Restructuring will make Dubai stronger

The collective announcements made by the Dubai Government, Dubai World and Nakheel in restructuring Dubai World's $23.5 billion (Dh86.4 billion) debt is one of the best solutions put forward by their officials and will go a long way to restoring confidence in the emirate's ability to come back in the market very strongly.

The proposals put forward for Dubai World's creditors of a 100 per cent payment in five to eight years is probably the best option, in which the creditors will not have to consider a direct haircut.

The proposal might have been a surprise to many who have been talking about a possible 40 to 50 per cent haircut. That is not the case. The government has agreed to pay creditors 100 per cent. The issue now could be the timeframe — eight years.

The Dubai Government also acted very responsibly by agreeing to pump in $9.5 billion (Dh34.9 billion) to support the plan over the specified period. The government support in reshaping both Dubai World and Nakheel will ensure a gradual recovery of both conglomerates, which have collectively been contributing to Dubai's growth.

The proposal by the government also gives creditors enough time to reassess their position and come up with a fair response in settling this by May this year.

In an economic downturn all parties involved in wealth creation come under financial stress, some more than others. At the end of the day, what matters is how smartly one comes out of the situation.

The roadmap laid out by the Dubai Government last December is a clear and transparent one. Yesterday's debt restructuring is part of the plan put forward to the creditors — giving them ample time to go through and strike a deal. There are no hidden surprises.

If the creditors accept the proposal, Dubai will emerge much stronger than many other economies.