Alabbar explains $80bn Dubai debt, denies selling assets

Emaar Properties chairman and veteran Dubai public official Mohamed Alabbar is back in a leading role in the local administration as chairman of the powerful new advisory council of senior government figures to steer the emirate through the global economic crisis.

Today he told the DIFC Week conference that he wished to be completely transparent and clear about the city’s debt levels which have been subject to much rumor recently. He stated that Dubai government sovereign debt totaled $10 billion and ‘affiliated companies’ debt was $70 billion.

‘Going forward there is absolutely no doubt that Dubai will be able to cover its debt,’ he said. ‘The total debt of $80 billion compares with sovereign assets of $90 billion and affiliated companies assets of $260 billion’, although he was unable to explain exactly how these valuations were reached. He also strongly denied that the government had sold any assets to meet debt obligations.

DFM crash

Dubai Financial Market’s total value has crashed by 75 per cent, something Mr. Alabbar euphemistically termed a ‘healthy correction’, and the local real estate market is at a complete standstill.

He did explain the composition of the new advisory committee which was apparently formed six weeks ago. Its membership comprises senior figures from across the spectrum of state and para-state entities.

Questioned on the links between the committee and the federal authorities of the UAE, Mr. Alabbar referred to informal rather than formal connections. But two members do have federal government roles that provide links at the highest levels, and this is important because federal funding is likely to become increasingly important in the future.

New Emirates Development Bank

For example, today’s announcement of the creation of a new federal bank, the Emirates Development Bank which includes the ailing Dubai mortgage companies Amlak Finance and Tamweel as well as the UAE Real Estate Bank, is an indication of how direct federal funding will support the local economy in the future. Mr. Alabbar could give no further details about this bank whose precise form and function is still being worked out.

On the other hand, Mr. Alabbar also spoke of the need to ‘face new economic realities’ and ‘rationalisation’ of expansion plans, again without being more specific.

Bringing Mr. Alabbar back into public prominence – after letting him devote all his time to Emaar Properties over the preceding five years – returns one of the architects of Dubai’s expansion to a key position at the right time. The man who founded Emaar with a $3 billion IPO in 1997 is clearly the best person for the job, and he actually made his reputation in the Dubai Government by sorting out real estate investments that had gone wrong in Singapore.

‘I am proud of what we have achieved’ he declared, saying that Dubai would do whatever it took to safeguard this achievement for future generations. In terms of injecting confidence into the market this was a good first step, albeit some speakers at the DIFC Week felt it had come a little late.
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