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Abu Dhabi, UAESunday 18 November 2018

Positive magnate repels negativity

Profile: Oil is not the only precious commodity relentlessly sought in the UAE. ­Another is Hussain al Nowais's time.
Hussain Al Nowais, chairman of Khalifa Fund, is a towering figure in the UAE's business world.
Hussain Al Nowais, chairman of Khalifa Fund, is a towering figure in the UAE's business world.

Oil is not the only precious commodity relentlessly sought in the UAE. ­Another is Hussain al Nowais's time. As chairman of six companies, vice-chairman of a seventh and a board member of another nine, Mr al Nowais is among the most connected figures in the Emirates business world. Based in Abu Dhabi, he has a leadership role in major companies across multiple sectors, including heavy industry, construction, financial services and property. So, when Mr al Nowais takes a moment to speak on the state of the nation's economy, people listen. "I have personally lived through four economic crises in the Gulf: the collapse of the Souk al Manakh in Kuwait in the early '80s, the Iraq-Iran war, the Iraqi invasion of Kuwait and now this major economic crisis of such global scale. We have always been able to recover very quickly," he says from his office at the Abu Dhabi Basic Industries Corporation, an industrial development and investment company of which he is chairman. The key to preserving the national economy through the financial crisis, he says, is maintaining high levels of public spending. Although oil prices may stay relatively low this year, the UAE Government - and Abu Dhabi in particular - cannot cut back projects that will help diversify the economy. Investors should be reassured that "the Government has clearly said we will continue to spend, we will not stop", he says. "This will not be an easy year, but I think we will manage." If the economic climate does worsen, Mr al Nowais expects Abu Dhabi to use its financial resources to aid the other emirates. Despite some reports to the contrary, Abu Dhabi will not hesitate to rescue a neighbouring emirate in serious need of financial assistance, he says. Mr al Nowais likens the loyalty of an Abu Dhabi citizen to the rest of his country to that of a Scotsman. Although a Scotsman may object to mistakenly being called English, he still considers himself a member of the greater United Kingdom. During good times, different parts of the union may engage in friendly competition, but that rivalry does not mean they will refuse to help each other during a crisis. The same is true of the United Arab Emirates, he says, emphasising the word "united". "When push comes to shove, trust me, it is the United Arab Emirates... There could be problems, whether in Dubai or Sharjah, or Ajman or anywhere else. Fine. Will Abu Dhabi stand behind them? Absolutely," he says. An Abu Dhabi native, Mr al Nowais started studying business and finance during his years as an undergraduate at Lewis and Clark College in Portland, Oregon. After continuing his studies in France and ­London, he returned to the Middle East, where he has spent the majority of his professional career working for large companies, most of them in the Gulf. Recently, Mr al Nowais has shifted his focus to a different part of the economy. As chairman of the Khalifa Fund to Support and Develop Small and Medium Enterprises, he leads an effort to provide loans to local business start-ups. Mr al Nowais's eyes light up when he tells of the individual men and women whom the Khalifa Fund has helped in more than 150 firms since the fund was established in 2007. Although new, some of these small family companies already employ more than 50 workers in businesses as diverse as cooling, catering and clothing. In the long term, he says, "small and medium enterprises are the backbone of the economy". In the meantime, UAE businesses must contend with a harsher economic landscape. Already, the financial crisis has forced the merger of Dubai's two largest home finance providers under the umbrella of Emirates Development Bank - itself the result of another recent merger - and there will be more, he says. "Sometimes such crises force consolidation. And I think this should take place in all sectors. Consolidation will help to pool resources, to cut costs, to streamline, and to sort out the men from the boys. It has to happen, not just in the banking sector, but across the board." In recent years, while Dubai's real estate market grew at a dizzying pace, Abu Dhabi took a more measured approach. Although this often left the capital in the role of plainer sister to the glitzy Dubai, the emirate is now less exposed to the funding difficulties that have squeezed many Du­bai-based developers and mortgage lenders, Mr al Nowais says. As a result, Abu Dhabi is in a slightly better financial position. "People have criticised us [in Abu Dhabi] for being slow to make some of the decisions for some of our major projects. I think this careful thinking has now turned to our advantage." Still, he adds that Abu Dhabi also has its share of speculators, who will be hurt. "We will see some defaults on second and third and fourth payments with freeholds," he says, referring to meeting payments on property deals. Problems in the property market have not yet had a serious impact on what Mr Nowais calls the "real economy", which includes the industrial sector, but not banking or finance. But if weakening demand for properties leads to further price drops, that would hurt contractors, which would then affect subcontractors, and eventually suppliers. Such a chain effect is one way problems in the real estate market could spill over into the wider economy this year. "That will be something to watch for," he says. Mr Nowais also worries that if stock prices continue to fall this year, it could lead to margin calls for investors who bought stocks using borrowed money. If they are forced by their lenders to sell, then that wave of selling could trigger a spiral of more price drops, more selling, and more margin calls. So far, this has not happened on a large scale in the UAE, Mr al Nowais says - but it could. But low stock prices can be a boon to those with enough courage to enter the market at its lows, he adds. "I'm a great believer that difficulties can create opportunities. And I think there will be opportunities coming up for the wise investor who has two things: guts and cash." Over the longer term, Mr al Nowais thinks Abu Dhabi's development plan, as outlined in its Economic ­Vision 2030, remains achievable. The Government can easily adjust its short-term time frames to account for weaker economic conditions this year. Abu Dhabi can still meet its goals of becoming a larger, more diversified and more open international economy by 2030. The drive to develop its industrial sector is particularly important if Abu Dhabi - and the rest of the country - is to reduce its dependence on oil. "Industry creates added value and exploits competitive advantage. We are positioned to do that by building infrastructure, by investing in logistics, including the port, the airport and now the rail," he says. Nonetheless, Mr al Nowais says people should have no illusions that the Abu Dhabi economy will ever become independent from oil. Even by 2030, the Government still expects oil to contribute 36 per cent of GDP. "No matter what we say, oil plays a big part. That's a fact; one cannot ignore it," he says. "Even if you say I have diversified away to industry, these industries are still energy dependent. It's oil and gas that drives them." tpantin@thenational.ae