Business | Economy
Too many things happened too fast, Al Ghurair says
"The speed of growth in Dubai was a problem. Too many things were happening too fast, and the 15 per cent growth was seen as good. But in the future we should look for more sustainable growth," said Abdul Aziz Al Ghurair.
- By Francis Matthew, Editor at Large
- Published: 23:35 May 16, 2009
- Image Credit: AP
- People settle at their tables for a dinner party held at the King Hussain convention centre for the World Economic Forum, taking place on the shores of the Dead Sea, in Jordan.
Dead Sea, Jordan: "The speed of growth in Dubai was a problem. Too many things were happening too fast, and the 15 per cent growth was seen as good. But in the future we should look for more sustainable growth," said Abdul Aziz Al Ghurair, Speaker of the Federal National Council.
"When things speed up again, we should slow them down so that we are able to digest them better," he said, while taking part in a CNBC debate on the state of capitalism in the Middle East, held at the World Economic Forum at the Dead Sea.
Al Ghurair saw no need to rush the single Gulf currency into existence. "We should take our time to get to the Gulf currency. Even if it takes five to 10 years, that will still be alright. It is important that the politics, the economy and the people are all ready for the change."
But he was confident that the currency will come. "It will happen. The regional reality is that the business community will force regional economic and monetary convergence to speed up. For example the UAE and Saudi Arabia are already among the largest investors in each others' economies. Convergence is happening."
The CNBC debate flowed around many topics, but kept coming back to the governance issues of governance and reform.
Al Ghurair spoke out in favour of reform and liberal regulations, arguing they are both inevitable and vital for good business practice.
"Reform will continue since the government has seen the benefit of reforms and they want to see more. The UAE has very open markets and light regulations. We are one of the least regulated countries in the area," he said, pointing out that when a UAE company invests in another Arab country it expects to find the same open style, and is often disappointed.
But regulations are not the whole story, according to Al Ghurair.
"Regulation in the US did not stop the fiasco. What we all need to do as businesses is to work more ethically. We have to let ethics penetrate our businesses, and we have to discipline ourselves. We have to make sure that the customer understands what he or she is buying, and we have to work so that the bonuses do not work for short term gain. Working ethically will protect institutions from trouble."
Looking ahead to future privatisations as the government sells its companies into the open market, Al Ghurair made a plea for more realistic pricing. "One request I make to the government is that they lower their expectations. They used to sell their companies onto the markets at five times the book. They should sell at a reasonable price as they privatise."
He also pointed out that better planning would allow a government sale to balance the conflicting aims of both making money from the sale and at the same time fulfilling a social responsibility of spreading assets to the lower and middle earning sectors of the population.
"The answer is to have a tranche of shares aimed at the small buyer, so the lower and middle income people are able to buy into the share issues," said Al Ghurair.
Al Ghurair was confident that the Gulf banks are in good shape, but "we need to build consumer confidence again. The Arab and Middle East banks have very high capital adequacy rations at between 15 to 19 per cent. In the first quarter of this year, they did better than the first quarter last year. They are producing a return of 2 to 3 per cent on equity.
"While all this is very good, we do not have consumer confidence. When people regain their confidence then the banks will relax and start to lend again," said Al Ghurair.
He also spoke clearly about the need to find a new way to finance the vast GCC governments' plans for a spend of $550 billion on infrastructure, the majority of which will be on power and water projects.
"Banks will not be able to lend much to support the financing of this infrastructure."
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