A powerful surge of renewed confidence ran through Dubai’s business community today on the news that Abu Dhabi has supported Dubai with a further $10 billion, on top of the $15 billion already committed through Dubai government bonds.
This total of $25 billion comes to just under a third of the total of about $80 billion of debts from entities and companies owned by Dubai government, many of which are due over some years to come. This large proportion of money made available has left Dubai a debt problem that has become manageable, and will go a long way to resolving some of the wilder fears that have been affecting Dubai and world markets over the past few weeks.
The last-minute announcement of the full redemption of the $4.1 billion Nakheel sukuk has already driven up the UAE markets, but will take some time to filter through to the world at large and restore Dubai’s battered reputation to where it should be.
Businessmen happy
The business community is particularly pleased with the focus on their needs, as the announcement by Shaikh Ahmad Bin Saeed Al Maktoum, speaking as the Chairman of the Dubai Supreme Fiscal Committee spelt out that “the Government of Dubai is particularly focused on addressing the concerns of Dubai World trade creditors within the Emirate of Dubai. To help address these concerns, today the government of Dubai is announcing that the remainder of the funds provided will be used for the satisfaction of obligations to trade creditors and contractors”.
Nothing will restore business confidence better than getting huge long-outstanding bills paid. There are contractors who are owed billions, and as one such harrassed character explained: “Our bank will not give us an overdraft of a billion, so our suppliers are unpaid and some are going out of business. We need to pay them as soon as we can.”
Federal system at work
The announcement also puts paid to persistent rumours that the Government of Abu Dhabi wanted to take some ownership of equity in key Dubai businesses in return for its financial support. The arrival of another huge sum in support of Dubai is a clear demonstration that Abu Dhabi is willing to support the emirate as a whole as part of its commitment to the federation.
This support is not blind, and Abu Dhabi has made clear that is wants and supports the restructuring that Dubai has announced. Part of this was made clear today through the April 30, 2010, deadline which Dubai’s Supreme Fiscal Committee has set for the Dubai World restructuring.
This new focus on financial discipline will be essential in the future as Dubai works its way through the crisis and uses the money available to best effect in order to build new businesses for the future.
