By Claire Valdini
Shehab Gargash says Gulf state should relax regulations required to set up businesses
The UAE could lose its competitive edge if the Gulf state does not relax regulations required to set up businesses, the CEO of Daman Investments said.
The Gulf state, which is ranked 27 out of 142 countries on the World Bank’s 2011-2012 competitive index, could risk losing out to Singapore or Hong Kong, said Shehab Gargash.
“It’s more restrictive and less profitable [than ten years ago]. If that trend continues you will reach a point when people say we have lost our competitive advantage. It’s not going to happen next year but it will happen on a trend basis,” he said.
“Look at the two other competitors to Dubai; Hong Kong and Singapore. As they have grown, as they have flourished, as life has got more complex, it has still a relatively easy place and cheap place to go in and set up shop,” he added.
Gargash, speaking at Daman Investments annual press briefing, said he remained optimistic about the UAE’s economic outlook, in particular its real estate, tourism, trade and transport sectors, but cited a lack of liquidity and bank’s “extra prudent approach” towards lending as areas of concern.
“As of the beginning of this year we have seen the beginnings of recovery in income generated from the hotel, residential and retail sector. We have seen a lag in office [real estate] but in all of those sectors, including offices, the worst seems to be behind us,” he said.
“I will venture to say that real estate is well poised to be the next big gainer in 2012 plus,” he added.
The UAE economy grew by 4.2 percent last year but the global slowdown is expected to take toll this year. The country’s Minister of Economy, Sultan bin Saeed Al Mansouri, in June cut the country’s growth from “almost four percent” to around three percent but said its leveraged banking system remained resilient to potential deterioration.
The UAE central bank this week said it plans to launch a discount window to enable banks to borrow intra-day and overnight funds in a bid to boost liquidity. “This facility will improve liquidity management practices within the UAE and support money markets if there are liquidity shortfalls,” the central bank said.
The euro zone debt crisis coupled with exposure to real estate, government and semi-government entities will continue to weigh on UAE lenders, said Gargash.
“Every sector of the economy over the last couple of years has shown signs of revival, nascency, renewed activity and general positive inclinations, we believe UAE banks have not jumped on that early indicator and have opted to remain cautious,” he added.
“That is a lost opportunity for UAE banks to engage [and] to once again flush liquidity back into the system.”