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Economists Call For More Transparency


DUBAI - Continued investment spending by the UAE and other Gulf countries has so far helped cushion the impact of global crisis on the region’s economy but economists, speaking at a panel at the Dubai International Financial Centre, warned that the region’s lack of specific data will hinder restoration of consumer and investor confidence.

“The problem here in the region is the absence of regular official data encouraging the rumours [of economic problems],” Marios Maratheftis, head of regional research for the Middle East, North Africa and Pakistan at Standard Chartered Bank.

Last week, the Abu Dhabi government loaned Dh 16 billion to five local banks at a rate of 6 per cent. Maratheftis said the move raised more questions than it answered.

“First, why are we seeing a capital injection? There is no problem with the capitalisation of banks,” he said. The move confused analysts, he said. “In my view we need deposits in the banking sector.” Since UAE banks compete for deposits, they offer high interest rates, contributing to 
inflation.

With a blustering opening, chief economist for the government of Dubai Dr. Raed Safadi tried to assuage fears about the local economy.

“I live in Dubai and actually what keeps me up at night is the constant sound of the cranes. That shall remain music to my ears so long as the global economy languishes.”

He said the UAE is still issuing more residency visas for Dubai than it is cancelling and 2008 saw an increase in the number of business licenses. Safadi did not give firm numbers for visas issued, a point of controversy following reports that there were 1500 visas being cancelled each day.

Initially, he said there were 59,000 more visas issued than cancelled in December 2008 and approximately 40,000 more visas issued than cancelled in January 2009. He then said that there was an average of 1,000 net visas issued each day in January.

The lack of public data became a point of indirect verbal sparring between IMF’s Middle East and Central Asia Department Director Masood Ahmed and Safadi.

“Would you rather we hit you with taxes so that we can report to you on a monthly basis?” Safadi said, directing his speech at the business community present at the discussion. “You ask for data, we want to provide you with data but we can only provide you with data if you give it to us.”

The IMF has not yet released its annual report on the UAE’s economy. Done in consultation with each member country, the so-called Article IV reports examine the economic health.

“If we don’t release the Article IV and the country decides it does not want to release it we do send out a public notice saying that decision has been made,” Ahmed said.

Safadi acknowledged that Dubai’s integration with the global economy slowed growth – “We did get contaminated,” he said. “Oil is two to four percent of GDP. How could you have achieved such a growth in such a short period of time if you don’t leverage?” Safadi said Dubai should maintain that integration rather than turning towards protectionist measures, something many economists fear is happening in developed economies like the US. “Protectionism is not the way we shall go. This economy has been built on openness and we will continue.”

· emily@khaleejtimes.com