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MENAFN - Khaleej Times - 16/06/2009

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(MENAFN - Khaleej Times) The UAE real estate market should bounce back next year, but the banking sector is likely to face hardships for at least another 12 months, an executive of a Dubai-based research and consultancy firm said.

In an interview with Khaleej Times, Waqar Mirza, Director of KF1 Management Consultants, said the UAE government needs to simplify and speed up procedures for businesses and cut the cost of visas to help lighten the financial load that many companies face here.

Mirza added that sovereign wealth funds in the Middle East should focus primarily on developing their own national economies and those of 
regional countries.

KF1 has been in business since 2007 and has operations in Europe and Asia as well as the Middle East. Below are the excerpts of the interview.

What do you say about the current financial crisis? How can UAE entrepreneurs and companies turn the crisis into an opportunity?

A) There is no better time to review existing business agreements or even start new ventures than now, when the cost of setting up a business has dropped by 30 to 40 per cent. Cheaper costs in acquiring competent personnel, lower rents and competition among suppliers also contribute to the favourability of the market for new businesses. Even buying existing businesses is a great opportunity for investors.

What can the UAE government do to help investors and the business community during the downturn? Do you think stimulus packages will steer the economy out of crisis?

A) I believe that confidence among people and not mega billion-dollar bail out packages will make the difference in this situation. The UAE government also needs to reduce red tape within the agencies dealing with the business sector, as well as decrease visa costs to ease the load on the 
business community.

The property sector in Dubai faces serious challenges since the US mortgage crisis unfolded last year. What do you foresee, and when is recovery possible?

A) Local and regional people do not make up the majority of individual investors in the UAE. As such, the local real estate market highly depends upon UK investors, who are not expected to bounce back until spring 2010.

Do you see mergers of small banks in coming days? What should the banks' strategy be to survive this difficult time?

A) Banks in the UAE have grown alongside the property boom. Since the banks had been a bit too ambitious in lending … in the past, we are expecting large-scale consolidations and mergers to happen amidst projections that the banking sector will face hardship for another 12 months at least.

What immediate steps would you recommend to restore the confidence of investors, especially in Dubai's retail, tourism and real estate sectors?

A) It is a very good strategy these days to undertake large-scale marketing campaigns that will highlight the advantages of investing within Dubai. In addition, the emirate can also capitalise on its reputation as a place that provides excellent business prospects as well as opportunities to enjoy life's luxuries.

Do you think Sovereign Wealth Funds in the Middle East are in a strong position to take advantage of the global crisis by investing in Europe or America?

A) No, they should focus on developing their own economies and those of regional countries. Based on the current market scenario, Europe and America have been hit the hardest by the crisis, and Sovereign Wealth Funds, or SWFs, should exercise much caution, if not totally reconsider investing in European or American assets.

There are several challenges for companies — for example, shrinking sales and profits—in the wake of the crisis. What do you suggest and recommend for businesses to survive these days?

A) A great team is important to remain competitive, so companies should keep the best people and focus on reducing auxiliary costs.

The problem is no one in Dubai has really been through a period of recession, making the market inexperienced in dealing with the current challenges. Maintaining an efficient and knowledgeable pool of staff will definitely work to the advantage 
of businesses.

What are possible alternative approaches to generating investment?

A) It is imperative to maintain robust financial backing for businesses to remain stable during recession. Some of the alternative sources of cash in this time are private equity firms and investment banks. Companies have also become more open to joint ventures with suppliers and contractors, and even employing the help of friends for emergency … funds.

Do you recommend setting up new businesses or expanding existing ones at present?

A) As I said, investors can leverage today's business climate in terms of benefiting from better deals with rent, manpower and goods. They can also establish a strong presence in the market, which will put them in a strategic position after the impact of the crisis blows over. Businesses have to keep in mind that people have cash, but they are looking for solid investments to put their bets on.

How do you rate the investment environments in Pakistan and India?

A) Despite its current political situation, Pakistan remains a country of great potential, which still attracts foreign direct investments. India is a much safer bet, with its large population and vast amounts of money. However, investors should bear in mind that there are great local brands that enjoy a loyal following in the domestic market.

By Muzaffar Rizvi


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