GCC execs say worst of downturn probably over

From banks to property firms, executives across the Gulf region and Egypt believe the worst of the financial downturn is over, but many warned of more bumps along the way.

"This has been an extraordinary year, things fell off a cliff overnight," Mustafa Abdel-Wadood, managing director of Abraaj Capital, the Middle East's biggest private equity firm, told the Reuters Middle East Investment Summit this week.

"I don't think we are still in a very pretty place regionally or globally, but there is better visibility."

The Gulf Arab region's six-year oil boom came to an abrupt end last year as the credit crunch swept the globe and oil prices fell from record peaks of $147 a barrel down to $32 in December.

The liquidity crunch dented the property sector - especially in Dubai, the region's business and tourist hub - while banks across the region were rocked by a debt implosion at Saudi conglomerates Saad Group SAADG.UL and Ahmad Hamad Algosaibi & Bros.

But a glimmer of stability seems to be returning to the region and beyond.

"We feel that the whole crisis is bottoming," said Egyptian Prime Minister Ahmed Nazif, adding that some indicators had shown a "a small but very distinct" change in direction upward.

In the battered property sector, sales of land by Abu Dhabi's Aldar Properties in the third quarter for the first time this year was a sign, analysts said, that the market is recovering.

"I think we are over the worst," said Shafqat Malik, chief financial officer of Aldar, the emirate's largest property developer by market capitalization.

Executives also said that hiring had picked up after a rash of redundancies across several sectors, particularly property.

In Saudi Arabia, deal-hungry international banks and firms are struggling to find qualified staff, although that is also partly due to the difficulty of attracting employees to the ultra-conservative kingdom.

The UAE's Aldar has hired 500 people in its hospitality sector alone, Malik said.

"Eighteen months ago our biggest challenge was execution and getting the right people. Now both things are in abundance."

The renewed confidence has led to hopes the dormant M&A market may come alive in 2010, as may the IPO pipeline, as liquidity returns to the market and financing becomes more readily available.

But executives also warned of over-enthusiasm and celebrating too soon, noting it was important to take heed of lessons from the crisis.

"We've learnt that financial institutions will always do something silly and that the herd effect is still there," said Stuart Pearce, chief executive of Qatar Financial Center Authority.

"One of the biggest lessons is don't assume that someone is looking after you. That's not always the case."

Some executives said the clouds had yet to start clearing.

"The worst is still happening in some sectors and certain things are still not fully worked out," said Suresh Kumar, chief executive of investment bank Emirates NBD Capital.

"The financial crisis was in some aspects a signal of a chronic malady and you can't just pop a few pills to resolve it. Some of it needs surgery." (Reuters)

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