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GCC’s Wealth Can Make a Difference: Merrill Lynch

DUBAI - The financial wealth of the GCC gives the region the ability to make a difference amid the global economic downturn, John Thain, Merrill Lynch chairman and chief executive of Merrill Lynch & Co. Inc. said.

Speaking to journalists on Monday at Dubai International Financial Centre, Thain said the region’s sovereign wealth funds (SWF) had tremendous opportunities to take advantage of the financial difficulties around the world.

He observed that that no country could be totally decoupled from the global economy.

“The region, despite its oil wealth, is not immune to the crisis and will certainly undergo an economic slowdown. The question is the degree and the duration of this slowdown,” he said.

However, he said there would soon be more lending activities between banks in the GCC as an unfreezing in the global financial markets gains momentum.

“Worldwide, we can see the beginning of unfreezing of liquidity between banks. You will start to see some access into the commercial paper market in the US so that the capital injection, plus the other pieces of the programme that the Fed and Treasury put together, will start to unfreeze the commercial paper market.’’ Thain said he was optimistic about the long-term economic outlook of the Middle East region.

Oil revenues will continue to provide a degree of protection to Gulf states. “Our plans to open up offices in Kuwait and Qatar and expand our wealth management business are based on this optimism,” he said.

The two offices will be operational by the end of this year.

“In spite of all the financial difficulties and concern about the global economy we continue to be optimistic about our presence in the Gulfand we are certainly committed to continue to grow our presence here,” Thain said.

Merrill Lynch said in a report earlier this month it had lowered growth forecasts for the UAE, Saudi Arabia, Qatar and Kuwait and that GDP growth for the region as a whole was expected to slow to 4.5 per cent in 2009 from 6.2 per cent this year.

Merrill Lynch, which is being taken over by Bank of America Corp., reported a fifth straight quarterly loss as the credit crisis left the firm with at least $13.5 billion of write-downs. He said the takeover procedures would be completed by December.

Thain said he expected “thousands’’ of job losses from the bank’s $50 billion takeover. Most of the cuts will fall in information technology, operations and finance.

He said there would be more consolidation in the US banking sector. “There is a need to recapitalise small and medium banks. Equally important is better and efficient banking regulations.

He said the actions by the Fed and authorities across the globe in recent weeks would start to unblock and unfreeze the credit markets.

With regard to the credit default swap market, Thain said more transparency was needed in that segment.

issacjohn@khaleejtimes.com