DUBAI - Urgent action is needed to shore up Dubai World’s Nakheel, developer of the emirate’s signature palm-shaped islands, and Dubai Holding, an investor in Sony of Japan and Europe’s EADS aerospace group, Dubai’s finance chief said on Tuesday.
However, Emaar Properties, the largest real estate developer in the UAE, is not asking for emergency financial support because “it believes it can handle” the crisis, Nasser Al Shaikh, Director-General of the Department of Finance, said in an interview.
Nakheel and Dubai Holding are among the first companies that will have access to proceeds from the sale this month of $10 billion in bonds to the UAE’s central bank. The first detailed rescue plans involving these funds should become available in another two weeks, Al Shaikh said.
Dubai’s property companies — a lynchpin of its economy — have been under pressure since late last year, when the global crisis and slumping oil prices stifled an economic boom in the Gulf region. The emirate’s successful bond sale buoyed sagging investor confidence. Since then, however, official forecasts of possible negative economic growth in the second half of this year have raised fresh concerns.
Much like American car-makers asking the U.S. Congress for bailout money, Dubai’s fallen angels must file plans that take into account new economic realities: dried-up demand for property and hard-to-get credit.
“There is no free lunch; we will be helping companies on commercial terms,” Al Shaikh said. “We would like to avoid sitting down with them in six months and talking about the
same issue.” To do this fairly, Dubai has put together a five-member fiscal committee headed by Emirates Airline Chairman Shaikh Ahmed bin Saaed Al Maktoum. “I don’t make the call; it’s the committee that decides,” Al Shaikh said. “These times, everybody questions what we do. In good times
Local banks, including Islamic institutions, have also submitted propoals to the government to provide help to small and medium-sized enterprises, he said.
Dubai will shortly appoint non-bank financial advisors to ensure that assets are valued properly and to avoid conflicts of interest, Al Shaikh said.
“We can only see 10 to 15 metres ahead,” he said. “We will have to revisit our plans and stay focused on the short-term challenges.”