Crisis 'will not deter Dubai's ambition'

Sheikh Mohammed, the Ruler of Dubai, says the emirate's aim to become a global economic player is undiminished by the financial crisis.

Dubai has passed through the worst of the economic downturn, says Sheikh Mohammed bin Rashid al Maktoum, ruler of Dubai and prime minister of the UAE.

Dubai's aim to become a global economic player is undiminished by the financial crisis and the emirate is well placed to pay its debts, says Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. The speech to foreign investors at an event organised by Bank of America Merrill Lynch came less than two weeks after Dubai raised US$1.93 billion (Dh6.97bn), the first new loan from international markets since the crisis hit last year. "The worst is over and Dubai is now well placed," Sheikh Mohammed said in his speech in Dubai. "The global economic crisis, despite its impact, will not deter Dubai's ambitions of implementing its development plans." The ruler's comments helped pushed Dubai shares to their highest level in a week. Sheikh Mohammed also expressed confidence that investors would subscribe to a second $10bn bond expected within weeks, after the Central Bank bought the first $10bn in February.

The $20bn bond programme was designed to ease repayments on $85bn in debt built up during the building boom of the past decade. There has been speculation on whether private investors will be interested in the second half of the bond. "Those who know me trust me when I say that the second part of the bond programme initiated by Dubai recently will be well received by subscribers, and will contribute to settling Dubai's financial obligations in the coming years," said Sheikh Mohammed. He reiterated the strength of Dubai's links with Abu Dhabi, and told critics of their relationship to "shut up". "I assure you that we will be there for each other when we need it," Sheikh Mohammed said.

Abu Dhabi's oil and sovereign wealth savings are considered an important support to Dubai's ability to service its debt, especially since credit markets tightened with the global banking crisis. Dubai launched the $20bn support fund in response to the financial crisis, which caused property prices to fall, drained liquidity from banks and led to thousands of job cuts. Defending Dubai's response to the crisis, Sheikh Mohammed said: "We preferred to wait rather than rush into action, because we are keen to ensure that our major enterprises are restructured to allow them to have the momentum and strength they require to cope with the realities of the new economy."

In the biggest sale of Islamic bonds in the Gulf so far this year, Dubai raised $1.93bn last month. Economists estimated that Dubai would need to either repay or refinance $10.1bn in debts coming due next year. It will need $12.1bn in 2011, $15.2bn in 2012 and $4.8bn in 2013. The Government said on Sunday it repaid a $1bn Dubai Civil Aviation Authority sukuk due on November 4. Nakheel, the Dubai Government-controlled developer, is expected to repay a $3.5bn Islamic bond next month with bondholders due to receive more than $4bn in principal and profit. "The speech delivers important reassurances," said Eckart Woertz, the programme manager of economics at the Gulf Research Centre in Dubai. "However, markets don't operate on political statements but on economic realities on the ground. In that sense, the repayment of developer Nakheel's bond in December will be an important indication. Narrowing spreads show that the markets have regained confidence in Dubai's ability to meet its obligations." Mr Woertz said a lack of information on Dubai's debt situation had contributed to market scepticism in the past. [e-mail]