Globally, the coming year will be testing. Major first world economies have moved from boom times to bust.
The spectre of recession casts a shadow over the financial landscape. But nothing is forever. After the deluge, there will be a changed environment, invigorated with new ideas. Lessons will have been learnt, new economic parameters put in place and I believe that very soon it will be business as usual. The fact is the UAE is better placed than most other countries to withstand the global downturn.
On December 2nd we celebrated UAE National Day. As I drove to my office in Dubai that morning I experienced a sudden realisation: this great, internationally-admired metropolis that we usually take for granted sprang from the sands in less than four decades. If I hadn’t witnessed it with my own eyes I wouldn’t have believed it possible.
It was a partnership between UAE nationals and their leadership that fuelled this marvel and the idea that such phenomenal progress could be diminished by a fleeting glitch seemed to me outrageous. The ideas, innovations, toil and ‘can do’ spirit that forged this vibrant country are alive and well today. They, above all, will cushion us from this current worldwide financial turmoil.
Most importantly, the fundamentals of our economy are sound. This country of just 4.6 million benefitted from a GDP of US$167.3 billion in 2007, representing an increase of 7.4 per cent on the previous year. This year, GDP is expected to have increased by 6.8 per cent, while UAE companies reported a 44 per cent growth in profits during the third-quarter. Isn’t it time we stopped perceiving the glass as half empty?
The 2009 UAE budget displays the government’s determination to continue its foresighted timetable of diversifying away from oil into banking, tourism, construction and real estate – current main staples – as well as industry. Furthermore, the UAE enjoys a massive fiscal surplus, while the country’s sovereign wealth funds are the weightiest in the world. In retrospect, Gulf Sovereign Funds and Wealth Funds should have invested more in their booming local economies and should now revise their strategies in the national interest.
The 2008 ’Legatum Prosperity Index’ gives the UAE Federation an overall ranking of 28th in the world. Such a high score isn’t surprising. People flock to the UAE in search of a better life in a country that is renowned for its stability, security and lifestyle. This is considered a high-end location and it will continue to attract people from all four corners of the globe.
To cope with the ever-increasing passenger traffic the UAE’s national carriers Emirates and Etihad Airways are expanding, Abu Dhabi Airport is currently undergoing a massive US$6.8 billion expansion, Dubai International Airport, is undergoing further expansion at the cost of US$1.3 billions to construct a third terminal concourse, while Dubai is constructing a new airport at Jebel Ali set to be one of the largest in the world, In tandem, the real estate and hotel sectors are growing.
The Central Bank of the UAE must directly set up a mechanism to assist developers and large corporations who should be encouraged to go ahead with new projects, as these not only represent home-based cash investments but they also bolster related sectors besides fuelling employment. As well, banks guaranteed by government funds must continue to provide liquidity/loans to projects and businesses.
The UAE Central Bank has already indicated it is studying whether to set up a fund to facilitate property lending, which would be helpful. In addition, given the current environment, the Central Bank should avoid overly-long holiday closures. Banks should curtail their traditional vacation time during this period so that business transactions are not interrupted.
On January 20, there will be a new White House with a powerful team of economic experts, expected to inject renewed confidence into both the US and global economy. Provided these experienced fresh faces are able to quell investor nervousness, the UAE is certain to swiftly rebound along with other countries. Until then, savvy investors here will spot unprecedented opportunities the moment they suspect the market has bottomed-out. The same goes for our stock markets racked by irrational negative sentiment when foreign investors took flight due to the global credit squeeze.
In the meantime, irresponsible media rumour-mongering and sensationalism should stop. I would strongly appeal to our own newspapers and television networks to quit the hype. The media should also refrain from providing platforms to irresponsible ‘doom and gloom’ financial analysts or representatives of those financial institutions that triggered the international meltdown. Unrealistic and unfounded assessments from rating agencies are similarly damaging.
This country may be built on sand in the literal sense but as those gleeful individuals writing mostly in the foreign press will soon discover, its foundations are as unbreakable as the hardest diamond and its people’s spirit just as bright.
The year 2009 will be defined by opportunity and we as a people will be defined by our ability to recognise it and grasp it.