Dubai: The Government of Dubai has unveiled a Financial Support Fund, designed to manage and distribute $20 billion worth of state funds to government owned entities.
The support fund is aimed at government and government-linked companies and institutions and not at private companies.
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Reuters reported last night that Dubai also yesterday launched the second tranche of its $20 billion sovereign bond programme, turning to foreign as well as local banks.
The first $10 billion tranche was sold to the UAE Central Bank.
"It is very clear that [the support fund] is for government and government-related entities," Abdul Rahman Al Saleh, director general of Dubai's department of finance, told Gulf News on Wednesday.
While recipients of the fund cannot be named, it means any government-related companies who have been hit by the fallout of the global economic downturn can be hopeful of financial assistance, provided they meet the criteria.
Al Saleh said further details relating to the criteria for applying to the fund will become clearer as more information about the fund itself becomes known. He described the fund as "strategic and significant" for the economy of Dubai.
The fund will give loans on a commercial basis to government and government-related entities deemed to be of "strategic and development importance to the emirate of Dubai", according to a government statement.
Dubai launched the bond programme in February to give financial assistance to state-linked companies caught in the midst of the global economic downturn.
Chief economist at the Dubai International Fin-ancial Centre, Nasser Al Saidi, is optimistic and said there is an "appetite" in local and foreign banks who are eyeing the second wave of $10 billion as a potential opportunity.
"I think there's appetite in the banks, including foreign banks who are interested in the second tranche.
"The market is now ready to look at long-term exposure," Al Saidi said.
The fund will hold the power to issue financial instruments, such as bonds and sukuks and will also be able to invest in commercial projects both in and outside Dubai.
The support fund will also have the ability to acquire partial or whole stakes in institutions and companies.
"If Dubai manages to fully raise the $10 billion second tranche, it will be a good piece of news in terms of a new source of fresh funds," said Philippe Dauba-Pantanacce, senior economist, Middle East and North Africa, Standard Chartered.
