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QUEST MEANS BUSINESS
Sovereign Wealth; Prince Salman Discusses Bahrain's Transformation To A Constitutional Monarchy; The Glazer's and Their Management of Manchester United Club.
Aired March 10, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Bahrain's crown prince tells me tonight political and economic change is irreversible.
China makes, the world takes. The latest export numbers from the country.
And showdown at old Trafford (ph), we're live at Manchester United to find out what's going on.
I'm Richard Quest, I'm live in Bahrain, where tonight, I mean business.
Good evening, again, from Bahrain. A warm welcome to our continued iList coverage from Bahrain, where tonight we are at the financial capital in Manama, and, as you might be able to tell, little less Grand Prix tonight and a lot more talking about finance. And what better place to be than with that building behind me.
It is the Bahrain World Trade Center, the magnificent building, the first to have actually these twin towers shaped like sails, with the turbines in the middle. I will tell you more about that building and how it works and what its all about later in the program.
We need to begin though with the bit about the country and our interview tonight with the crown prince.
Bahrain has been living through a decade of transformation. In 2000, the king of the country, Sheikh Hamad, began a program of political reform. He gave citizens the right to vote in elections, to the lower house of parliament. There was an upper, appointed, parliamentary house. The following year women got the vote. The reforms turned Bahrain from a hereditary emirate into a type of constitutional monarchy. The first woman was elected to parliament in 2006. The son of the king, Sheikh Salman, has been heavily involved in driving through these reforms since he became the crown prince in 1999.
His royal highness is also the chairman of Bahrain's Economic Development Board. In the course of the program we are going to hear from him twice on political issues, the role of democracy and where Bahrain stands in the region. But you and I need to hear from him, first of all, on the big questions of the economy; democracy and how a market economy and the role of government.
HRH PRINCE SALMAN, CROWN PRINCE OF BAHRAIN: We are moving it to a far more diversified economy, that is dependent on the private sector as the main engine of growth, as opposed to the private sector spending our natural resources in driving the economic cycle forward. And we are going to do that by really stimulating business, by transforming the role of government and continuing to invest in new technologies and innovations.
QUEST: So, it is a reduction of the role of government?
QUEST: And in doing so that is a cultural difference that the people here are going to have to get used to. The government as provider, is no longer, the government as regulator is the future?
SALMAN: Well, let's think of it as growing the private sector and replacing the fundamental role that government takes with a virtuous cycle that spreads wealth and develops productivity for all of our citizens.
QUEST: Why? Why are you doing it?
SALMAN: We have to. I mean, we are not in any danger of running out of oil in the 10 years, but for the future generations, that expect a better future than their parents had. We have to build an economy that is based on productivity. And in order to do that we need to invest in education, we need to get them-skills, new technologies, it gives them a better life. I mean, is there any other reason to develop an economic program?
QUEST: No, but as diversify you have got to decide where you are going to diversify.
SALMAN: We have a good idea of where we are going.
QUEST: And you are going financial services.
SALMAN: We are going financial services, we are going manufacturing, we're going into niche products so that we specialize and do what we do well.
QUEST: Earlier this week the finance minister talked to me about the fact that obviously the economy here wasn't as badly hit. The banks were more cautious and everything was a little bit more restrained.
QUEST: But that restraint also meant you didn't enjoy the boom years, of previous decades, didn't it?
SALMAN: Well, we-
QUEST: You lost ground?
SALMAN: We had growth. But we did not grow as fast, that is true.
QUEST: And you lost ground.
SALMAN: We gained but slower than others.
QUEST: Is there a risk that you don't have the drive necessary to claw back some of that?
SALMAN: Well, I would respectfully suggest that our ambition is firmly in the right place. And we intend to grow, and we intend to provide that future to our citizens, and we intend to compete.
QUEST: What will you not be doing? I mean, I am always suspicious when hear-
SALMAN: Well, we have the luxury-well, we don't have the luxury of going for the whole-the whole, shebang, so to speak. We can't be the masters of every thing. We really have to focus our talents. So, we have to pick areas where we want-logistics, for example. We have a world-class infrastructure in the Khalifa Port, we have Sunman Industrial City, we know the kinds of companies we want to attract. Those that create high-value jobs, those that build into our logistics infrastructure. So we are going to go after those. But we are not going to just target, willy-nilly everything and anything that comes our way.
QUEST: A service oriented economy?
SALMAN: Yes, sir.
QUEST: With, obviously, major clients in the other nations around you.
SALMAN: Yes, a trillion-dollar market, $2 trillion by 2020.
QUEST: Get it right and you've built a sustainable society for the next 100 years. Get it wrong-
SALMAN: And we will have problems.
QUEST: When you talk to your people, it is basically saying, you may have had it good, but it ain't going to continue if we don't do certain things.
SALMAN: Richard, I think it is important for people to realize, we are the generation that will inherit the post oil era. And we have to lay out our future, but a better life for our children.
So, yes, that discussion must take place. But I'm not one of these people who paints a picture of doom and gloom. I'm very optimistic about the future of Bahrain. Because I know we have a plan, and we have a vision, I know we have the tools to execute and I know that we have the people who are ready and willing to embrace it.
QUEST: The crown prince of Bahrain talking to me on the economic front. And we will hear more from his royal highness on the democratic changes taking place in this country. And when he tells us that they are irreversible, later in the program.
Economic news, now, from other parts of the world. And it now looks like China's economy is well and truly on the long march to recovery. The latest numbers show a huge jump in exports, up by some 45 percent, from the previous year.
CNN's Eunice Yoon, reports on these numbers.
EUNICE YOON, CNN INT'L. CORRESPONDENT: China's exports are showing signs of a pick up in global trade. Chinese goods sold overseas in February, jumped by their fastest pace in three years, up nearly 46 percent from 2009, that data is coming off a low base. Exports plummeted during the financial crisis, even so, many economists were encouraged by the stronger shipments. They believe that the increase in orders could pressure Chinese policymakers to further rein in bank lending, easing China's rapid economic growth.
In addition, the latest figures are fanning the growing debate here over China's currency policy. The Chinese juan has been more or less pegged to the U.S. dollar for the past 18 months. That is a policy many of China's trading partners believe gives Beijing an unfair advantage. Some economists say that the new evidence of strengthening exports could lead Chinese policy makers to allow the juan to appreciate. Others, though, argue that the global demand is still too fragile. They also say that the surge in China's imports could ease international pressure on Beijing, over the juan, as China's trade surplus fell to its lowest level in a year.
Investors are now waiting for the latest inflation figures. On Thursday consumer prices for February are expected to hit a 16-month high at 2.5 percent. Beijing is hoping to keep consumer inflation within a 3 percent target for the year. Eunice Yoon, CNN, Hong Kong.
QUEST: Eunice's skyline might look a little bit bigger with a few more lights, but I promise you-I shall soon be catching up before too long. Other economic news, now, and the furious pace of growth in China, is in stark contrast to what is being experienced by European economies, certainly on the exports front.
German numbers show exports pretty flat in January. Up by just a fraction compared to a year earlier, and actually down from the previous month. That was a shock to analysts, who were analysts who were actually expecting a rise -- excuse me. They're putting it down to the cold weather.
Italy's numbers showed an economy shrinking faster than originally thought. GDP for the Q4 was 0.3 percent from the previous three months. Over the whole of the year, economic output had the biggest annual fall on record, a drop of more than 5 percent.
But there was some encouraging news in Europe, evidence that investors' concerns about higher levels of debt easing. Portugal's paying less to borrow money, just raised more than 1.3 billion by selling bonds. And the returns investors are demanding to lend money to the government are lower than at the last year (ph) in January. Wednesday's bond sale oversubscribed, so there was no problems. The Greece contagion effect did not appear to have arrived or at least had abated.
You're up to date. That's how the business world is looking this midweek on the midweek. Max Foster has the news headlines for us, he's at the CNN News Desk.
Good evening, Max.
MAX FOSTER, CNN INTERNATIONAL CORRESPONDENT: To you, Richard. These are the headlines from the London News Room.
As you say, U.S. Vice President Joe Biden is condemning an Israeli plan to build new -- 1,600 new homes in east Jerusalem. Biden met with Palestinian Authority President Mahmoud Abbas today in the West Bank. He said the Palestinians deserve a viable state and warned against actions that could inflame tensions. Both sides have agreed to indirect talks brokered by the U.S.
Iranian President Mahmoud Ahmadinejad is on a visit to Afghanistan. He met with Afghan President Hamid Karzai and accused the U.S. of playing what he called a "double game" by fighting Afghan rebel groups it had supported in the 1980s. Mr. Karzai praised his country's relations with Tehran and he said he hopes Iran would help bring security to Afghanistan.
Police in Indonesia confirmed that the mastermind of the 2002 Bali attacks was killed in Tuesday's raid on an Internet cafe. Dulmatin (ph) is suspected of organizing the attack that left 202 people dead. The high-profile coup by Indonesia comes ahead of a visit by U.S. President Barack Obama next week. Officials deny the timing of the raid had anything to do with Mr. Obama's visit.
American actor Corey Haim died today after collapsing at his home in California. Authorities say Haim had been suffering from flu-like symptoms. He was known for his work in the 1980s films like "Lucas" and "The Lost Boys." He had also waged a very public battle with drug abuse. He was 38 years old.
Those are the headlines, Richard. Back to you in Bahrain.
QUEST: Well, thank you for that, Max Foster at the CNN News Desk.
Now, we've been talking a great deal about the financial sector. When we return -- Bahrain or Dubai, is it a mutually exclusive club? Can one succeed or the other? Are both able to benefit? What's it take to be number one?
QUEST: All the European markets were high, not much of a gain for the Zurich SMI.
Greece is getting ready to shut down again. On Thursday, workers in both the public and private sectors will go on strike. They are protesting against government reforms and, of course, the cutbacks necessary to cut the country's massive budget deficit. It'll mean a day of no schools, no flights and in some cases, no doctors.
As Jim Boulden now reports, some protests have been going on for days, but things are now about to escalate.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Even though the one-day national strike is called for Thursday, that hasn't stopped groups here in Athens from demonstrating, striking or even blocking the roads, including this group.
Many of these people are former workers of the once state-owned Olympic Airways. It's now been privatized and these people say they haven't received the fair share of their pension.
Why have you been in front of this building now for eight days?
UNIDENTIFIED MALE: As you know, we are the former workers for Olympic Airways, which is under liquidation right now. We lost our jobs 15 of December last year, and we have been promised by the government to get our -- the money for losing our job.
BOULDEN: Protestors have also been blocking landfills so there has been some garbage piling up in the streets of Athens, though it's not as bad as some people predicted.
And it'll be here, around Constitution Square, on lunchtime on Thursday when tens of thousands of marchers will come through here on their way to Parliament. The public sector employees who will be striking are upset that their pensions are being scaled back along with their bonuses, and their salaries are being cut. The private sector employees who will be striking are upset about the increase in fuel tax, value-added tax and things like that.
However, the polls indicate that still most Greeks support the government's efforts to cut the budget deficit.
UNIDENTIFIED FEMALE: The taxation system must change because it's not very organized, I think. I support the plannings for freeze and I believe it will be short (ph).
BOULDEN: It was here two weeks ago, where tens of thousands of people marched through the streets during a one day strike. There was some violence as some protestors battled with police. We even had one of our cameras smashed.
Many of the marchers will once again come in front of this building, the Finance Ministry, which has been a focus of much of the anger. And the hotels here along Constitution Square are warning customers and tourists they may have a bit of trouble coming and going from their hotels during lunchtime.
Jim Boulden, CNN, Athens.
QUEST: Now let's turn our attention back here in Bahrain and to one of the important areas, the non-oil important areas of the economy, that's of financial services. Bahrain sees itself as a regional hub center for banking and the provision of such services, and with good reason. It's the least dependent state in the region on oil. According to the U.S. State Department, it's worked to diverse it's economy over the past decade. A regional financial and business center. And this may surprise you, the financial sector is actually the largest contributor to GDP at some 30 percent. According to figures out just today, jobs in the financial services industry grew 1.5 percent in 2009.
Mayank Malik is the chair of the Bahrain Association of Bankers, and joins me now.
Good evening, sir.
MAYANK MALIK, CHAIRMAN, BAHRAIN ASSOCIATION OF BANKS: Good evening, Richard.
QWEST: Thank you for joining us.
MALIK: Thank you very much for inviting me.
QWEST: Well, the banking and financial services, we were told that there were 400 financial institutions here, but to some extent, is it still growing when you have other centers like Dubai?
MALIK: I think it certainly is, Richard. In fact, Bahrain is the oldest banking and financial center, one of the oldest ones in the Middle East and in this region. And the fact that we have 150 banks and 420 financial institutions is by design, not by accident. And we continue to have new banks and financial institutions coming in because one of the things why Bahrain is so compelling is not just doing business in Bahrain, but doing business from Bahrain.
QWEST: But if these other areas -- I mean, let's face it, does -- well, first, a blunt question, the blunt question. Do you suffer from Dubai's misfortune?
MALIK: I don't think so. I think Bahrain is very distinctive in terms of what we have achieved.
QWEST: Well, it didn't hurt you. I mean, let's face it, if somebody's going to move on --
MALIK: We've had a head start of 40 years, firstly. And the second thing is we've got a learning curve which we have developed in the process. And I think there is so much in terms of the gateway which we provide to this region and a trillion dollar economic base around us, that there's lots which we can do and I think -- I'm very optimistic about the future in terms of Bahrain is doing.
QWEST: The cautious nature of this place, has it been cautious as in like to its own detriment? It's been so cautious, it's been so conservative, it's been so slow in that sense, that it has missed out.
MALIK: I wouldn't say slow, I would say steady. In fact, if you look at the last 24 months, I think it's really clear to everyone that what's happening is that we've stayed the course. What we've achieved is stability. What we've achieved is a very good and strong regulatory framework, and I think most important, the right balance between being business friendly and between having a tight and a very, very robust regulatory framework.
QWEST: So what do you want -- so all right, the Crown Prince
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: So all right, the crown prince has been talking about the economy, he says that the changes are reversible, he says, less government more private sector. Your private sector, because you're also the head of Citibank in the area; what do you want from government here, what do you want?
MAYANK MALIK, CHAIRMAN, BAHRAIN ASSOCIATION OF BANKS: I think what we're getting from government is a lot of support. What we're getting is a lot of direction in terms of what we need to do and it's also the fact that we've got a very enabling environment in this country. And I can tell you something Richard; you have something very similar in Bahrain to what you do, just like Quest Means Business, Bahrain means business friendly, it's as simple as that. That's what we want from the government and that's what you've got.
QUEST: Well alright, if you mean business then join me at my traffic lights so at least. Red ,amber or green; now let's not just talk about, because I'm sure you would say green if we were just talking about your banking system, but red, amber or green, for the overall if you like, economic situation at the moment here, what do you think it is?
MALIK: I would say it's a bright green.
QUEST: I suppose I asked for that and, didn't I? I'll get it to flash for you.
MALIK: It's a bright and it's a strong green as well.
QUEST: We'll leave it at that. Many thanks in deed.
MALIK: Thank you very much Richard. Thanks for being in Bahrain.
QUEST: Now, when we come back in just a moment, we're going to be talking about Manchester United. We're going to do it from Old Manchester and we're going to find out whether the supporters actually have a say, in just a moment.
QUEST: Welcome back, QUEST MEANS BUSINESS, we are live in Bahrain where of course we're talking about business economics and now let us turn our attention to football. Manchester United takes on AC Milan at Old Trafford in European footballs champions' league. Now, I don't know much about football, well you know that better than I do, but David Beckham is back in Manchester, his old club, but he is playing for the Italian side. The game had been stopped for about twenty minutes; although we care maybe some do about who wins the match; you and I care about the other match that is off pitch and that's the match to see who owns the club itself.
Alex Thomas joins me now from Manchester and from Old Trafford. Alex we know this conglomerate called the Red Knights wanted to try and buy the club, the Glazers say it's not for sale and Beckham is back on pitch.
ALEX THOMAS: That's right the supporters heads are in bit of a spin here Richard, because there's a huge game of football, they also see their returning hero David Beckham, international sex icon and global sporting superstar, but also a lot of them are wearing green and gold scarf's, the colors of Newton Heath the club that gave birth to Manchester United and that's a very symbolic and visual protest against the Glazers the American owners of Manchester United. Earlier I spoke to Andy Green, who's a financial adviser for the Manchester United supporters trust, (inaudible) warned about the dangers of the Glazers ownership of the club and the first thing that I asked him was, what was so wrong about them as owners?
ANDY GREEN, MANCHESTER UNITED SUPPORTERS TRUST: they've loaded $706 million pounds of debt onto the club and the people who are paying for that debt, pay the interest and it off over time are the fans, through season tickets and through merchandise and through supporting their team.
THOMAS: Do you think even supporters who aren't activists are to feel the strain now and see what they consider is going wrong with the Glazers.
GREEN: I think, I think there's been a tipping point with the bond document they published earlier in January where people can see the plans for the club, can see they're planning to take out probably $120 million this year to pay off their own debts, which they always said were their responsibility. So yea, I think the fans; all sorts of fans are really joining to the cause now.
THOMAS: I guess the counter argument is the Glazers are very rich, they've been reasonably successful in sports franchises in the U.S., shouldn't you give them more of a go?
GREEN: Well I'm not going to talk about the NFL, because that's not my area, but I know that, that business interest America, not doing brilliantly in America. All the property interest, real estate, retail real estate, one of their shopping centers Columbus, Ohio went into foreclosure in February, so I don't think things are going great for them, I'm not sure they're the great business people that they like to make out they are.
GREEN: Oh not at all, negative. We don't care who owns the club from a nostalgic point of view, I mean look at Randy Learner or Austin (inaudible) he's an American, done a great job, popular with the fans, there's been some terrible British owners of football clubs, I can assure you.
THOMAS: The Red Knights are a group of kind of rich and almost famous, Manchester United fans who planning to maybe try and buy out the Glazers; what do MUST make of those plans?
GREEN: Well I think the trust would want to see the details of any take over, but I think the people involved, you know has some really incredible supporters and I think the point is that, doing it from the right perspective, they want to take to being a football club and away from being a cash cow for people who don't have any interest in football.
THOMAS: Can it really work, supporters taking ownership of a club as big as Manchester.
GREEN: Well this would be a new model obviously, it wouldn't be bustling around Madrid, but I think you're talking about a small number of rich supporters, top of the pyramid and hopefully a lot thousands, tens of thousands of smaller supporters have a small stake at the bottom. All having a say, albeit a small say, in many cases, you know in how the club is run.
THOMAS: And it's very interesting, you know Richard, there so many fans from all over the world that come here to Old Trafford to see these big European Knights and all of them are getting involved with the green and gold scarf protests. Not all of them understand necessarily the financial issues, but most of them, that I'd spoken to, what to see a change in ownership of this club.
QUEST: Alex the numbers I've seen, the Red Knights (inaudible) anybody would have to come up with is 1.3 to 1.5 billion before the Glazers would probably even take them as a serious contender. And it all assumes the Glazers would ever want to sell and they say they don't want to-Alex.
THOMAS: They don't want to and you're right we are talking about huge numbers. The people behind the Red Knights are serious executives with sound financial knowledge, nonetheless the idea of finding forty or fifty rich individuals to invest, you know forty or fifty million pounds each, is definitely a long shot, which is why we only had cautious support from the Manchester United Supporters Trust. What about the supporter on the street though Richard? Well here are the thoughts of one-
UNIDENTIED MALE: Well they've got us into debt, haven't they? You cannot spend the money on eclairs, you know.
UNIDENTIFIED CORRESPONDENT: Are you happy with the Glazers as owners of United?
UNIDENTIFED MALE: No, no.
UNIDENTIFED CORRESPONDENT: Do you think the fans are more concerned about the results on the pitch than who owns the club?
UNIDENTIFIED MALE: Tomorrow they will forget the concerns, but I think overall they are very, they think about the future.
THOMAS: And that's the problem you see Richard, all these grumbles have resurfaced again because of (inaudible) being sold last season. The fans here just want to see big players playing on big nights like this and success for the team.
QUEST: Alex many thanks, keep us informed on that, what's happening there. Alex Thomas who is in Old Trafford tonight and of course on our website we're asking the fundamental question, who do you think should own the Manchester United, the Glazers, the fans, the Red Knights; read the blog, post your own views CNN.com/ UNB and a fine piece it is too.
In just a moment, when we're back in Bahrain, hear the second part of my interview with his Royal Highness, the Crown Prince; this time less economics, more democracy.
This is QUEST MEANS BUSINESS, we're live in Bahrain.
RICHARD QUEST, ANCHOR: Each one of those three turbines on that building generates roughly 225 kilowatts of power. Overall, the intention that it will generate about 10 to 15 percent of the total energy requirements of the World Trade Center that you see there.
Good evening to you, I'm Richard Quest, "Quest Means Business." This is CNN. We return to our (entry) with his highness Crown Prince of Bahrain (Sheik) Salman. We've been talking of political reforms which began in 2000 shortly after his father acceded to the throne.
And then came parliamentary elections, the right of women to vote. Now when you take into freedom of speech in the variety of other major changes that have taken place, major by the standards of this part of the world, I asked the crowned prince what he hopes it's going to achieve in the long term for his country.
HRH PRINCE SALMAN, CROWN PRINCE OF BAHRAIN: Well, I want the young people to believe that their future is in their hands, and I want them to have the skills and the tools to make it happen. So education is critical and making sure we transcend the (inaudible) that exists in any society. Whether they be sectarian, whether they be class based, whether they are skill based, we must do our outmost to give everyone a fighting chance.
QUEST: It is these policies that are now driving the king and his son in everything they do.
SALMAN: Doing the right thing always leads to good results on the economic front so politics (leads) into the economics and the economics (leads) into the politics.
QUEST: With that in mind, how is this country adapting to the concept of democracy?
SALMAN: I think it's adapting very well. We must remember that our society was always an open one. It was about institutionalizing the process of consultation that we have embarked or because of the process of institutionalizing consultation, we embarked on this reform program.
QUEST: But I wonder whether or not his majesty and yourself respectfully are actually trying to hold the democratic tiger by the tail, and it is inevitable that it is going to come and bite.
SALMAN: No, I disagree with that. I think democracy is a process. It is a set of values and legal institutions, separation of powers, voting rights, due process of law, all of those things that are in place as we speak today.
QUEST: Do your neighbors sometimes think look upon what you're doing somewhat scants?
SALMAN: Well, we have always run things that what we have done is for our own society and our own country. We have a civil tradition and a civil society which is quite old and behind, and quite diverse and deep. So really we need this for ourselves, and our neighbors are really living a different timeline and are in a different process.
QUEST: But they must express their opinions to you and what you're doing?
SALMAN: I think they watch and they study and they -
QUEST: Because - with respect, the discrepancy now between what you are doing here and your regional partners, north, south, east and west, is really quite dramatic.
SALMAN: For us it is right, and I think from behind, we do what serves our society and our country. Our neighbors really have to speak for themselves and decide what they seek to do.
QUEST: If we take, for example, the situation in Iran at the moment, and there isn't politically now much common cause between yourself and Iran, and furthermore, you're sitting there with the (fifth) fleet on your doorstep, as your neighbor becomes potentially the (inaudible).
SALMAN: Well, the fundamental difference I think between us and our Iranian neighbors is that we have a multiparty system and they have a more single party system. Having said that, they have their own political process to go through and they have their own issues to deal with, and they face some difficulties however, I believe it is up to the Iranian people to decide how they wish to take that forward.
As for the (fifth) fleet being in behind, we have had a long-standing relationship with United States, not just behind us, the whole region. And I don't see that changing in the foreseeable future.
QUEST: The one thing one knows about a nut is it gets cracked in between the nutcracker.
QUEST: Is that a risk?
SALMAN: No, I don't think so because we must remember that the United States and the (fifth) fleet are not here because of Iran. They have been here for well over six decades in an official capacity, and that is to guarantee a stable and safe supply of a vital, natural resource of energy to the globe.
This region has always been on the crossroads of civilization, and we have managed to try and prosper even in the most difficult of times. And because we maintain good neighborly relations, and we have a relationship with Iran as do we have a relationship with the United States. I believe we are quite prudent.
QUEST: Prudence has arrived, and I sometimes wonder (inaudible) perhaps in your endeavors, you know, there's a little bit of plate spinning going on.
SALMAN: Well, I'm not as skilled as that, but I think a much leisurely balance on scales would be a more appropriate analogy.
QUEST: The Crown Prince of Bahrain talking to me at the residence yesterday. Now, let's talk about credit. Would like it a bit? When credit is tight, cash is the powerful tool to have in your pocket and you are better tooled with lots of cash than this region's sovereign well funds.
That's what they're called, but they're really massive piggy banks, the repositories of vast amounts of oil and gas wealth. These sovereign funds are buying out left, right and center investments, which they say are strategic and for the future. What do we make of these funds? John Defterios in his Johnny D segment. I think that's good. The Johnny D segment. Johnny D is with me tonight.
JOHN DEFTERIOS, MARKETPLACE MIDDLE EAST: It goes to J.D. Reports -
QUEST: All right, on the rocks, let's hope not. Tell me about funds.
DEFTERIOS: Well, it's fascinating what's happened here because despite the fact there was a downturn, the size of the funds continue to grow both in the Middle East and worldwide. Let's take a look at the overall numbers. We're looking now totally in terms of the global sovereign funds of $3.8 trillion.
The percentage from the Middle East is $1.5 trillion, OK. So that's the size today vis-a-vis where we were say 10 years ago, which was below a trillion dollars. Now, let's take a look at the top five funds in the list.
Number is ADIA, this is the Abu Dhabi Investment Authority coming in at $627 billion that's the biggest fund then it's followed by the most conservative fund, which is Saudi Arabia's, the sum of $445 billion. Kuwait, the oldest back in 1953 and they were at the bottom of the list has been the most active as you know, Richard, Qatar at $65 billion. Investments in Credit Swiss, investments in Barclay's Bank, (inaudible) the U.S. Embassy in London.
Even in this last week, there's discussion of it going over and taking the percentage of the (inaudible) in Asia right now. So it's extremely active even looking at an oil field off the coast of Brazil, $627 million for which ones for the top one.
QUEST: For the top one.
DEFTERIOS: For the top one, that's ADIA.
QUEST: Right, right.
DEFTERIOS: And these are acronyms that we never even talked about five years ago. Think about it, they all come out of the shadows.
QUEST: What's the object of these things? Is it to provide host oil wealth? Do these things actually, these funds provide massive good returns for their country?
DEFTERIOS: Well, they've had a very difficult time in the last, you know, 18 months, somewhere down 30 to 40 percent. You've talked to the crowned prince in the interview. He talked about this idea that they don't have oil wealth forever. They need this fund to diversify the economy.
I spoke to the CEO of Bahrain's fund, they didn't get caught in the downturn, but he's looking now outside of Bahrain out for future growth. Let's take a listen.
QUEST: All right. Well, we'll -- we'll have to forfeit (ph) I'm afraid, and join the toast (ph).
(UNKNOWN MALE): OK. (Inaudible) Q and A.
QUEST: Many -- many thanks indeed. Join the toast. Johnny James (ph) -- Cord's (ph) cutting him slightly short tonight. When we come back in just a moment we are going to be talking about slamming the door on a good investment. We'll be talking about the U.S. housing market. Quest Means Business -- we're in Bahrain. Good evening.
QUEST: Welcome back. Wall Street -- stocks trading in extremely tight ranges. Many (inaudible) are little changed. Financial stocks gaining. The hope as the U.S. economy improves, financial profits will likewise.
In the United States millions of Americans are seriously behind on their mortgages. And those homes are at risk of foreclosures, cutting back, handing over the keys, basically turning in the property.
Maggie Lake is in New York, and is looking at foreclosures first tonight.
LAKE: That's right, Richard. Just think about it. What would happen if everyone who owes more on their home than it's worth just threw away the keys and refused to pay any more? It is a huge issue. It is sparking a major ethical debate that could have serious implications for the economy.
(GLORIA): I want to get it over with. You know? I want to move on.
LAKE: Gloria, a resident of Queens, New York is at risk of foreclosure. She's working with her real estate agent and bank to sell her home with the hope of paying off some of her mortgage. But the bank is taking months to approve the sale.
(GLORIA): I still don't want to walk away. But if they're going to - - to waste many more months of my time, I may not have a choice. I don't know how much longer I can keep this up.
(UNKNOWN MALE): The owners get to where they have no other choice than to walk away. Because you know, they've -- they've tried to sell the house for the best price that they can get. And the banks continually say no to the prices.
LAKE: Banks are signing off on deals, but in some cases heavy volume, and debate over pricing can make the process agonizingly slow. And homeowners stuck with underwater investments are walking away in growing numbers.
(UNKNOWN FEMALE): Yes, this house they just razed (ph). I sold that for one-five....
LAKE: Even in neighborhoods once untouched by foreclosure.
(UNKNOWN FEMALE): I felt better a year ago.
(UNKNOWN FEMALE): Yes.
LAKE: Barbara Shervanian (ph) has been selling real estate on Monmouth (ph) County, New Jersey for 25 years. An hour commute to Wall Street -- the housing market has taken a big hit. But this downturn is different from anything she's seen before.
(SHERVANIAN): There's not the stigma of my home was foreclosed. They understand that the whole world is changed, and they are just doing what they can to preserve their assets. It's like maybe making a trade for someone else. So try to cash out, and hold onto their cash, and then re- buy at a lower rate at some other time.
LAKE: It may be one of the biggest risks facing the U.S. housing market. One in four Americans now owe more on their mortgages than their homes are worth. One in four. So people are starting to ask does it make sense for all those people to continue to throw good money into a losing investment.
(UNKNOWN MALE): Banks act in their own financial interests all the time. That's why they made these loans. A business might decide, "Well, we're going to shut this factory down. It's just not viable to run it." If the people on that side of the table can make a decision entirely for their own financial interest, and that's seen as -- as moral. And -- and in my view it is as far as we've gone. Why can't the homeowner do that?
LAKE: So far the majority of consumers with good credit are still paying their mortgages. After all, bailing out leaves a black mark on your credit rating. Bankers also warn it could push mortgage rates up for generations to come.
(UNKNOWN MALE): If we get into a situation where abandonments become of size, they're going to price for that risk in the mortgages -- in the cost of loans for those who will get mortgages going forward. Not to say what it does to the borrower who is thinking about walking away.
(UNKNOWN FEMALE): I've done everything...
LAKE: A tough dilemma for stressed consumers doing their best to navigate the housing bust.
LAKE: It all comes down to debt forgiveness, Richard. Nobody wants to do it, but a lot of people are starting to feel it's the only way out of this mess.
QUEST: Maggie Lake in New York -- many thanks indeed with the story of foreclosures.
Before we go to Jenny Harrison at the weather (inaudible), I did promise you a couple of -- of information about this magnificent building. It is the World Trade Center. It's 50 stories high. Those three turbines produce about 10 to 15 percent of the energy when the building was opened in 2008.
But the fascinating part about it is the way the building is constructed. That round bit funnels the wind into -- from the north by the way -- into those turbines. Well, there you are. And so it actually generates more wind as a result of that. You're up to date. You now about all about that rather nice building.
Jenny Harrison is at the world weather center. Jenny, that building of course to be totally productive with eyes on one thing. Wind.
HARRISON: Wind. Yes. Something you know a little about. Yes? Indeed it does (inaudible) wind delocation. We -- we talk often about the -- the dry storms of course that blow across the region in the Middle East.
QUEST: Excellent. Many thanks, Jenny. Jenny Harrison at the World Weather Center.
Wherever you go here you will see there is construction of one sort or another. It is simply everywhere. When we come back after the break, new (ph) construction. How about some very traditional industries as part of our world at work?
QUEST: Buildings, more construction, more glitz and glamour -- in our wide world, it's tempting to think that everything has a computer at the other end of it. But some old-fashioned art simply won't go away and we need to be thankful for that.
For our World At Work series from Bahrain, I put behind me the modern and I went to meet a young man who has a very traditional job.
QUEST: A skill, an art, a way of life -- generations of the Al Shoughel family have been turning the potter's wheel for more than five decades. And now, the 24-year-old is the latest to be carrying on the tradition.
Jameel has been playing with clay since before he can remember.
JAMEEL SHOUGHEL, POTTER (through translator): I'm used to work with the clay since my childhood, when I was two years old. My grandfather brought me here to work with the clay.
QUEST: His grandfather and father spent years teaching him different tricks of the trade. For instance, getting the right thickness of the clay and using enough water with which to mold. He tells me it's a difficult job. He has to concentrate hard or it can go wrong.
SHOUGHEL: First, I build the clay up. Then I made a hole in the top. Then I take it up again. Then I take it up more.
QUEST: It takes years of practice to be able to do this smoothly.
(on camera): What can go wrong?
I mean if I -- if I -- if I poke this, what's going to happen?
SHOUGHEL: If you touch it hard, it will fall down.
(voice-over): The well-intentioned amateur needs a good bit of help when they have a go themselves.
QUEST: The steins the family produces are traditional. Jameel sometimes wishes he could make more modern creations like this. But the older hands don't agree.
SHOUGHEL: Yes, I discuss with my father a few times. They always say, well, the market want, we have to produce.
QUEST: Day in, day out, the clay arrives, the pots are thrown and fired and the tradition goes on in this World At Work.
(END VIDEO TAPE)
QUEST: Fascinating stuff. The last time I did anything involving pottery, I was at school. I think it was an ash tray. And if I remember correctly, my mother diplomatically said that it had fallen on the floor and the cat had went off with it. Those were the good old days.
When I come back in just a moment, I'll have a Profitable Moment.
QUEST: Tonight's Profitable Moment.
With so many governments lurching from one election to another, it is refreshing here to find a leadership that has a vision plan that is strategic and is designed to last for 20 years or more.
Here in Bahrain, they call it Vision 2030. It's a document that has the aspirations on political and economic reforms.
But a document alone is not enough. Faith without action is, of course, meaningless. There are many countries in this region that have lots of strategic documents, but the countries thoroughly are making no fundamental or major changes.
Here in Bahrain, there's been (INAUDIBLE), not enough, perhaps, on the democratic front for some people and far too conservative economically for other people -- an approach that some believe has been simply too sluggish, too slow and the country perhaps has suffered as a result.
I tell you, tonight I think it misses the point. Whether you agree, whatever argument you think there is, everybody says something must be done. The status quo has become unsustainable and an agenda has been set. And that agenda, as you heard the crown prince say on this program, democratically, economically and politically, according to his royal highness, it is now irreversible.
And that's QUEST MEANS BUSINESS for this Wednesday night live in Bahrain.
I'm Richard Quest.
I thank you for your time and company.
And whatever you're up to in the hours ahead, I hope it's profitable.
Christiane is after the headlines.