By SHARON WROBELdubai real estate extraordinary view 248(photo credit: )
Finance Minister Yuval Steinitz said Sunday that the country's exposure to Dubai's debt problem was minimal removing fears over spill-over effects for the local economy.
"Over the last few days, the world has been watching the debt crisis in Dubai," said Steinitz at a round table discussion in Jerusalem with the Histadrut Labor Federation and the Israel Manufacturers' Association. "At the moment we can say that the repercussions on the country's pension funds, insurance companies and banks is minimal or close to zero. It will not have a macro-economic impact for Israel."
Dubai, which is part of the United Arab Emirates, said at the end of last week, that it would have to ask creditors to postpone paying back its $59 billion debt, which triggered worries over a large default and big losses at banks and companies involved.
Speaking on national television on Saturday evening, Steinitz said that although the Treasury did not see macro-economic repercussions for Israel, there was some concern over possible aftershock.
"This is further proof of the resilience of the Israeli economy which has weathered the global economic crisis better than most countries and is on the path to recovery," said Steinitz.
The exposure of Israeli business in Dubai has been very limited since the two do not share any diplomatic relations and Israelis need a visa to visit. In addition Dubai follows the Arab League boycott against direct business with the Jewish State.
It is, nevertheless, "a relatively liberal place" for the region, according to Joshua Teitelbaum, professor of Middle East History at Tel Aviv University"I personally know many Israelis who do business in Dubai, even on a weekly basis, by traveling there on foreign passports," he said Sunday, by telephone.
Among the local tycoons doing business in Dubai is diamond mogul Lev Leviev, who owns two jewelry shops and is involved in the Dubai Diamond Exchange. Real estate tycoon Yitzhak Tshuva, who is said to be involved in property and shopping center projects in Dubai through a joint venture, said in an interview with Army Radio on Sunday that he had not invested "even one cent" in Dubai.
On a global level, Dubai's attempt to reschedule debt may spur a "correction" in emerging markets, according to Mark Mobius, who oversees about $25b. of developing-nation assets as chairman of Templeton Asset Management Ltd. A 20 percent drop for shares is "quite possible," he said over the weekend.
"The overall impact on stocks here can only be indirect, which comes from a loss of risk appetite when confidence is battered by something with global implications like the Dubai default," said Michael Sarel, chief economist at Tel Aviv-based Harel Insurance Investments Ltd. "Bonds are being seen as a safe haven here in Israel, much as in the US."
The Tel Aviv-Index fell to its lowest level in a week, dropping 0.5% to 1,073.07 at the close on Sunday. Bonds gained for a third day with the yield on the 5.5% benchmark Mimshal Shiklit bond declining two basis points to 4.28%.
Local analysts and economists commenting on Sunday on the crisis fears in Dubai agreed that the reaction was blown out of proportion and that its impact on the global economy will be minor.
"Most likely Dubai will not default on its debt at the end of the day," said Dan Halman, CEO of Halman-Aldubi Group, a mutual funds firm. "The major impact will be short-term mainly bringing oil prices down (financing of Dubai's debt) and on the emerging markets."
Similarly, Yoram Gabbai, chairman of Peilim Investments, said that the debt crisis in Dubai in itself was not likley to endanger the financial stability around the world.
"The fallout though remind us that the world is still at the foot of an active lava mountain," said Gabbai.
Bloomberg contributed to this report
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