Looking Up in Dubai

By Platt, Gordon | Global Finance, July/August 2009 | Go to article overview

Looking Up in Dubai


Platt, Gordon, Global Finance


The UAE economy is well on the road to recovery, one of its biggest boosters says.

Abdul Aziz AJ Ghurair, speaker of the house of the Federal National Council, the parliament in the United Arab Emirates, is a leading businessman in the country. He is president of the family-owned Ah dulia Al Ghurair Group, which employs 65,000 people, and CEO of Mashreq, one of the UAE's leading banks.

As one ot the largest conglomerates in the region, the Abdnlia Al Ghurair Group exemplifies the UAE's success in diversifying its economy, while still reaping big profits from its energy and petrochemical industries. "Trading is doing well," Al Ghurair says. "Our food business is thriving, thanks to rising personal consumption. Banking, insurance and financial services are growing, and cement is still at its peak," he says. "Ali of our businesses are doing extremely well, except for real estate and construction, which are fiat."

Dubai's property sector was hit last year by the global financial storm, hut it has since bottomed out, Al Ghurair says. "Banks are back in the mood of lending selectively," be says. "But we don't like to see too fast of a recovery "The UAE's budget for 2009 is based on oil piiced at $55 a barrel, so the rise to a six-month high ot $70 a barrel in June was a nice gift, he says.

The UAE government responded quickly to the global financial meltdown last tall, guaranteeing all bank deposits last October and creating a $19 billion rescue facility. The Dubai government's SK) billion bond saie in February 2009 to the UAE central bank has boosted confidence and demonstrated with absolute clarity that the country is united in the face of the challenge, Al Ghurair says. No strings were attached to the federal aid, and Dubais business model has not been altered, he says.

UAE banks have proven to be resilient during the global financial crisis, although market capitalization and share prices have fallen. The lower stock prices are unlikely to lead to a consolidation of the country's banking industry, Al Ghurair says. "Bank capital far exceeds international requirements, and the industry's 2.5% return on assets and 20% return on equity is the highest in the world," he says. "Mergers and acquisitions will only be done as the result of a strategic fit, and not because of opportunistic reasons," he says.

Could the Dubai property slump have been avoided? "The UAE is an open economy," AJ Ghurair says. "There was great confidence in our policies, and investors came from all over the world. We never thought the crisis could come from afar. We got hit by a storm," he says. "The good news is that we spent the money from the last oil boom on infrastructure and making sure that Dubai is a worldclass place to live and work," he adds. "The money didn't go to consumption."

The UAE pulled out of a planned Gulf monetary union after expressing reservations over a May 5 decision that Riyadh rather than Abu Dhabi should host the GCC Monetary Council, the precursor to a proposed joint central bank. Four members of the six-nation Gulf Cooperation Council - Saudi Arabia, Kuwait, Bahrain and Qatar - signed the long-awaited common currency agreement in June. Asked if the UAE would consider rejoining the planned monetary union at some time in the future, Al Ghurair says, "Before we get in, we have to agree on the principles and criteria. If we are not clear, then we raise expectations, and people build business plans, which could he a real problem if the monetary union does not succeed."

The UAE was the second GCC country after Oman to abandon the single-currency project.

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