Concerns about Dubai's debt are overdone, in the view of the head of the Dubai International Financial Centre. "Ratings agencies say Dubai lacks the financial muscle to cover debt... Dubai is not just built on credit; in the past it's largely been equity financing rather than debt," said David Eldon, chairman of the DIFC authority at a conference during DIFC Week. "The reality is we need to distinguish sovereign debt from corporate debt."
He added that Dubai's debt is very different from indebtedness in the US; in Dubai, debt was channelled into financing infrastructure projects and public utilities to increase productive capacity and enhance growth. "The reality is that Dubai is not alone, it has the backing of UAE, particularly Abu Dhabi, which happens to have the world's largest sovereign wealth fund as well as vast oil reserves," said Mr Eldon.
Though global debt may be drying up and access to local and global sources of funding are limited, Mr Eldon believes the Gulf is one of the economies that will recover "quicker than others," though the impact of the financial crisis are already being felt in the region. "With significant tumbles in regional stock markets and the withdrawal of capital by foreign investors needing cash, it is only natural for people to harbour pessimistic perceptions," he said.
He added that falling property prices, while painful to some speculators, may not be a bad thing. "The reality is that the market was overheating; it could be argued that subject correction is a sign of a maturing economy," said Mr Eldon. shamdan@thenational.ae
