The cows involved in this project are not medically inseminated or treated
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Nasser Al Shaikh, the finance department’s director general, gave this updated timetable for Dubai’s next bond sale after weeks of suggestions from the government that it might not need the extra money.
“Because of this openness,… I think Dubai was one of the first cities in the region to witness the effect of the global financial crisis in our economy here. Will it cause us to change our plans? Definitely,” Al Shaikh said.
For its 2015 Strategic Plan, the government had assumed it could achieve an 11 per cent annual growth rate in Gross Domestic Product, or GDP. “In the world that we live in today, this is simply not achievable. So we have to go with a more realistic target.
“If we can manage to still grow our GDP when most of the world is declining and witnessing a contraction, this is an achievement by itself,” he said.
The government has so far distributed “a bit more than half” of the money it received from its $10 billion bond sale two months ago. It has lent many of these funds to government-affiliated property developers that encountered cash-flow problems after Dubai’s once-scorching real estate market turned cold late last year.
The liquidity injection is having the desired effect, as all government-linked developers have started paying their bills, he said.
The Dubai government authorised a total sale of up to $20 billion in bonds. The finance department is paying the Central Bank an interest rate of four per cent over five years on its first tranche. The department charges companies “four-plus” per cent for a share of the money and requires repayment in under five years, Al Shaikh said.
“After issuing the first tranche, we had very good interest from other parties beyond the boundaries of the UAE. So we do have a number of options” for selling a second tranche, he said.
“I think we will issue it within this year, but when exactly? I mean, this is completely dependent on the requirements of these companies.”
A key objective for his department remains investment in infrastructure projects such as the Metro elevated railway.
“My directive... is ‘Do not cut back on any infrastructure project.’ It has to be completed as planned.” The government’s logic is that the economy will eventually get back on track, “whether it’s in a year or two, and we have to be ready to be one of the first cities to rebound once we overcome these challenges,” Al Shaikh said.
“Today, what’s most important for us is to safeguard our economy, to support our companies. It’s not to go and invest abroad. It’s not to invest more in property — I think we’ve done a good job there. Of course, there was a great learning over the past 10 years. We did many things right. We did a few things wrong,” he said, without giving details.
Al Shaikh acknowledged that it would be “very important” for Dubai to establish a credit rating. “People always expect us to be more transparent than we used to be, and a credit rating helps us to achieve that. But is it a priority of the Department of Finance today? No, it’s not.”
He has met already with representatives of three big credit rating agencies, and his department plans to start the formal process of seeking a rating in the second half of the year. The process normally takes six to 12 months, Al Shaikh said.
“But of course, the house has to be in order before we start this exercise.”
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