Media reports mix up Dubai World, government
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Recent media reports had "mixed up" Dubai World and the Dubai government, Abdul Rahman al-Saleh, director general of the Dubai Finance Department, said Monday.
Dubai World "is a company set up with commercial basis and its transactions with creditors and investors were based on that respect," al-Saleh was quoted as saying by the official news agency WAM.
He said the group used to get financing based on its commercial status and feasibility of its projects.
"The gross mistake of the media is that they deem the company as part of the government. It is baseless," al-Saleh said, stressing that the Dubai government has supported the group since its inception.
The official noted that Dubai World has implemented huge projects in the emirate of strategic significance, but has been affected by the global financial crisis similar to what happened to many corporations worldwide.
The group faced difficulties in the redemption of its financial obligations, and hence, the decision taken by the government to restructure the company was to help it overcome that situation, according to al-Saleh.
He added that the debts and obligations were not guaranteed by the government.
Although the government is owner, "the company has multi- activities and prone to risks," al-Saleh said.
"So it was indicated that the government is not a guarantor. Therefore, the dealing of company with all parties was based on this conception," he added.
Al-Saleh underscored that the creditors should bear part of responsibility as they offered loans as per feasibility of projects and not upon the guarantees offered by the government.
As for the restructure decision, he reiterated that the decision was sound and favors all parties in long term and not short term as Dubai World has strategic projects.
He emphasized that the reaction was disproportionate to the size of Dubai World loan problem and that the situation would be rectified, calling on media to learn from the experience.
The restructure of companies is normal in many countries through intervention of governments or boards of companies to deal with difficulties of some companies when they occur, al-Saleh said.
He cited the United Arab Emirates (UAE) Central Bank's intervention Sunday to assure the markets and banks, stressing the existence of good federal coordination in this respect.
The government of Dubai, a member of the oil-rich federation UAE, announced last Wednesday that it would ask creditors of Dubai World, one of its largest and most important conglomerates, to agree to a debt moratorium of at least six months as a first step towards restructuring.
The announcement, described by ratings agency Standard and Poor 's as a default, provided the focus for world financial markets and media last Thursday, hitting bank stocks and the prices of oil, but lifting the dollar on a day when the U.S. and most Gulf markets were closed.
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