Business | Economy
UAE 'will weather turmoil despite real estate worries'
With assets worth Dh1.3 trillion, Dubai's banking and financial sectors have enough muscle to withstand the current financial crisis, although some issues in the real estate sector continue to pose a major concern, a top Dubai Government official said.
- By Saifur Rahman, Business Editor
- Published: 23:33 November 5, 2008
- In the worst-case scenario, due to the liquidity crunch, we may see reduced demand and a softening of real estate prices. If more supply emerges, the gap between demand and supply might be reduced even further, says Hamad Buamim, Director General, Dubai Chamber of Commerce and Industry.
- Image Credit: Supplied Picture
Dubai: With assets worth Dh1.3 trillion, Dubai's banking and financial sectors have enough muscle to withstand the current financial crisis, although some issues in the real estate sector continue to pose a major concern, a top Dubai Government official said.
Hamad Bu Amim, director-general of the Dubai Chamber of Commerce and Industry, said: "Now that GCC economies are also in the middle of this turmoil, GCC governments should draw lessons from this experience and develop new strategies to better manage their assets.
"They need to speed up cooperation and use the economy of scale in establishing the GCC single currency and monetary union."
He said they need to review financial risks management and establish a common institutional floor to build up future financial systems.
"There are clear moves towards nationalising significant parts of the financial systems, and reviewing domestic economy control systems and re-establishing good governance's checks and balances. It is almost certain that in the future, many economies will reduce their financial dependency on global financial markets," Bu Amim told Gulf News in an interview.
"Unlike the US and other Western economies, about 95 per cent of UAE enterprises being small and medium size family companies, they employ mostly family equity with much less dependence on international capital markets. Therefore, the impact of the financial crisis on family enterprises is assumed to be mild and might be limited to indirect impact through reduced global demand for re-export.
"However, there is the need to protect minority shareholders, to regulate bankruptcy, to regulate further development of the financial market etc. These policies should be captured by transparent laws and regulations, with the required institutions to maintain and internalise them."
He said the UAE financial market is not immune to negative influences from Wall Street. The UAE is a net exporter of FDI and its economic absorption capacity and potential to grow are significant, so is the GCC, he said.
"The GCC total assets in the US have exceeded $2.5 trillion (Dh9.19 trillion). But with the recent financial turmoil, they could have fallen in value," he added.
Demand-supply gap
With regard to the real estate market, Bu Amim said demand still exceeded supply. "In the worst-case scenario, due to liquidity crunch, we may see reduced demand and a softening of real estate prices. If more supply emerges, the gap between demand and supply might be reduced even further," he said.
Rashid Obaid Al Helli, general manager, International City, Nakheel, said: "Although there is a panic in the market, now is the time for end-users to enter the market. Buyers have now become more matured and the market is correcting itself from speculators."
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