New body set up to tackle crisis

Dubai The federal government has set up a new committee to try to revive the ailing financial and banking sectors in the UAE, a top official said.

"This is a commitment from the government related to the international finance crisis," Abdullah Al Saleh, director-general of the Ministry of Foreign Trade, told Gulf News.

"It is a reaction from the government to monitor the impact on activities of banks in the UAE and to give recommendations to the Cabinet. All of this is to protect the financial sector."

Al Saleh said this will increase confidence in the market and shows the government is committed to mitigating and relieving the impact on the UAE economy.

Liquidity and the sluggish real estate market will be top of the agenda, analysts say, for a new committee, consisting of three senior government officials: the minister of finance, the minister of economy and the Central Bank governor.

The move comes following a massive capital outflow to the tune of Dh500 billion in recent months that has crashed stock markets and slowed down the fast-growing real estate and construction sectors in Dubai.

'A positive step'

"It's a positive step. It (the committee) will discuss the liquidity of the banks primarily, the real estate situation - is it overbuilt, are all the projects still viable, will the massive infrastructure projects go ahead - and the exposure the economy has to real estate in Dubai," Barmak Besharaty, chief executive officer of Al Mas Capital, said.

On whether the new committee is likely to give more money to boost both the financial and banking sectors, Besharaty said it was very important how money is deposited and how the government can persuade banks to lend to the business community, as these are global issues.

Raju Menon, managing partner of Morrison Menon Chartered Accountants, agreed that more financial assistance is needed to keep the market afloat.

"Liquidity is a major issue. The government must inject more money to get the market back in balance. It's the only way," Menon said.

As the new committee is being formed, initiatives are being taken to resuscitate the mortgage market in the country.

Abu Dhabi has created an $8 billion (Dh29.4 billion) lender, Emirates Development Bank, by merging the Real Estate Bank and Emirates Industrial Bank.

Dubai-based lenders Amlak and Tamweel will also be incorporated into the new Emirates Development Bank.