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Dubai Seeks To Quell Fear Over Debt

by Carla Jonhson, Investors

25 November 2008

Mohammed Alabbar, Chairman of Dubai’s Advisory Council, quashed fears over Dubai’s debt obligations which currently are estimated to amount to USD10bn.

Alabbar, who is also Chairman of local property giant Emaar Properties, put speculation over Dubai’s debt obligations to rest by saying that the government of Dubai is fully capable of fulfilling them.

He was speaking at the DIFC Forum, the second major business conference that forms part of DIFC Week, the Dubai International Financial Centre’s (DIFC) prestigious annual series of business events.

In his first major public address as the head of the Advisory Council set up to manage the impact of the global financial crisis in Dubai, Alabbar said: “There has been a lot of talk about the debt obligations of Dubai. There is confusion and therefore concern about how much Dubai owes, and how this debt will be refinanced. Let us put an end to that speculation.

“Currently, the Dubai government’s sovereign debt obligations stand at USD10bn (AED37bn). While our key sovereign assets are currently being evaluated, I can give you a rough estimation of its value being over USD90bn (AED330bn). And this does not include our airports, bridges and the Metro.”

Alabbar also estimated the total debt obligations of affiliated companies at USD70bn (AED256bn), compared with assets valued at USD260bn (AED950bn). The total value of the assets of the government and affiliate companies in Dubai was put at over AED1,300bn.

“The government can and will meet all its debt obligations going forward. Let there be no doubt about this fact,” he told an audience of financial business leaders from the region and around the world.

Alabbar pointed out that Dubai’s borrowing has been used to finance Dubai’s long-term infrastructure development. “Our debt serves government institutions and state-owned entities that have positive cash flows and that have extremely strong long-term value,” he said.

Speaking about the action that the Dubai Advisory Council is taking to manage the impact of the global financial crisis on Dubai, Alabbar said: “The Advisory Council, which is already at work, meets frequently to review the state of key sectors of the economy. Make no mistake: We will act in a timely manner. And we will be transparent in those actions.” he said.

Alabbar also said that the Advisory Council will work with Dubai’s three largest real estate developers to manage the supply of real estate projects. “Today, Dubai’s three largest developers control about 70% of the supply onto the market. The Council, acting in co-operation with them as well as other private developers, is managing the current and future supply of new projects onto the market. Let me assure you that we have our finger on the pulse of the real estate sector.” He also said that the Dubai government will step in and help associated and affiliate real estate companies “if and when the need arises.”

On the state of Dubai’s real estate sector, Alabbar said: “Today, the real estate sector is witnessing a healthy correction. This is a consequence of global financial conditions – and is inherent to the very nature of the market. As we all know, real estate is cyclical. Monitoring supply and sales, the Advisory Council is managing this important sector of our economy, ensuring that new supply is properly managed and that current and future demand is adequately met.”

Reiterating that Dubai will take every measure to safeguard itself from the impact of the financial crisis, Alabbar said: “We are rising to the challenge of managing the new economic realities. But our feet are firmly planted on the ground – and our eyes remain fixed on new horizons, on a future that remains bright. Here in Dubai, we are realists. And we are also optimists. We have risen to great challenges before, and we will rise to them again.”

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