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UAE banks will gain from US free-trade deal delay

posted on 11/03/2007: 2241 views



The likely inability of the UAE and the US to complete a free trade agreement (FTA) during the presidency of George W Bush will give local banks breathing space to strengthen their balance sheets and meet competition more effectively, analysts said.



According to a report by the Dubai Chamber of Commerce and Industry, an FTA with the US will result in American investment in the UAE banking industry, with US-based banks strengthening their presence here.



"An FTA is expected to facilitate full operating licences for large US banks in the UAE,” an analyst said. "A delay gives the local banks time to consolidate.” National Bank of Dubai and Emirates Bank International last week announced a merger that will create the region's largest financial institution with more than US$45 billion (Dh165.23bn) in assets.



Meanwhile, National Bank of Abu Dhabi's chief executive said the lender may consider a similar move.

US trade officials said on Friday they would not finish free trade talks by the end of this month, in time for an accord to be ratified during the current administration. "Negotiations will resume at a later date,” Gretchen Hamel, a spokeswoman for the US Trade Representative's office, said.



The UAE is negotiating eight FTAs with key economic blocs that will impact trade worth Dh388 billion, according to 2005 figures. Trade between the UAE and the US amounted to US$12.3 billion (Dh45.16bn) in 2006.



"The agreements with the European Union and the US are major ones for exports, economic diversification and attracting foreign investment into the region,” said Steve Brice, head of research for the Middle East at Standard Chartered Bank in Dubai.



Brice told Emirates Today in an earlier interview the EUGCC trade agreement will be signed this year, but he was less optimistic about a similar deal with the US. "The US Congress will prove difficult, as the prospective deal between America and Oman has shown. This may be impossible until the end of the current US administration,” he said.



"The American FTA seems to be more geopolitical in nature than economic. The Americans want good relations with friendly Middle East countries, but the P&O ports deal will play on peoples' minds,” Brice said. Negotiations over the past year have focused on a few core areas of the FTA, particularly relating to investment.



The process was put in jeopardy last year by a political furore over Dubai Ports World's purchase of US ports as part of the P&O takeover. . Negotiations between the UAE and the US began early last year, about the same time as those between Oman and the US. The Oman FTA was ratified by Congress last year. (Emirates Today)

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