Marketplace Middle East - Blog
Surprises Lurking in the Shadows
The noise represents the sound of expansion -- big pylon drivers bang away day and night as yet another tower looks to fill more space in the Dubai skyline.

Depending on where you are staying, big shadows are cast from these vast skyscrapers which block the bright sunlight of the Arabian Gulf. But visitors to the region in search of high growth and opportunity are finding that even the best intentions and strong will cannot overcome what is a Western-led financial crisis.

The finance minister of the region’s most populous country, Egypt, is striking a more cautious tone right now after posting the best economic growth in two decades. Youssef Boutros Ghali is an old hand in Egyptian politics and he told Marketplace Middle East he is only hoping for the best.

When asked if Egypt can hold onto at least five and a half percent growth after hitting more than seven percent last year, Boutros Ghali hedged his bets: “I am keeping my fingers cross. We have not seen the end of this problem. We have not seen the end of this crisis. My suspicion is there are surprises lurking in the shadows. ”

There are signs of concern from most camps throughout this broad region. Just two months ago, the International Monetary Fund was predicting growth in excess of six percent. That is low by regional standards, but certainly not recession. The challenge is the pillars that were projected to support that growth -- oil, property development and financial services -- are in the danger zone.

As I was waiting for a car to take me to chair the Leaders in Dubai conference this past week a banker from Bahrain shared his thoughts with me: “We don’t know where we are going,” then drawing on the metaphor of the car he was about to jump into he said, “That is my biggest fear after knowing only growth for a decade.”

It was a brief encounter, but certainly summed up the sentiment. A great deal of information is shared in the lobbies of hotels, at the coffee bars and, yes, in the taxi queues. I always find the lobby of the Emirates Towers Hotel the best hub for gathering sentiment. A year ago while taking in an espresso there, the talk was dominated by private equity players from Europe and Asia ready to fund the latest project. Today, the discussion is about which projects get completed and which ones get mothballed.

This is the modern form of the ancient agora where real time information and gossip from business peers replaces efforts by government leaders to manage expectations.

Those participating from outside the region at Leaders in Dubai were not providing the answers or inspiration that many were looking for. James Wolfensohn, the former head of the World Bank said no corner of the world will be left untouched. He pointed to outstanding derivative trades that still need to be unwound that hover over the banking sector like a dark cloud. “I can only say we are in a tough situation” said the veteran banker.

On the trip back to Dubai Marina on the Sheikh Zayed Road, one scans the skyline to see what has been completed to date and what is still under construction. This is one of those places where it is difficult to tell how much capacity is too much. There are a lot of rental signs in place which seems to square up with a report from HSBC that house prices in Dubai and Abu Dhabi fell for the first time. That seems only logical after a four-fold surge over the last decade.

Right now, global markets are not being built on logic, but on fear. That is what has taken the Dow Industrials below 8000, oil below $50 a barrel and property prices in some markets around the world down 20-30 percent.

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John Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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