In the opulence of probably the world’s most luxurious hotel, finance ministers from more than 20 Arab countries have gathered to examine the state of the global economy. They are also calculating the impact the debt crisis in Europe and the slowdown in the United States could have at the crossroads of East and West, the Middle East.
But nearly nine months into the Arab Spring, the finance ministers who are in charge of regional economies without the benefit of huge oil and gas reserves have expressed deep concerns about funding transitions in Egypt and Tunisia and potentially in Syria and Yemen.
The Chairman of the Arab Monetary Fund Jassim Al Mannai painted a picture of a prolonged period of economic uncertainty: "The fear is that economies of countries whether those that witnessed political shifts or those that are still witnessing political unrest today, will take a long time before they recover and go back to normal.”
It has almost become legend in London Underground parlance, “mind the gap”, meaning that commuters should move with caution as they enter the train to avoid an accident on the platform.
This phrase “mind the gap” applies as well with what we are dealing with in Dubai and the UAE overall. Comments, many complain, have tended to be either inconsistent on the one hand or contradictory on the other.
That again was the experience in the last 48 hours, when the central bank of the UAE said it would offer liquidity to the banking system to all domestic and foreign banks with operations in the Emirates. The move was designed to avoid a run on institutions by depositors and guarantee there are ample funds available if the need arises. It went over well and indeed there was no panic.
Twenty-four hours later, we were on the receiving end of a statement by a hitherto unknown official from the Dubai Department of Finance Abudulrahman al Saleh who said the investors and lenders may have to shoulder the responsibility of their actions.
To be precise, he noted that Dubai World “was set up on a commercial basis and not guaranteed by the government.” The statement was crystal clear, that buyers or in this case lenders should beware. Nothing wrong with that approach if it is telegraphed in advance, but in this case -– having spoken to a number of bankers and others involved in the process –- it was not. This, one London veteran of the Middle East said, “is not the way to rebuild confidence.”
When covering the region one learns to put various pieces of the puzzle together by working the phones, talking face-to-face over a coffee and then completing the picture. In this instance we are not there yet. Some would contend we are still a way off.
The chairman of the Supreme Fiscal Committee of Dubai and Chairman of Emirates Airlines, Sheikh Ahmed bin Saeed al Maktoum is the man calling the shots right now as he and his team comb through the assets of Dubai World and the other “Dubai Inc.” entities. The people I spoke to over the last 72 hours expect more clarity by Wednesday.
In the meantime, bankers who have lent an estimated $123 billion to the UAE overall, 70 percent of that from European banks, might feel they too need to mind the gap.
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