Thu, December 03, 2009
CAIRO, Dec. 2 (Xinhua) -- Global markets were stunned by the debt crisis of Dubai, a fishing town turned financial hub, however, some Arab economists said that it is in the interest of all players to help Dubai to overcome the crisis, suggesting a set of procedures and measures that would help Dubai to ride out the hard times.
Dubai World, one of Dubai's largest and Emirate's leading state-owned company, asked last week for a delay in repaying nearly 60 billion U.S. dollars it owes to creditors as a first step to restructuring the company, causing panic and concerns across global financial markets.
Performance of stock markets in the United Arab Emirates declined during the first day of trading after the Eid al-Adha holiday ended on Monday.
The response to the crisis is primarily through expenditure rationalization in Dubai, especially in the new projects, said Dr. Ahmed Gowaili, Secretary-General of the Council of Arab Economic Unity.
Gulf countries, affected by this crisis, should help Dubai by meeting their obligations and paying their debts to alleviate the negative impacts of the crisis, Gowaili told Xinhua.
The senior economist attributed the crisis of Dubai's debt mainly to what he considered "uncalculated expansions" in investments, especially in the field of real estate, adding that the inability of Dubai institutions to meet their debts due to the significant expansion in these investments created a state of anxiety and fear in global markets either directly or indirectly.
Gowaili pointed out that Dubai crisis had a negative impact on the stock exchanges and the Gulf markets, and is expected to dent the UAE investments abroad, especially the ports and real estate.
Concerns about Dubai's debt problems continued to ease on Tuesday. Dubai World said it is in talks to restructure 26 billion U.S. dollars of debt, which helped to play down the worries that it might go into default and wipe out the investment of its creditors.
The news also helped to lift equity markets worldwide. London's FTSE 100, Germany's DAX and France's CAC 40 all closed with gains of more than 2 percent. Asian markets rallied as well with Japan's Nikkei ending 2.4 percent higher.
In spite of the concerns raised by the crisis of Dubai World, the UAE leadership has stressed on the strength of the country's economy and ability to overcome crises. UAE President Sheikh Khalifa bin Zayed al-Nahyan said on Tuesday that the country's economy was "fine" and the impact of the financial crisis would not stop its plans for growth.
Meanwhile, UAE Vice President Sheikh Mohammed bin Rashid al- Maktoum said in his address that ambition would remain key to the country's plans despite the impact of the global financial crisis.
"Ambitions will remain the ally of our plans, big goals will remain our objectives, nobility of our nation and welfare of the citizens will remain the compass that guides us and orientates ourwork," said Sheikh Mohammed, who is also prime minister of the UAEand ruler of Dubai.
The UAE economy had "become stronger and more cohesive," he said, adding that in spite of the impact of the global crisis, "the wheel of progress and achievement in our country did not stop turning."
He also called on media to convey the truth when covering the restructuring plan of Dubai World.
It is difficult to determine the losses caused by the crisis, either in Dubai or outside UAE, or even to predict the amount of decline in foreign investments and Arab investments, said Ambassador Gamal Bayoumi, Secretary General of the Federation of Arab Investors.
According to what would happen in the days to come, Dubai government would determine the measures to be taken, said Bayoumi, adding that would also encourage some countries such as Saudi Arabia and others to help Dubai to confront that crisis.
Bayoumi told Xinhua that global financial markets, particularly the Arab ones, were hit as investors from Dubai started to sell in Egypt, Saudi Arabia and Britain to provide more liquidity in Dubai and Abu Dhabi which were more vulnerable than the rest of world.
He commended the steps taken by the UAE central bank to inject liquidity in the UAE market, which was welcomed by the United Nations as well, stressing that it is important to know the real losses that would be compensated.
The Central Bank of UAE said Sunday that it stands behind its banks and branches of foreign banks operating in the Gulf Arab country. It provided the banks with a special additional liquidity linked to their current accounts at the central bank.
It is in no one's interest to turn his back to Dubai during the crisis, whose negative impacts on world markets can be avoided, added Bayoumi.
