2007 was in no way different nor better than the previous years, as the Arab World remained plunged in political bottlenecks drifting at times into military conflicts from Iraq, Palestine and Lebanon to Sudan and Somalia; as the US Administration and Israel pursued their strategy of redrawing the map of the Greater Middle East region.

On the International level, 2007 was an eventful year with the persistent crisis over the Iranian nuclear file, the resurgence of violence in Afghanistan and the return to the cold war between the world’s superpowers, specially the United States, Russia and China.

Dramatic developments throughout the Greater Middle East ushered in an era of instability and a substantially adverse political panorama with far reaching consequences on the future of the region and the world security as well.

Throughout 2007, Lebanon was the source of a deep political conflict between the parliamentary majority and the opposition on the backdrop of an escalating regional and international confrontation, preventing the election of a new president. On a brighter note, the Lebanese Army confirmed its national unifying role by its victorious emergence from the bloody Nahr Al Bared battle.

Fuelled by the persistence of Israeli military attacks, the Palestinians found themselves suddenly entrenched in two conflicting territories, governed by two conflicting governments.

Towards the end of the year, the US organized a conference to launch the peace talks between Israel and the Palestinians in Annapolis with the wide participation of more than 50 states of which 15 were from the Arab world, including Syria. This new initiative did not yet result in a concrete road map towards a comprehensive settlement in the region.

In Iraq, the government was unable to achieve its committed reforms on the legislative, economic and security levels that would have laid the grounds for the national reconciliation. As a result, the bloodshed continued with 2007 marking the highest number of casualties among the civilian population but also among the US troops and the Iraqi security forces as well.

While international efforts spearheaded by the US succeeded in drawing the road map to the settlement of the North Korean nuclear crisis, the Iranian nuclear file remained the pivotal issue and the cornerstone for the future developments in the region.

After the imposition of economic and political sanctions on Iran by the United Nations, fears have risen of a threatened US military attack on the backdrop of the insistence of the American Administration, backed by its western allies, to prevent Iran from developing nuclear mass destruction weapons.

With the resurgence of violence in Afghanistan and the escalation of the confrontation between NATO forces and Taliban, Pakistan witnessed throughout 2007 a series of political bottlenecks and sectarian upheavals and suicide attacks culminating with the assassination of Benazir Butho, the opposition leader who had just returned to the country after years in exile to participate in the upcoming parliamentary elections.

On the world scene, political and economic developments during 2007 ushered in the return to the cold war between the world’s superpowers. 15 years after the collapse of the Soviet Union and the advent of the new world order, relations between the US and its allies on one side, and Russia and China on the other, were again tarnished by confrontation rather than cooperation in the wake of the difficulties faced by the US policy in its war on terrorism.

Internationally, the political arena witnessed some major changes, most notably the election of Nicolas Sarkozy as the new president of France, who adopted a more confirmed pro-American stance raising speculations on the possibility of France rejoining NATO.

Gordon Brown succeeded Tony Blair as the leader of the labor party and subsequently Prime Minister of Britain. The cornerstone of his foreign policy was to distance himself from the legacy of his predecessor by declaring a timetable for the withdrawal of the British troops from Iraq.

In Russia, armed by an economic revival prompted by an unprecedented rise in oil prices, President Putin adopted a firmer, and at times, confrontational policy vis-a-vis the US especially in the Iranian nuclear crisis and the proposed missile shield held over Europe; bringing back memories of the cold war era. As his second presidential term is nearing its end and due to constitutional restraints for reelection, Putin unveiled his strategy to retain power through heading his party’s list to the general elections and subsequently chairing the new government coupled with a platform of constitutional reforms aiming at concentrating the executive powers with the prime minister.

Economically, despite the multitude of developments, 2007 was particularly earmarked for the spectacular rise in oil prices and the ensuing increase in the prices of commodities especially gold and other precious metals. 2007 witnessed also the global credit crunch caused by the subprime debacle in the US mortgage markets.

Moreover, China and India are emerging as new economic superpowers with sustained high growth rates evidencing their growing need for energy sources. This contributed to the worldwide increase in demand for energy, considered by many industry experts as the main factor behind the substantial rise in oil prices.

In fact, prices of oil have touched for the first time ever the $100 per barrel mark influenced by a strong speculation and fears related to production and supply, aided by the growing instability of the oil rich Greater Middle East region.

During Opec’s last meeting held in Abu Dhabi in December member countries committed to take all necessary measures in order to keep the balance in the oil markets and confirmed their earlier decision to increase production by half a million barrel per day to 27,250 million barrels.

Gold prices jumped to 28 years record levels to reach 950 USD per ounce in view of the increased demand by international investment funds and the diversion of investors from the traditional money market instruments towards higher yield to safeguard against inflationary pressures and recession mainly in the US markets.

Economically, the most important development was the Sub Prime Real Estate Mortgage crisis in the US.

BNP Paribas was the first international bank to declare a freeze on billions of Dollars investment in some of its investment funds that were hit by the sub prime debacle. Central Banks across the world intervened in order to calm the financial markets and injected more than $200 billion in the world banking system in order to ease the squeeze on the credit markets and to prevent liquidity crunches from hitting harder.

In an anticipatory move, the Federal Reserve Board reduced interest rate on the US Dollar by one percentage point. The Fed chairman Mr. Ben Bernanke, warned of the far-reaching consequences of the crisis on the private sectors, financial markets and the global economic growth.

The US Dollar pursued its retraction against the world's major currencies and dropped to as low as $1.48 to the Euro and to $2 against GBP; prompting the European Union to voice its concern over the future of the exchange markets and to debate the issue during the rich nations meeting. Moreover, European economic experts strongly condemned the move to reduce the interest rates on the US Dollar, the Japanese Yen and the Chinese Yuan.

Exchange differences are hurting major industrial European exports, notably Airbus Industries, whose sales contracts are denominated in the retracting US currency; while US exports are being favored.

Regionally, the developments on the Iraqi crisis and the Iranian nuclear program had their direct repercussions on the general political climate in the Gulf. The abrupt depreciation of the US Dollar has directly impacted the economies of the Dollar pegged GCC countries, whose oil sales are denominated in the American currency.

Resulting inflationary pressures have prompted Kuwait to revalue its currency and to abandon the decades-long dollar peg for a more equitable currency basket; pending the launch of the unified GCC currency initially scheduled for the year 2010.

The GCC Central Bankers meeting in Saudi Arabia in September led however to a general perception in the region that the year 2010 is far from being realistic and that the birth of a unified GCC currency will be delayed. This has fuelled a strong wave of speculations across the GCC of an imminent revaluation move especially in Saudi Arabia and the UAE.

To calm the markets, HE Sultan Nasser Al Suwaidi, Governor of the UAE Central Bank declared that, as a matter of policy, the UAE will only act according to a concerted GCC move. He pointed out that the unified currency will pass through three stages before it becomes a reality, stressing that the first two stages will be completed by 2010. He confirmed that the third stage, which will witness the birth of a single GCC currency, will be delayed beyond 2010 pending the integration of a GCC common market.

In fact, the GCC summit concluded by announcing the formation of a Gulf Common Market as of January 2008 and assured its commitment towards achieving a monetary union and the issuance of a single GCC currency by the end of 2010.

In order to limit the incoming flow of funds from outside the UAE to benefit from a potential re evaluation of the Dirham against the dollar, the Central Bank of the UAE on 28 November 2007 launched the Bidding mechanism on Certificates of Deposit (issued by the Central Bank). This move led to a big reduction on AED interest rates as compared to US dollar. It is suspected that this reduction in interest rate has diverted important amounts of foreign liquidity into the stock market and used for speculative activities in order to cover for losses suffered from interest rate reductions.

In the UAE, the year 2007 was a milestone in the country’s path towards economic growth benefiting from the huge pouring of liquidity. The Ministry of Finance and Industry predicted the GDP to grow by as much as 8.5% in 2007 to reach AED 697 billion up from AED 642 billion in 2006, and a growth in non oil sectors by 21% to reach AED 455 billion i.e. 65% of GDP. Local economic reports have however warned against the negative repercussions on the forecasted growth due to the escalating increase in the prices of basic commodities, consumer products, rents and services.

The IMF, on its part, declared that the economic horizon in the UAE looks bright on the medium term; forecasting a sustained growth. The IMF stressed that the positive expectations are fuelled by the high prices of oil, set to continue in light of strong global demand; and thanks to the overall improvement in the local corporate environment.

The IMF pointed out also that the major challenges ahead consist of achieving continuous non-inflationary growth and further diversification of the economy.

The Dollar peg , according to the International Monetary Fund, has so far benefited the national interests of the UAE; stressing on the country's commitment to work closely with the other GCC members to reach an adequate exchange system .

Finally, the IMF called on the UAE authorities to upgrade corporate governance procedures and banking control and supervision in view of the anticipated growth of the debt market and the rapid expansion of the real estate sector.

The most important development during last year was the adoption of a strategic planning stage for economic growth on a federal level; whereas 6 major sectors were included; Social welfare, Economical welfare, Governmental development, Education sector as well as infrastructure and the development of remote areas.

The Federal National Council adopted the 2008 Budget that reached AED 34.9 Billion witnessing an increase of AED 6.7 Billion or 23.8% comparing to 2007 Budget, of which AED 1.44 Billion was allocated to a governmental strategic program for ministries and federal authorities. Moreover, the 2008 Budget focused on education and health where the ministry of education budget was increased by AED 2.15 Billion to reach approx, 7.136 Billion and the ministry of health’s budget was increased by 9.2% comparing to 2007 budget to reach AED 2.565 Billion.

During 2007 development initiatives and economic achievements flourished throughout the various Emirates and across all sectors.

In addition to construction works on major roads and tunnels, as well as new parks and touristic facilities, the government of Abu Dhabi unveiled a massive $175 billion (AED 640 billion) 5 year plan to diversify the economy in order to reduce the Emirate's dependence on oil, through joint public-private sector initiatives in the industrial and tourist sectors.

Of these mega initiatives that have already been launched with a 50% contribution by the private sector, are the $ 25.5 billion Industrial city of Abu Dhabi (ICAD) and Khalifa port and its industrial zone.

The Saadiyat Tourist Island project has also been launched at a total cost of $27 billion, to be executed over 3 phases.

In a related matter, reports in the western press have estimated the total overseas investments of Abu Dhabi Investment Authority at $875 billion rendering it the World’s top governmental investment authority.


In Dubai, the Dubai Mercantile Exchange has been inaugurated providing the first ever mechanism for the pricing of Arabian Heavy crude; a project that has been attempted to no avail over the past few years by major international institutions.

The Bourse aims at fulfilling the gap between the working hours of the major oil futures exchanges in London and the Far East; and at bolstering the ties between Dubai and the international commodities markets.

In Dubai also, Limitless, the global development arm of Dubai World, has unveiled its Arabian Canal project, described as the Middle East's biggest civil engineering endeavor and Dubai's most ambitious mega-project.

Work on the 75 kilometer man-made canal, scheduled to start in December to be completed in 3 years, will involve digging and moving more than a million cubic meters of earth. The $11 billion (AED 40 billion) project will flow in-land from Dubai Waterfront, passing to the east of the new Dubai World Central International Airport before turning back towards Palm Jumeirah. Up to 150 meters wide and 6 meters deep, it will be able to accommodate boats up to 40 meters long.

Limitless will also master plan its biggest mixed-use development yet as part of the Arabian Canal project. The $50 billion (AED 183 billion) Waterfront development will span 20,000 hectares and stretch 33 kilometers along the inland section of the waterway, east of the new airport. Works are expected to start towards the end of 2008, and will be completed over a 15 year period.

On the other hand, Dubai has made a flamboyant entry into the world investment markets with the signing of a Memorandum of Agreement between Bourse Dubai and NASDAQ, where Bourse Dubai will acquire a stake of at least 20% of NASDAQ. This was followed by a joint bid by Bourse Dubai and NASDAQ to acquire stakes in London Stock Exchange and Sweden's OMX.

The country made a quantum leap in the airline industry where the growth in air traffic exceeded 11.5% amounting to 490,000 flights against 431,100 in the year 2006 and reached highest records in the airline industry history. This was achieved on the backdrop of major development of the fleets of the three national carriers; and the expansion of Airports in Dubai, Sharjah and Jebel Ali.

In Dubai and during the month of March the merger between Emirates Bank and National Bank of Dubai was announced with the blessings of the Government of Dubai. It has been agreed that Mr. Ahmad Humaid Al Tayer, Chairman of Emirates Bank, will become the Chairman of the new Bank and Mr. Abdullah Mohammed Saleh the Chairman of National Bank of Dubai to become the Deputy Chairman of the new bank.

The merger between the two banks will create the biggest banking structure in the region with assets estimated at AED 165 Billion representing 20% of the total balance sheet of banks operating the UAE, which is estimated to be AED 700 Billion.

Dubai witnessed the announcement of a strategic partnership between two economical UAE Giants with investments spreading in the different sectors of the local and international economies, Emaar and Dubai Holding.

In light of the strategic partnership Dubai holding will acquire 2, 3 Billion Shares of Emaar against lands for development owned by Dubai Holding in key areas. Analysts considered the deal to be a major step towards other strategic alliances amongst UAE companies to strengthen their competitiveness locally and internationally.

In Sharjah, the Emirate continued its path towards a comprehensive development drive, through a broad spectrum of growth oriented projects across the various economic sectors.

Sharjah airport witnessed a series of renovations and expansions, the most important being the expansion of taxi areas for aircraft as well as the addition of new passenger gates and tunnels, in addition to new check in desks and the opening of new retail shops, restaurants and other interfaces of the airport.

The public works department in 2007 increased its activities in implementing vital projects described to be the biggest in the history of the Emirate such as roads, tunnels to be completed in 2009 with an estimated cost of AED 1.5 Billion. From the important projects, we can note the renovation of King Abdul Aziz Street, which includes the construction of four flyovers for a cost of AED 300 million and Cultural Square tunnel costing AED 600 Million.


On the Infrastructural development, H.H. Sheikh Sultan Bin Mohammad Bin Sultan Al Qassimi Crown Prince and Vice Ruler of the Emirate of Sharjah, Chairman of SEWA, signed 2 contracts amounting to AED 560 Million to execute the first phase of the water desalination in Hamrya power plant with a capacity of 20 million barrels of water a day, and to build a 50 Megawatt gas operated power plant in Khorfaquan.

Moreover, Bourouj Real Estate an affiliate of Abu Dhabi Islamic Bank announced the signature of a contract amounting to AED 15 Billion to build Sharjah Marina between the Lagoons of Al Khan and Al Mamzar. A 2 KM water canal will be constructed with a waterfront where freehold projects will be executed. The area will be earmarked by attractive projects for Gulf and Arab Investors as well as touristic destination with its hotels, resorts, restaurants and other attractions.

On the other hand the Government of Sharjah signed an agreement to establish a company called Barajeel for Real Estate Development (a private joint stock company 50% owned by Government of Sharjah and both Majed Al Futaim Investments and Majed Al Futaim Development 25% each). The aim of this company would be the investment, planning and development of multipurpose real estate projects.

In March, the IPO for Air Arabia was launched for AED 2.4 Billion and fully subscribed. Company officials reported that the purpose of this IPO was to provide finances relevant to the development of the airline through ordering new planes and opening new routes.

In October, United Arab Bank declared that it has obtained the approval of both the UAE and Qatar Central Bank to sell a strategic stake to Commercial Bank of Qatar.

UAB pointed out that its major shareholders have agreed to sell 40% of the bank at the price of AED 7.75 per share for a total of AED 2.206 billion.

The Sharjah-based Dana Gas announced the acquisition of the majority shares in Dana Gaz Bahrain. The Bahrain Company will be owned 66% by Dana Gas and 34% by Bahraini investors. Its first operation will be the construction of a gas liquefaction plant in Egypt under the corporate name Suez Gulf.

Works on the plant will encompass civil, installation and operation of the high value liquefied gas. The plant is expected to treat 55 billion cubic feet of natural gas annually, and to produce around 120,000 tons per annum of Propane and Butane liquids.

Dana Gas had earlier announced a major gas discovery in Egypt. The intensive tests on the new gas well revealed a production capacity of 16.5 million cubic feet of gas per day, the equivalent of 2,800 barrels of oil and 330 barrels of condensates per day. With this discovery, Dana Gas moved upward to occupy the 6th place among the 64 gas and oil exploration companies active in Egypt. Dana Gas will also dig a total of 12 exploratory wells in Egypt before the end of 2007.

To finance its expansion, Dana Gas declared that its convertible Sukuks have been fully underwritten and that in view of the big market appetite it has increased their ceiling from $750 million to $ 1 billion.

Considered the 1st ever Sukuk transaction to be fully underwritten in a record time and the 3rd Sukuk issuance in terms of value , the convertible Sukuks are part of Dana Gas's strategy to build a financial structure with diversified funding vehicles to cope with the company's planned growth and diversification .

The Sukuks, with a deferred settlement period, will mature in 2012, and will be convertible into shares according to specific conditions.