Dubai has hired HSBC to advise it on borrowing US$3 billion to finance the expansion of its two international airports as passenger numbers surge.
The emirate is aiming to boost annual passenger flow at Dubai International Airport and Al Maktoum International Airport to 146 million by 2025.
HSBC will be advising the Department of Finance for the Government of Dubai, the Investment Corporation of Dubai and Dubai Aviation City Corporation on raising the money through a number of sources that will include Islamic financing, the Department of Finance said in a statement.
The expansion of airports in Dubai and Abu Dhabi and heavy investment in the hotel sector are part of a broader push to diversify the UAE’s economy and make it less reliant on oil revenues.
An HSBC spokesperson declined to elaborate further, but bankers who did not want to be named said that the financing would be likely to include a big chunk of export credit agency loans – a form of intra-government lending that can be cheaper than commercial loans but that is often dependent on the borrower buying goods from that country.
“Dubai remains firmly committed to the development of the Al Maktoum International Airport and to the growth of the global aviation sector, and this initial $3bn transaction to support Dubai’s ambitious 2025 passenger capacity targets is testament to our belief,” said Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Dubai’s Supreme Fiscal Committee.
Dubai International Airport, is the world’s largest. In 2015, it hosted 78 million passengers, representing a 13 per cent average compound growth rate since 2000. Last year, it overtook London’s Heathrow as the world’s busiest airport.
The UAE economy has been given a push in the past couple of years by government spending on infrastructure that has included not only airports but other civil projects such as roads, hospitals and museums.
While the collapse in oil prices in the summer of 2014 has hit some projects as governments cut back on funding, many of those governments are borrowing money to ensure that key projects keep moving ahead.
“In line with Dubai’s vision to maintain its status as one of the world’s most important cultural and commercial centres, the planned expansion of both of the city’s airports is critically important, and our department is proud to play a vital role in their ongoing financing, just as we have with other similarly major projects,” said Abdulrahman Saleh Al Saleh, director general of the Department of Finance for the Government of Dubai.
mkassem@thenational.ae
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