DIFC Forum opens with pledge - and call - to face facts

Outside the Godolphin Ballroom, where some 600 industry leaders and policy-makers were gathered, Dubai's vitality seemed undimmed: its streets teeming with late-model cars and well-dressed people, its skyline dancing with construction cranes.

However, two of the city's most eminent business leaders acknowledged that the financial shock waves from the global credit crunch were already breaking on Dubai's shores.

If last year's DIFC week was an extended celebration of the city's creativity, dynamism and vision, and an exploration of how Dubai and the Gulf region could most profitably interact with the global marketplace, 2008 would explore how that creativity, dynamism and vision could be marshaled to protect Dubai's economic miracle.

"The global community is entering uncharted waters, and facing uncertain times", said HE Dr. Omar Bin Sulaiman, Governor of the DIFC. But, he reminded the forum, "Uncertainty and risk are inherent in business...

"Today, sustaining growth requires breakthrough thinking and new ideas... I say crisis is the mother of opportunities", Dr. Bin Sulaiman said.
Dr. Bin Sulaiman argued that "there is no better group than this distinguished group gathered here today", and no better forum than the DIFC, to come up with ways out of the current crisis. But, he warned, "If we are to benefit from this positive energy, I urge you all to leave all your preconceived ideas behind".

The keynote speaker, Mohamed Ali Alabbar, Member of the Dubai Executive Council and Chairman of Emaar Properties, dispensed with the euphemisms with which such addresses are so often laced:
"I promise you I will not be mincing words, but stating facts", he said. "These are serious times, as we all know. And they require frank talk and real action. So let's speak clearly, honestly and openly...

"It's a fact that during a rising market, everyone is a financial genius", Mr. Alabbar said. "But at this moment in history, I have to say I am not sure how many of us feel like geniuses.

"It's a fact: we have to not only change how we do business ... but how we look at world, as well".
Mr. Alabbar addressed rumours about Dubai's debt, and its ability to service that debt. The city's debt obligation was $10 billion, he said. Key sovereign assets were currently under valuation, but were estimated at $90 billion - "and that does not include airports, our metro, bridges, the healthcare system"... At the same time, total debt of affiliated companies was $70 billion, with total assets nearly four times that.

"Let me therefore state categorically that the government can and will meet all its obligations going forward", Mr. Alabbar said. "Please have no doubt about this fact". Further, he said, Dubai's borrowing was not used to fund state expenditure, or fuel consumption, or provide subsidies: "it is funding of long-term... infrastructure development". He also noted that the UAE government had been among the first to guarantee depositors in the banking system.

"Will the government step in & help affiliated companies"? Mr. Alabbar asked. "If and when the need arises, yes, we will". And the Central Bank "will continue to act appropriately and in the best interests of our nation as we move forward.

"Make no mistake; we will act in a timely manner & we'll be transparent in all these actions", he said.

Dubai's historic management style has always been: think, decide, and take action swiftly, he said. It was this faculty which was being deployed to face the current crisis.

For instance, he said, the Advisory Council and Dubai authorities had moved quickly to facilitate consolidation of the biggest real estate banks, to protect the city's most important sector. "I don't think that will overnight create faster funding for real estate, but it will increase flexibility", he said.

It could also be argued that, after more than a decade of steady, double-digit growth in the real estate sector, global financial conditions were creating a "healthy correction", Mr. Alabbar said.
"We were lucky: for the last 18 years, we've been galloping", Mr. Alabbar said. "I think you will see more consolidation, especially with third-party developers, who may be facing some problems getting credit".

Dubai's three largest developers control about 70% of the market. The Advisory Council had been working with them and with third-party developers to monitor supply and other issues on ground, to make sure that future needs are met.

Indeed, the crisis had created unprecedented cooperation among the three developers, Mr. Alabbar said.

"We must not forget, not too long ago, these three entities were competing aggressively with each other. But we have to understand realities on the ground, and work accordingly. Realities did change on the ground - now, we have to work together, to collaborate; maybe in the future we'll go back to competing again".
In other words, once again Dubai's famed flexibility, its talent for harnessing its people's creativity and adaptability, would be its strength.

"We are by nature a very optimistic people, but we are also realistic", Mr. Alabbar said. "We have to face reality, and make some hard decisions - but we must move on, for the sake of our children.

"You're seeing the same realities on the ground in Mumbai, in Singapore, in LA - the whole world is trying to collaborate and deal with this".
After more than a decade of double-digit growth, "with six, seven, eight percent - we call it a slowdown", Mr. Alabbar said. "I think this is a chance to take a breather. I hope we learn from what world's going through to make us a stronger city in the days to come.

"For so long, Dubai has served as a beacon of hope to people across a diverse region, representing all that can be accomplished when you have the means and the will.

"Today, however, everywhere on earth, faith in the future is being put to the test. Here in Dubai, we recognize this with humility - many challenges lie ahead. I assure you we will not spare any effort to secure our future. We recognize the challenges before us. But this city, as part of one strong nation, will continue to grow & thrive".

At the same time, however, there was only so much government can do, he said:
"Look at the US: the government is trying every possible trick, including giving money back to the people. We should do all that is necessary to manage our affairs, and stimulate our economy. But at the end of the day, I think people need time: time to understand, to rebuild their confidence -- & that's something you can't change."

Interactive polling in the hall showed a consensus that the global financial crisis was having a strong impact on Dubai; perception has played a major role in the current crisis, the polling suggested, but so have business fundamentals.

However, asked to come up with a timetable, the audience came out on the optimistic end of the spectrum, believing the situation would stabilize in 12 to 18 months - rather than the 2-3 years on the outside end of the scale.