Essays on Special Purpose Vehicle Case Study

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The paper 'Special Purpose Vehicle' is a great example of a management case study. Over the past few years, there has been observed that the rate of industrial growth and development has increased at a rapid pace. This mainly due to the fact that with the coming of the industrial age there has emerged an era of infinite demands. There are even to date being invented and discovered new innovative methods to ensure that the production can be carried out in a more economic and efficient method which is both sustainable as well as prosperous. Special Purpose Vehicle: There have been many new developments that have been experienced in the industrial sector in the 21st century.

These developments have most often than not tried to develop new methodologies of economic productivity and efficiency. One of the important economic developments that have taken place post the industrial revolution in the 21st century is the development of the SPVs The SPVs are special purpose vehicles are also known as the special purpose entities (SPE). These are usually called SPVs in the European continent. It is a legal entity that is usually constituted by the parent company to ensure that the unit is free from the risk of bankruptcy.

These are also thus referred to as the ‘ Bankruptcy- remote entities’ . These are usually limited, they are either an offshoot of the parent company or they may even be separate legal entities. They are usually limited companies or have a limited amount of partnership with the parent company. The Investopedia (an international guide in the economic sector), defines the special purpose entities as “ The SPV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.   They are also referred to as a "bankruptcy-remote entity" whose operations are limited to the acquisition and financing of specific assets. ” (Investopedia, online) The special purpose entities that are created are usually set up with a specific goal or aims and they function to usually fulfill only these specified functions.

Thus, the role that can be played by such entities is limited, but with time most of them become functional units which at times also achieve self-dependence and free existence separate completely from the mother company. In the present project for the sake of an example to serve as a case study, we shall look at King Abdullah Economic City.

The project is one of the biggest megaprojects that was un-curtained in the year 2005 by the King of the Islamic nationality of Saudi Arabia, Abdullah bin Abdulaziz Al Saud. It was a major project, which called for the setting up of a system that intended to ensure that Saudi Arabia is able to establish itself as a top nation-state for investment and economic destinations by the year 2010.

The project was set up along with 5 other five economic cities. The total area that was to be bought under development under the King Abdullah Economic City was approximately 66.8 square miles, say around 173 square kilometers. It was located along the coast of the Red Sea. There was ensured that the city was set up in an area that was in close proximity to the economic center of the country, Jeddah.

The project is being constructed by Emaar, which is a Dubai based public joint-stock company (AME info. com, 2008). The project that was undertaken had an initial budget of around 80 billion dollars, which is equal to around SR 300 billion. The city was to be built in two stages, the first stage is planned to reach completion by the year of 2010, while the second phase is supposed to ensure that the city reaches it complete glory by the year of 2020 (Mouawad M, 2008). The basic aim of the city was to bring in more domestic and foreign investment directly to ensure the diversification of the oil-based economy of the nation-state.

The other main aims that the project aims at fulfilling are the ensuring creation of available jobs for about a million of the country’ s population, while it also looks at providing residency to half a million of the country’ s population. It also will look to attract tourists and act as an active contributor to the foreign exchange.

References

AME info.com 2008: Emmar, the economic city signs MoU with Mar GCC to establish manufacturing facility in KAEC, pub July 2008.

McCann A: Export and import bank of US: Structured and project finance; Financing Environmental Exports, accessed on December 31 2009 at http://66.102.9.132/search?q=cache:NHa_B561Wt4J:www.acec.org/advocacy/committees/pdf/anncon09_mccann.pdf+Export+and+import+bank+of+US:+Structured+and+project+finance.&cd=4&hl=en&ct=clnk&gl=in.

Investopedia: What is SPV, accessed on December 31, 2009 at http://www.investopedia.com/terms/s/spv.asp.

Mckune K O: SPE’s- Who, What, Why, Where, When and How; ABA seminar, archives of ABC

Mouawad J 2008: The Construction Site called Saudi Arabia, January 20, 2008, pub The New York Times.

Shepherd W 1996: Integrating Islamic and western finance, Global Finance, May 10, 1996, pp 44-50, Finance in Islam.

Thorold C, 2008: New cities rise from Saudi desert, BBC News June 11, 2008, accessed on December 31, 2009 at http://news.bbc.co.uk/2/hi/middle_east/7446923.stm.

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