Al Abbar reassures market on stability

Full text of speech by Mohammad Ali Al Abbar, Chairman of the Advisory Council Government of Dubai and Chairman of Emaar Properties, at DIFC conference on Monday.

Excellencies, ladies and gentlemen, distinguished guests, it has been said that in a rising market, everyone is a financial genius. At this moment in history, I have to say, I am not sure how many of us feel like geniuses.

Today, I am here to talk of Dubai and our shared and proud identity as part of the UAE. I will not mince words. I am here to state facts.

These are serious times that require frank talk and real action. All of us know that to be true. So let us speak clearly and honestly and openly.

Across the world, we face real challenges. Whether we are in New York or London or Tokyo ... or in Mumbai, Shanghai or here in Dubai.

The current challenges to the stability of the global fin-ancial system are without precedent. The necessity of taking action to address those challenges has never been more important.

Here in Dubai, we are rising to the challenge of managing the new economic realities.

We have accomplished so much in such a short time. For the past 18 years, we have witnessed remarkable growth across all sectors of our diverse and dynamic economy.

We have built roads and bridges, schools and hospitals, ports and airports, financial centres and power stations. We have built iconic structures and strong business clusters. Just look around the city and you will see for yourself.

Yes, we accept the challenges that face us and the world. Yes, we recognise this new reality.

But our feet are firmly planted on the ground - and our eyes remain fixed on new horizons, on a future that remains bright. Here in Dubai, we are realists. And we are also optimists.

We have risen to great challenges before, and we will rise to them again.

Here in this city, we draw great strength from the collective experience of the country as a whole, and from the wisdom of our inspired political leadership.

Now, let me tell you how we will rise to the challenge of change.

Six weeks ago, the Government of Dubai formed a working group to analyse and address the economic challenges that face us.

The Advisory Council, as it has been named, was formed at the direction of His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and will help ensure the long-term stability and growth of the key sectors of our economy.

The Advisory Council, which is already at work, meets frequently to review the state of key sectors of the economy. Our mandate encompasses all sectors of the economy, which we will review with leaders in each area, as and when necessary.

We will formulate recommendations based on our findings, which will then be submitted to the government for action and implementation. Make no mistake: We will act in a timely manner. And we will be transparent in those actions.

Example

Let me give you an example of how we will do that.

Just two days ago, with the support of the Council and the UAE Ministry of Finance, it was announced that Amlak Finance and Tamweel would merge with the Real Estate Bank of the UAE. This is a significant measure that will provide greater stability to the sector, and allow increased flexibility in how real estate finance is funded and provided in the UAE.

This decisive action demonstrates how serious we are about addressing the current challenges - and shows how we will act moving ahead.

Let me now turn to another area of the same sector where we are taking equally important action.

Today, Dubai's three largest developers control about 70 per cent of the supply in the market. The Council, acting in cooperation with them as well as other private developers, is managing the current and future supply of new projects onto the market. Let me assure you that we have our finger on the pulse of the real estate sector.

Today, the real estate sector is witnessing a healthy correction. This is a consequence of global financial conditions - and is inherent to the very nature of the market. As we all know, real estate is cyclical.

Monitoring supply and sales, the Advisory Council is managing this important sector of our economy, ensuring that new supply is properly managed and that current and future demand is adequately met.

There has recently been a lot of talk about the debt obligations of Dubai. Let us put an end to such speculation.

Currently, the Dubai Government's sovereign debt obligations stand at $10 billion (Dh37 billion). While our key sovereign assets are currently being evaluated, I can give you a rough estimation of their value, being over $90 billion (Dh330 billion). And this does not include our airports, bridges and the Metro.

Debt obligations

At the same time, the total debt obligations of affiliated companies stand at $70 billion (Dh256 billion), compared with assets valued at $260 billion (Dh950 billion).

As you can see, the total value of the assets of the government and affiliate companies in Dubai is well over Dh1.3 trillion.

Let me therefore state categorically: the Government can and will meet all its obligations going forward. Let there be no doubt about this fact.

It is also important to appreciate that Dubai's borrowing is not used to cover state expenditures or fuel consumption. It is funding our long-term, risk-free infrastructure development. Our debt serves Government institutions and state-owned entities that have positive cash flows and that have extremely strong long-term value.

Will the Government step in and help associated and affiliate companies if and when the need arises?

Yes, we will. And I hope this statement is clear.

Think now about the timely and appropriate intervention that has already taken place at the federal level to ensure the stability of the country's financial system. I think that serves as a reminder that we stand by our guarantees, as one country.

To sustain Dubai's growth, we must manage the new economic realities.

Dubai, my friends, is a great city. And it is part of a young and dynamic wider region, including our shared Middle East and across the seas to India. We are rich in oil, rich in gas, rich in youth and vitality and ideas.

For so long, Dubai has served as a beacon of hope to people from across this diverse region, representing all that can be accomplished when you have the means and the will. Dubai represents the opportunity to achieve economic dignity.

Dubai is a platform from which people and companies can grow and succeed. People like you, and me. Companies like yours, and mine.

Today, however, everywhere on earth, the world's faith in the future is being put to the test.

Yet here in Dubai, while we recognise with humility that many challenges lie ahead, we will spare no effort to secure our future.

We recognise the challenges before us. But this city, as part of one strong nation, will continue to grow and thrive.

As Shaikh Mohammad said recently: "Dubai's direction is straight and forward, and we will continue our growth story."

Thank you.