The tall tales about the severity of the UAE's crisis, with the yarn about the thousands of dust-covered sports cars allegedly abandoned at the airports, are not true.
Local financial gossip starting to smell a bit fishy
Everyone knows that flamingos are not naturally pink. They obtain that colour from their diet, which is dominated by tiny crustaceans from their wetland habitats. What is less well-known is that this steady intake of uncooked shrimp cocktail causes flamingos to emit a particularly foul-smelling effluent, and that any large group of flamingos kept in one place can't be kept secret for long. Besides, flamingos are really noisy. Therefore the rumour floating around that a flock of African, or Floridian, or whatever kind of flamingos was stranded at Dubai International Airport appears to have been an apocryphal tale, utter hooey. It ranks up there among the tall tales about the severity of the UAE's crisis with the yarn about the thousands of dust-covered sports cars allegedly abandoned every day in the airport's parking lot. The rumour was given legs by Harper's magazine, which last month lampooned it in an article about Dubai. The story was that the birds had been held up by construction delays at The Lagoons, an enormous property project on Dubai Creek. Harper's dismissed the rumour, yet the urban myth survives. It is true that part of The Lagoons is called Flamingo Creek, and that the project's logo includes a silhouetted flamingo but why developers would want to import a flock of squawking, reeking, crawfish-craving waterfowl to a country where they are indigenous is beyond me. If those flamingos were stuck at the airport in some kind of avian lock-up, someone somewhere would have known about it for sure. It is, however, in the absence of fact that this kind of nonsense is repeated. Similarly, without any reliable, regular economic data from the Government or the Central Bank, we are all left to extrapolate from gossip just how bad the slowdown is in the UAE. The truth, economists say after examining what evidence is at their disposal, is that things are neither as bad as you may have heard, nor as good as you may have been led to believe. Buoyed by vast oil savings and insulated by an underdeveloped financial sector, the UAE and the rest of the Gulf have still managed to escape the worst of the crisis. But it will take more than higher oil prices and rising incomes in China to clean up the mess left after the collapse of the huge property bubble that once floated over our desert landscape. The latest reality check comes from the government of India. It is now commonplace to hear that planeloads of south Asian construction workers are being shipped home. Vayalar Ravi, India's minister for overseas Indian affairs, told his country's parliament this month that up to 150,000 Indian workers had returned home, most of them from the Gulf, due to the global crisis. But it's not that simple. The minister also told a reporter from this newspaper that since 2007, about 300,000 return every year from the Gulf as their contracts expire. So 150,000 returning is normal. The ministry's figures for emigration clearances are also telling. Emigration clearances from the ministry's office of the protector of emigrants are required only for unskilled workers heading to 18 countries. Thirteen of those countries are in the MENA region; six of those are in the Gulf. After rising to 848,601 from 676,912 in 2006, clearances dropped in the first half of this year to 327,356, less than half of the number given in 2006. So construction workers are not being replaced as their contracts expire but the number of Indians coming to the Gulf is not falling, Mr Ravi said. Instead of unskilled workers, more skilled workers appear to be coming to work in the healthcare and service sectors. These educated workers do not require emigration clearances and are therefore not included in the data. More fun with numbers was offered up this week courtesy of the Central Bank, which published monthly banking statistics. Bank deposits decreased slightly last month, which is not entirely good news because most have been trying to beef those up in order to push their loan-to-deposit ratios below 100 per cent. But analysts say that decline is largely a symptom of the fact that many converted deposits from the Ministry of Finance, which regular readers will recall were made to encourage lending, into a sort of special loan that counts as Tier 2 capital and helps them achieve higher capital-adequacy targets set by the Central Bank. Deposits, however, are still only 4 per cent higher than they were at the end of the year when the crisis was raging. Despite talk of an increasing willingness to lend, therefore, the banks' loan portfolios have expanded only 1.5 per cent since the end of the year. Bankers are not idiots; to expand lending in an economic slowdown would be foolish. In Saudi Arabia, lending is actually declining. We have no idea how fast the economy is growing. While China may publish quarterly GDP data, this Government does not. Economists say the best indication is the Central Bank's data on money supply, which grew 13.5 per cent in the second quarter, the slowest pace in more than six years, according to Reuters. Analysts say that it grew at all is testimony to how resilient the economy has been to the crisis. Also interesting are figures on banks' provisioning for non-performing loans (NPL), which are defined as loans for which borrowers have not paid interest or principle for at least three months. Banks have set aside Dh23.9 billion (US$6.5bn) against such loans, representing a 21 per cent increase from the end of last year. That's a sharp climb in dud loans but it represents only a sliver - just more than 2 per cent - of their overall loans. In the Asian financial crisis, NPLs ratios jumped into double-digit figures in some countries. It is good news that banks are setting aside earnings against these loans. There is no law that says borrowers won't eventually start paying again, but just in case they don't these provisions will protect banks from losing capital and being able to lend even less. The problem is that we can only infer NPL ratios from the provisioning figure. The Central Bank does not, like so many central banks elsewhere, publish its own estimate of NPLs. Many worry that banks are not yet recognising the extent of their troubled loans and that some are still extending new loans to ease the pain of delinquent borrowers. Luckily, the Central Bank announced last month it had hired a management consultancy, Oliver Wyman, to help it restructure "banking supervision, monetary policy, payment systems, anti-money laundering and combating the financing of terrorism, in addition to governance, organisational structure and human resources". Let's hope that data dissemination figures in there somewhere, too. email@example.com