Cure for lending constipation needed

DUBAI/ Yes, the market for IPOs is opening up, investors are regaining confidence and the worst seems to be over, but challenges are still looming and there's a dire need for a change in regulation. Or so suggested Shuaa Capitals' chief Sameer al-Ansari.

"With the balance sheet of banks, whatever is keeping them constipated, we need to give them something to start. Banks have to be more comfortable and confident that there are no more shocks on the horizon," said Ansari at the Reuters Middle East Investment Summit in Dubai on Tuesday.

The right provisions need to be made -- and that means more acknowledgment of non-performing loans -- in turn bringing adequacy ratios down, so that banks get a boost and start
lending again, Ansari noted.

"We need to open the tap a bit, even if its a drip," the banking exec said, using hand gestures to illustrate his point. "We can't have growth in the economy if its negative."

Ansari, who'd made recommendations - simple to drastic - to decision makers in Dubai, suggesting solutions, cited the Irish example of gathering all bad debts linked to real estate and placing them in a government bank.

"It should be looked at here. If that's what's making the banks constipated, then lets do it!" he says.

Dubai, one of seven emirates that make-up the UAE federation, was hard hit by the global financial downturn and endured billions of dollars in projects cancellations, not to mention the $25 billion debt restructuring of Dubai World.

So is the worst over? Ansari opts for cautious optimism.

"We've seen the worst, been through the bottoming out process. I see growth coming back," he said. "We'll see a slow gradual recovery but the pace will be different in different places of the region."

The region still boasts strong fundamentals, underpinned by strong oil prices which drive government spending, a young growing population, a developing consumer society with regional risk ratings that are far better than any of the other regions by several notches, he said.

All of this makes one wonder why the region is undervalued compared to the rest of the world, he said.

On anti-Dubai comments, Ansari said: "When people go through a Dubai bashing exercise, you have to remember Dubai isn't sitting on the moon by itself."

While Dubai and the UAE have greater challenges than the rest of the region, Dubai's been going through a vicious circle that hit its main three economic pillars.

"If you look at Dubai, we've been through the impact of the global financial crisis, a severe regional real estate crisis and a major stock market crash," he said. "There has been phenomenal wealth erosion."

But the decline has finally been arrested and an upward trend is taking place.

"Recovery can only happen if these pillars bounce back. These three pillars are what will drive growth. I am cautiously optimistic that the vicious circle is beginning to come back up," he said.

(Writing by Tamara Walid in Dubai)

No bonds for Arabtec; not for now anyway

MIDEAST-SUMMIT/ARABTEC Just to be clear, Arabtec is not considering a convertible bond issue.

The builder has no need for funds and has adequate access to capital if needed. But nonetheless its chief financial officer Ziad Makhzoumi is watching the region's increasing capital raising activities with interest.

"I don't think we need any funding whatsoever... As a CFO I have to look at all the options all the time," he told the Reuters Middle East Investment Summit in Dubai on Monday.

Convertible bonds are an attractive way to raise funds for listed companies, he said, highlighting Emaar Properties' recent issuance plans.

Earlier this month, Emaar, the builder of the world's tallest tower in Dubai, outlined plans for a $500 million convertible bond issue.

Makhzoumi said he saw more convertible bonds coming to the market, but there was no mention at all of Arabtec.

Arabtec has expansion plans which include a push into Central Asian states like Kazakhstan and Uzbekistan, which could be funded from internal resources, he said.

"Any company needs working capital. Usually it's in the form of equity or some form of borrowing. In our case our gearing is very, very low. Any process takes time, the decision has to be made first. And I don't think we are at this stage to consider."

So Arabtec is not considering a convertible bond issue. For now at least.

(Writing by Jason Benham in Dubai)

Is investor confidence returning to the Middle East?

UNITED ARAB EMIRATES/A recovery in the Middle East and the prospects for investment are on the agenda at the Reuters Middle East and Investment Summit, taking place in Dubai, Riyadh, Cairo, Kuwait, Beirut, Bagdad, Abu Dhabi and London.

In the wake of Dubai’s debt crisis, which rocked financial markets globally and dented confidence in the region, top executives and officials will discuss whether the investment climate in the region is improving and confidence returning. 2011 will be a year of more restructurings, but the region’s capital needs will lead to a surge in debt issues and even a possible revival of the IPO market.

Reuters Middle East Investment Summit will generate exclusive stories, investable insights, online videos and blog postings. Check back here for more over the course of this week.