Barons brush off Moody's worry

Dubai: Dubai's economy is well-diversified to continue growing smoothly, leading business figures said yesterday after ratings agency Moody's raised concern about the debt of government-owned companies.

Nasser Saeedi, chief economist of the Dubai International Financial Centre (DIFC), said openness to foreign investment, infrastructure spending and a multi-sector growth strategy were the key elements of Dubai's business model.

He said the oil and gas sector forms just three per cent of the emirate's economy, so Dubai relies on a range of revenue streams and these are growing. "Growth is expected to remain high and the capacity of state to generate revenues is growing with time," Saeedi told Gulf News.

Moody's said it has "conservatively identified" more than $47 billion in liabilities at various government-related companies, which represents more than 100 per cent of Dubai's 2006 gross domestic product.

Priorities

Saeedi said unlike in the US, Dubai's borrowings are not used for financing government and consumer spending. "Dubai's borrowings go into real physical assets, infrastructure and public utilities. This means increased productivity and greater revenues in the future," he said, adding that to talk about a risk is "not consistent with Dubai's economic fundamentals."

Sultan Bin Sulayem, who heads Dubai World, the state conglomerate that has been involved in mutli-billion foreign asset acquisitions and includes companies such as Nakheel, Istithmar and DP World, said the group remains in strong position to raise cash. "We are a very solid company and well-diversified," he was quoted by Bloomberg as saying. "We don't have any problem raising money," he said, and asked: "Why would we announce a big tower if we can't afford to pay for it?"

Nakheel recently announced a Dh140-billion development that will include the world's tallest tower.

Moody's said its analysis of government-related debt issuers in Dubai places growing emphasis on the willingness and ability of the federal government and Abu Dhabi to support Dubai-based firms, in addition to Dubai's own willingness and ability to support.

The notion of Dubai corporations relying on Abu Dhabi for funding "is news to me", Bin Sulayem was quoted as saying by Bloomberg.

According to Marios Maratheftis, regional head of research at Standard Chartered Bank, economic fundamentals of the UAE as a whole remain strong and Dubai should not be seen in isolation.