Yes, Dubai has debt…but who doesn’t?
Nobody in the world succeeds or becomes a pioneer unless he makes mistakes. it's a price that we sometimes have to pay, says Habtoor.
November 29, 2012 8:58 by Reuters
But Dubai’s fall from grace was almost as spectacular as its rise. Real estate prices tumbled over 60 percent in the three years from 2008, obliging Dubai Holding, Dubai World and other state-linked firms to restructure billions of dollars of debt.
Dubai also got a last-minute $10 billion bailout from neighbouring Abu Dhabi to avoid a bond default by palm islands developer Nakheel, and the emirate still faces a wall of debt repayments with an estimated $50 billion in liabilities due between 2014 and 2016.
The crash clipped the wings of many top executives; Sultan Ahmed bin Sulayem, the third business lieutenant identified by Krane, was removed from the helm of Dubai World in 2010 and now chairs port operator DP World.
Sheikh Mohammed turned to two people in particular to repair the damage. One was his uncle, Sheikh Ahmed bin Saeed al-Maktoum, head of the committee overseeing Dubai’s financial support fund and chairman of Emiratesairline and the Emirates NBD bank.
The other was Mohammed al-Shaibani, who is chief executive at Investment Corp of Dubai, which owns some of the emirate’s top corporate assets, and director-general of the Ruler’s Court, which supervises and coordinates government departments.
Shaibani helped to orchestrate debt refinancing negotiations with international creditors and also commanded a war on corruption in state-linked entities, which resulted in a wave of management reshuffles and mergers at state-linked firms.
Now Dubai seems to have repaired most of the damage. While state-linked firms still have plenty of debt, most have succeeded in pushing maturities into the future; property prices have begun recovering and the economy is again growing strongly.
That is an environment in which executives such as Alabbar and Gergawi can pursue their ambitions, as Sheikh Mohammed made clear in a speech announcing the mall project.
“The current facilities available in Dubai need to be scaled up in line with the future ambitions for the city,” he said.
There are signs, however, that Dubai’s next boom may be managed a little more cautiously than the last.
“The ambition is back but this time I’m confident it’s going to be more pragmatic and better managed,” said a person familiar with Dubai’s inner circles, who declined to be identified due to the sensitivity of the issue. “Everyone’s learned the lessons.”
Projects announced by Sheikh Mohammed this month will rely on the retail and entertainment spending of tourists from around the Gulf, India and elsewhere, rather than Dubai’s fickle real estate market, which was the focus of the last boom.
Khalaf Ahmad al-Habtoor, founder and chairman of the Al Habtoor Group and one of the band of top Dubaiexecutives, said the emirate had learned from its experience and was now able to handle its debt better than many Western countries.
“Nobody in the world succeeds or becomes a pioneer unless he makes mistakes. It’s a price that we sometimes have to pay,” Habtoor told Reuters. “Yes, Dubai has debt…but who doesn’t?”
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