A senior US economic official commended the decisive actions taken by the UAE’s financial authorities to bolster local markets and provide valuable feedback on the steps the United States and other countries have announced.
Speaking about ’The Stabilizing Force of Open Investment in the Global Economy’ at Dubai International Financial Centre (DIFC), Deputy US Secretary of the Treasury Robert M. Kimmitt. said: "The authorities here in the UAE have taken important steps to strengthen the financial sector through the introduction of a large liquidity facility and measures to recapitalize banks. The region’s authorities have complemented global policy responses by reducing repo rates, injecting capital into banks, and announcing deposit guarantees. These measures will help restore liquidity to the markets and rebuild confidence in the financial sector in the region and around the world.
The UAE has shown leadership and vision in economic modernization and have become a beacon for financial market liberalization in the Middle East. The Dubai International Financial Centre represents the incredible strength that can be achieved through openness. The DIFC’s promotion of better business practices and financial sector reforms has helped transform Dubai into a globally-recognized hub for international business and finance," Kimmitt added.
For some time, the United Arab Emirates has been an example of strength through cooperation, working together to channel natural resource wealth toward economic diversification.
The UAE’s openness has also brought exposure to global economic turmoil, and changes in global credit markets are affecting both the Emirates and the Gulf more broadly. This is even more reason why we need to continue to work together to get through this difficult period. To give investors confidence, promoting a consistent message on the importance of market stability and investment flows is more important than ever before. We are economic partners and allies who are taking decisive steps to address the situation at hand.
He noted that much had changed, and changed for the good, in the two and half years since the Dubai Ports World issue was an international headline.
That controversy made clear to U.S. policymakers the importance of reconfirming our commitment to open investment and of taking proactive steps to respond to the lessons learned. Specifically, we have implemented five stages of reform in the Committee on Foreign Investment in the United States (CFIUS).
Turning to UAE-US bonds, the US top official said: "The United Arab Emirates and the United States have a strong and enduring relationship based on mutual and reinforcing policy interests: political and security as well as economic and financial.
We see this common commitment demonstrated in the recent decisions of the UAE cancel Iraq’s debt and expand diplomatic engagement there, for which we are appreciative. We are also now working more closely together than ever before on addressing the current global financial crisis and resisting protectionist pressures, as demonstrated by our partnership leading to the Santiago Principles on sovereign wealth funds.
As we emerge from the current turmoil, which we will, it is through this constant communication, coordination, and collaboration that we enhance the prospects for prosperity not only in our own countries, but in the Gulf region and beyond."
In his remarks, Kimmit said: "Countries around the world are encountering unprecedented economic challenges. Financial market conditions are severely strained, and risks to the global economic environment are the most serious and challenging in memory. In recent weeks, it has become evident that the turmoil is not isolated to the United States and Europe, but has ramifications for all countries, including in the Gulf.
It is critical to learn the correct lessons from the current turmoil, starting with the fact that our economies are stronger acting together than in isolation. Collectively, we need to rebuild confidence in our markets so that capital can flow again to help spur global growth.
In the past two weeks alone, we have witnessed an unprecedented international response to this financial turmoil. The Group of Seven industrialized countries are implementing a coordinated action plan to stabilize financial markets and restore the flow of credit.
Others around the world, from Hong Kong to Denmark, he added, had adopted similar approaches. Countries are taking steps to provide liquidity to markets, strengthen financial institutions, prevent failures that pose systemic risk, protect depositors, and enhance confidence in financial institutions. While financial markets have begun to respond positively to these unprecedented efforts, much work remains.
We now find ourselves in the midst of an historic reassessment of risk by the world’s financial markets. For its part, the U.S. Government has taken a number of bold steps to stabilize markets; mitigate the systemic impact of a number of failed institutions; and address the underlying sources of market uncertainty."
Together, he went on to say, these actions significantly strengthen the capital positions and funding ability of US. financial institutions, enabling them to perform their role of underpinning and facilitating overall economic growth. These actions demonstrate to market participants around the world that the United States is committed to taking all necessary steps to unlock our credit markets, minimize the impact of the current instability on the US. economy, and restore the health of the global financial system.
Authorities in the Gulf, he maintained, had been proactive in responding to their own tightening credit markets and weakening investor sentiment, employing a comprehensive set of policy tools. The region’s authorities have complemented global policy responses by reducing repo rates, injecting capital into banks, and announcing deposit guarantees. These measures will help restore liquidity to the markets and rebuild confidence in the financial sector in the region and around the world.
He acknowledged that one fact is already clear: opaqueness in our capital markets and inadequate risk management and supervision by financial sector participants contributed to the crisis. When we emerge from this period - and we will emerge from it - our next task will be to strengthen the financial regulatory structure to forestall such excesses in the future.
The global effort to achieve these goals will continue with the G-20 leaders meeting on 15 November in Washington. This leaders meeting is just one step in what will be an ongoing process, and we will continue to consult closely with key friends in important economies around the world, including with officials from the Emirates.
"The current crisis also reminds us that complacency has no place in financial policymaking. We need to be proactive and focus vigorously on vulnerabilities, including how to address emerging threats to our economic stability," he indicated.
