Wednesday, January 5, 2011

Keeping faith with Dubai

IF HISTORY is anything to go by, Dubai never does things by halves.

The increasingly oil-starved emirate has wowed the world with audacious projects like the tallest tower and grandest hotels in the world. It tottered under a massive debt burden after the financial crisis hit in 2008, before creating waves last year by restructuring some US$25 billion (S$32 billion) of debt held by government-owned conglomerate Dubai World.

So it is somewhat anti-climatic when the man who has overseen Dubai's climbdown from financial exuberance, Mr Ahmed Humaid Al Tayer, 60, will concede only that 'there is challenge' in his work.

'This is the first time that we as a country and company are dealing with a restructuring plan of that size, okay?' says the member of the Dubai Supreme Fiscal Committee, which looks into the emirate's debt and spending policies.

He was in Singapore recently to officiate at the opening of Emirates NBD bank's first Asia-Pacific branch and to meet Senior Minister Goh Chok Tong.

Throughout the 90-minute interview, he deflects troubling questions about the robustness of its financial sector and economic strategy, and the treatment of foreign labourers in the emirate. Instead, he chooses to focus on the bright spots like how Dubai's construction blitz in the past few years has put it in good stead for the future. He is also 'proud' of the 100 per cent support Dubai World's debt restructuring plan received from its creditors.

Dubai World, one of the emirate's flagship companies, has subsidiaries which operate in transport and logistics, drydocks, urban development, and investment and financial services. It is known for eye-popping projects like 'The World', made up of reclaimed islands in the shape of the world's continents.

Having peered into the seams of its financial woes, he agrees with a recent International Monetary Fund (IMF) assessment that Dubai needs to boost transparency to lift confidence in its economy. Dubai World, he says, expanded its investments overseas on cheap credit too fast, and without enough market experience.

The IMF last year estimated Dubai and its state-owned entities are sitting on US$110 billion in debt, which is about 130 per cent of its gross domestic product.

Even though Dubai's economy is on a more even keel now, having grown 2.3 per cent in the first six months of last year, he still chafes at global estimates about Dubai's debts, which he feels are misrepresented.

He says: 'The issue was with Dubai World and that was US$25 billion. The balance (of the debts) is held by good government and semi-government companies that are doing fine. They serviced their debts and they were cashflow-positive... There is no issue regarding their capability to repay (their debts).'

Such was the confidence in these government bodies that the Dubai Electricity and Water Authority found its US$2 billion bond issue oversubscribed by 6.5 times in October, he points out.

New board members have been introduced to Dubai World units such as Nakheel and its maritime arm Drydocks World to raise standards of governance. 'Most of them come from the private sector. They know the business, as they come from families managing these businesses for a long time, ' he says.

In the meantime, the Dubai government has bankrolled nearly completed projects like golf-course fringed houses in Jumeirah Golf Estates while putting others like reclamation development Palm Jebel Ali on hold. How the latter lot develops in the future will depend on market conditions, he says.

Dubai, which before the crisis stood out in the Middle East with its large expatriate population and cosmopolitan lifestyle, will not change, he stresses. This is despite the US$10 billion bailout by its more conservative neighbour Abu Dhabi in 2009, leading to speculation that the oil-rich emirate might now wield more influence over Dubai.

He says: 'I don't think the crisis will change that culture of Dubai as a hub or will change how people do business or deal with the cultural issues. Dubai is an open city and people live together and they do business together.

'No matter if they are expatriate or UAE nationals, male or female, I don't think there is an issue.'

Asked about the treatment of foreign workers who were reportedly left unpaid and stranded by employers who had skipped town, he again parries the question by saying: 'I don't think we should listen to the rumours... Some companies defaulted, but the government has taken all the measures to secure their salaries and wages. This happened even during the crisis. All of them (have been) paid by their companies.

'But of course after the crisis and decline in the construction business, some of them left to go back home or to neighbouring countries.'

In a similar fashion, he waves away notions that Dubai is still dealing with lingering fallout from the crisis, save for predicting the property sector will take three to five years to recover. 'There is always talk about the crisis, but it has a positive side - the inflation today is below 1 per cent. That itself will encourage businesses and support investment.' Even the oversupply of real estate now 'will help a lot do business' by lowering the cost of housing and setting up offices.

Dubai's building boom in the past few years 'will support the growth for the next 20 to 25 years without major expansion', he says. Major infrastructure projects like its metro and Al Maktoum international airport have been partially completed, and these will allow the growth of Dubai as a logistics hub.

Asked if he foresees any challenges ahead, he chooses to sound an optimistic note: 'I don't think there are major challenges. All the issues have been addressed by the government... Things are moving in the right direction. The strategy of the government and the country is in place to be competitive for doing business built on our achievement in infrastructure.'

Dubai, he says, is something like a 'twin' to Singapore, having banked on growth in aviation, shipping, banking, tourism and education to create a services hub for its region. The quality of infrastructure in Dubai is 'hardly' rivalled by any country in the region.

He reels off the statistics to show that Dubai is slowly getting back into the groove: The value of its trade grew 14 per cent in the first four months of last year over the same period in 2009, while the tourism industry was expected to grow 20 per cent last year after a decline in 2009. And Emirates Airlines recently reported an 'excellent' half-year profit of about US$1 billion.

Still, he makes an oblique plea for investors to keep their faith in Dubai, by referring to the then Union Bank of the Middle East's (UBME's) commitment to two Orchard Road shopping malls during Singapore's 1980s recession. UBME later became part of Emirates NBD bank.

'When I was in Singapore in the 1980s... we had two projects in Singapore at that time, Forum Galleria and the Wisma Atria... We believed in Singapore. We believed in its policy and economy. So we continued to finish our project and we made very good return on our investment.'

And so it will be for Dubai, he says assuredly. 'Investors should be patient. They should believe in the system and government policy. This is the only way. Because we are working together, with the private sector, to come out of those difficulties.'

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