Business | Economy
'Challenges yes, but no regrets'
A senior Government of Dubai official acknowledged the challenges faced by the emirate amid the global financial and economic turmoil and hinted at reassessing some of the projects in the pipeline.
- By Gaurav Ghose, Financial Features Editor
- Published: 00:01 November 20, 2008
- The Dubai Mall. After riding a crest for six years, real estate in Dubai is showing signs of a slowdown.
- Image Credit: Supplied picture
Dubai: A senior Government of Dubai official acknowledged the challenges faced by the emirate amid the global financial and economic turmoil and hinted at reassessing some of the projects in the pipeline.
"Yes, we do have certain challenges ... [but] we have no regrets," about the policies that the Dubai government has pursued, Nasser Hassan Al Shaikh, director-general of the Dubai Department of Finance, said at a business luncheon organised by UAE Bankers Forum yesterday.
"Some plans have to be changed, [particularly] in real estate, but what has been started has to be completed. On the infrastructure side, we are not easing up," he said, adding that all Roads and Transport Authority (RTA) projects in the pipeline and the new airport coming up will not be affected.
Crashing property prices
Recent reports suggest that after almost six years of boom, real estate is starting to show signs of a slowdown, with prices of property coming down by four per cent in Dubai. Some areas such as downtown Burj Dubai and Palm Jumeirah have witnessed prices falling between 20 to 40 per cent, sales agents have confirmed.
With global credit markets worsening, banks in the region had suddenly been faced with a liquidity crunch. In a move to combat the tight inter-banking lending facility and credit squeeze, the UAE government had pumped in Dh120 billion, which has not yet had the desired effect. Banks have become overly cautious in their lending policies, which have almost frozen sales in the real estate market.
"You cannot blame the banks as they were caught off guard," Al Shaikh said, adding it would take time for the situation to normalise.
Touching on the issue of Dubai's debt, which Fitch Ratings recently reported that government-owned companies own about $70 billion (Dh257 billion) in foreign currency bonds and debts, Al Shaikh said given their cash flow, most state-controlled companies will be able to service their debts and only a few "may need the government to pitch in as needed."
He also denied a Financial Times report of ongoing talks between Dubai and the UAE federal government to crate a state-funded loan facility to help firms facing difficulty in accessing capital amid tightening global credit markets.
Expecting the next 18 months to be challenging, Al Shaikh said: "Once we survive this period, we would be the first to rebound."
State funding
Meanwhile, a latest Financial Times report said Dubai is in talks with the UAE government over a loan facility that would make state funds available to companies as international sources of capital dry up.
The plan would draw on support from the cash-rich federal government, bank-rolled by Abu Dhabi, the capital, that also owns 90 per cent of UAE's oil wealth.
Dubai's ability to engineer a soft landing is vital for companies betting on the Gulf as a haven of stability and a source of growth. The plan would establish a facility for state-owned companies similar to a Dh120bn liquidity package for banks.
With inputs from Financial Times.
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