Experts say extended period of relative inactivity puts pressure on the economy.
Summer slowdown hits small firms hard
ABU DHABI // Thousands of companies across the UAE, especially smaller ones, suffered from a stifling combination of summer doldrums followed by Ramadan and a week-long Eid break, business groups said yesterday.
For many residents, the timing of the season and holidays meant a leisurely return to business as usual. But small businesses say it meant the daunting prospect of having less time to make up for slack summer revenues. "Business clearly slowed down during the summer, and then for it to follow straight into Ramadan makes it an especially quiet period," said Elias Sayah, the executive vice chairman of the American Chamber of Commerce in the UAE.
"It puts pressure on the economy to be closed down for such a long time. The pressure comes from the lack of business being done because people are more difficult to reach." July and August are traditionally slow trading periods, as many people leave the country to dodge the soaring temperatures. The slowdown was exacerbated by Ramadan's arrival in late August, bringing the holy month's shorter working hours.
And like last year, when the Government declared six days off for Eid, this year brings the temptation for workers to simply take an entire week off. The effects of the global slowdown have further complicated things, some business group leaders said, even as they praised government efforts to sustain business through the quiet period. "It has been a more challenging period, but there is nothing that can be done about that," Mr Sayah said. "In the summer, people are away; then there were concerns over influenza, then Ramadan delayed things getting back to normal."
Mr Sayah said state-run companies had made a greater effort to operate during the summer months by continuing to hear presentations made by companies competing for new state contracts. "The problem of a quiet period like this is that it won't get fully back to normal for some companies till Monday," he said. "Some people will still be absent for the rest of this week and for those companies which work with clients in the West, they will have to wait until Monday to be able to speak to foreign clients."
Gary Whabi, one of the founders of the Indian business group, agreed that business conditions had been tough in recent months. However, he said, average summer trading had improved. "In my perception, the summer is not affecting business as badly as it used to," he said. "The difficulty arises because so many of the decision-makers are away, and this means that decision-making on the large-scale projects is slow."
He said the situation was made worse because private and public-sector holidays did not match. Yesterday was a holiday for the public sector but not the private one. "This means private-sector staff will go into work but are unable to move forward on any projects with the public sector because they will not be back until the next day," he said. "Public holidays should be the same for everybody. They should be normalised."
Claire Fenner, the co-founder of the Abu Dhabi women's business group Heels and Deals, said getting staff back into the office after a four-day break could be difficult. "Some offices have just closed down for the week so their staff can make a fresh start on Sunday," she said. "Other people have taken advantage of the shorter week and booked off a couple of holiday days so they can get a full week's break.
"There is a temptation among some staff to unofficially extend their holiday by taking a sickie, especially as the weather has now cooled down. "But that can be quite a dangerous thing to do at the moment in this economic climate. People are being more protective of their jobs. They don't want to get on the wrong side of their boss by getting caught taking a sickie." Peter Michelmore, the chairman of the British Business Group, said he had not noticed a summer slowdown in the capital, but said he feared Dubai had been more affected.
"I would expect the situation in Dubai to be different," he said. "The real-estate sector and some of the infrastructure projects have been hit, and I would expect business there to have been slow during the last few months." But while small firms felt the pinch during the summer lull, analysts said, the country's wider economy had not been severely affected. On a macroeconomic scale, they said, the country has benefited from more promising global trade conditions, backed up by stable oil prices.
Many large firms, moreover, have been given a boost by improving global economic conditions and rising stock markets over the summer. Dubai's main market index rose by about 19 per cent during Ramadan, while stocks listed in Abu Dhabi are up by about 11 per cent. "Markets have been driven by a very healthy global sentiment and very stable oil prices," said Udo Schaeberle, the head of private clients at BHF Bank, a German private bank with investments in UAE markets.
"These were two of the drivers for a nice recovery in the local markets, not only Dubai and Abu Dhabi but also the other GCC markets." This summer has certainly been better than last year, when the onset of the financial crisis was close at hand, analysts said. "This year I've felt the economies in the Gulf were operating at closer to more normal levels than in the past," said Simon Williams, the chief economist at HSBC Middle East in Dubai. "Last Ramadan we all knew there were painful times ahead and were bracing for the downturn. This year we know that we are walking into a recovery.
"Growth will be sub-trend next year and fall short of some people's expectations, but it's going to be a lot better than the contraction we've experienced during 2009." He added that seasonal shifts in trade, such as those experienced during the summer and Ramadan, were common in most economies. Ali Khan, a director at Arqaam Capital in Dubai, said: "The international backdrop continues to remain strong, and we continue to get economic data that reinforces the trend that the recovery is on track."