The major exports from Malaysia to the UAE for example are construction companies and expertise. The growing number of Malaysian professionals and expatriates in the last few years is the testimony of the demand here for our expertises as well as worsening economy problems at home.
With the current global credit crunch turmoil, the UAE like other Middle Eastern states may no longer be regarded as a safe haven as no countries are immuned and everyone is affected. Hundreds of billions have already dissappeared from region's bourses.
Immediate action by UAE's central bank to set up an emergency funding of 50 billion dirhams (RM48.8 billion) was received with big relief to address the issue with urgency. This is to shore up the liquidity in its domestic money market and relieve some funding issues here.
It is said there is a correction process in the local property market. Some projects are already stalled and some properties on sale are not moving like before.
Top developers and analysts have warned that the financial turmoil affecting the world markets will slow the pace of construction and possibly hit prices in Abu Dhabi and Dubai.
There will be a slowing of real estate markets although Abu Dhabi and to more of an extent Dubai are media darlings, they are still relatively small markets on the global scale and are thus reactive and influenced heavily by global trends. Either the pace will drop or the prices will. Both cannot be sustained in this market condition.
The failure of Lehman Brothers and problems at American Insurance Group (AIG) in New York would lead banks to tighten their lending for new developments and mortgages. Less mortgages mean less sales and that developer profits, too, could take a hit.
Both developers and construction firms are now facing a tightening credit environment that would inevitably hamper their ability to raise capital to spur growth.
Thus far, a large portion of the profits of developers has been a result of free land granted from the government. As that slows, joint ventures are becoming more prevalent - and less profitable. There will be no collapse but certainly a slowing.
Likely in this situation, there will be also a significant slow down in spending on infrastructures as access to financing becomes increasingly difficult. There are some rumours already in the local market about retrenchment exercises in certain industries to sustain the bottom lines.
Not surprisingly, the prices of construction materials are also softening fast to reduce margin pressure. However consumer prices in the Gulf is predicted to continue to rise this year, despite weakening consumer demand and a strengthening dollar.
There is always blessing in this kind of situation. I have gone through the worst in 1987 (unemployed) and 1997 (retrenched) financial downturns and am ready for any consequences of this turbulent time.
We have to weather the storm with an open mind, calculated efforts and tawakkal as well as equip our plans with wise strategies (plan A, plan B etc) and come out stronger as survivors.