Читать книгу Corporate Governance - Quantity Versus Quality - Middle Eastern Perspective - Saleh Hussain - Страница 15

Gulf Cooperation Council countries "GCC" are not immune from the worldwide economic crisis. In fact they are as much involved as other countries, if not more so, due to the fact they are blessed with reserves emanating from oil revenues. Therefore, the crisis had its spill over to the GCC as well. The impact and severity of the crisis will certainly take time to be determined. Below are the areas of impact on the GCC:

•Losses on GCC stock markets in 2008 were estimated to be between 35% and 50% compared to the value of the indices at the end of 2007.

•Credit / funding cost increased in the last quarter of 2008 by 250 to 400 bps compared with costs prevalent in the first three quarters of the year.

•Liquidity tightening was apparent especially in money market transactions.

•International investors started offloading their GCC positions due to the financial crisis at home and the need for liquidity. There were no immediate buyers of those positions anyway, and those that managed to sell did so at prices lower than asked.

•The regional banks had to reduce lending activities and avoid large ticket transactions. In fact some signed and committed contracts had to be canceled or renegotiated.

•Some GCC countries announced the halt of planned projects. Most of those projects were planned over the past few years at the peak of high oil prices.

•The real estate sector started to experience a setback, and the coming years will certainly see a major correction.

•The GCC sovereign wealth funds "SWFs" had already shown signs of big losses in 2008. Some reports spoke of US$450 bn. The estimated value of those SWFs at the end of 2008 was US$850 billion (US$1.3 trillions less the estimated loss of US$450 billion).

•Provision for sub-prime loans in 2007 and 2008 for banks and financial institutions in the region were estimated at a figure close to US$10bn.

•The impact on investment banks is still unknown. There are two types of investment banks, those that operate within the principle of Sharia laws, i.e. Islamic banking financial institutions and those that handle traditional, conventional banking. Due to the way their balance sheets are structured, it might not be readily possible to know the impact of the crisis on their operations. Some of them are thinly capitalized and might be assuming responsibility for large transactions on behalf of their investors. The extent of their position and viability will only be established over the next two years.