UAE: United Arab Emirates begins to bail out Dubai's rattled lenders, consolidate its financial sector and cap a building spree

Record ID: 784542

  • Title: UAE: United Arab Emirates begins to bail out Dubai's rattled lenders, consolidate its financial sector and cap a building spree
  • Date: 26th November 2008
  • Summary: WIDE OF EMAAR CEO MOHAMMED AL ABBAR ON PODIUM (SOUNDBITE) (English) EMAAR PROPERTIES CHAIRMAN MOHAMMED AL ABBAR, SAYING: "I think we will see more consolidation, especially with third party developers, who may be facing some lending difficulties in today's market." AUDIENCE (SOUNDBITE) (English) EMAAR PROPERTIES CHAIRMAN MOHAMMED AL ABBAR, SAYING: "This new entity will be supported by capital and funding so I'm very optimistic that it will go very well, but we will be sharing the details quite soon about a lot of what's going on now'.' DIFC WEEK CONFERENCE HALL
  • Embargoed: 11th December 2008 12:00
  • Keywords:
  • Topics: Economic News,Domestic Politics
  • Reuters ID: LVA93P3JSOKXR7ADYO4WPKA31C2Q
  • Story Text: Mohamed Alabbar, a member of the emirate's ruling council, assures investors that the self-styled regional financial hub of Dubai is able to meet its sovereign obligations as pressure from the global financial crisis mounted.
    The United Arab Emirates began to bail out Dubai's rattled lenders, consolidate its financial sector and cap a building spree on Monday (November 24) as the former boomtown began cutting state spending in the face of the global crisis.
    In a major policy shift, the federal government will inject capital into its Emirates Development Bank, a newly created rescue vehicle preparing to absorb merging Islamic lenders Amlak and Tamweel, a leading official said.
    Mohamed Alabbar, a member of the emirate's ruling council, assured investors that the self-styled regional financial hub of Dubai was able to meet its sovereign obligations as pressure from the global financial crisis mounted.
    ''We are rationalising our expenditure and consolidating our activities too. Times are changing, to sustain Dubai's growth we must manage the new economic realities'', he told investors at the conference.
    Dubai will meet all its official obligations and will help state-affiliated companies if needed, Alabbar, also chairman of Emaar Properties, said.
    He said: "The government "can and will meet all obligations going forward."
    ''I think we will see more consolidation, especially with third party developers, who may be facing some lending difficulties in today's market," Alabbar said.
    A federally funded bailout would represent a major policy shift for the 37-year-old confederation of seven seaside emirates where the federal government has played more a role of facilitator than underwriter of progress.
    A cash injection would also represent the first big step by the federal government, dominated by the conservative oil-exporting emirate of Abu Dhabi, to bail out high-flying banks in neighbouring Dubai, suffering under the global crisis.
    The UAE rescue plan comes on the heels of European and U.S. bank rescues, the most dramatic of which emerged earlier on Monday when U.S.
    authorities bailed out Citigroup Inc.
    Dubai has resorted to drastic measures to stem the financial crisis in recent days, placing the planned merger of Amlak and Tamweel under a little-known state-run entity called Real Estate Bank, then placing Real Estate Bank into the newly created Emirates Development Bank (EDB), which will receive funding.
    ''This new entity will be supported by capital and funding so I'm very optimistic that it will go very well, but we will be sharing the details quite soon about a lot of what's going on now,'' Alabbar said.
    Wealthy Abu Dhabi, one of the world's biggest oil exporters and dominant member of the UAE, has long been expected to bail out Dubai, which has virtually no mineral resources but has made an audacious bid to become a regional trade and tourism hub.
    The global financial crisis has torn through the Arab Peninsula, until recently thought immune due to massive sovereign savings and earnings from energy exports, with almost the same violence as in Europe and North America.
    Dubai's sovereign debt stands at 10 billion U.S. dollars while the debts of state-affiliated firms amount to 70 billion U.S. dollars , he said, broadly in line with external estimates.
    Dubai held 90 billion U.S. dollars in government assets and 260 billion U.S. dollars in assets belonging to state-affiliated companies, he said.
    Troubled Islamic property lenders Amlak and Tamweel, whose shares were suspended from trading on Sunday, will be brought under the umbrella of the EDB.
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