A senior executive at one of the UAE’s biggest family conglomerates has warned that companies are facing a liquidity crunch.
“Traders who have been here for decades are suddenly losing liquidity because their money is stuck in inventory, so unless you have the cash to circumvent that then you will have a problem,” said Abdulla Fareed Al Gurg, the group general manager of Easa Saleh Al Gurg Group.
“The market is making the strong stronger and the weak weaker.”
The group, founded in 1960, is one of the country’s longest-established family firms, with more than 3,000 staff across 28 companies. The comments from Mr Al Gurg come as banks report rising defaults among small businesses, which has led some to pull back from lending to the sector.
“There is a bit of pessimism right now, but it is not 2008. It’s not that dramatic, but unless we snap out of it soon it will be worse this year,” he said.
Mr Al Gurg urged lenders to support traders to boost growth.
Bank deposits have fallen by 16.6 per cent year-on-year as of December 2015, according to official data.
That has reduced the willingness of banks to increase their exposure to borrowers that are perceived to be a higher risk, such as small- and medium-sized enterprises.
“It’s clear liquidity is becoming tighter as loan-to-deposit revenues are close to the limit set by the Central Bank,” said Nasser Saidi, the former chief economist at the DIFC.
“Banks are looking to lower risk investments inhibiting growth. Governments need to refinance themselves offering bonds and sukuks, leaving banks to finance the corporate sector.
Part of the problem is the UAE has still to pass the federal debt law, which may happen in the next few months.”
Last week, Easa Saleh Al Gurg Group struck a joint venture with Akzo Nobel to develop the Dulux paint brand in the region.
The Netherlands-based multinational anticipates opportunity in the region despite signs of stress in the construction sector and weakening real estate confidence.
“We realise we have to invest and grow gradually,” said Peter Tomlinson, the managing director of AkzoNobel Middle East.
“This region is worth $150 million a year, at least, and even if the market was getting smaller from the level we are at now, we could make gains.
“The market is flat or declining right now, but I see serious double-digit growth for Dulux and AkzoNobel.”
ascott@thenational.ae
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