Economist Intelligence Unit survey points to era of lower risk tolerance and higher financial regulation

Dubai: May 12, 2009: The global economic crisis has "fundamentally changed" capitalism and the way governments and business view the world. That is the main conclusion to be drawn from an Economist Intelligence Unit report commissioned by Dubai Holding.

The report, 'Risk and Regulation: A new era for capitalism', is based on the findings of a survey of 418 global senior executives. The survey found that almost 60% of respondents believe that capitalism is entering a new era of lower risk tolerance, higher regulation and slower growth.

"This report is an important contribution to the debate about the lessons to be learned from the global economic crisis. Although we are still in the midst of the economic fallout, now is the time to question many of the assumptions that have underpinned the global financial system and grasp the opportunity to change things for the better," said Ahmad bin Byat, Chief Executive Officer, Dubai Holding.

The report examines the shape of this new landscape, how management decisions will change as a result and whether business people support government measures taken so far to stem the crisis.

In summary, the executives surveyed believe decision-making within businesses will reflect a new reality, as frugal customers and state regulators hold sway. The respondents support emergency intervention in the banking sector, but their opinions are more conservative when it comes to further reform, such as outright nationalisation of other key industries, creating so-called bad banks that buy and ring-fence toxic debts, or limits on executive pay and bonuses.

The main findings of the survey include:

Capitalism has "fundamentally changed"

Respondents say that their long-held faith in free markets is at an end, and Adam Smith's "invisible hand" appears to be malfunctioning. Nearly 60% of senior business executives agree that "the current crisis has fundamentally changed capitalism". Moreover, 46% believe that when the upturn arrives there is unlikely to be a return to the finance driven economy of the past, with easy credit fuelling investment and asset prices.

Executives want more regulation in the banking sector and beyond

Today, regulation is no longer seen as counter-productive meddling in otherwise perfect markets, but a prerequisite for a functioning global economy. Business people are not known for their affection for red tape, and usually balk at the idea of accepting more bureaucracy. Yet almost two-thirds (65%) of executives agree with the statement: "I am in favour of further bank regulation, even if the result is slower economic growth."

Regulators and customers will have more sway over business decision-making as a result of the crisis

Power centres are set to shift as well, with some stakeholders exerting more pressure than others. At the top of the influence list are regulators, customers and creditors. In contrast, employees, non-governmental organisations and trade unions will be left out in the cold, with large majorities believing their influence will wane or stay the same.  

Caution will prevail in the aftermath

Risk appetites will diminish in the next two years, and remain flat in the following two to five years. Respondents say that the hangover from this downturn will be longer than in the past, with almost 60% believing that economic growth will be harder to achieve in the next recovery.

There is broad support for government measures taken so far to stem the crisis

Nearly 70% of respondents support government intervention in the banking sector such as buying shares and nationalisation. The majority of respondents also believe that governments' response to the downturn will have a long-term positive effect on their business. Only 17% think that the measures taken will have a negative effect on their long-term business prospects.

"Our survey shows how much the economic downturn has alarmed the business community," says Robin Bew, editorial director and chief economist at the Economist Intelligence Unit. "Many respondents believe the psychological effects of this recession will last far into the next recovery. They expect they will need to adjust to a world of conservative banking, frugal customers and more active regulators for some time to come."

A free copy of the report can be downloaded from: www.capitalism09.com

www.eiu.com/site_info.asp?info_name=risk_and_regulation&page=noads

Risk and regulation: A new era for capitalism is an Economist Intelligence Unit report, sponsored by Dubai Holding. The research is based on an online survey of 418 executives conducted by the Economist Intelligence Unit in February and March 2009. The survey respondents represented a broad range of company sizes and industries, and came from a wide spectrum of functions. More than half of respondents described themselves as board members, C-level executives or vice-presidents. The quantitative survey was supplemented with interviews with senior executives, analysts and academic experts.

-Ends-

About Dubai Holding
Dubai Holding was launched in October 2004 to consolidate the various large-scale infrastructure and investment projects in Dubai, as well as to identify opportunities to develop future major projects that will benefit the UAE and the region.

The company has been created with the goal of providing a better future for all through the range of life-improving industries it is involved in. Each Dubai Holding operating company focuses on key areas which dynamically support the development of Dubai as a world-leading hub for commerce, leisure and finance.

Under its slogan: "for the good of tomorrow" Dubai Holding has created a strong presence in 13 various industries by developing pioneering initiatives spanning numerous sectors including Finance, Real Estate, Technology, Hospitality, Energy, Healthcare, Aerospace, Communication, Industrial Manufacturing, Biotechnology, Education, Leisure & Entertainment, and Telecommunication.

Dubai Holding's seven member companies are: Jumeirah Group, TECOM Investments, Dubai Group, Dubai Properties Group, Tatweer, Sama Dubai, and Dubai International Capital. Through these companies Dubai Holding has a foothold in four continents with more than 250 companies and around 16, 000 employees.

The seven members have initiated, launched, and manage companies in different sectors. These companies include: Jumeirah Living, Jumeirah Essex House , Wild Wadi,  Dubai Internet City, Dubai Media City, Dubai Knowledge Village, Dubai investment Group, Noor Islamic Bank, Borse Dubai, Dubai Properties, Injaz, Salwan Properties Management, Dubai Healthcare City, Universal Studios Dubailand, The Tiger Woods Dubai, Dubai Towers, Salam resort brand, Dubai International Capital Global Equity, and Dubai International Capital Private Equity.

More information about Dubai Holding, can be found at www.dubaiholding.com

About the Economist Intelligence Unit
The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. As the world's leading provider of country intelligence, the Economist Intelligence Unit helps executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies.

More information about the Economist Intelligence Unit can be found at www.eiu.com.

For further information please contact:
Malcolm Ward
JiWin Public Relations
Tel: + 971 4 361 3576
Email: Malcolm.Ward@jiwin.ae

© Press Release 2009