Dubai scrambles to restore confidence

Dubai scrambled to restore its reputation on Thursday, assuring investors that major property and leisure projects would go ahead and dispatching two top officials on a public relations drive to Washington.

Dubai raised fears of a second round to the global financial crisis on Nov. 25 when it asked for a standstill on $26 billion of debt linked to flagship conglomerate Dubai World and its property units Nakheel and Limitless.

This week, Dubai's wealthier neighbour and fellow member of the United Arab Emirates, Abu Dhabi, lent it $10 billion to meet Dubai World's obligations until the end of April and stave off a bond default by Nakheel, developer of its palm-shaped islands.

But confidence remains shaky, with syndicated lending in the Middle East at a five-year low, and bankers say Dubai companies will now need explicit government support to borrow abroad.

In a bid to restore the reputation of the Gulf business hub famous for extravagant developments such as the world's tallest building, the U.S. Treasury said two senior Dubai officials would meet Treasury Secretary Timothy Geithner later on Thursday to discuss the debt crisis.

Sheikh Ahmed bin Saeed al-Maktoum, chairman of Dubai's Supreme Fiscal Committee, and Mohammed al-Shaibani, chief executive of the Investment Corporation Dubai, also met officials in London on Wednesday, a government source said.

Abu Dhabi's loan has alleviated immediate concerns, but banks remain uneasy about the billions of dollars they lent to fuel Dubai's development boom on the assumption the emirate or the oil-rich federal government would back the debt.

"The headline risk remains, as Dubai World is still involved in a fluid process, so it is still key to proceed the dialogue with international investors," said Ali Khan, managing director and head of brokerage at Arqaam Capital.

sirfpaisa.com