Abu Dhabi has today passed $10 billion across to Dubai so that the ailing Dubai World can meet its Islamic debt obligations that mature today. $4.1 billion will be used to pay immediate ‘sukuk’ obligations within 14 days. The remaining $5.9 billion will be used to keep Dubai World going until April 2010. It also appears from a Reuters report that the United Arab Emirates (UAE) central bank will inject liquidity as required into banks that are exposed to Dubai World.This move will hopefully put to bed all the doom mongering that has circulated around this story. The problem, although big enough to cause a few jitters, was never really big enough to cause an immediate global meltdown. That became apparent within a few days as the markets priced the risks in.
Sheikh Ahmed bin Saeed Al Maktoum, the President of the Department of Civil Aviation and Chief Executive, Chairman of The Emirates Group as well as Chairman of the Dubai Supreme Fiscal Committee said that Dubai is also in the process of re-drafting their bankruptcy laws. The new law is to be “based upon internationally accepted standards for transparency” so as to give protection to creditors. This law will be available to use should there be future problems and Dubai World is unable to restructure its obligations satisfactorily.
"Dubai is, and will continue to be, a strong and vibrant global financial centre. Our best days are yet to come”. Said the Sheikh.
Dubai is one of seven Emirates that make up the UAE, formerly known as the Trucial States. The others are Abu Dhabi, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah and Fujairah. Of these Abu Dhabi is the largest and its capital, also named Abu Dhabi, is the capital of the UAE.
What put pressure on Dubai is falling oil revenues and a hasty rush to replace income with money from property and tourism. But this led to some over leverage as they stretched themselves with their huge building projects. Maybe a less ambitious project would have had the best result in the long run, as the economic 'rule' that huge building projects are a precursor to a recession seems to be being borne out again.