Wednesday, Nov 12, 2008
Gulf News
Dubai: Lack of transparency, coupled with "lousy" hype and marketing, is damaging the image of the region, particularly that of Dubai, and fuelling speculations that the GCC is not strong enough to face the deepening global financial crisis, a top official from an investment company said here on Tuesday.
Ali Al Shihabi, the CEO and founder of Rasmala Investments, urged business, economic and political leaders in the GCC to be transparent and publicly disclose the relevant economic data in order to stop people from speculating and eventually helping regain public confidence.
Al Shihabi held the current confusion in the marjet responsible for the collapse in GCC stocks and the slump in the real estate sector.
This confusion, he said, was largely the result of inability of the local business leaders to reveal to the public the real picture and show how the region's economies are different from those in other emerging nations.
"Communication, unfortunately, is still a weak skill among business, political and economic leaders in the GCC. They have to understand the importance of communication, the importance of explaining what they have been doing because that affects the psychology of the market," Al Shihabi said during a networking event with Dubai Property Society.
"There is very little data that come out in the region or Dubai. And that has proven to be negative because without proper information, everyone is reaching at his or her own decisions," he added.
He said the GCC region is actually in the strongest possible position to withstand the crisis due to its massive financial reserves and is one of the few markets in the world that will likely incur real growth in gross domestic product (GDP) in the next few years.
"The decision taken by the UAE Central Bank to inject liquidity into the banking sector was an extremely powerful and valuable move. But that has not been communicated clearly to the public.
"And you can see that, particularly in the performance of the stock market. The stock market is like a temperature of the economy. It tells you the sentiment of the people and the general sentiment is much more negative than it has to be."
He said the region is more likely to emerge unscathed from the global financial crisis, compared to other emerging economies, because the GCC countries have no international borrowings and have accumulated substantial savings over the years.
"What the investor has not yet understood is that the underlying economic strength of GCC countries will make the region completely different from the rest of the world, maybe with the exception of China."
Caution
He also cautioned against the announcement of projects of massive proportions, like the biggest reclamation or mile-high building, saying that such announcements also drive investors away, especially when they are made at a time when major economies in the world are battered by the financial crisis.
"The traditional Middle Eastern approach of pretending that everything is fine, when the rest of the world is not, is counter- productive. Enough of the largest, biggest island the size of Manhattan or Hong Kong and underwater hotels.
"That kind of hype is unnecessary because Dubai is a serious business model and by continuing that hype, you've brushed a very serious sector with the Disneyland or Hollywood brush," said Al Shihabi.
"This gives the wrong image. It tells the world that these are rich people spending their money and they don't know how to spend it. It scares people," he added.
Gulf News 2008. All rights reserved.
