Dubai: Dubai's courts are full of criminal cases linked to the financial situation, Lieutenant General Dahi Khalfan Tamim, Dubai Police Chief and Head of the Government's Budget Committee, told a gathering on Saturday night.
"As long as the number of debtors and borrowers grow against inadequate liquidity to pay the debts, we can't predict speedy recovery," he said.
"The economic crisis triggered a remarkable increase in the number of financial cases not only in the UAE but the GCC as well," he added.
There is no quick recovery in sight, Dahi said. "The economic crisis might last for seven years due to the current financial situation," he explained.
Dahi was speaking at a traditional Ramadan gathering held at his Majlis in Dubai on Saturday evening. The gathering of businessmen and economic experts from the UAE and Saudi Arabia discussed ways to minimise the impact of the global economic recession on Gulf economies. They also looked at how to enhance policies to help the recovery of businesses in the region.
"Since the GCC economies were dependent on the oil sector, the governments didn't take enough measures to protect them. [They thought] that the oil proceeds might cushion [their] economies against any adverse impact.
"This misconception has led us to this difficult situation as all previous estimates and analyses proved to be incorrect," he said.
Dahi dismissed the latest figures [showing] growth in trade, retail and tourism as not being valid signs of a recovery.
"We should look at the huge capital invested in giant projects that are facing lots of problems," he said.
"The over-ambitious development projects are behind our crisis, especially in the real-estate sector. Moreover, a number of banks were unrealistic [and] not conservative at all in the way they used to lend to every one [who] pretended that he is an investor or company owner. [As a result, we have ended up] with the current credit crunch," he said.
"What we have suffered is not a real-estate crisis as everyone said, but it is a banking crisis."
However, Dahi remarked that the central banks in the GCC now have a measure of control over banking procedures.
Referring to the way the GCC governments tackled the economic situation, he said, "our countries are not like Greece or Spain [which ] announced their reform plans to manage the crisis. Unfortunately, our situation in the region is different and very sensitive — controlled by emotion more than logic".
Giving an example, he said that when some UAE companies fired employees, arguments and criticism were raised against them, although millions of people had lost their jobs in the US and Europe due to the financial crisis.
Shaikh Khalid Bin Zayed Bin Saqr Al Nahyan, chairman of Tamweel and a leading UAE businessman, said, "We still live with the effects of the world economic crisis".
He added that there was misunderstanding and inaccurate evaluation as to the extent of the economic crisis, as the world's biggest economies — like those of the US, China and the European Union — are still suffering from a decline in growth. Moreover, the nine per cent growth rate that India used to record has dropped to five per cent.
Pointing to the role of the private sector in reducing the impact of the global downturn, Shaikh Khalid said: "The private sector copes well with the downturn and complements the UAE's public sector in drawing up development plans".
He said that during the crisis the partnership between the private and public sectors in the GCC and particularly in the UAE was strong, since these societies are small and interconnected.
However, he added that legislation and development plans should be revised to cope with the current economic situation.
In 2008 and 2009 there was a tremendous boom in the construction and real-estate sectors, which was financed by foreign liquidity that was flooding into the market — but this has ceased to be the case.
"Thus, there [need to be] alternative investments in the market to ensure a gradual cash flow to the market which in turn will re-energise the economic cycle," Shaikh Khalid added.
In his comments on how injecting cash is very important to reduce the impact of the crisis, Shaikh Tariq Bin Faisal Al Qassimi, Chairman of Emirates Investments Group, said, "The liquidity obstacle in the GCC is different to that in the West.
"In the GCC and UAE, companies and organisations, as well as banks, are suffering due to liquidity shortage, while there is sufficient cash in the sovereign funds. This [is different to] the financial situation in Europe."
He remarked that the government should put more effort into transferring liquidity to small and medium businesses.
However, he added that the government is not reluctant to do this.
"Recently, huge development projects have been launched in the GCC, but this will take years to realise," he said.
Abdul Rahman Al Saleh, Director-General of Dubai's Department of Finance, said: "The government didn't fail to manage the crisis but the global economic crisis hit the whole world suddenly. Even the US — the world's biggest economy and the most organised country in [terms of] economic legislation — failed to face the crisis.
"The UAE has pumped enough liquidity into the market and the Central Bank ensured there was support for all the local financial institutions," he said.
Mohammad Al Tuwaijri, HSBC's Head of Global Banking and Markets, Middle East and North Africa, said there was no doubt that there were signs of economic recovery in the GCC. The recovery had been supported by the countries' reserves and most banks had returned to lending.
However, others expressed concern.
Dr Mohammad Al Asoomi, a leading UAE economic expert, reminded everyone of the US Congress' latest warning about a looming sovereign debt crisis in the US, similar to that in Greece, which — if it materialised — would have a disastrous impact worldwide.
"We reached the bottom of the curve, [and a rise in oil prices is helping GCC economies recover gradually].
"However, the effect [of the crisis] on the stock market was very bad for Gulf investors — as was the collapse in the real estate sector. This was a spontaneous reaction to the breaking of economic laws," Al Asoomi said.
"Breaking financial regulation is like jumping the red light in the traffic system, which automatically leads to catastrophe," Al Asoomi remarked.