Dubai: Economic diversification certainly has helped UAE to survive the world economic crisis, Hamad Buamim, Director General, Dubai Chamber of Commerce and Industry, told Gulf News in a special interview.
He said: “the UAE effectively coped with the global economic downturn by promoting the diversification of the UAE economy across many sectors.”
Most of the businesses sectors have been affected from the global downturn, he added, however, trade and logistic proved to be the main pillar of economic during that time.
The fiscal, legislative and monetary measures that the government adopted have helped a lot in reducing the impact of the world economic crisis on the UAE, Buamim said.
Pointing to the main lesson learnt by the crisis, he said that the need for strong corporate governance and transparency was highlighted by the global financial crisis.
What was the direct impact of the global economic crisis on the UAE and how did it cope and turn business around?
Finance was directly affected, and in turn, the construction and real estate sectors were impacted. Trade slowed mildly. Despite the crisis, tourism remained strong throughout. As a result, Dubai as well as UAE GDP registered negative growth in 2009. However, the UAE effectively coped with the global economic downturn by promoting the diversification of the UAE economy across many sectors. Rather than the dominance of construction and real estate sectors, trade and logistics reclaimed its position as an economic pillar. Other sectors that performed well were hospitality and tourism. The UAE also encouraged diversification of export markets into growing economies across Africa and Asia. This diversification of export markets helped businesses grow their sales, as the export markets grew and contributed to economic growth. Continued diversification across growing export markets will further help UAE businesses increase their sales in the future and contribute to continued economic growth. Other steps that the UAE took included increased fiscal spending which helped achieve the targets of economic growth.
What were the most affected sectors?
The financial sector, construction sector and real estate sector were most affected, but have since rebounded.
What is the estimated loss and size of debt left behind after the crisis?
When money is borrowed to build out infrastructure and social capital there is no such thing as a ‘loss’ as the benefits play out over the long-term. Investing in the country for the benefit of the people is a fundamental part of the vision of the leaders of the UAE and is a major contributing factor to its successes.
How did the UAE overcome the global recession? What measures have been taken in the private and public sectors?
At the private sector level, some of the affected firms scaled down their activities and other were merged to remain financially viable. However, some firms that scaled down during the global crisis are now increasing their size post the recovery. In the public sector, many laws have been passed to protect investors. For example, the bank deposits were guaranteed by the government. Further, fiscal and monetary policy measures were undertaken to mitigate the impact of the crisis on the economy. Additionally, several financial and economic reforms were undertaken to strengthen the UAE position in the long-term.
Looking ahead, the UAE Companies Law will have a further positive effect on the economy. This law will make it easier to set up a business, strengthen the protection of shareholders and lay down a framework for the governance of public companies. It will also ensure transparency and disclosure of financial data and the efficiency and integrity of a company’s board of directors. This gives businesses a more modern set of standards to adhere to that meet today’s changing business climate. Generally the law will improve the competitiveness of Dubai’s economy and encourage new investment. We think it will encourage the establishment of more new companies in Dubai because it makes the regulations and business environment more attractive for foreign investors. It will also improve the ease of doing business in the city and will have a positive impact on foreign direct investment.
What lessons were learnt by the global crisis?
The need for strong corporate governance and transparency was highlighted by the global financial crisis. For businesses, the ability to look to new markets and spread risk is also important, as is the ability to change and react quickly to external forces.
What should the UAE do to avoid the impact of such economic crises?
Given the UAE’s exposure to world markets it would be difficult to avoid global financial crises in the future. However, swift action by the UAE government helped to lessen the impact of the crash, and as such the UAE has seen a swift turnaround. Having strong policies in place and enforcing sustainable business practices will help the UAE weather any future economic upheavals.
What is your advice to the business community?
Dubai’s economy is stable and growing. The city is a fantastic place to do business, with easy access to markets across the Middle East, Asia and Africa. Dubai Chamber has seen its new members increase by six per cent in the first half of the year which indicates that more new businesses are being established here all the time. Now is as good a time as any to start a new venture. There are always risks, but with proper information and guidance, which Dubai Chamber can provide, there are opportunities for investment.
