The UAE will have positive growth this year
The UAE will see positive growth in its gross domestic product this year while other countries struggle to prevent themselves being dragged into negative territory, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, said yesterday.
Setting a global benchmark for transparency, Sheikh Mohammed, who recently celebrated his third anniversary of accession, was answering media queries online through his new website, UAEPM.ae.
Outlining the strengths that will help the UAE and Dubai economy to emerge from the global financial crisis less bruised than other countries, Sheikh Mohammed said "the worst is behind us". Significant indicators of returning optimism have emerged already, he said.
Sheikh Mohammed stressed the UAE has and will always act in a unified way, as a federation, to meet any crisis with confidence, just as it has done in the current economic environment.
He condemned rumour and speculation that is not based on the realities of the situation and stressed on "positive discussion about the issues and values that Dubai and the UAE care about".
ENCOURAGING INDICATORS OF RECOVERY ON THE HORIZON
The government has taken significant steps to support the financial services and property industries in the UAE. Are you happy with the results so far?
I am very pleased with the results, and I am confident we are on the right track. Everybody will recognise shortly the encouraging indicators of the economic recovery.
What are the main strengths and weaknesses of the UAE, as it faces the challenge of the global economic slowdown? What are the particular challenges that Dubai faces as it positions itself as a global business centre?
The UAE's strengths are numerous. The UAE's success in facing the global financial crisis and alleviating its impact on the Emirati economy is the most conspicuous evidence of these strengths. The country enjoys a leading ranking position in several fields such as productivity, environment, connectivity, and transformation to knowledge economy.
Yet the failure to match best international practices in these fields might be considered a major weakness. We always benchmark ourselves against the best. I always say that we have just embarked on a long journey of hard work to fulfil our promised sustainable development through a series of strategic projects to be established during the years to come.
Do you believe that the UAE economy will contract this year? Or will it achieve certain growth? And at what per cent?
We are confident that our national establishments' abilities, combined with the economic measures undertaken by the government, will lead to economic growth this year. Yet, we expect that growth may not come at the same rate of pervious growth records we sustained over the past few years. While speculating global economic contraction of 0.5 per cent, international financial bodies forecast a slight growth for the UAE economy. Other forecasts speculate a three per cent growth for the UAE economy.
If it became necessary, what further steps of support would the government consider for the financial services and property industries? Would the government consider extending support to other important industries in the UAE, like tourism? If so, what form might this take?
The measures we have undertaken so far have shifted the UAE economy from the crisis mode to the solution mode. Not one country in the world, regardless of what efficient systems it boasts, could have ensured recovery from the financial crisis before recognising its actual impact on the global economy and international markets. No one could predict ensuring recovery before the world's leading economies consolidates their efforts to face the crisis. That actually took several months of constant work. Now, optimistic voices are getting louder worldwide, while markets' fear has started to gradually diminish.
The UAE has one of the region's most progressive, vibrant and open economies. Efforts by world's leading economies to deal with the financial crisis have been effective and fruitful, while the tendency to increase international cooperation including recent decisions by the G20 summit in London - remains very positive and encouraging. I can confidently say that the UAE is very well positioned on the recovery path, thanks to our domestic policy measures such as the fiscal stimulus, easing monetary policy, and increasing liquidity in the system. There are some early indicators of international economic recovery. Yet, I cannot predict that the global economic recovery will proceed without potential hurdles. I cannot also claim that repercussions of the economic financial meltdown are over yet. But what I can say is that the worst is already behind us, and there is now a solid will and determination among concerned countries to join hands to collectively revive the global economy as well as their own individual economies.
Increasing financial support to other business sectors is probable, pending the actual needs of each particular sector. The UAE's tourism sector is in a good shape, with UAE hotels recording high occupancy rates. The country's tourism industry has already successfully survived the worst period and resiliently adapted itself during the most critical times.
By the end of the first quarter of 2009, what is your evaluation of the economic performance of the UAE in light of the financial crisis? What is the UAE government's strategy to raise the national economy, and emerge from the financial crisis stronger than before? How do you respond to the rumours that Dubai has turned into a ghost city?
The performance of our economy in the first quarter of this year proves that we are on the way out of the crisis, and that we are on the right track. Our economy will resume its health faster than other economies, but the speed of that resumption is not governed only by the strength of our economy and its abundant resources. The speed will also be influenced by developments in the international economy - including the measures of revival in the grouping of industrialised states known as the G-20, whose role in international trade movement is about 90 per cent of the total international trade, and whose GDP is about 60 per cent of the entire world GDP. The speed of general recovery will also be influenced by the capability of international measures connected with monitoring markets, and the role, functions and work mechanisms of international financial institutions, especially the International Monetary Fund. I am optimistic that good implementation of the decisions of G-20 and the International Monetary Fund will speed up the recovery of the global economy.
Maybe every cloud has a silver lining. The financial crisis has restored balance to the markets following years of inflation which posed a threat to Dubai's and the UAE's economies. Do you see this tough correction, for instance to the real estate market, a good solution to a problem that could have escalated in the future?
Sometimes opportunities are born from the wombs of crises. The most important thing is to focus on the future and develop appropriate frameworks that guarantee highest levels of performance on heels of the crisis. Measures undertaken by the government on both local and federal levels will ensure that we shall emerge from the global financial crisis with least damage. The UAE has proven remarkable ability in facing and overcoming previous crises. Specialised committees and task forces are closely monitoring the development of the global crisis and analysing its impacts on our economy and subsequently propose action plans to resiliently cope with these ongoing changes.
There is no doubt that good planning is one of the key factors behind the success of the UAE, backed by the close monitoring of the ongoing challenges and opportunities. In your plans, what are the challenges that you foresee? What is the country's level of readiness to address them?
Humans face challenges throughout their lives. Through commitment to proper planning of projects and programmes, and following up on their implementation, challenges can be successfully addressed. It is also crucial to anticipate challenges without ignoring any possibility. Yet, there are some unforeseen challenges that originate remotely but influence us - as in the global financial crisis that erupted in the United States and spread to the economies of developed countries and the rest of the world. One must be prepared to effectively deal with the implications of such challenges to one's country, economy and security. We, in the UAE, are aware of the challenges that we face and are always prepared for the worst, and are also willing to face whatever unforeseen developments regardless of their magnitude and impact.
There are many other positive aspects of the global financial crisis which were embodied in refining the current competencies, reviewing the need for expatriate expertise, and strengthening the bonds of the federal entities that supported the UAE. In your opinion, what are the lessons learned from this crisis both on the local and federal level?
There are many lessons to be learned from the crisis, the most important one being the assertion of the state's role in regulating and monitoring the overall economy and markets, and confirming the fact of the global economy's unity, in addition to the unification of the global market. The widening scope of the crisis, which includes all parts of the world, confirms this unity and the common international pursuit. In addition, President Obama's public statement, which verifies that the United States cannot overcome the global crisis on its own, is further confirmation of the unity of the economy and the market. Other lessons learned from the crisis is realising the urgent need to develop the regulations, terms of reference and working mechanisms of international financial institutions to commensurate with the unified markets and economies, and the involvement of many influential players.
In the United Arab Emirates, we perform a wide range of reviews through specialised federal and local committees which are well aware that within the challenges of the crisis, remain many opportunities. The first opportunity to be seized is to benefit from the lessons learned from the crisis, and be prepared to deal efficiently with the world after the crisis; a world completely different than what it was before. As for the forces of federal entities, the fact is that the strength of these entities is what enabled them to cope with the crisis and contain its negative effects.
What is the policy that the UAE will use with regard to the latest developments of the global financial crisis?
Our economy is strong and its potential lies in its great diversity. The proportion of oil in the UAE's GDP is less than 30 per cent, and this reduces the impact of oil price fluctuations on the national economy. I agree with you regarding the presence of many pessimistic reports on the world economy, but it's an exaggerated and unrealistic pessimism. Countries with the largest economies are seriously committed to rehabilitating the economy, while the summit of the G20 came out with encouraging results after meeting in London recently. Our hope is to commit ourselves to the implementation of all decisions. In fact, the negative vibrations will decrease, and will be substituted by cautious optimism. As for the levels of growth, few states in the world are likely to maintain high levels of growth recorded in recent years. We, in the UAE, will achieve economic growth rates lower than those recorded in previous years.
THERE IS NO BUYING OR SELLING BETWEEN DUBAI AND ABU DHABI
Your Highness received His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, in Dubai last week, and escorted him on a tour that included key landmark developments across the emirate. What was the significance of this visit?
I meet with His Highness Sheikh Khalifa on a regular basis. We are companions on our journey of development, and he is our Leader and our President. Dubai is his home and he is most welcome at any time. The visit comes in line with His Highness's ongoing follow up on development efforts across the seven emirates. He is always keen on meeting his people across the country to listen to their views and ensure their own welfare.
As a matter of fact, all His Highness's visits to Dubai are important. His latest visit was significantly important as he toured Dubai's new landmarks, expressing his satisfaction at Dubai's milestone achievements. He was also very keen on visiting "Dar Al Ittihad" (Union House) where establishment of the United Arab Emirates federation was proclaimed. The visit was in honour of this remarkable achievement.
When Dubai launched the $20 billion bonds and the UAE Central Bank subscribed to $10 billion, it was interpreted as help from Abu Dhabi to Dubai to get out of the crisis. How do you evaluate this action by the UAE Central Bank, and what about the second tranche of the bonds, which would be another $10 billion?
It seems that people are not aware of the life realities in the United Arab Emirates. Well, I welcome this interpretation because it emphasizes the depth of ties among the emirates and ensures the strength of our Central Bank and its confidence in Dubai's economy.
We have announced bonds totalling $20 billion, raised half of it as a public offering, then the Central Bank subscribed to the full amount; we will pay an annual interest rate of four per cent annually on the five-year coupons. What we put forward, meets our needs at this stage. Should we need the second part that is, $10 billion we will then announce it to the public; we know that it will be of interest to many.
Dubai officials have said that there is no current need for the other $10 billion. Does this mean that the Government of Dubai has closed the doors for new subscription to a second tranche? Will support be provided by the Government of Dubai for its companies as a grant?
The doors to subscription have not been shut down. The subscriptions so far meet our requirements. The support given to companies is not a grant, because its origin is the bill, and companies possess productive assets that enable them to meet all the requirements. The problem of these companies is part of the liquidity problem that has afflicted the financial system and banking world.
There is talk that Dubai will sell some state-owned companies and that Abu Dhabi will be its partner in many projects in place or under implementation. What is the truth in this?
These rumours and speculations turned into news and headlines in several prominent international newspapers. Rest assured that between Abu Dhabi and Dubai, there is no buying and selling. Everything in Dubai belongs to Abu Dhabi and Dubai and the rest of the UAE, and all that is in Abu Dhabi belongs to Dubai and Abu Dhabi and the rest of the UAE. Let me remind you about what The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, said last month about this matter. He said that the impact of the current global financial crisis on the national economy of the United Arab Emirates has been misunderstood and exaggerated.
He said that the relationship between members of the UAE Federation has been misrepresented.
"We are ... one strong, coherent body. As for the measures taken (at) the federal or local level to address the crisis, they were declared and (made) clear-cut. There was no need to unleash predictions in this respect,'' His Highness said.
People who are aware of the relationship between Dubai and Abu Dhabi say that there is no need to worry about the effect of the crisis on Dubai because it relies at the end of the day on the financial strength of Abu Dhabi, which owns the biggest sovereign fund in the world. What would you say?
Those people know well that they can't bracket the relationship between both emirates into just a financial relationship. The money element is a very minimal component in a superior relationship built on family ties with a unity soul, with "tolerance" essence and foundation concurred by both Sheikh Zayed and Sheikh Rashid on 18 February 1968, when they met and issued a historical statement announcing the establishment of a federal union between Abu Dhabi and Dubai and called on their brothers in the neighbouring emirates to join the union.
Do you know what it meant for us to stand a few days ago with His Highness Sheikh Khalifa at Union House under the UAE flag, and in the same place where our ancestors stood the day of the UAE announcement? Would you be able to appraise our feelings at that moment? These are moments that you cannot ponder easily. They are priceless.
Those who know the truth about the Abu Dhabi and Dubai relationship and all the other emirates are well aware that the federation of the UAE is a choice of wise and liberated people who are guided by their hearts, beliefs and wisdom. They are people who God Almighty described as ready to sacrifice their souls for others. Again, I remind you of what His Highness Sheikh Khalifa said: "We are... one strong, coherent body.
A year ago, and during your visit to Asia, you warned against the global financial crisis. Why did you not take precautionary measures to prevent the negative impact of this crisis on both Dubai and UAE?
The crisis has taken the whole world by surprise and evolved at a tremendous pace. During my visit to Asia, I had warned against turmoil in financial and commodities markets, marginalising the role of international financial institutions and potentials that these institutions fall short from fulfilling their expected roles in a world where all international markets became very much related, turning into one huge global market which does not follow any international rules, regulation or supervision. I had urged leading world economies to move swiftly and reconsider roles and mechanisms of international financial establishments and institutions, especially the International Monetary Fund - and that what exactly the G20 summit did earlier this month.
Regarding the precautionary measures, I believe that no preventive measures neither in the UAE or any other country in the world would have provided the desired immunity from the ramifications of the global financial meltdown. The UAE's solid economic structure, efficient performing establishments, adoption of a balanced model of conservative banking policies overseen by the federal Central Bank and liberal economic approach, were the key elements that enhanced the country's ability to survive the negative implications of the global crisis and prevented any case of bankruptcy in any of the country's banks or major corporations. The impact of the crisis on our economy was significant during the last quarter of 2008, yet it was not as harsh as on other major economies.
Amid the growing global crisis and in the latest G20 summit, many were demanding a reconsideration of the global economic system, and declaring the failure the entire system of capitalism. Would the UAE with its regional and international reach consider a new financial direction, such as the Islamic banking system, as a substitute, even temporarily, to the current global economic system which is currently deteriorating?
The UAE, on its own or through the GCC, the Arab League and the specialised international institutions, plays an integral role on this front. The capitalist system did not fail. What has failed is the excessive economic liberalism, which pushed to minimise the intervention of the regulatory government institutions in the markets and banks' activities.
Certainly the world is witnessing the birth of a new economic and financial order. The results of the G20 summit are a prelude toward this end. However, consensus on the format and the content of this new global economic system would not be reached soon. Different factors determine the future of this system, including growing global competition and conflicting national economic interests. No party would easily give up its position and gains for the benefit of the global economy recovery.
As for the suggestion on the Islamic banking, it is of interest to the global banking sector. However, to be a substitute to the current economic systems, even if only temporarily, is a much more complex approach, which relates to the nature of economic systems, the size of the economies of nations, and the size of Islamic banks in the banking sector worldwide. As you are aware, there are a lot of factors that govern this, such as the distribution of the economic, military, scientific and social powers in the world, as well as the competitive nature of civilisations, and the strong links between the civilisations and religions.
The UAE has proven remarkable capability in managing previous crises, including the First and Second Gulf Wars and the 9/11 events in the US. What are the steps endorsed by the country's supreme leadership to overcome the current financial crisis? And do these measures include re-evaluating the UAE's strategy and its plans for the coming few years?
Revisiting and re-evaluating strategies and plans are ongoing processes. They aren't only restricted to times of crises. Life is full of changes and developments, but only the clear-headed can effectively monitor and examine these changes and identify their trends and then determine how much these developments will impact their own strategies and plans.
Your recent visit to Russia complements your strategy in visiting the strong economic countries worldwide such as Germany and China last year. Do you think that these visits are still useful nowadays? Are you planning to continue this approach and what is the objective of those visits? What was the outcome of your last visit to Moscow?
This is a strange question. We are pretty sure that this crisis will not last forever, and that it will end. The UAE has always had good relations with all countries around the world and especially the weighty economic countries. Our duty is to work toward developing and enhancing those relationships. In fact, during global crisis countries should broaden those visits and enhance their bilateral relations especially since this crisis may result in forming a new economic and political world construc
NO INCOME TAXES EVEN IF THERE IS A BUDGET DEFICIT
One of the many effective measures taken by the UAE Government to deal with the fallout of the global financial crisis has been to maintain or increase spending on infrastructure projects, even if this leads to a deficit budget. Would the UAE be comfortable with a deficit budget for the first time in many years? Would you immediately put in place measures to wipe out the deficit (if that happens) in the next year? What such measures would you consider?
This is a hypothetical question. Actually, we evaluate all possible scenarios and we are very keen on endorsing a deficit-free budget. Yet I can read between the lines of your question about potential measures to face budget deficit. My reply is: No Income Taxes.
You asked the Ministry of Finance last year to prepare the federal budget for 2009. The early announcement prior to the global economic crisis has resulted in a deficit-free budget. Would the crisis have implications on the 2010 budget, particularly with regard to the basic needs of Emiratis?
In the past three years, the federal budget was issued early and before entering the new fiscal year. The submission of the budget for 2009 without a deficit is because its main provisions have not been affected by the global financial crisis. I also do not think that 2010 budget will be affected. We still have seven months for the year to end, and in my opinion this is quite a long period - we may see by the end of it some positive indicators that would help in accelerating the recovery of the global economy.
Dubai has been recently criticised for its development strategy in the light of the global financial crisis. How do you perceive this campaign and how are you dealing with it?
Criticism and negative statements do not really disturb me. We do not mind receiving objective criticism that helps us improving our services and methods. If there were negative aspects, then we will address them and work toward revamping them. But following the global financial crisis, what we read and heard was not in reference to the negative aspects. In fact it was a "media bombardment" targeted at the UAE as a model for a federal state, a successful and prosperous Arab country. And Dubai, the city that has set up a successful economic model at a global level, was under a daily attack by some Western media, as if they were in a race against time to harm the UAE.
As for the motives of the campaign, God knows. But it seems that the success of the Arab, whether individual or state, city or a company, is seen as unacceptable. It seems that seeing distinct images of successful Arabs and Arab countries disturbs some people. They would rather stick with the distorted images of Arab stereotypes in their minds.
I need to stress here a very important perception. We are not growing in order to be a model for its highest building in the world, best airport, and most luxurious hotel, and the largest seaport and man-made islands. These landmarks and features are unique and famous all over the world. But the Dubai model is beyond that. Dubai is an Arab city with scarce natural resources but with a clear vision of comprehensive development and social needs. It is a city that succeeded through its investments in human resources, its unique geographical location, and its trade expertise. This has enabled us to achieve unmatched growth and to become the focal connection between the East and West. Dubai has proved as well the possibility of coexistence of different cultures in an open and tolerant Arab Islamic environment.
Dubai's model, which is part of the UAE model, lies in the success of the economy's diversification, and in sparking the interest of the Arab region and neighbouring countries in the information and communication technology, the e-government and the knowledge economy, and in facilitating access to the people in our region to global best practices. Our international experiences in various areas are often on display through exhibitions, conferences and other activities.
Dubai's model also lies in proving the viability of investing in the region, of investing specifically in the knowledge economy and in human welfare. It has also raised the citizens' expectations in the region concerning levels of good governance and transparency, and the quality of public services and state-of-the-art infrastructure.
Dubai is about providing the highest international standards in education and health systems. It is a city with entrepreneurial spirit that entered into international investment areas and bought assets in global ports, airports and financial markets. Dubai succeeded in building a global financial centre and entering into partnerships with reputed financial institutions, and was able to compete globally in the areas of air and sea transport, and charitable initiatives that were created to help developing the less fortunate countries.
These are some of Dubai's model features, which has attracted the attention of the world, and enticed the interest of the Arab region and its people, and inspired many people and motivated them. Is this the model that our critics are targeting?
I asked my brothers and myself this question and I did not expect a reply, because we are accustomed in the UAE to respond by work, not words. We believe in God and we have full faith and confidence in Him and in our people and businessmen and the many other believers in Dubai.
Abu Dhabi is also witnessing an attack since it succeeded in leading a successful Arab union and launched initiatives of a strategic and important nature such as Masdar City. I know that the international media have covered art initiatives in Abu Dhabi, including building an outpost of the Louvre. But one gets the impression that even in such coverage of important initiatives, there's invariably some reference or the other to discredited stereotypes of the Arab Gulf. Now the focus is on Dubai, and again the stereotypes are being brought up. It seems that any successful Arab model in economic development invites such negative treatment in the international media
To be fair, we read recently a few balanced articles reporting on what is the UAE doing with regard to the effects of the global financial crisis on our region.
The media campaign has focused on pointing that Dubai is facing an economic crisis threatening the foundations of its economic development. What is the actual impact of the crisis on Dubai economically and socially?
In fact, the campaign has gone much further than that. An American writer, well known for his extreme views, was so keen to project Dubai's alleged "failure" in the coexistence of cultures, that he went all the way stating that Dubai was a place where cultures break up and not where cultures meet. He reached that conclusion based on the fact that Dubai has jailed and deported a British couple caught having illegal sex on a public beach.
With regard to the fact that the global crisis effect threatens Dubai's growth and economy, I can guarantee you that those references constitute "wishful thinking" on the part of some people; they are illusions, not realities. The economic foundations and development are firm and stable; otherwise Dubai would not have been able to deal efficiently with the global financial crisis consequences. In addition to that, Dubai is not a city on its own. It is a member of the United Arab Emirates federation, which is strong, resilient and successful a federation that is able to face the most difficult challenges.
Foreign media are reporting on "the bubble that burst". What would you tell the people who are endorsing this view?
I keep hearing the expression of "the bubble" for the past couple of decades. In my opinion, this bubble is found only in the minds of those who often keep repeating it and do not know its meaning. The future will prove to them the truth.
Let me assure you we are fine, we have overcome the crisis with the least amount of losses. In our culture, we say: be virtuous and you will gain. That is why we always look at the half full cup of water, and when we look at the empty part, we do not moan over the void, instead we think of better and faster ways to fill it.
If this is an unfair campaign against Dubai then could you explain to us how to get out of the current crisis?
The impact of the global financial crisis has been felt all over the world. It generated a state of panic in all developed economies. It was expected that our region would not be immune to the crisis, especially in view of the fact that it led to the credit freeze, write-downs at banks, deferral of mutual credits, and a freeze on lending in some of the wealthiest industrialised countries, such as the United States.
The crisis hit the world in September 2008, but I think that the panic phase is over now, especially after the intervention of governments in many major countries to regulate financial and banking sectors, and the allocation of large sums of money to revitalise their economies. This step has enabled the summit of the G20, that was held in London recently, to agree on a package of decisions and actions aimed to revive the global economy and the organisation of the international markets.
For us in the United Arab Emirates, I can safely say that we have succeeded in containing the risks of the global financial crisis in record time. This is a result of the good policies of the Central Bank, and the government's action to ensure the liquidity of banks and the protection of deposits, and other actions at the local level, such as the additional liquidity that the Abu Dhabi Government pumped it into the Emirate's banks and the bond issuance of $20 billion bonds.
The crisis management in addition to the decisions taken during the G20 summit have spread a high degree of satisfaction and optimism around the world, and reflected positively on all the nations including the UAE, which has always had a strong, multi-potential and diverse economy.
We did not at any time feel that the financial crisis is a threat. The worst is over and behind us. Since the eruption of the crisis we did not hear of any state-owned bank or company announcing bankruptcy. None of the economy sectors was snapped. We are currently implementing plans and programmes of action to benefit from the lessons of the crisis and ensure the recovery of the negative effects..
By Yazad Darasha
© Emirates Business 24/7 2009
