Besides the fact that it is THE luxury event of the yearMay 27, 2015 9:48
UAE: Coping with its “new realities”
EFG-Hermes’ annual UAE Research Yearbook is out. The nation has suffered, but there may be some positive changes in store.
December 11, 2008 4:18 by kippreport
The past year hasn’t been kind to UAE residents and investors. Rents are continuing to rise, Emaar’s stock prices have fallen to AED3.09 and property prices have fallen in the fourth quarter of 2008. And according to EFG-Hermes, an investment bank based in the Egypt, although many of the UAE’s problems are due to the effects of the global credit crisis, its issues are compounded by low investor confidence.
In its annual UAE Research Yearbook, EFG-Hermes analyzes the changes in several sectors in the nation, including real estate and banking; according to the report’s strategy outlook:
“The UAE stock markets are currently suffering from a crisis of confidence, with share prices factoring in a worst case scenario…we believe the critical issue at stake with regards to investor confidence is one of credibility and uncertainty.”
However, well before the credit crisis reached the UAE, investors suspected that corporations in the Emirates are not transparent. Their suspicions turned out to be true.
By September 2008, the former-CEO of Deyaar, Zack Shahin was arrested, so was the CEO of Dubai Islamic Bank (in connection with the Deyaar case). In June, the bank’s former VP for finance structure, Rifaat Othmani, was arrested as part of the same investigation. Employees at Nakheel , Tamweel and Etisalat were also arrested on corruption charges. The list goes on.
As part of the UAE government’s drive to improve the level of transparency and corporate governance, and, hopefully, prove to investors that local companies can be trusted, it amended a federal law banning government officials, such as ministers, from signing corporate deals with the government while they are in office. The amendment was made on December 2:
“The amendment of article 62 of the constitution, states Prime Minister, or his deputies, or any federal minister should not indulge in any professional work, commercial, financial or any trade deal with the federal government or local governments while on duty. Any of above mentioned officials should not also hold more official jobs besides his/her main official job in any government of one of UAE emirates,” the official news agency WAM reported.
Such changes prove the government is willing to take steps to combat the growing concerns investors have about the government’s involvement in business deals. If implemented vigorously, the new law may help improve the level of transparency in the nation, and rework how corporations view and practice corporate governance.
Furthermore, the change proves what EFG-Hermes claims in its report: that the government is taking steps to ensure the nation is able to cope with its “new realities,” and to confront the challenges of restoring investor confidence.
In retrospect, 2008 may have shattered the UAE’s image as a financial haven, and in some respects, the party may truly be over in Dubai. And although thousands in the nation are suffering financial losses, perhaps they and the nation’s businesses will have more calculated projections of the future and strive for sustainable growth. –DB