to wealthy Muslim investors, as this instrument would be

Sharia-compliant. It is hoped that policy makers, not only in the

predominantly Muslim developing countries such as Pakistan, Bangladesh,

Malaysia, and Indonesia, but also other emerging economies seriously

consider this financing option for infrastructure projects in their countries.

We have also shed some light on recent Dubai crisis with a focus on

Islamic finance instruments. This makes our study more interesting and

relevant in the current context.

History of Islamic Banking

During medieval times (1,000 – 1,500 AD), Middle Eastern tradesmen

would engage in financial transactions on the basis of Sharia’a, which

incidentally was guided by the same principles as their European

counterparts at the time. These instruments without interest which

worked on a profit- and loss-sharing basis catered for the financing of

trade and other enterprises.

Although it was not until the mid 1980s that Islamic finance started to

grow exponentially, the first financial company in recent history based on

Sharia’a principles was the Mit Ghamr savings project in Egypt. From a

handful of banks in the late 1970s, including the Islamic Development

Bank and Dubai Islamic Bank, the Islamic banking industry has grown

significantly. Since the late 1990s the industry has been growing at a rate

of 10 – 15% per year.

Islamic financial products

Islamic financial products work on the basis that the bank and the

customer share the risk of investments on agreed terms. Profits are

distributed based on negotiated terms; risk is distributed based on the

share of the ownership. In addition, Islamic financial products typically

have an underlying asset or enterprise that requires financing.

What is Islamic Banking?

Islamic Banking is a system of banking activity which is consistent with

Islamic law of Sharia, which prohibits the payment or acceptance of

interest fee for lending and acceptance of money. Islamic banking has the

same purpose as conventional banking except that it operates in

accordance with the rules of Shariah. The basic principle of Islamic

banking is the sharing of profit and loss and the prohibition of (interest).

Islamic banking is restricted to Islamic acceptable transactions and hence

ethical investing is the only acceptable form of investment, and moral

purchasing is encouraged. In theory, Islamic banking is an example of full-

reserve banking, with banks achieving a 100% reserve ratio.

In its 2007 report Socially Responsible Investments: Shariah-governed

investing, Celent outlines the high level guide to the principles of Shariah:

• no interest (riba) may be charged or paid; one may not benefit from

another’s uncertainty (gharar) – in investment terms this includes

the trading of risk or sale of something not yet obtained;

• where income is involuntarily received, the investment or portfolio

must be purified – the income may be given as a donation (zakat) to

charity;

• certain investments are not religiously permissible (halal) –

including investments in alcohol, hotels/restaurants that serve

alcohol, tobacco, pork, gambling, weapons, and entertainment such

as films; and

• No investments in companies that do not meet specific financial

parameters in relation to debt to equity ratios (no more that 33% of

 enterprise value), interest income (no more than 5% of income

attributable to interest).

Islamic Banking is unique and its rapid growth in the recent years has

prompted the attention of financial industry and the academics alike.

Many in the west cannot even imagine the existence of a non interest

financial system that encourages profit sharing among parties.

Throughout the past 30 years or so the practice of Islamic Banking has

proved to be a viable alternative. Today, Islamic banking and finance has

become a US$100 Billion and is growing at an estimated annual rate of

15%. Many conventional banks have realized that Islamic banking

provides opportunities to tap into new markets and many of them like

Barclays, Citibank, HSBC and ANZ are offering Islamic services.

The general perception of ethical investments is that the ethical investor

is likely to earn portfolio return that is below the market portfolio return.

Ethical portfolios are believed to be subsets of the market portfolio and

hence will underperform due to lack of sufficient diversification.

Islamic instruments

Explicit interest on risky capital investment is considered illegal ‘haram’

according to Shariah laws and this has spawned several finance

techniques under Islamic law. Broadly the techniques can be classified

into three basic forms of Islamic financing methods for both investment

and trade finance types:

1) Synthetic loans (debt-based) through a sale-repurchase

agreement or back-to-back sale of borrower or third party-held asset.

The most prominent form of Islamic instrument is this category is

murabaha (cost-plus sale) contract. A murabaha contract either

involves sale-repurchase of borrower-held asset which is equivalent to

negative short sale or the lender’s purchase of a tangible asset from a

third party on behalf of the borrower (“back-to-back sale”).

2) Lease contracts (asset-based) through a sale-leaseback

agreement (operating lease) or the lease of third-party acquired assets

with purchase obligation components (financing lease).

Similar to conventional operating lease, al-ijarah provide credit

in return for rental payments over the term of the temporary use of an

existing asset, conditional on the future re-purchase of the assets by

the borrower. The lease cash flow is the primary component of debt

service. The lessor acquires the asset either from the borrower or a

third party at the request of the borrower and leases it to the borrower

or a third party for an agreed sum of rental payable in instalments

according to an agreed schedule. The legal title of the asset remains

with the financier for the duration of the transaction. The financier

bears all the costs associated with the ownership of the asset, whereas

the costs from the use of the asset have to be defrayed by the lessee.

3) Profit-sharing contracts (equity-based) of future assets. As

opposed to equity-based contracts, both debt- and asset-based

contracts are initiated by a temporary transfer of existing assets from

the borrower to the lender or the acquisition of third-party assets by

the lender on behalf of the borrower.

In Islamic profit-sharing contracts (equity-based), lenders and

borrowers agree to share any gains of profitable projects based on the

degree of funding or ownership of the asset by each party. In a trustee-

type mudharaba (or mudarabah) financing contract, the financier (rab

ul maal) provides all capital to fund an investment, which is exclusively

managed by the entrepreneur (mudarib) in accordance with agreed

business objectives. The borrower shares equity ownership with the

financier (i.e., a call option on the reference assets) and might promise

to buy-out the investor after completion of the project. At the end of

the financing period, the entrepreneur repays the original amount of

borrowed funds only if the investment was sufficiently profitable.

Profits are distributed according to a preagreed rate between the two

parties. Investors are not entitled to a guaranteed payment and bear

all losses unless they have occurred due to misconduct, negligence, or

violation of the conditions mutually agreed by both financier and

entrepreneur. The equity participation and loss sharing in a

musharaka (or musharakah/musyarakah) contract is similar to a joint

venture, where both lender/investor and borrower (or asset

manager/agent) jointly contribute funds to an existing or future project,

either in form of capital or in kind, and ownership is shared according

to each party’s financial contribution. Although profit sharing is similar

to a mudharaba contract, losses are generally borne according to

equity participation. (Jobst)

The most popular Islamic instrument sukuk is discussed in detail in the

next section.

Why Sukuk

Sukuk is a form of Shari’ah-compliant securitization which is gaining wide

acceptance not only in Muslim states, but also in largely non-Muslim

countries where it is seen as a very promising instrument to mobilize

funds for economic development by government or public-related

institutions.

Sukuk could be said to have evolved due to the needs of Islamic Banks

and Financial institutions to diversify their investments and for meeting

their immediate liquidity requirements. The evolution of Sukuk and its

phenomenal growth over the past few years as a secondary market tool

could be said to have been facilitated by the fact that it is based on real

assets and that it could be bought and sold.

Sukuk is an Arabic term and is the plural of sakk which means ‘a

certificate’ This mode of financing involves the securitization of a tangible

asset so that investors could share in its profits and risks for which

purpose a certificate vesting ownership in such investors is issued. This

would entitle investors to a portion of the income in proportion to their

investment. Although often termed ‘Islamic bonds’ Sukuk differs from a

conventional bond in that there should be a true sale where the asset that

has been sold should not remain in the books of the seller and should be

transferred to the purchaser.

 According to estimates from Standard & Poor’s, the growth of the sukuk is

part of the overall explosion of the Islamic market, as Shariah-compliant

assets worldwide total close to $500 billion reflecting growth of more than

10% a year over the past decade. S&P predicts that Islamic finance will

continue to expand, both geographically and in terms of products offered,

and newly created Shariah-compliant instruments are set to rival product

offerings at conventional banks. In response to the growing market, last

year Dow Jones and Citi launched the Dow Jones Citigroup Sukuk Index,

the first Islamic bond index. Looking at the data from the Dow Jones

Citigroup Sukuk Index –

Descriptive Statistics

Name Numbe Market Averag Averag Qualit Yield-to- Effectiv Spread

r of Value e e Life y Maturity e to
Bonds ($ Coupon (yrs) Duratio LIBOR
Millions n to
) LIBOR
Sukuk 13 7,650.2 3.10 4.31 A 5.88 2.39 358
Index 4
AAA 1 846.80 3.17 4.96 AAA 3.28 4.62 66
A 7 4,029.9 2.65 3.24 A 5.58 1.38 360
7
BBB 5 2,773.4 3.71 5.64 BBB+ 7.09 3.18 445
7
1-3 Yr. 7 3,435.5 0.88 2.53 A- 6.90 0.06 513
7
3-5 Yr. 4 2,458.5 4.90 4.63 AA- 4.04 3.77 161
5
7-10 Yr. 2 1,756.1 5.54 7.72 BBB+ 6.44 5.01 330
3

Source: Citigroup Index LLC.

From the above table we can see that Sukuks are given ratings by reputed

rating agencies in a similar fashion as that of conventional bonds. They

have the same kind of coupon and yield to maturity.

 Performance

Name Index 1-Month 3-Month 6-Month YTD 12-Month

Value
Sukuk 124.22 6.52 10.82 28.41 37.49 17.15
Index
A 122.02 5.19 9.98 29.80 39.56 16.35
BBB 86.54 8.80 9.49 9.49 5.86 -12.65
1-3 Yr. 140.99 4.43 9.34 15.54 27.08 24.16
3-5 Yr. 104.76 5.65 5.65 16.62 23.43 0.81
7-10 Yr. 112.42 11.29 14.29 63.23 72.95 25.93

Base: 30 Sep 05 = 100. Source: Citigroup Index LLC.

From the above table we get an idea of how Sukuks are performing as

compared to other conventional bonds. As seen above, Sukuk give almost

the same returns or above average returns.

THEORETICAL PROBLEMS AND CHALLENGES

Although the idea of Islamic banking is still young, the last decade has

witnessed a slowdown in the number of Islamic banks in the world in

general and in the West in particular. In general, attitude is the main

problem facing the development of the Islamic banking system in the

West. Conceptual problems of Islamic banks also pose obstacles to the

Islamic banks' development in the West. Interpretations of Islamic Shariah

principles are left to Muslim scholars. This lack of standardization and

clarity also makes it difficult for Western regulators to understand the idea

of Islamic banking. Consequently, regulators tend to be restrictive in

granting licenses for Islamic banks.

The long history of the conventional banking system resulted in effective

regulatory and supervisory bodies. Since the Islamic banking system has

only recently emerged, regulatory and supervisory techniques have not

yet been developed to accommodate Islamic banks. One of the major

problems facing the development of Islamic banks is the current legal

structure. Lack of understanding, coupled with lack of regulation, and

caused tension between Islamic banks and regulators, which in turn

affects the regulators' willingness to support such organizations.

Another issue related to regulation and supervision of Islamic banks is

that of capital and liquidity requirements. Islamic bank cannot use the

central bank as a safety net and take advantage of its services as a lender

of last resort because of the interest that must be paid on the loan during

repayment. Most of the tax systems that prevail seem to favour

conventional banks to Islamic ones, through allowing interest to be tax-

deductible, whereas profit, which is an alternative to interest under the

Islamic banking system, is not tax-deductible.

Growth in Islamic Finance

Islamic Finance has been growing at a quick pace with equity capital

markets growing at a CAGR of over 29% (before crisis). The most rapid

growth in Islamic finance has been in banking - both in Islamic banks and

in conventional banks with Islamic windows. The Islamic capital market

has also seen a surge in activity, with a variety of multi-million-pound

bonds (Sukuks) gaining popularity. Sukuks are seen as an important way

for the Islamic finance market to meet the funding requirements of both

the Middle East and South East Asia, which are estimated at E250bn and

£500bn respectively over the next five years. The growth in demand from

these two regions has resulted from two factors:

1. The massive accumulation of assets in banks operating in the

predominately Islamic countries that have benefited from the

extraction of energy reserves. The most obvious examples are the

Gulf States, along with Brunei, Malaysia and Indonesia.

2. A reaction to western financial practices throughout the Muslim

world and a move towards comparative practices that adhere to

Islamic law {sharia). It's estimated that there are between 1.5 billion

and 1.8 billion Muslims worldwide, of whom a quarter live in

countries with a Muslim majority. While most of them currently

subscribe to western financial principles. The new developments in

Islamic finance may appeal to this group. It's also believed that the

socioeconomic ethos underpinning Islamic finance may prove

attractive to non-Muslims.
 In the UK, banks such as Lloyds TSB and HSBC are offerings/jana-

compliant accounts and loans, while the government recently changed

the law on stamp duty to aid the growth in Islamic mortgages. The Muslim

market in the UK is certain to grow, according to a survey commissioned

by advertising agency JWT. It accounts for three per cent of the

population, it's the country's second largest faith group and it has the

youngest age profile. British Muslims have an estimated total spending

power of C20.5bn. (Willsdon)

Hypothesis: The returns from Sukuk are higher than that of conventional

bonds

Method: We obtained 2006 onwards data for Dow Jones Sukuk index and

Dow Jones Corporate bond index. The two indexes possess similar

compositions and structure. The maturity timeline, index quality, pricing,

rate of return calculations and yield curve are sample criteria which allow

a comparison between these indices. For both the data sets, we calculated

average weekly returns from daily returns. We then calculated percent

change in returns every week and ran ANOVA to study if the difference

between the returns is statistically significant.

Result: As per the results of ANOVA – significance > 0.05, therefore the

null hypothesis which suggests that there is no difference between the

returns of Sukuk and conventional bond is rejected. Thus returns from

Sukuk are higher than that of conventional bonds.

Discussions:

The study helps to draw some important inferences about

differences in Islamic and conventional securities. It states the merits and

demerits of investing in Sukuk there by providing an insight into alternate

investment opportunities for both Islamic as well as non-Islamic investors.

An interesting finding of our study is that the belief that Islamic financial

instruments had a key role in Dubai crisis is misconceived. The exposure

of Islamic financial instruments such as Sukuk was around 25%.

One of the limitations of the study is absence of a model that can

quantify risks associated with Sukuk, though we have tried to use the

value-at-risk model. Another limitation is availability of sufficient data

related to Sukuk.

Currently, our research was restricted to Dow Jones Indexes of

Sukuk and conventional bonds. The study can be extended to European

markets, especially London as it is one of the biggest and growing

markets for Islamic finance.

Dubai Crisis and Sukuk (Nakheel): The Role of Dubai

Government
With the onset of a global recession, Dubai's real estate market declined

after a six-year boom. On November 25, 2009, the Dubai government

announced that it "intends to ask all providers of financing to Dubai World

and [its subsidiary] Nakheel to 'standstill' and extend maturities until at

least 30 May 2010". On November 26, 2009, Dubai World proposed to

delay repayment of its debt, which raised the risk of the largest

government default since the Argentine debt restructuring in 2001. The

extent of the debt rattled many markets causing many indices to drop;

including oil prices. U.S. stocks fell sharply, both Moody's and Standard &

Poor's Investors Services heavily downgraded the debt of various Dubai

government-related entities with interests in property, utilities,

commercial operations and commodities trading.

Below is the transaction overview of Nakheel:

- Nakheel Prospectus
(Page 7)

Dubai was poised to become the financial centre for the Islamic banking

industry, and a gateway for Islamic banking in the Middle East, as due to

Dubai's position, the Gulf region was able for the first time in 2007 to

surpass Malaysia in the issuance of Islamic Sukuk bonds. Dubai also

sought to make the Dubai International Financial Centre [DIFC] the centre
for Islamic finance. However, news about this crisis shook Dubai's financial

credibility, and raised many questions over Dubai's financial transparency.

The announcement of the restructuring of this debt also did not include a

lot of detail, leaving many questions unanswered.

As per the excerpt below, it states explicitly that there is no government

guarantee behind the bonds.

“Dubai World is a public corporation established pursuant to Law

No. 3 of 2006 issued by His Highness Sheikh Mohammed Bin Rashid

Al-Maktoum as Ruler of Dubai. Investors should note, however, that

the Government of Dubai does not guarantee any indebtedness or

any other liability of Dubai World.”

- Nakheel Prospectus

(Page 35)

A major source of risk relating to Dubai world is the lack of consolidated

financial information. The same is explained in the excerpt below:

“Dubai World is not required to does not and has no current

intention in the future to publish consolidated or non-consolidated

audited financial statements under UAE law.”

- Nakheel Prospectus (Page

35)

However, one interesting thing to note here is that Dubai world is a newly

established corporation and the companies that are being transferred to it

were earlier under the purview of the Government of Dubai. Below is the

reference from the offer document:

“The current intention is that the principal businesses that are or

will be transferred to Dubai World will be those commercial

enterprises that were run by The Corporate Office (the TCO), an

unincorporated arm of the Government of Dubai led by Sultan

Ahmed Bin Sulayem.”

- Nakheel Prospectus (Page

35)

Further in the prospectus it states that Dubai world is wholly owned by the

Government of Dubai, which puts a big question mark on it as a guarantor

to the issue.

“Dubai World was established by decree of His Highness Sheikh

Mohammed Bin Rashid Al Maktoum, the Ruler of Dubai and Prime

Minister of the United Arab Emirates, as a public corporation

pursuant to Law No. 3 of 2006 (issued on 2 March 2006) and is

wholly owned by the Government of Dubai.

Dubai World was established to be the holding company through

which the Government of Dubai holds its interests in certain

companies currently under common management control. Dubai

World is wholly owned by the Government of Dubai but (like all

companies created by Government of Dubai decree) it does not

have an issued share capital.”

 - Nakheel Prospectus (Page

93)

- Nakheel Prospectus (Page

94)

Another important thing to note is that the Government of Dubai appoints

the Chairman of Dubai world, thus maintaining control. Excerpts below:

“The principal purpose of Dubai World being granted the statutory

powers pursuant to Law No. 3 of 2006 was to avoid directly

burdening the Government of Dubai with operational matters

relating to entities owned through Dubai World. However, the

Government of Dubai maintains some control over Dubai World

 through the Chairman of Dubai World, who is appointed by the Ruler

of Dubai.”

- Nakheel Prospectus (Page

96)

Dubai world is also exempt from the Government of Dubai taxes. Excerpt

below:

“Dubai World is exempt from Government of Dubai taxes and

charges including registration charges payable by obligors in

respect of mortgages.”

- Nakheel Prospectus (Page

96)

More is at stake with Nakheel's default than just the exposure of what are

reported to be the largest holders of the bonds - Ashmore Group PLC

(ASHM.LN), Blackrock Inc. (BLK), Julius Baer Group AG (JBARF) and Bank of

America Merrill Lynch (BAC). Even if the state or its investment vehicles

were to waive sovereign immunity, allowing them to be sued, that waiver

could also be revoked. Law No. 10 of 2005 provides that an

establishment of the Government may be sued, but that no debt or

obligation of such establishment may be recovered by way of an

attachment on its properties or assets. Excerpts below:

“However, the rights of the Trustee and the Security Agent to bring

proceedings against Dubai World or the Co-Obligors may be delayed

pursuant to Law 10 of 2005, which provides that proceedings may

 be brought against the Government of Dubai and government

entities (which may include Dubai World and the Co-Obligors)

before the courts of Dubai provided that the relevant claimant has

first given details of such claim to the Attorney General of Dubai

and has entered into settlement negotiations for a period of two

months. If the parties are unable to reach a mutually acceptable

settlement at the end of the two months, the claimant shall be

entitled to commence proceedings against the Government of

Dubai or the government entity.

In addition, Law No. 10 of 2005 amending Government Lawsuit

Code No. (3) of 1996 (as amended by Law No. 4 of 1997) provides

that an establishment of the Government may be sued, but that no

debt or obligation of such establishment may be recovered by way

of an attachment on its properties or assets.”

- Nakheel Prospectus (Page

46)

The prospectus for the trust certificates worth $ 3.52 Billion that come due

Dec.14 made clear that Dubai's legal concepts are fundamentally at odds

with the English legal structure. Dubai's legal system has no track record

of adjudicating complex international transactions, and court precedents

there don't carry much meaning and are rarely recorded. Moreover, the

issuer has no attachable foreign assets. The real estate assets under the

trust that secure the debt are located in Dubai, which likely would not

enforce a judgment from an English court. Excerpts below:

“Under applicable Dubai law, no debt or obligation owing from the

Ruler or the Government of Dubai may be recovered by laying hold,

attachment, sale in auction, or taking possession in any other legal

action of the Ruler’s or the Government’s properties and assets

whether or not a final judgment is issued in respect of such debt or

obligation. References in the law to the Government of Dubai

include its departments and any other establishment or public

authority and so would include Dubai World and each Co-Obligor

and may include the Issuer. It is not possible to give any assurance

as to whether any waivers of immunity from suit, execution,

attachment or other legal process by the Issuer and the Co-Obligors

are valid and binding under the laws of, and applicable in, Dubai. In

addition, it is possible that any such waiver could be revoked.”

- Nakheel Prospectus (Page

50)
The Bailout

The government of Abu Dhabi and the UAE Central Bank stepped in with a

$10 billion bailout offer for the state-run Dubai World, which has recently

been in debt.

Out of the allocated amount, $4.1 billion is meant to take care of the

World's immediate debt obligations comprising Shari'ah-compliant bonds

(sukuk) of the Nakheel, the property development arm of the company,

which was due on December 14, the announcement date. The remaining

$5.9 billion of the bailout will help meet the obligations to trade creditors

and contractors of the Dubai World. Dubai World had suddenly asked for

time from its creditors until the end of May 2010 to repay their loans of

about $59 billion.

Sukuk's Security

Sukuk have been under cloud since the time Taqi Usmani, a prominent

scholar on Islamic economy, questioned that their Shari'ah compliance in

most cases (85 percent) slows down sukuk's popularity. The reason why

sukuk attracted in the crisis the attention of the market was that their

payment due on December 14 was the center of time-resetting

negotiations; Islamic bonds, so to say, triggered the crisis.

A more realistic approach could not have missed the point that the

amount due was no more than 6 to 7 percent of the total money involved,

and failure has not yet taken place. Rating agencies could have shown
little restraint in their decisions. They wield enormous power in the global

bond markets, and they can literally force any government regarding debt

issues.

Sukuk was not so much the issue in Dubai crisis as some have tried to

make it. Sukuk market remained calm and unaffected across countries,

including the leading market of Malaysia. Dubai was in part a victim of

global meltdown and was in part overtaken by unguarded optimism and

mismanagement.

The crisis has compromised Dubai's reputation as an economic power

house in the region it may find difficult to retrieve. It still faces the

daunting task of restructuring the remaining $22 billion of Dubai World's

debts. Important the issue is what is going to be the fate of Dubai's huge

investments sunk in high-value property mostly in anticipation of foreign

demand, especially from the West.

The future is quite uncertain, if not bleak. The Emirate must proceed with

caution.
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