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UAE economy strong enough to face global financial crisis

Following the decisions taken by the government in response to the international financial crisis, liquidity is available in the UAE, says Economy Minister Sultan bin Saeed Al Mansouri. And the economy is strong enough to deal with the repercussions of the global meltdown. « The UAE economy will enjoy a good growth rate but 2009 will be a real test for the global and UAE economies, » Al Mansouri told Emirates Business at the International Talent Conference organised by etisalat. « There is full co-ordination between the government, financial institutions and the private sector to alleviate the consequences of the crisis. » Mohammed Abdul Aziz Al Shehi, Under-Secretary at the Ministry, said the UAE was the country least affected by the financial crisis. The decisions taken by the government during the crisis in relation to the guarantee of deposits and the provision of Dh120 billion for the banking sector confirmed the strength of the UAE economy. « There is no a liquidity problem and projects are being executed without delay according to schedules that were set previously, » he said. « The evidence of that is the banks’ withdrawal of 15 per cent of the liquidity provided by the Central Bank. « The UAE economy is projected to achieve a growth rate of six per cent in 2008 compared with 5.8 per cent in 2007. Inflation is set to halve due to the drop in the price of oil and the increase in the value of the dollar by 20 per cent to 25 per cent against other currencies. » Al Shehi said the prices of some commodities, particularly food stuff, has started to come down in local markets. « A memorandum of understanding has been signed by the ministry and economic departments in Abu Dhabi and Dubai to intensify control of markets and curb manipulators, » he added. Etisalat Chief Operating Officer Ahmed Abdulkarim Julfar said the international crisis would affect all countries and institutions without exception. But despite the crisis etisalat remains determined to become one of the world’s top 10 firms. « Etisalat is in a good financial situation, » he added. « It will be slightly affected by the downturn. But the crisis will be an opportunity for etisalat to make acquisitions and enter new markets. » Abdel Hai Mohamad business24-7

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EmiratesNBD plans acquisitions and expansion

EmiratesNBD, the Gulf’s largest lender by assets, said yesterday it was ready to acquire any troubled rivals and was seeking to expand in Saudi Arabia and enter markets ranging from India to China and beyond. « That’s a role we are ready to take on. The question is how to go about it. It could be a cash transaction or a no-cash transaction, » Sanjay Uppal, Chief Financial Officer for Emirates NBD, told the Reuters Middle East Investment Summit. « We are ready to consider the right targets for the right prices, » he said. Uppal said EmiratesNBD was not in any specific acquisition talks but saw a need for consolidation among UAE banks. Banks across the world’s top oil exporting region have been squeezed by the global financial crisis, which has hampered their ability to finance multi-billion-dollar infrastructure and industry projects launched during a six-year oil-fuelled boom. Even before the turmoil raised the pressure for financial consolidation around the world, EmiratesNBD was seeking to expand its presence in Gulf markets and planned to have operations from North Africa, to Turkey, to South Asia. Uppal said talks to buy the Royal Bank of Scotland’s stake in Saudi Hollandi Bank had gone cold, but it was still interested and keen to expand in the Gulf’s most populous country. EmiratesNBD already has one branch in the Saudi capital and is keen to expand to some 10 branches but is waiting for licences. « In general, we have not seen a lot of expansion of presence of GCC banks into other GCC countries, » he said, referring to the Gulf Co-operation Council. « We are the only UAE bank with a branch in Saudi. This does give us opportunities… Business has done well to the extent it can but we would like to have more branches in Saudi. » EmiratesNBD has applied for a banking licence in India but had no time frame for the launch of operations there, he said. It expects to open a branch in Singapore in the second quarter of 2009. The lender was also in the process of applying to open a representative office in China, as a first step to acquiring a banking licence. Uppal said the Asian focus was propelled by the growing markets there and by solid ties between India and the UAE, home to a large population of Indian expatriates and businesses. « Our initial focus in these markets originates from the increased level of activity between this region and those countries. Having a presence there will give us an advantage, » Uppal said. « We are not going to focus on competing with players that have a solid presence there. » Reuters

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Dubai summit can ‘pave the way for a new era of progress’

Electoral systems around the world need to be reformed for better global governance – and new powers need to be integrated into the international decision-making framework, the World Economic Forum heard yesterday. Klaus Schwab, founder and executive chairman of the WEF, said real progress in the world’s governance system needed participation of as many global powers as possible. The world was witnessing a transformation, he said, which would affect the future and the coming generations. « There are transformational changes and we see them already in the world. We have to really re-think about the notion of capitalism and make it more integrated and more human, » he said. « We have to re-think about global governance and global co-operation. We have to re-think about the relation between governments and businesses as well as the relation between the rich and real economies. « Everybody is talking about new powers such as China and India, but the financial crisis showed the world that it must look at other places as well, including the Middle East and the GCC region, » Schwab said. The summit is a gathering of 700 of the world’s most innovative and relevant minds, including leaders from academia, business, government and civil society from around the world. It provides a platform to share ideas and collaboratively address some of the key issues on the global agenda to lay out solutions to some of the most pressing issues. The three main issues on the agenda at the summit are financial instability, food security and energy supplies. At the opening press conference, Schwab was joined by Mohamed Alabbar, Member of the Dubai Executive Council and Chairman of Emaar Properties and co-chairman of the summit. Alabbar said the gathering was a clear declaration to the world from the UAE and Dubai « that we are committed participants on the international arena… and we have sincere intention to launch and support practical solutions to overcome world challenges. » Alabbar said that despite the difficult circumstances lived by the region, Dubai remains to be the ray of hope for this region and the world as well. « The Dubai summit can pave the way for a new era of global socio-economic progress, » he said. « We were preparing for the summit for 11 months. Its timing has become critical due to the recent dramatic events in the world economy. « We saw the crisis originate in the developed world and have a significant impact on the developing world. This added more importance to the discussions about global challenges and integration during this critical time. » Al Abbar added that Dubai was the perfect place for such a historic meeting. « As a city, we are global in character and have always been forward-looking. » Mohmad Al Kady business24-7

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Global business leaders warn of pain ahead: Dubai WEF summit

Business leaders gathered in Dubai on Saturday have warned the world to brace for even more painful economic times ahead, but said the victory of US President-elect Barack Obama offers hope for fresh leadership at a crucial time for the global economy. The financial crisis that began with bad US home loans is now moving from the banking sector into wide swaths of the global economy, costing millions of jobs, forcing working families to cut back and driving once-mighty companies into bankruptcy. The US government said on Friday the country’s unemployment rate shot to 6.5 per cent, its highest level in 14 years. Jobless rates are rising elsewhere too: The UN labor agency said last month that world unemployment will hit 210 million people by the end of next year, its highest rate in the past decade. How deeply the global downturn will cut remains uncertain, participants at a regional meeting of the World Economic Forum in Dubai said on Saturday. While they called for calm, they also acknowledged there is cause for concern. “We will be telling our children and our grandchildren about this crisis,” said Mohamed El-Erian, co-chief executive of Pacific Investment Management Co., the Newport Beach, California-based investment firm better known as PIMCO. “You cannot turn off the fuel of this crisis easily.” Consumers in the US for example, are facing the triple whammy of tougher access to credit, rising joblessness and falling home and investment values, El-Erian said. Cleaning up the fallout will take both time and sacrifice, participants said. “It’s going to be really tough,” El-Erian said. “You now have to save even more for retirement. This is a tough time, and it’s important that expectations be formulated accordingly.” The need to recalibrate spending and expectations was a theme sounded by others as well. Howard Davies, director of the London School of Economics and Political Science, said residents of countries like the US and the UK have no alternative but to increase savings and reduce household debt. And, he said, homeowners and individual investors need to accept that a big chunk of the nest eggs they had amassed on paper is likely gone forever. “People are going to have to recognise the wealth hit and be prepared to move on from that,” he said. The economic slump is not just affecting Western countries. Soud Ba’alawy, executive chairman of investment firm Dubai Group, said “each and every business is going to be challenged”. He predicted annual growth in the booming Gulf could slow to as low as 2 to 3 per cent, from 6 to 8 per cent previously. Business leaders were hopeful, though, that the future Obama administration will bring a renewed willingness by the world’s largest single-nation economy to work with other countries to fix the global economy. “You now have a golden opportunity for leadership at a time when leadership is needed both domestically and internationally,” El-Erian said. The three-day event, a forerunner to the World Economic Forum in Davos in January 2009, has attracted more than 700 economic and academic experts. AP

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Oman joins bailout bandwagon by allocating $2 billion

Oman’s central bank yesterday jumped onto the bailout bandwagon allocating about $2 billion (Dh7.34bn) to lend to local banks and ease credit crunch in the country’s financial sector, its governor said yesterday. « We encourage banks to acquire the liquidity from each other or from foreign banks but in case they fail to acquire the liquidity we are willing to lend to them » Hamood Al Zadjali told Al Arabiya television. « We have allocated about $2bn, » he added. The central bank will lend at an interest rate of Libor plus 150 basis points. The central bank said it would provide dollar liquidity to banks in the Gulf state to make up for shortages caused by the global financial crisis. A central bank statement carried by the agency said the plan was in response to the « current situation on world markets » and includes dollar loans of one to three months by the central bank, as well as measures to make foreign exchange transactions smoother. The bank said the liquidity can be used only to fund local projects, pay back the depositors of hard currency, or service foreign loans that are due and cannot be extended. The plan has been launched together with the finance ministry. The global financial crisis has prompted Gulf Arab states to enact a slew of policy responses to combat tight liquidity conditions in markets and sagging investor confidence. The other five members of the oil-rich GCC have already pledged to stand by their banking sectors as the global financial crisis bites. Agencies

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Dubai exports rise 43 per cent despite global credit crisis

Exports from Dubai so far this year have registered a 43 per cent increase compared to the same period last year, according to Hamad Buamim, Director-General, Dubai Chamber. Firms registered under the Chamber exported goods worth Dh193 billion until the end of October 2008 compared to Dh135 billion during the same period last year. Speaking during the release of ‘The Report: Dubai 2008’, published by the Oxford Business Group, Buamim said the effects of global slowdown will be visible during Dubai’s next year’s growth results and urged the businesses community to make use of the available opportunities. « We had a 43 per cent growth this year compared to last year. The number of Certificates of Origin issued until the end of October this year was 533,000 – a 15 per cent increase, compared to 463,000 during the same period last year, » said Buamim. « So I don’t think the financial crisis has had any impact so far. But we think the outlook for 2009 will have an impact. To be very honest the global financial crisis and the slowdown in the United States and Europe will definitely have an impact on us, as we are a global city and part of the global economy. But this impact will be minimal. The double-digit growth that we have been achieving for the last few years will reduce, » he added. A slide in the oil prices will also contribute to a partial slowdown, he said, adding: « Right now we are witnessing oil prices going down. Yet the average has managed to remain over $100 per barrel. Although this will have an impact, some of these prices are higher than what was even budgeted by several countries in the region. » A working group has been created to look into the impact of global economic crisis on the local economy. « The working group has been discussing the challenges ahead. We are still positive about the future. At one stage we looked at the projection for 2015 to find out if it will be affected in any way. But so far we believe that the plan will not be affected as the Dubai’s growth during last two years was even higher than what we planned for, » he added. « For the past ten days I have been attending several events and we are discussing these issues. Although nobody exactly knows the extent of impact on the local economy, people have been discussing about the opportunities that have arisen and made use of, » said Buamim. Firms such as DP World and Dubai holding could make use of the very attractive rates of investment overseas. « The whole of UAE and GCC has a lot of investments overseas. We believe that the fundamentals are still solid and it would not be such a bad idea to take advantage of attractive investment rates. » Joseph George business24-7.ae

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Dubai Group to organise first World Pension Forum in region

More than 80 participants from the US, as well as government officials and senior executives of leading UAE companies will address the Middle East’s first World Pension Forum (WPF), which will be held in Dubai on from November 17. Organised by diversified financial services company Dubai Group, WPF hosts various conferences around the world to help US pension fund managers make knowledgeable investment decisions and allocate funds to potential investment destinations. Titled « Pearls of the Gulf », the forum will facilitate the development of long-term partnerships between the funds and the Middle East. The forum aims to offer insight into the new patterns of global trade and people flows, the expanded role of sovereign wealth, and the erection of first-class infrastructure. The event will also give UAE-based companies an opportunity to share their success stories. Soud Ba’alawy, Executive Chairman of Dubai Group, said: « Given the current scenario worldwide, this forum comes as a timely event and will offer key insights into our financial markets, particularly the role that this region is playing in the global economy. Organisations such as the World Pension Forum provide opportunities to foster long-term partnerships and open doors for business opportunities around the world. WPF pursues a shared vision with Dubai Group to bridge capital flows between the East and the West. » Philip Schaefer, President of the World Pension Forum, said: « We are thrilled to be bringing our delegation of institutional investors to the UAE for the first time. The region has shown what can be accomplished with dynamic, visionary leadership. We plan to return often. » Over the past few years, pension funds and other Western institutional investors have been eagerly exploring opportunities in the Middle East to capitalise on the region’s extraordinary growth story. In January 2008, The Economist reported that Morgan Stanley estimates pension funds worldwide hold more than $20 trillion (Dh70.4trn) in assets, the largest for any category of investor. business24-7.ae

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Zurich and Abu Dhabi firm in takaful venture

Zurich Financial Services Group and the UAE-based Abu Dhabi National Takaful Company have signed an agreement to establish an Islamic insurance company in Dubai. The new insurance company, Zurich Takaful Company, will be based in Dubai International Financial Centre, subject to the receipt of the required regulatory approvals. Zurich will control 51 per cent in the new joint venture company, while the remaining 49 per cent stake will be owned by the Abu Dhabi company. Mario Greco, CEO of Zurich’s Global Life Business segment, said: « The launch of Zurich Takaful offers an exciting growth opportunity and is in line with Global Life’s strategy, while it also reinforces the group’s commitment to the Middle East and North Africa. The new company provides a partnership, blending global financial strength and experience with specialist takaful expertise through the union of two powerful brands to create a new force in takaful. » Khadem Al Qubaisi, Chairman of Takaful, said: « We are delighted to announce our new partnership with Zurich. The business will offer a tailored family takaful product range to meet the needs of our discerning consumers. This joint venture will enable takaful to participate in one of the fastest-growing business lines in the region and in the world, which is a key component in our regional expansion plans ». business24-7.ae

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Etihad Airways to save Dh73m on fuel this year

Etihad Airways would be able to reduce its annual aviation fuel bill by Dh73 million ($20m) by the end of this year, owing to a series of cost-saving measures. The airline said yesterday it has so far saved more than Dh44m. The Abu Dhabi-based carrier, which launched a fuel hedging strategy in December 2006, saw it hedged at 70 per cent in 2007, 80 per cent in 2008 and 40 per cent next year. Now, with oil dropping to around $68 a barrel from its peak of $147 a few months ago, the airline says it still remains a wild card. « Whilst the oil price has fallen relative to its summer peak, it still remains a sizeable cost for all airlines and, of course, it is not a controllable cost such as headcount or capital expenditure, » James Hogan, Chief Executive of Etihad Airways, told Emirates Business. « The cost of oil, whatever the price, has a bearing on our business but the key point is that Etihad has to remain competitive in whichever market we operate. Pricing is an important element but as a full service carrier you need to look at all the aspects of our offering, » he added. The fuel bill fluctuates between 35 and 40 per cent of Etihad’s operating cost, which is a huge leap on the 20 per cent it cost back in 2006, according to Hogan. When asked how the airline was managing to raise finance for new aircraft and route expansions at a time when the credit market is drying up across the globe, Hogan said: « We have just had an Airbus A340-600 delivered and another one is set to join the fleet in December. We financed the debt for the two planes in the market and we were fortunate that the rates agreed were set before the September slump in the financial sector. » Clearly, the global financial turmoil has not deterred Etihad from revisiting its orderbook. « The orderbook is unchanged with the first aircraft of our deal announced at the Farnborough air show in July set to join the fleet in 2012, » said Hogan. He said similarly the airline is moving ahead with its route expansion starting off next month with flights from Abu Dhabi to both Moscow and Almaty in Kazakhstan. And March 2009 will see Etihad begin non-stop services to Melbourne and Lagos. Etihad had said recently that going forward the carrier may be looking for possible equity partnerships in order to face the international financial crisis. « In terms of possible equity partnerships my focus right now is on the core business and every day I look in microscopic detail for any blip in any market that might be feeling the squeeze, » said Hogan. He said the airline’s passenger and yield numbers look good for November, December and January. « But there is no complacency here. All markets are tough and we must remain competitive and keep a tight rein on controllable costs. » The airline said besides hedging strategy, fuel savings have been achieved through a variety of measures that include reducing weight on board, changing certain operating procedures and reducing cruise speed where appropriate. Shweta Jain business24-7.ae

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UAE oil output 2.3 mln bpd after cut

The United Arab Emirates is pumping around 2.3 million barrels per day (bpd) of oil, down from 2.5 million, after cutting output in line with an OPEC decision and shutting some wells for maintenance, a state oil company official said. « Now we’re producing around 2.3 million bpd, » Abu Dhabi National Oil Company (ADNOC) deputy chief executive Abdulla Al-Suweidi told reporters at an energy conference in Abu Dhabi on Tuesday. « Before Opec, we were producing around 2.5 million. Production is also reduced due to maintenance. » Around 150,000 bpd of oil output was off-line for scheduled work at offshore fields, he said, adding that it would come back by the end of November. The world’s fifth-largest oil exporter planned to cut oil output by 150,000 to 200,000 barrels a day for 40 days in October and November for maintenance, an ADNOC official had told Reuters earlier this year. The Opec member pumped around 2.5 million bpd in October, a Reuters survey showed. [nL3648048] On Monday, UAE Oil Minister Mohammed al-Hamli said the country had kept its pledge to cut oil supplies in line with its Opec commitments, and had started reducing production along with other OPEC members. The country would cut by 134,000 bpd, in line with the group’s decision on October 24. The UAE’s current oil production capacity stood at 2.8 million bpd, Suweidi said. The country would take another 10 years to boost its oil capacity to 3.5 million bpd, Suweidi said. It had previously targeted 3.5 million bpd by 2012. Suweidi gave no reason for the delay but said that most of the 3.5 million bpd production capacity would be on-line by 2015. « We are going ahead with projects as planned, but whenever we can wait we will wait (because of high costs). Our plans are not affected by changes in the oil price. » ADNOC was pumping around 5 to 6 billion cubic feet per day of natural gas, he said. A new project to boost production by one billion cubic feet per day would be completed in 2013 to 2014, he said. The plan is known as the Integrated Gas Development Project. The Organization of the Petroleum Exporting Countries agreed at an emergency meeting last month to cut output by 1.5 million bpd, or about 5 per cent, starting from November, to stop a plunge in oil prices that have more than halved since July and lost 32 per cent in October alone. ADNOC notified term customers last week it would cut its contracted volumes for its main export grades by 5 to 15 per cent in December, and cut its Upper Zakum crude by 5 per cent starting from November. Reuters

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