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Oil Sector Recovery to Lead 
GCC Economic Rebound

DUBAI - The UAE and rest of the GCC countries will be among the first economies to rebound from the financial meltdown, which is expected to last for three to five years, on the back of a steady recovery in oil demand, the head of a national investment company said.

The oil sector still contributes and represents a major part of the GCC economy, which is one of the fastest- growing regions in the world after China and India, said Shaikh Mohammed bin Faisal bin Sultan Al Qassimi, Chairman and CEO of the Sharjah-based Manafa LLC, a holdings and investment company with a significant presence in the Middle East.

The economic outlook for the GCC is positive as the region continues to amass huge financial reserves primarily driven by an unprecedented rally in oil prices till July 2008, he said. “I believe the oil sector will be the first to lead the way to robust growth.” However, he did not say how soon the oil sector recovery would take place.

Although oil prices plunged to below $50 from a peak of $147 a barrel in mid-July 2008, the rising demand in developing countries, led by China and India, will more than offset the negative effect of the global financial crisis on oil demand, Shaikh Mohammed said.

“I believe oil prices would bounce back to $60-70 a barrel and revitalise the UAE economy, which is driven by prudent development of oil revenues, abundance of wealth and liquidity, and commitment to legal and economic reforms. Given the reasons, I believe the GCC and the UAE in particular will be among the first countries to 
bounce back.”

Shaikh Mohammed said the property market would start improving from the first quarter of 2010 “very gradually 
and slowly.”

“Prices of properties were becoming unbearable and unrealistic, be it rental orsellablespace, in the market conditions we have faced before the global crunch. The market is still holding in the first quarter of 2009 with slight decrease. The real estatefeverwe had experienced will come back as a cycle, but in the very long term.”

Shaikh Mohammed felt that the UAE government was doing “an excellent job with tits reform policies and stimulus programme. It is a matter of time that things will fall in place and get back to normal.

“Personally speaking and analysing the reports from a cross-section of financial institutions and investment houses, I feel the global economic downturn could last for as long as three to five years,” he said.

“Without doubt 2009 is going to be the worst — especially the last quarter of 2009, and the impact may continue to be felt, possibly even as far as five years from now.

“Over a period of time, we will begin to see the economy pick up naturally, but it will be a gradual process. Regaining the confidence of investors in such a climate is not easy, of course, but it will be those who are savvy enough to invest intelligently in the long-term and see the bigger picture (who) are going to survive. Short-term gain is over – it just doesn’t exist anymore.”

Shaikh Mohammed said the current market environment demanded even higher standards of excellence from companies that wished to remain competitive. The downturn is an opportunity for businesses to reassess and analyse the effectiveness of their infrastructures and strategies, he said. “At the moment we (Manafa) are looking at existing operations to enhance performance, consolidate business and improve corporate social responsibility,” he said.

“We will look to improve policies and procedures too. Taking this approach will aid us in finding the very special opportunities that will help us to navigate through the rough weather,” said Shaikh Mohammed, who has steered Manafa to a period of growth 
and expansion.

Over a short period since its launch in 2003, Manafa has acquired new businesses and has now under its umbrella a portfolio that encompasses a diverse range of sectors including real estate, hospitality, tourism, trading, marketing, energy and resources and 
private equity.

Shaikh Mohammed remained cautiously optimistic about prospects of further expansion. “Any expansion is determined on the equity and leveraging that financial institutions would provide.” 


issacjohn@khaleejtimes.com