UAE economy – what next?

November 25th, 2010 by Stephen Jones Leave a reply »

Further concern for local investors in troubled real estate projects, becuase a UAE developer has filed for liquidation, according to the Financial Times. The move is the first court-mandated bankruptcy of a distressed property project since the financial crisis began. Al Murjan Real Estate, the owner of the $3bn 8,000-home White Bay project in Umm Al Quwain, filed for insolvency in the Sharjah courts. Investors in the development, which includes two man-made islands and waterfront housing, must use  the legal process to recover their down-payments alongside other creditors.

In the third quarter, the all-residential index fell by 4.75 percent against the same period last year. Apartments dropped by 7.48 percent, while villas rose by 0.90 percent. Further data revealed that prices of the smallest apartments fell by 18.30 percent in October, year-on-year, and that mid-range (51 to 100 square metres) flat values dropped by 7.94 percent. REIDIN.com  said that its full residential index was only 59 percent higher than its January 2003 base value.

Around $72bn worth of construction contracts are due to be awarded in the Gulf by the end of the year. The  GCC Building Construction Industry Report 2010  was unveiled at The Big 5 2010 exhibition, the largest building and construction exhibition in the region and concluded that nearly a third of the contracts, or $23.5bn, will be awarded in the UAE. Five key sectors, including retail, commercial, residential, tourism and leisure, were analyzed, with retail highlighted as the most promising sub sector for growth.

There are still concerns about asset quality given all the banks’ exposures to real estate and infrastructure lending, though profitability has actually been quite resilient. Banks in the UAE suffered as non-performing loans surged during the global financial crisis, forcing lenders to take provisions on debt. State-owned Dubai World said in September it reached an accord with most of its creditors to restructure $24.9bn of debt. Nakheel, a unit of Dubai World, said on July 14 that a group of its creditors unanimously supported a plan to alter the terms on $10.5bn of debt.

  • Mashreq bank has cut 50 jobs as part of restructuring process and is the second such announcement by a Dubai-based bank in the last two days. Mashreq, which is controlled by the Al Ghurair family, said the job cuts were part of a reorganisation of the lender’s small and medium-sized lending business. In an email statement on Wednesday, the bank confirmed that it will no longer provide its small business-owner loan product.
  • The announcement follows hot on the heels of Noor Islamic Bank, a Dubai government controlled bank, which on Tuesday confirmed that it had laid off more than 30 employees. “Thirty something” employees were let go a few weeks ago, Hussain Al Qemzi, the bank’s CEO, told Bloomberg in an interview in Manama. .

 More than $15bn of borrowings mature in 2011 and most of them will need to be refinanced,

However,  Passenger figures at Dubai International Airport are expected to hit 90m by the end of this decade, -  the world’s busiest international passenger traffic. Growth will be driven by a projected 10 percent increase in Emirates Airline passenger numbers and a  doubling FlyDubai traffic

For 2011  passenger growth at Dubai International Airport will grow by 13.1 percent in 2011, breaching 50m for the first time. . Freight traffic is will alsoby 4.8 percent to 2.2m tonnes next year. Total aircraft movements will rise by around 12 percent to 328,900.

 Taxi drivers however seem to be faring more badly despite the Dubai fare surcharge  from Sharjah. More than 100 taxi drivers gathered on Wednesday morning outside the Ministry of Labour in protest against the decision to deduct 52 fils per kilometre from their monthly revenue.  Since the rule was implemented on November 1, taxi drivers from all five franchise companies complained that the decision was unreasonable since it leaves them with less than half of their previous monthly revenue.

  • As one taxi driver commented ‘… If I want to make the same commission as before [30 per cent] I need to work double. But customers are much less because they find taxis expensive. ‘
  • ‘A ministry official told us that we have no other choice but to abide to our contracts. I would rather leave get my end of service benefits, instead of working for free and leaving my family back home with debt,” said another driver.

In response to the protest, Sharjah Transport released a statement yesterday saying: “The working relationship between the driver and the franchise company operating the service of taxis in the emirate is ruled by the Labour Code, and the law guarantees all of their rights. The rules are legally binding and were agreed upon by both parties, [the company and its employees]. If the employees disagree with the contract, then they have every right to hand in their resignation at the Ministry of Labour in Sharjah

And despite the doom merchants the DUbai growth rate seems to have eben 2.3% in the first six months of 2010 as trade and manufacturing improved along with tourism, the Dubai Statistics Centre said. The sectors of manufacturing, transport, logistics, services, wholesale and retail trade, hotels, restaurants and government services achieved positive growth,” Arif Obaid Al Muhairi

The economy of the emirate, which accounts for some 80 per cent of the UAE’s non-oil trade, expanded 5.7 per cent in real terms in 2008.Official 2009 GDP data for Dubai are not available, although the IMF estimates a 0.9 per cent contraction.Concerns about Dubai’s liabilities, estimated at around $115 billion, have eased after Dubai World reached a deal in September to restructure almost $25 billion (Dh91.8 billion).

 

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