US embassy cable - 04ABUDHABI2272

C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 002272 
 
SIPDIS 
 
STATE FOR NEA/ARP, NEA/RA, AND EB 
COMMERCE FOR CLOUSTAUNAU, 
4500/ITA/MAC/DAS 
3131/CS/OIO/ANESA 
 
E.O. 12958: DECL: 07/06/2009 
TAGS: PREL, PGOV, ECON, EFIN, EINV, SA, TC 
SUBJECT: A trickle, but no rush of people and capital 
from Saudi Arabia to the UAE 
 
 
Classified by Richard A. Albright, Charge d'Affaires, 
a.i., reasons 1.5 (b) and (d). 
 
1. (C) Summary: Terror attacks and insecurity have 
prompted a small number of expatriates to leave Saudi 
Arabia and relocate to the United Arab Emirates, 
according to business, government, and diplomatic 
contacts, as well as press reports.  The limited 
exodus concerns individuals, not entire firms. 
Meanwhile, the UAE's stable business climate has 
continued to attract Saudi investment, especially in 
the real estate market, and there is evidence that 
fund flows from Saudi Arabia into the UAE's capital 
markets have driven up the UAE stock market.  End 
Summary. 
 
2. (U) After the recent series of terror attacks in 
Saudi Arabia, rumors began circulating in the UAE 
about an exodus of expatriates and Saudi capital from 
the Kingdom.  According to local press reports, terror 
bombings had created a panic within the Western 
community, and started to stifle capital flow into 
Saudi Arabia. 
 
3. (U) The Gulf News on June 22 quoted Saudi economist 
Ihsan bu Hulaiga as saying that reports about the 
relocation and withdrawal of some Western companies 
from Saudi Arabia are exaggerated."  These firms are 
very well established in Saudi Arabia and a pullout 
was not an option, he said.  "Don't forget that we are 
now into summer and many expatriates, including 
Westerners, leave Saudi Arabia for their annual 
holidays.  This might have given rise to speculation 
that Westerners are fleeing Saudi Arabia because of 
those terror attacks," he added. 
 
American citizens and other expats trickling out 
--------------------------------------------- --- 
 
4. (C) American citizen and immigration authority 
contacts have told our consular staff that several 
Amcits either have relocated, or are seeking to 
relocate, from Saudi Arabia to the UAE for security 
reasons.  A hospital administrator at Shaykh Khalifa 
Medical Center in Abu Dhabi told one of our consular 
staff, "We are receiving a greater than usual number 
of applications from (American) employees currently 
working in Saudi Arabia and we have (hired) a number 
of staff in the last year from that country." 
 
5. (C) Colleagues at other diplomatic missions in the 
UAE had similar anecdotes.  "There is a lot of 
unhappiness among Indians" over the security situation 
in Saudi Arabia, Indian Embassy First Secretary Suresh 
Reddy told Polchief.  "We are getting calls from our 
citizens who are interested in any openings in 
companies in the UAE.  These are engineers and other 
professionals.  "They are looking to move out because 
of their sense of insecurity." 
 
Businesses staying put 
---------------------- 
 
6. (C) While some individuals may be leaving Saudi 
Arabia out of a sense of insecurity, we have no 
reports of companies transferring their operations or 
large numbers of employees to the UAE for security 
reasons.  Foreign firms are very well established in 
Saudi Arabia and have the means to protect their 
employees and families in the Kingdom, American 
business contacts in the UAE told us.  John 
Velliquette, President of the American Business Group 
of Abu Dhabi and Vice President and Operations Manager 
for Raytheon, said his company had no plans to 
transfer any personnel to the UAE, even though he had 
suggested it.  "Headquarters refused, saying that if 
things were that bad, why keep people close to the 
fire.  It is better to send them back to the U.S.," he 
said.  Contacts at the American Business Council in 
Dubai, while commenting frequently on a long-standing 
multi-year trend of multinational companies moving 
their regional headquarters from Saudi Arabia to Dubai 
for "quality of life" reasons, have given no 
indication that they perceive the trend to have 
accelerated in recent weeks. 
 
7. (C) Dieter Onken, a German security expert who said 
he came to Abu Dhabi in 2003 after spending 21 years 
in Saudi Arabia, maintains there is no mass exodus 
from Saudi Arabia in any direction.  Onken told 
Polchief that some individual business people may 
transfer to the UAE if their operations allow it, "but 
it is not on a massive scale."  A small company may 
move to Jebel Ali near Dubai, he added, but large 
companies will stay in Saudi Arabia because they have 
the means to protect themselves.  He said he did not 
leave the Kingdom for security reasons, and is, in 
fact, considering going back to start his own security 
company with a Saudi partner.  "People simply have to 
be careful.  This situation could go on for a while." 
 
8. (C) Some U.S. company representatives (specifically 
the smaller defense contractors at Al-Dhafrah Air 
Base) told us that they are experiencing difficulties 
filling open slots in the UAE.  The senior Systems 
Administrator (please protect) for the communications 
contract at the air base noted that his employees had 
not expressed any security concerns to him and did not 
intend to return to the United States before 
completion of the contract.  He wondered, however, if 
events in the region were discouraging qualified 
people from applying for several vacant positions. 
"We had no problem filling these slots this time last 
year, but now we're not even receiving resumes."  In 
Dubai, however, the rental market in neighborhoods 
favored by expatriate families has heated up markedly 
in the past two months, during a season (early summer) 
that normally sees higher levels of vacancies due to 
families departing at the end of the school year. 
This year, contacts in the real estate industry tell 
us, four-bedroom villas are scarce, and those that 
come on the market are snapped up quickly, at rates 
10-15 percent higher than those that prevailed several 
months ago.  The perception among realtors is that the 
boom is being fueled by families relocating from Saudi 
Arabia.  The families who choose Dubai are said to be 
only a small fraction of those that are choosing 
Bahrain, a factor that leads many to believe that 
recent developments in Bahrain could lead to an even 
greater influx into Dubai. 
 
Saudi capital boosts UAE stock market 
------------------------------------- 
 
9. (U) On June 20, Gulf News reported that fund flows 
from Saudi Arabia into the capital markets of the UAE 
were responsible for the strong performance a week 
earlier of the Dubai Financial Market (DFM) and Abu 
Dhabi Securities Market (ADSM).  "This is because many 
consider the UAE as the safest place in the region and 
hence they are bringing in money to the bourses here 
where the valuations are also relatively attractive," 
a broker told the newspaper.  Official statistics from 
the UAE Stock Authority, which nominally oversees both 
the Abu Dhabi and Dubai exchanges, indicate that 
approximately 7 percent of investors on the UAE 
exchanges are from Saudi Arabia.  Saudi participation 
in the DFM and ADSM has increased by 3 percent since 
late last year. 
 
Saudi investment targets Dubai real estate market 
--------------------------------------------- ---- 
 
10. (C) There is a long history of Saudi investment in 
Dubai, particularly in real estate, but we have been 
hearing numerous reports that the trend has been 
picking up of late.  Several new high-rises along 
Shaykh Zayed Road in Dubai have reportedly been 
purchased outright by investors from Saudi Arabia. 
One of the most prominent examples is the Al Salam 
Group's $150 million acquisition of the Dubai 
International Financial Center's flagship "Gate 
Building."  While it is not possible to say with 
certainty that nervousness about the situation at home 
is prompting Saudis to pull out their money and put it 
elsewhere in the neighborhood, there is certainly a 
perception here that such a trend is at play, and some 
anecdotal evidence to back it up. 
 
11. (C) Nabil Maaloul (please protect), a Tunisian 
financier with strong Emirati and Saudi contacts, 
predicted that 2004 would be a record year for Dubai 
in terms of attracting Saudi capital, especially in 
the real estate market.  "Saudis feel the Kingdom of 
Saudi Arabia is weak and are uncomfortable sending 
money to Europe."  Maaloul went on to add, "Dubai is 
safe, secure, and modern - it is the last good chance 
for (Saudis) to invest in the region." 
 
ALBRIGHT