Dubai finance chief confident on mega-projects even as oil price falls

A model of the proposed Dubai World Central development including the Expo 2020 site. Christopher Pike / The National

Dubai's finance chief believes the emirate can pay for the mega-projects planned over the next five years despite the falling oil price.

Speaking exclusively to The National, Abdulrahman Al Saleh, director general of the Dubai Department of Finance, said: "The capital markets have shown full faith in Dubai's business model and as you have seen, both equity and long term debt is easily accessible to Dubai entities. In addition we have seen the private sector is very keen to participate in the future growth plans of Dubai.

“We are confident that all these projects will be commercially viable and will be able to raise both equity and debt to manage healthy financial ratios,” he added.

Dubai is a relatively small oil producer, but experts believe the “feelgood factor” of high oil prices in the region is important for the emirate’s overall financial health. The finance department does not believe the state of the oil market is directly relevant to Dubai’s long-term plans.

“We are currently growing at a healthy and sustainable pace of 4.5 to 5 per cent in real terms and targeting a similar growth pattern going forward, which when compared to some of the developed nations is very good,” said Mr Al Saleh. “The next five years are very exciting for us.

“All entities will be very focused on achieving their targets under the Expo 2020 master plan and will benefit the economy significantly.”

Mr Al Saleh added that the emirate’s financial position had improved significantly since the Dubai World “standstill” of 2009. “All headline issues have been addressed, a lot of deleveraging has happened in the past five years and the cost of debt across Dubai has fallen.

“Most of the entities which were impacted by the financial crisis have altered their business plans to reflect the new reality and the risks of asset liability mismatches have been materially dealt with,” he said.

Dubai would finance its growth though a number of options. “As far as the government is concerned, we would continue to build infrastructure in line with the UAE and Dubai strategic plan 2021, which is based on an analysis of various demand supply dynamics in each sector of the economy.

“The government in its forthcoming budgets has enough headroom to fund the projects through a healthy debt equity mix. In addition, DoF has been built a strong yield curve to raise both long-term and short-term funds at attractive rates,” he said.

The media was partly to blame for the problems of 2009-10, when Dubai was restructuring debts against a background of volatile global markets. “With the benefit of hindsight, the media reaction to the news in 2009 was disproportionate to the actual problem and that led to investors being doubtful of the Dubai growth model,” said Mr Al Saleh. “The leadership in Dubai recognised the issues and came up with a swift action plan to correct the same. As you can see now the government has delivered on all these commitments during the past four to five years.”

Mr Al Saleh, who is preparing the imminent Dubai government budget, said that key areas of government work had been on improving communications with investors, property regulation and enforcement and clarity around government and government guaranteed debt, among others.

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