The Dubai government can, and will, meet all its debt obligations, a member of the city’s executive committee said today, highlighting the emirate’s strong financial position by sharing some key balance-sheet figures, including that total sovereign and affiliated company assets are more than $350 billion, while total debts are just $80 billion.
In response to an ongoing media debate regarding Dubai’s ability to finance its debt obligations, Mohamed Ali Alabbar, a member of Dubai’s Executive Council and chairman of Emaar Properties, said, “Let us put an end to this speculation … and let me state categorically, that the government can, and will, meet all its obligations going forward; so please have no doubt about this fact.”
Emphasising this, Alabbar noted that Dubai’s current sovereign debt obligation is $10 billion, while initial estimates put sovereign assets at approximately $90 billion, excluding major elements such as the city’s two airports; its metro system, which is currently under construction; bridges, and the healthcare system. A full valuation of sovereign assets currently is under review.
In the opening keynote speech of DIFC Week, he said total affiliated company debt is $70 billion while total assets of these companies are $260 billion.
Alabbar, who also is chairman of a Dubai government committee to help the emirate manage the impact of the global financial crisis, said that all of the sovereign debt is being used to finance long-term, “risk-free” infrastructure development and government institutions and state-owned companies that have positive cash flows and strong long-term value – “not to fund current state expenditures, consumption or subsidies”.
Alabbar said that were any sovereign-affiliated companies to require financial support, the government would step in. “If the need arises. Yes we will.”
Observing that Dubai has witnessed sustained double-digit growth of 14 percent for the past several years, he said, “if growth is just six, seven or eight percent, it gives us a chance to take a breather, since we’ve been running for a long time.”
He highlighted the proactive role of the UAE federal government in ensuring the stability of the country’s financial system, noting that it was one of the first in the world to guarantee deposits in the banking system; it had developed a facility to boost bank liquidity, and most recently it had supported the four-way merger of Dubai-based Islamic home financing providers Amlak and Tamweel with the UAE’s Real Estate Bank and Emirates Industrial Bank.
On the new institution, Alabbar said it would “increase the flexibility of real estate funding in the country”.
He said that the three largest players in the Dubai real estate market, Emaar, Nakheel and Dubai Properties control 70 % of the market and would be “coordinating” activities to help “monitor and manage the market” to ensure an appropriate supply of real estate.
In answer to a question, he said he expected consolidation among smaller real estate developers in Dubai. On rumours that the Dubai government would sell stakes in its affiliated companies, Alabbar was emphatic that stakes in these companies had not, and would not, be sold.
He said that, like the rest of the world, Dubai has been affected by the global crisis and would “have to rationalise our expenditures and consolidate our activities. Times are changing and to sustain our growth, we have to manage the new economic realities.”
Nevertheless, he said the fundamentals for Dubai, the UAE and the wider region were strong, noting that Dubai’s neighbourhood of the Middle East and India are “rich with oil, rich with young people, rich with dreams and rich with vitality.”
