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Government Move Seen as a Right Step
DUBAI - International financial institutions, business leaders and professionals in the UAE welcomed the move by Dubai and Abu Dhabi governments to support the nation’s corporate sector as a positive step in safeguarding the stability of the UAE economy and its financial system.
The announcement that Dubai government will support Dubai World in repaying Nakheel’s $3.5 billion bond and also in meeting its obligations with contractors with the $10 billion assistance pledged by Abu Dhabi clearly reflects the ability and willingness of the UAE authorities in supporting key players of the economy. Such positive moves will provide the UAE with a strong platform for future growth and investment, they said.
“It shows the strength and unity of the UAE as a country and it will dispel all fears and speculations with regard to the soundness of the UAE economy,” said Indian Consul General in Dubai Venu Rajamony. “This measure in particular the repayment in full of the Nakheel’s Islamic sukuks will provide a big boost to the stock markets and assure investors that their future is secure in the UAE. I strongly urge the Indian community, especially Indian businessmen, to do everything possible to infuse confidence in Dubai economy and to support measures being taken by the UAE and Dubai Governments,” said Rajamony.
Bill O’Neill, Portfolio Strategist at Merrill Lynch Wealth Management, said the governmental support for Dubai World in meeting the debt obligation of its subsidiary Nakheel underscored the ability and willingness of the UAE in honouring the financial commitments of the corporate sector. “It is a positive first step, but not a total solution to all debt obligations of Dubai.”
“We congratulate Dubai World and the UAE in coming to a mutually agreeable and equitable solution, and would echo the words of Shaikh Ahmed bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee: ‘Our best days are yet to come,’” said Simon Cooper, chief executive of HSBC Middle East. “HSBC has always, and will remain, the strongest supporter of Dubai, Abu Dhabi, and the whole of the UAE.”
The announcement from the Government of Dubai and the Government of Abu Dhabi highlights the true strength of the UAE federation, said Peter Sands, Group Chief Executive at Standard Chartered.
“Today’s commitment will boost global and regional confidence in the country and allow Dubai to continue to build its profile as one of the world’s leading financial centres. The bank believes the announcement sends the right message to the global financial markets,” said Sands.
All markets around the world have been impacted in different ways by the global financial crisis, said Shayne Nelson, Regional CEO Middle East & North Africa, Standard Chartered Bank. “The UAE has also been affected but today’s statement from the government is extremely positive and it will provide Dubai with a strong platform for future growth and investment.
Dr Nasser Saidi, chief economist at DIFC Authority: “The move showed Dubai is in solid footing, that it is able to honor its debts and obligations. It also shows that the UAE is a federation that stands together. This should be welcomed by the financial markets as the uncertainty has been resolved. The resolution of the debt issue is just a confirmation of the underlying strength of the UAE and the GCC region, and markets should reassess the long term future of GCC economies.”
Engineer Fatima Al Jaber, Chief Operating Officer of a leading Abu Dhabi construction company, said the development was “a good news” for the construction companies that have been awaiting payment for their services. “It will send a very positive message to the contractors, sub-contractors, suppliers and other industry stakeholders,” she said.
Al Jaber said that non-payment to contractors significantly affected their financial health and led to serious financial difficulties for many company. “The resolution to the issue will send strong message to international markets and boost investors’ confidence in the emirate.”
The payment to trade and contractors would boost the economy of the emirate as the estimated amount of claims runs into several billions of dirham, said William Kennedy, senior vice president at Hill International, project management and claims consultants based in Dubai.
“Large companies can manage their finances but the small and medium sub-contractors, consultants and other professional were really cash-strapped,” Kennedy said.
Khalfaan Saeed Al Kaabi, a director to the board of Abu Dhabi Chamber of Commerce and Industry said the bailout news has already boosted the markets.
Yusuffali MA, director of Abu Dhabi Chamber of Commerce & Industry said the timely move has been well responded by stock markets. “It is a huge boost to the local and regional finance markets. I was always confident of the economical power of the UAE, as one strong country with a visionary leadership”, he said.
“The rescue package can fully meet Dubai World external debt maturing in 2010. It looks like soft guarantees worked out this time around, but we still believe the ability of Dubai related enterprises to tap the external markets with large deals, especially those without explicit guarantees by the state, will be re-adjusted going forward,” said Luis Eduardo Costa, emerging markets debt strategist at Commerzbank AG.
Standard & Poor’s Ratings Services said the announcement was a step towards rebuilding confidence in Dubai’s policy-making environment. “In particular, we believe the intention to strengthen the laws governing the Dubai World restructuring is an opportunity for the Dubai government to demonstrate the workings of its legal system in dealing with such events.”
The ratings agency argued that the intervention of Abu Dhabi was an indication that “it stands ready to safeguard the stability of the UAE economy and financial system. However, we believe uncertainty remains as to the Dubai government’s general ability and willingness to provide timely extraordinary support to its government-related entities as well as the transparency and predictability of such support.”
“When the whole world was talking about the collapse of Dubai and Dubai World, the financial assistance extended by Abu Dhabi is a big relief. The market has reacted positively by bouncing back. I am sure this move will enhance the confidence level of the International Investors/lenders and thus improve the overall liquidity of this region.
This news also is a strong message to the foreign media who were discussing about the fall of Dubai,” said James Mathew, Managing Director, Horwath MAK International Consulting.
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