C O N F I D E N T I A L SECTION 01 OF 02 DUBAI 000092

SIPDIS

E.O. 12958: DECL: 1/8/2015
TAGS: PGOV EINV ECON TC
SUBJECT: DUBAI'S "EXECUTIVE OFFICE" SPLITS INTO BUSINESS AND
GOVERNMENT ARMS

REF: A) DUBAI 4630 B) DUBAI 4361 C) DUBAI 5013 D) DUBAI 3286 E) DU

I 4719 AND PREVIOUS F) DUBAI 2849 G) DUBAI 49 H) DUBAI 1466


CLASSIFIED BY: Jason Davis, Consul General, Dubai , UAE.
REASON: 1.4 (d)


1. (C) Summary: Dubai's "Executive Office," headed by Mohammed
Gergawi, has long been a key player in "Dubai Inc," the term
used to describe the various parastatal organizations that the
Ruler's Office has set up to manage and oversee the development
of Dubai. The Executive Office has recently been split into two
separate arms, one (known as "Dubai Holding") consisting of all
the for-profit businesses, and a second consisting of the
regulatory and governmental functions of the rump Executive
Office. Still fully owned by the Dubai government, Dubai
Holding is now organized as a major corporation, with six
companies worth billions of dollars under its umbrella. The
three regulatory/government entities of the Executive Office,
meanwhile, have been organized as separate government agencies.
The purpose of the restructuring, according to Dubai Holding CFO
Fadel Al Ali, is to adopt international standards of corporate
governance and transparency so that Dubai Holding can emerge as
a respected global player. End Summary.

From the Executive Office to Dubai Holding
--------------


2. (U) Dubai's "Executive Office," headed by Mohammed Gergawi,
has long been a key player in "Dubai Inc," the term used loosely
to describe the various parastatal organizations that the Dubai
Ruler's Office set up to manage and oversee the development of
Dubai. (The other two major components of Dubai, Inc are Sultan
bin Sulayem's "Corporate Office," which includes Dubai Ports and
Customs as well as the real estate giant "Nakheel"; and Mohammed
Al-Abbar's "Emaar," another real estate giant.)


3. (U) Until recently, the Executive Office was an umbrella
organization incorporating both business and government
operations -- everything from the quasi-governmental Dubai
Development and Investment Authority (DDIA) to the purely
for-profit Dubai Internet City. On October 8, however, the
government of Dub

ai announced that the Executive Office would be
split up into three "independent" government bodies and one
private corporation which would be known as "Dubai Holding."
With Dubai Crown Prince and de facto ruler Sheikh Mohammed bin
Rashid (MbR) as its Chairman, Dubai Holding is one of the
biggest companies in the region, holding billions of dollars in
assets. It remains 100 percent owned by the government of Dubai,
though rumors abound that it was spun off from the Executive
Office in part so that it can eventually be taken public in an
IPO.


4. (C) On January 2, PolEconoff spoke to Fadel Al Ali, Chief
Financial Officer of Dubai Holding and formerly a Citibank Dubai
executive for 18 years, about the reasons behind the recent
restructuring. Al Ali's take was that Dubai, now that it was
emerging as a major international player, needed to meet
accepted international standards -- and this meant in part
"drawing a line" between the government and the private sector.
He said Dubai Holding would have a corporate structure, clear
standards of corporate governance, a board, and -- eventually --
a public declaration of its balance sheet. "We are perhaps 70
percent transparent now; our aim is to become 100 percent
transparent. We can no longer be run on a project-by-project
basis....His Highness's (MbR's) vision is for Dubai Holding to
be a truly multinational company." Al Ali predicted that Sultan
bin Sulayem's Corporate Office (Ref A) -- see para 2, above --
would soon undergo a similar restructuring.

Dubai Holding -- The Breakdown
--------------


5. (C) Al Ali said Dubai Holding (DH) was essentially a shell
company, and one with a very small staff. "We basically created
a mother after the birth of the children," he noted wryly. Al
Ali said DH had nine Board Members (not including MbR) and that
there were six distinct companies inside Dubai Holding. Gergawi
(as CEO), Al Ali himself, and the CEO's of the six companies
CEO's were all Board Members; the ninth board member was the
head of MbR's private "Investment Office" (which is charged with
investing MbR's personal wealth), selected because his office
has large investments in DH.


6. (C) The first of DH's six companies is TECOM Investments,
headed by CEO Ahmed Bin Byat. TECOM includes Internet City,
Media City, Knowledge Village, Arabian Radio Network, and
several other media-related firms. The second of the six DH
companies, run by Saeed Al Muntafig (who also heads DDIA -- see
para 7) is known as "Tatweer Dubai" ("Developing Dubai").
Tatweer controls free zone projects such as Dubai Healthcare
City (in cooperation with Harvard Medical -- ref B), Dubai
Humanitarian City (ref C), and large non-free zone projects such
as Dubailand and Dubai Industrial City. The third DH company is
Dubai Properties, the property development and management arm of
DH, run by Hashem Al Dabal. (Dubai Properties controls the USD
two billion freehold real estate development Jumeirah Beach
Residence (ref D) as well as "Business Bay," the newly-announced
multi-billion dollar project to develop and extend Dubai's Creek
into a high-rise lined arc stretching back through the desert to
Sheikh Zayid road.)


7. (C) The fourth arm of DH is Dubai International Capital, a
completely new entity run by Sameer Al Ansari, until recently
Chief Financial Officer of the Executive Office. (Al Ansari's
company will invest money raised by the DH's other branches into
companies in the Middle East, Europe, and the US. The fifth
company, Jumeirah International, has a hotel and hospitality
focus; it is headed by Gerald Lawless. (Jumeirah owns the
landmark "seven star" Burj Al Arab Hotel, the Emirates Towers
Hotel, and several other hotels in Dubai and the UK.) The sixth
and final DH company is Dubai International Properties, headed
by Farhan Faraidooni, which will invest in projects throughout
the region, including Lebanon, Libya, and Qatar.

The Government Authorities
--------------


8. (C) The spin-off of all the Executive Office's business
projects into DH left a rump Executive office now divided into
three governmental entities. The first of those, TECOM
Authority, does licensing, free zone rules, and other government
activities for the TECOM free zones (including Dubai Internet
City and Dubai Media City). A second governmental entity, the
Dubai Development and Investment Authority (DDIA), run by Saeed
Al Muntafiq, is the project-germinating wing of the government
and will continue to generate ideas aimed at attracting outside
investment to further develop Dubai. DDIA has responsibility for
the planned Dubai Mercantile Exchange, to be jointly run with
the New York Mercantile Exchange (ref E).


9. (C) The third governmental entity remaining following the
spin-off of Dubai Holding will oversee existing government
improvement-related initiatives such as the Dubai Government
Excellence Program (ref F) and the new Dubai School of
Government (ref G). This third entity will continue to be
known, somewhat confusingly, as "The Executive Office."
According to Al Ali, the new Executive Office will "backstop"
the Executive Council, Dubai's Cabinet-like government
consultative body made up of all the Dubai government department
heads and chaired by MbR (Ref H). Nabil Al Yousuf, a top
director at the Executive Office, told us the new Executive
Office would liaise with all the government departments and
present new policy initiatives to the Executive Council. DH's Al
Ali, however, downplayed the Executive Office's role, saying it
would be "limited to government performance benchmarking,
education programs, and improvement of government efficiency."

Comment
--------------


10. (C) "Dubai, Inc." is the somewhat sardonic catchphrase used
to describe the government-led, public-private sector
partnerships that have been responsible for Dubai's meteoric
rise from a smallish fishing and trading town to something
approaching a world-class metropolis. The restructuring of the
Executive Office and the spinning off of Dubai Holding suggests
that Dubai's leaders understand the need for greater
transparency and better business practices. The restructuring
is also a tacit acknowledgement that the blurry borders between
government and business that have served Dubai so well until now
could become a liability as Dubai's focus becomes more
international.


DAVIS