Will the UAE have what it takes for an MSCI upgrade?

Will the UAE have what it takes for an MSCI upgrade?

As MSCI's classification review draws nearer, questions around its impact on the UAE's ailing business performance is in the spotlight. Will the UAE see the ranking as worth the change?

December 11, 2011 6:02 by Precious de Leon

This Thursday, the UAE will be at the edge of its seat once more as Morgan Stanley Capital International (MSCI) makes its decision on a classification review for the Emirates and for Qatar.

But there’s a possibility that the index compiler may just postpone the announcement once more as performance levels of the UAE have seen even more decline from when the review was delayed in June this year.

That’s why analysts have become a little bit more pragmatic about the impact the rating will have on the UAE’s investment prospects, as this article in Gulf News suggests. A positive rating from MSCI is, of course, good news but analysts doubt that it will boost business significantly.

Meanwhile though, Dubai shares rose most this week amid hopes that the UAE will be upgraded to ‘emerging-market’ status at the same time that European leaders are agreed on measures to contain their own debt crisis–so at least some positive news has come out of this imminent report.

For the most part, it’s hard to disagree with analysts. The UAE continues to feel the blows of the economic crisis from a couple of years ago, even know as it prepares for a second crisis that may be brought on by the Euro debt. And while the rating will help put the UAE on the radars of investors around the world, the current circumstances around regulation, business ownership and current market conditions make it less appealing for discerning investors to consider the UAE, compared to say, India, China or even Latin America, which hold promise of cheap labour, and a outlined and established investment regulations and business ownership.

Of course steps are being made to roll out the red carpet for potential business. There’s that new Companies Law that was recently approved that sets “a general framework for public joint-stock companies to ensure the rights of all stakeholders, transparency and disclosure of financial statements and the efficiency and integrity of board of directors” –at least that’s how a Gulf News article described it.

Beyond this vague description, there is still “a need for more clarity on the changes made,” as one Dubai-based analyst said on request of anonymity. And we have to say, we definitely agree. The more transparent business processes become, the better the country’s chances of being upgraded. So the UAE will have to decide how much they really want to be upgraded then, and if it’s really worth changing their current business processes.

That clock is ticking…December 14 is just around the corner.