Why is UAE trade optimism ahead of HK or Singapore?

On a bad day the heat or is it cool of the recession can be felt in the UAE where the roads are no longer full of construction traffic, and outside the main port at Jebel Ali thousands of unsold cars are parked.

But according to a new survey from the global banking giant HSBC there is notably more optimism about the trade outlook in the UAE than in rival trading hubs Hong Kong and Singapore.

Trade optimism

Some three-quarters of UAE importers and exporters expect trade volumes to increase or stay the same, against just 53 percent in Hong Kong and 64 percent in Singapore, reported the latest HSBC Trade Confidence Index.

The level of confidence displayed in the UK among traders was actually the highest among all the countries surveyed, with traders expecting the largest volume of business to come from the Middle East and sub-Saharan Africa.

This is hard to understand as it is not as though the oil states have entirely escaped the impact of the global recession. Indeed, there is an economic slump in cities such as Dubai where a real estate bubble has also burst and other major earners like retailing and tourism have also seen revenues crash.

UAE score

The survey examines sentiment and expectations of small and medium sized enterprises for foreign trade activity and business growth in the next three months. And the UAE scored 115.2 points out of up to 200 points, compared with 99.9 points for Singapore and 93.1 points for Hong Kong.

HSBC analysts said the bullish outlook for the major oil exporter and second-largest Middle East economy was ‘a result of the country’s strategic geographical position at the crossroads of three continents and the government’s investment in trade-supportive infrastructure’.

According to HSBC the Middle East remains the key area for sales growth for the UAE, ahead of Greater China and Western Europe. The bank said trade contributed 16 per cent of UAE GDP.

Of course, UAE optimism could simply be misplaced, or a more credible explanation is that an early resumption of high oil prices has boosted local confidence. Higher oil prices almost always do mean more trade for the UAE.