The newly appointed governor of the Dubai International Financial Centre (DIFC) has pledged to build on its success in promoting Dubai as a vital hub for capital and investment.
Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, on Saturday issued a decree naming Ahmed Humaid al Tayer to replace Omar bin Sulaiman, who had led the DIFC since its creation in late 2004.
His appointment followed an announcement last week that Sheikh Mohammed had named himself and two family members to replace three of Dubai’s most prominent officials on the board of the Investment Corporation of Dubai (ICD), the main government asset-management vehicle.
Bankers and analysts downplayed suggestions in international reports that the appointments represented demotions or signified a political schism.While the crisis has raised criticisms about the borrowing used to slingshot Dubai’s growth earlier this decade, they said the transfers were part of a broader financial restructuring to help refinance the roughly US$10 billion (Dh36.73bn) in debts that Dubai needs to repay next year. That sum is part of an estimated $85bn in total debts owed by the Dubai Government and the companies it controls.
Mr bin Sulaiman will remain the deputy chairman of the Central Bank, a spokesman for the regulator confirmed. The Central Bank has lent Dubai $10bn for the Dubai Financial Support Fund, which is overseeing efforts to restructure the emirate’s debts.The three remaining officials also retained key positions. Mohammed al Gergawi, who was removed from the ICD board, also serves as the chairman of Dubai Holding, which manages the personal wealth of Sheikh Mohammed. He is also the Minister of Cabinet Affairs.
A second ICD board member replaced last week, Mohammed Alabbar, remained the chairman of Emaar Properties, the government-controlled developer, as well as the chairman of the Dubai Economic Advisory Council.The third former ICD board member, Sultan Ahmed bin Sulayem, remained the chairman of Dubai World, the government-owned holding company that controls DP World and owns another key Dubai developer, Nakheel Development.
“Every board member who is leaving and coming, their contribution is highly appreciated,” Mr al Tayer said yesterday. “We are always soldiers to this country, to serve our country.”The DIFC is in many ways an emblem of Dubai’s achievements. Established in 2002, the organisation is one of Dubai’s Government-owned free zones, designed specifically to position the emirate as a hub for financial services and investment.
In addition to not having taxes on income or profits, the DIFC offers 100 per cent foreign ownership, while the UAE as a whole still requires that companies be at least 51 per cent Emirati owned.“The fact that Dubai is established as one of the major financial centres of the world is testament to the vision of the local authorities and the investment made in physical infrastructure and people skills,” said Peter Gotke, a vice president at The Bank of New York Mellon, which like many major banks has its offices in the DIFC.
“Whilst the DIFC lives that vision, the regulators and authorities have continued to evolve laws and access to make the region accessible and liquid.”The DIFC, like many Dubai Government-controlled entities, became highly leveraged in the course of its expansion. As a real estate development, however, DIFC is doing relatively well, analysts say.
Despite financial difficulties faced by many tenants, there is still a waiting list of at least 400 wanting to take up space, said a report last month by the ratings agency Standard and Poor’s.
DIFC bought a 2.2 per cent stake in Deutsche Bank in early 2007 and also owns stakes in Dubai Aerospace and in the private equity firm Abraaj Capital. DIFC typically financed these investments with private equity-style leverage, Standard and Poor’s said, paying for about a fifth of the investment in cash and borrowing the remainder.
That strategy left it vulnerable when the financial crisis started and credit for refinancing dried up. Standard and Poor’s said the DIFC had a debt-to-capital ratio of 76 per cent. The DIFC received a $1bn lifeline from the Dubai Department of Finance last year, which it used to repay $500m in loans.The company is also due to repay a $350m loan this week. It has $1.25bn in debt due in mid-2012.
By: Wayne Arnold and Uta Harnischfeger - The National
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