Dubai Should not Shed Jobs: S&P.

Summary: DUBAI - In order to build on the Dubai government's expansionary fiscal policy, the emirate's government-backed companies should retain their employees, a leading Middle East economist said.

Farouk Soussa, head of Middle East government ratings at Standard & Poor's said the government of Dubai 's budget, which included an 11 per cent increase in expenditure, is in conflict with redundancies by government-backed companies.

"On the one hand you're talking about expansionary fiscal policy. On the other hand, Dubai 's a very strange place because a lot of the policy institutions are the government entities," Soussa said, referring to companies like Dubai World and Dubai Holding.

In December, Dubai World's Nakheel laid off ten per cent of its staff. On Sunday, Dubai Holding announced a major restructuring that a DIC spokesperson reportedly said could lead to redundancies. The back offices of Dubai Holding's real estate companies Dubai Properties Group, Sama Dubai and Mizin will be consolidated. Dubai Group and Dubai International Capital will experience a similar restructuring.

When the Dubai Government announced its budget in January, Nasser Hassan Al Shaikh, director general of Dubai Department of Finance said the government was not planning on firing any of its 70,000 employees.

But firings at government supported companies will reduce employment.

"Some of these entities are shedding staff. These people have to go home," Soussa said.

The companies frequently employ foreigners who will need to go home after their visas expire. If too many people leave the country, the developments upon which Dubai has built its economy will face reduced demand.

Soussa acknowledged that the analogy to a government agency is imperfect because the companies do have profit-seeking investors.

"They're glad to see the companies are reacting on the commercial versus policy side," he said. "From a commercial point of view it makes complete sense."

Dubai has been the subject of a series of articles in international press that herald the demise of the city, something Soussa attributed to the lack of comprehensive information.

"No government in the world is immune to what's going on and investors worldwide are taking a dim view of everything , it's just a bad time," Soussa said. Without concrete economic data, people assume the worst.

"If you are in the situation of a crisis where you don't have data, the cycle turns and turns," said Jan Willem Plantagie, Soussa's colleague and the regional manager for Middle East at S&P. Plantagie was careful to say his view of international perceptions is a personal not company one. "If you don't live here and you read these types of stories, you believe it."

The lack of data was a popular topic at an International Monetary Fund roundtable at Dubai International Financial Centre last week. At the talk, Dubai 's chief economist Raed Safadi said Dubai can only provide comprehensive numbers if companies are reporting their numbers for tax purposes. "You ask for data," he said. "We want to provide you with data but we can only provide you with data if you give it to us."

Plantagie disputed this, noting that Saudi Arabia requires regular financial reporting despite its tax-free environment. "You can at the same time have an authority that receives information. The fact that you don't have taxes is not a valid argument," he said.

"If you have investors and general commentators believing there is a problem here and the government not acknowledging the problem, those people will think the government is trying to hide something or in denial and certainly will think the government doesn't have the solution."

Both Plantagie and Soussa said part of the problem is the rapid pace of growth in Dubai . When the economy was smaller and had less international investors, the demands for transparency were not as great. "You have to recognise the growth that's happened in Dubai ," Plantagie said. "You've had such tremendous growth over the last five years.

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