With more than 22 years of wide-ranging experience of Banking & Financial Services with organizations like ABN Amro Bank Canada, Royal Bank of Canada, Saudi American Bank, and Ernst & Young, presently Humayun Kabir is the General Manager responsible for the Business Banking activity which includes Corporate Banking, Investment Banking, Financial Institutions & Corporate Liability Management and Treasury.
Some rumors are hinting there are around four banks in Oman that have been exposed to the recent problems of Dubai World and it is said that National Bank of Oman is among those four banks.
"Yes, actually National Bank of Oman has exposure to Dubai World and we have accurately disclosed that news. Our exposure is about twenty-two million US dollars and it is in a syndicate arrangement. This particular loan has been serviced fully so far in terms of interest payments; it is due to repayment in 2013. Hence, we do not believe that at this point in time we have to be particularly concerned about its final settlement. The same exposure is held by some other banks in Oman as well. We will be watching developments in Dubai very closely and we are in constant touch with the facility agent for the syndicate, he notes.
But what is the final solution to the above problem? We know that Abu Dhabi has injected twice ten billion US dollars to solve the problem.
Basically, it is a liquidity issue and liquidity issues are usually resolved by time. There are assets which are supporting these loans but it takes time before you can liquidate assets. What makes it more complicated is there are many assets which you don’t want to liquidate especially in current times when they are deemed to be undervalued by the holders. "Therefore, it is a liquidity issue where the help from the UAE Central Bank and Abu Dhabi will help Dubai to buy some more time. And in the meantime, Dubai can also look at a more orderly disinvestment in some of their assets, which it probably didn’t want to do through a fire sale. So it is the time they are asking for and I believe that with the support of the UAE government and the UAE Central Bank, Dubai should be able to come out of it relatively unscathed."
Some financial experts are claiming that it is more of a psychological breakdown than a real financial problem. "It’s difficult to say yes or no because one of the issues is lack of transparency. So it could be psychological because information is not fully available, the transparency is not as good as it could be, and that leads people to panic more than they need to. But the Government of Dubai has assured that there will be transparency and disclosure of information to the creditors and to the public at large. And we hope that it will help alleviate and reduce the worries of the public in general and of in investors in particular," says Kabir.
Dubai claims that the problem is not really a big problem but the media and especially the international media has made of this news a big issue.
Again, in the absence of information, the media speculates. Given the limited information available to the market in the case of Dubai World, it has provided ample opportunity for some people to speculate and cause panic. So the best solution is to come out transparently. We have an excellent example here in Oman. As soon as the crises hit, the Central Bank of Oman immediately ensured that all banks in Oman disclose their exposure to Dubai World entities. There has been no speculation and no issues with regards to Omani banks once the disclosures were made.
Now, there are talks from many resources that the recession is almost over and there are positive signs.
"Yes, there are positive signs but the question is: are these signs due to the extraordinary amount of liquidity which was injected and the measures that were taken? We still believe that there is a question mark on the sustainability of these things. The picture will become clearer in the next three to six months as we will know whether the positive strides that the global economy has taken will continue without further large scale government intervention. Hence, we believe that it’s still a little bit early to claim that we have won or a success has been achieved. However, one can understand that the US officials including President Obama would like to restore the confidence in the eyes of the public and investors that things are going well," he says.
Though the financial crisis started in the international market it didn’t hit really the GCC countries. Would it bounce back on the GCC countries very soon?
GCC companies are a special case where given the importance of the oil and gas sector and so they have been insulated in many ways despite whatever the problem happens in the rest of the world. Oil prices this year have kept steady and at a very decent level. So for us, the main driver is the price of oil and really, as long as that remains at about seventy dollar level then we don’t believe that the financial crisis should have any significant impact on the Middle East.
In this regard, the real estate was a sector which was a bit overheated in Oman like the rest of the regional markets. We, however, have seen signs that the sector is bottoming out and there is renewed interest in real estate projects and land purchases. However, it will take some time before the same momentum will be built like we saw in 2008 and in 2007. Obviously, what’s happening in Dubai, from a real estate perspective, has psychological effects onto the region.
