The latest hiatus in the world's financial markets brought about by Dubai's current debt crisis is clearly a concern to family investors in the region, but it should be viewed as good news, the CEO of a leading family office in Abu Dhabi exclusively told www.campdenFB.com.
"It should be a catalyst for change in the right direction," he said. "This crisis will underline the importance of good planning, solid corporate governance frameworks and transparency."
While this viewpoint will not comfort those who have invested in Dubai World, the state-owned conglomerate that started the problems last Wednesday, it is a clear message that those in the UAE see this as a blip on the road to increased professionalisation and transparency in the region.
"The news about Dubai was expected and my forecast is that we will have a domino effect with several other groups in the UAE defaulting on their debt," said the CEO.
Leaner, more focussed groups with good cash flow streams and a diversified portfolio of cash generating businesses will emerge over the next couple of years.
"A number of speculative groups will follow the same path as Dubai World proving that speculative business practice, poor corporate governance and a lack of focus will result in value destruction," he said.
Crucially, however, he says the current casualties are not companies in which his family office sees long-term value creation. "If you made investments in the UAE in businesses that have good management, strong balance sheets with little leverage you will be ok."
In addition, he said the crisis should not be viewed as a Dubai versus the rest of the UAE problem. "The region as a whole still has strong fundamentals led by Abu Dhabi, Saudi Arabia and Qatar and it is important that investors do not become fearful."
European stock markets seem to agree, with many rebounding today following sharp falls at the back end of last week.
Campden Conferences' 2nd Middle East Family Office & Investment Workshop is taking place from 6–7 December 2009 in Abu Dhabi. For more information visit www.campdenconferences.com/abudhabi