Abu Dhabi's review of state-linked firms, which has involved the government tightening its purse strings and holding off key projects, is leaving investors and stakeholders guessing on how future business deals will unfold in the wealthy emirate, said experts.

The emirate, home to 95 per cent of the UAE oil reserves, had embarked on building trophy buildings and mega infrastructure projects, mirroring its flashy neighbour Dubai albeit at a steadier pace.

However, the capital city has had to retrench amid a property slowdown. And the review of nearly 40 government-related entities (GREs) and departments, by Sheikh Hazza bin Zayed al-Nahayan, brother of the Abu Dhabi ruler and UAE president, has led to a red pen being taken to major projects, funds frozen and several top-level management shake-ups.

The priority for Abu Dhabi is to reduce debt owed by government-linked firms, which carry an implicit Abu Dhabi guarantee, and ensure a return on billions in acquisitive spending.

"You are going to see a lot of deleveraging in Abu Dhabi over the next year, some asset sales, a lot of investments that will be marked-to-market," said a Gulf-based banker with an international firm who declined to be identified due to the sensitivity of the matter.

"As part of the review, they (Abu Dhabi) want the GREs to be self-sustaining," the banker said at the Reuters Middle East Investment Summit.

Bankers hoping that the emirate's hefty war chest from oil revenues will translate into lucrative opportunities may be disappointed.

"There are some mandates out there which have been delayed much further or we know may well never come into an execution stage," a senior Dubai-based banker.

"It's difficult when one of the key regions in the Gulf slows down. But the important thing for a bank is to hang in while the tough decisions are being made, so that you are called in when things are back on track."

Abu Dhabi has also pulled out of some investments that were considered unattractive.

Aabar Investments, a top shareholder in Italian bank Unicredit SpA and Glencore International Plc among others, has been selling some of its company shareholdings.

The firm, a unit of state-owned International Petroleum Investment Co, disposed of its stake in Daimler AG in October and exited its 40 per cent stake in the Mercedes Formula One motor racing team this month.

"No matter how rich you are, it's a good practice to keep an account of where the money is going and if it's getting deployed in the right manner," said the Dubai banker.

The extent of slowing deal activity is evident from the fact that dozens of banks pitched for advisory roles in a state-backed merger of Aldar Properties Plc and Sorouh Real Estate Company, two state-owned property developers.

The emirate's effort to orchestrate a merger between Aldar and Sorouh is an attempt to consolidate the property market and assert more order on the building boom. Yet oversupply in the property market still weighs on Abu Dhabi's growth path.

Despite faring better than neighbouring Dubai, where prices suffered a spectacular two-thirds collapse after 2008, home prices in Abu Dhabi have been sliding consistently and are expected to drop another 5 per cent in 2012 as more supply arrives, a Reuters poll showed in May.

Construction companies, consultancy and architectural firms working on billion of dollars worth of construction projects have complained of slow and irregular payments from some government-linked entities, leading to financial difficulties.

In a recent law, seen as a step to boost the property sector, Abu Dhabi asked public sector employees who reside outside the emirate to relocate within its borders.

"It's an interesting requirement and it would be interesting for regional and global companies based in Dubai who want to do business there. They might have to rethink where to locate themselves or split offices," said Rick Pudner, chief executive of Dubai-based Emirates NBD Bank.

Some investors and bankers see a window of opportunity in federal spending on housing, utilities and transportation, though the International Monetary Fund has warned that continued government spending by the oil producing states may lead to a deficit by around 2017.

In 2011, total state spending in the six GCC economies jumped by some 20 per cent in dollar terms, the IMF said, as governments responded to unrest by boosting social spending.

Yet such spending may also create openings.

"We expect some of the more strategic projects in the emirate to get completed, like the airport expansion or the (Emirates Aluminium) financing," said a senior Dubai-based banker at large international bank. "So we are trying to get a role in those."-Reuters