Gov't jumpstarts lending to Dubai businesses

$10bn bond being made available to largest enterprises on commercial terms.
Gov't jumpstarts lending to Dubai businesses
By Jack Reerink and John Irish
Tue 24 Mar 2009 03:24 PM

Funds from the Dubai government’s $10bn bond will target Dubai World, Dubai Holding and domestic firms in the emirate's sovereign wealth fund's portfolio, the emirate's finance department head said on Tuesday.A five-man fiscal committee, headed by Emirates airline chairman Sheikh Ahmed bin Saaed Al Maktoum, was established a month ago to assess the companies' requirements and decide how the funds would be used, Nasser Al Shaikh said in an interview on Tuesday.

"We will not wait to support the companies, there are urgent requirements that need to be dealt with quickly," he said.

"There is no free lunch; we will be helping companies on commercial terms."

Shaikh said the funds would begin flowing in the next few weeks and said non-bank financial advisors would help allocate the financing to avoid "conflict of interests."

Dubai secured $10bn from the UAE Central Bank a month ago for what will become a $20bn.

Ratings agency Standard & Poors believes the Central Bank will also provide the remaining $10bn when required.

Dubai property prices have been under pressure since late last year, when the global financial crisis and a slump in oil prices ended an economic boom in the Gulf region.

Hundreds of billions of dollars of expansion projects have since been suspended or cancelled in the UAE.

Dubai companies have laid off thousands of employees and UAE banks have been loath to extend new mortgage loans.

Local banks, including Islamic institutions, have also submitted proposals to the government to provide assistance to small and medium enterprises, Shaikh said.

"For us it's like driving a car with poor visibility: We can only see 10 to 15 meters ahead," he said.

"We will have to revisit our plans and stay focused on the short-term challenges."

Emaar Properties, the largest listed UAE property developer, has not held discussions with the government as it "believes it can handle it (the situation)."

The government is also set to appoint an international PR firm as part of its plans to collate all Dubai's economic data on the web.

"We are working on improving the economic data," Shaikh said. "There are different reasons for rumours in Dubai but once the information is out there it will kill them. (Reuters)

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.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.