UAE owes millions of Euros to overseas suppliers

The credit crisis continues to spread far and wide, and Coface, the international export credit insurer says it is chasing at least €60 million owed to overseas suppliers by companies based in the UAE. Many developments were funded by deposits and part payments up front as the properties were sold off plan – but that market has all but dried up.

Coface insures exporters against non-payment and collects debts, and are  seeing  a massive jump in claims – largely down to the UAE’s property development sector. “There are easily half a dozen big incidences here where foreign suppliers are owed around €10m each,” said Jerome Cazes, the chief executive officer of Coface. “This compares with absolutely nothing at this time in 2008.”

The amount of bad debts continues to grow as the sector continues to cancel or delay projects in Dubai particularly. Property prices in Dubai are continuing to fall, and almost no one is buying investment property in Dubai at the moment.

“In most of the cases local developers are failing to pay international suppliers,” Mr Cazes said. “We have unpaid debts on cancelled projects.” Coface has been working in the region since Sept 2007 when it set up a regional office in Dubai.

The economic crisis is boosting the credit insurance business in the region, Coface said. “People just don’t trust the companies they are shipping to,” said David Venediger, the managing director of Coface Emirates. Credit insurance is one of the main alternatives to letters of credit.

Credit insurers will initially urge their clients to renegotiate the outstanding claim, before moving to debt collection. If everything else fails, credit insurers will indemnify the claim after five months and pay the client about 90% of the outstanding amount.