A senior Dubai government official has hit back at media claims the emirate is living in a “state of denial” over the economic impact of the global crisis, during a panel discussion at the World Economic Forum in Jordan on Sunday.
Nasser Al Sheikh, director general of Dubai’s Department of Finance, admitted to delegates the crisis had been the first real challenge for the UAE.
However, the country was now going through a mode of “stabilisation” – rather than recovery - and liquidity remained an issue of concern for some of the emirate’s key firms, delegates heard.
“The fundamentals that have fuelled the growth in Dubai are still there. We still think being an open economy is the right strategy …we realise that credit will be tight for our key players,” Al Sheikh said. Ensuring government-related entities (GREs) remained in business had been the key reason for the government’s $20bn bond issued in Febrary - of which $10bn was immediately bought up by the UAE Central Bank.
The bond was for the sole use of GREs, he confirmed, adding that the second $1-0bn tranche should be released later this year.
“The reason for the bond is only to support government-related entities. We are willing to raise more money as sovereign to protect them."
“Dubai cannot live with out Emirates, Dubai cannot live without DIFC,” Al Sheikh added, as examples of important corporate players.
The funds will not support government activity, only GREs, which will in turn create jobs.
Al Sheikh added that he was “confident” all GREs would meet their financial obligations in a “very responsible” manner.
His comments came in response to media reports that some government-backed real estate developers were failing to pay their outstanding bills to contractors on time.
Nakheel, owned by Dubai World, has revealed that it may need to borrow more funds from the $10bn to help repay a $3.5bn Islamic bond, due at the end of the year.
A special committee decided on applications from GREs for the bond funds, Al Sheikh revealed, but refused to say what the criteria were for getting aid, or the names of the recipient companies.
But, he could reveal that more corporate consolidation was on the cards this year, with plans already drawn up by firms and seen by the department of finance, he conference heard.
“This experience was the first real challenge to the federation ….this experience brought us a little closer to our colleagues in the federal government," Al Sheikh said.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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