Dubai: Dubai has taken a first step to rehabilitating its reputation in international markets. The emirate has made a reasonably clear presentation of a plan to restructure some $24 billion of debt at flagship holding company Dubai World and property subsidiary Nakheel, which will repay creditors their principal in full. Yet to rebuild credibility, Dubai needs to do more.
The emirate has come a long way. The latest announcement was well organised and positively received by investors. That is a stark contrast to last November, when Dubai threw global markets out of kilter by announcing the need to restructure its debts on the eve of a long religious holiday. At the time, officials seemed disorganised and unprepared. To keep up the momentum, Dubai must focus on executing the debt plan. It needs to be both efficient and transparent in its dealings. Outside advisors have already helped the secretive emirate become more professional in addressing its debt woes. Deloitte has provided financial advice and Shriti Vadera, former British government minister and currently adviser to the G20 chair, provided her expertise. Dubai must remain open to sound strategic advice. In the longer term, Dubai must develop a comprehensive bankruptcy process. Last year it hurriedly announced a framework to apply to Dubai World if a consensual restructuring could not be reached. It was not clear if the emirate's wider corporate bankruptcy law applied. There is still uncertainty over how other government entities would be treated in case of failure.
Dubai needs to regain international confidence. It generates less than 10 per cent of GDP from oil and gas, so international trade and financing are crucial. The emirate's strong infrastructure and tourism industry provides something for foreigners to invest in and it can reasonably aspire to be the location of choice for international investors trying to tap Gulf wealth. But Dubai's reputation has been badly damaged by the story of its rapid boom and bust. Investors won't come back unless the emirate keeps up the momentum of change.
