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| Top down |
| Una Galani / Aug 05, 2009, 00:31 IST |
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Dubai: Dubai is stuck in a re-financing sandstorm. The emirate is half way to raising its targeted $20 billion to help stretched state companies meet short-term debt obligations, part of Dubai’s larger $80 billion debt pile revealed last year. But the belatedly established Dubai Financial Support Fund, intended to manage the proceeds which should be integral to the emirate’s recovery, appears a long way from on its feet.
The DFSF was unveiled last month, despite apparently not yet having a management board, external financial adviser or any cash to invest. The emirate raised the first $10 billion of the desired $20billion in February from the United Arab Emirates’ central bank, in effect from the federal authorities in cash-rich neighbouring Abu Dhabi. But by the time the DFSF was launched, that money had already been mostly distributed to undisclosed recipients.
What remains are questions, such as where the second half of the DFSF funding will come from and whether it will be sufficient. So far, Dubai has done little to ease local and foreign concerns about the emirate's financial health. Speculation remains rife that Dubai will not be able to raise the second $10 billion tranche from private sources by the end of the year as planned – forcing the emirate once again to turn to Abu Dhabi.
More needs to be done, faster, to salvage the once-hailed vision of Dubai as an international financial hub. Downgrades of government-related entities from rating agencies will discourage outside investors. Few will be willing to list or channel funds through the emirate without a clearer sense of how near or far Dubai Inc is to default. The sudden and still unexplained replacement of Dubai’s respected finance director in May adds to the many doubts.
Transparency is something of a buzz word in the emirate, but it remains much more of an aspiration than a reality. As a new body, the DFSF has an opportunity to set a new standard, creating the possibility of a cathartic healing. But until investors know where money comes from or is going to, there isn’t much reason for optimism.
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