Dubai national holiday brings little joy for Swiss

Dubai is celebrating a national holiday on Wednesday, but in the aftermath of the emirate’s debt declaration last week western corporations are unlikely to be celebrating.

After seeing a construction boom go bust, Dubai continues to struggle with debts of 60 to 80 billion dollars and Middle East markets slumped significantly this week.

After initial concerns about the exposure of Swiss companies to the problems drove down shares, investors seemed to be more reassured this week, although questions linger.

The Swiss Market Index (SMI) continued to rebound on Wednesday morning after a sharp fall last week linked to Dubai World’s financial status.

Switzerland’s two largest banks, UBS and Credit Suisse, have extensive operations in Dubai but analysts say their exposure to the debt problems is limited.

The banks themselves have not been publicly commenting on the situation, which has only fanned speculation and temporarily drove down their stock prices.

Credit Suisse vice-chairman Urs Rohner was overheard to say he does not expect Swiss banks to suffer “material consequences” from Dubai World's difficulty repaying its debt, according to a report this week from the Wall Street Journal.

Rohner was talking in private to a bankers’ forum in Switzerland but his words were passed on by someone connected to the media.

Credit Suisse confirmed the comment to Swisster.

But if other banks across the financial system suffer – Britain’s HSBC is exposed to 17 billion dollars' worth of loans in Dubai – then Swiss banks could still be hurt indirectly.

Other Swiss companies also face potential consequences.

Switzerland sends 2.8 billion francs worth of exports to the United Arab Emirates, according to 2008 figures from Swiss exporters’ group OSEC.

The two countries are also major gold trading partners, figures from the Dubai Multi Commodities Centre show.

Wolfram Eberhardt, a spokesman for Swiss engineering group ABB, acknowledged that infrastructure projects in Dubai have faced delays this year.

The company is involved in large-scale power transmission projects across the Arabian peninsula.

But ABB “is not affected by any cancelled projects in UAE,” said Eberhardt. “Our other exposure is limited,” he said, “as we supply mainly installation and low-voltage material to various building projects.”

The Dubai downturn may also affect Swiss elevator manufacturer and supplier, Schindler, which is in a start-up phase in the Emirates.

Shindler spokesman Riccardo Biffi told Swisster that most of the orders are in Abu Dhabi so “exposure is very small”.

However, “the possible impact of the Dubai debt problems on Schindler's customers – if it will have any – are currently being assessed.”

Carsten Weisner, who runs projects in the Emirates for Basel-based freight and logistics company Fracht AG, predicted the effect of Dubai’s debt difficulties “will come later on.”

Fracht, like many other companies involved in the global movement of goods, was affected by the global economic downturn “a year ago.”

But despite the problems in Dubai, Weisner said the company’s operations in neighbouring Abu Dhabi are “quite okay”.

Zurich-listed human resources company Adecco is also likely to be reviewing its prospects in a region which faces further job losses at companies connected to state-funded projects.

Adecco has its Middle East headquarters in Dubai.

Switzerland’s government has boasted of recent investment success stories in Dubai.

The Swiss Business Hub Dubai, which is affiliated to the consulate general, brokered a new agreement between a local biotech park and the Swiss Biotech Association.

But Christian Watts, the hub’s Gulf regional director, was unavailable for comment when Swisster asked about other organisations active in the region.

Neither would OSEC comment on any individual companies.

Meanwhile, the possible threat of Muslim boycotts may also affect Swiss businesses trying to do business in the Gulf area.

In a newspaper interview last week, Swiss justice minister Eveline Widmer-Schlumpf cautioned that the country’s exports could be damaged by the recent referendum decision to ban minarets in Switzerland.

Ruedi Christen of the Swiss Mechanical and Electrical Engineering Industries association, of which ABB is a member, said on Monday that “a ban of minarets might have a negative impact on Swiss business relations with Islamic countries,” according to Bloomberg News.