Identifier
Created
Classification
Origin
09DUBAI299
2009-07-23 12:15:00
SECRET
Consulate Dubai
Cable title:  

DUBAI FINANCE DEPARTMENT LAUNCHES SUPPORT FUND

Tags:  EFIN ECON EINV PGOV AE 
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VZCZCXRO4597
PP RUEHDH RUEHDIR
DE RUEHDE #0299/01 2041215
ZNY SSSSS ZZH
P R 231215Z JUL 09
FM AMCONSUL DUBAI
TO RUEHC/SECSTATE WASHDC PRIORITY 6567
INFO RUEHAD/AMEMBASSY ABU DHABI 3606
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHDE/AMCONSUL DUBAI 9856
S E C R E T SECTION 01 OF 02 DUBAI 000299 

SIPDIS

DEPARTMENT FOR NEA/FO;NEA/ARP/BMASILKO

E.O. 12958: DECL: 7/23/2019
TAGS: EFIN ECON EINV PGOV AE
SUBJECT: DUBAI FINANCE DEPARTMENT LAUNCHES SUPPORT FUND

REF: ABU DHABI 189

DUBAI 00000299 001.2 OF 002


CLASSIFIED BY: Jennifer Gavito, Acting Principal Officer,
Consulate General Dubai, UAE.
REASON: 1.4 (b),(d)
S E C R E T SECTION 01 OF 02 DUBAI 000299

SIPDIS

DEPARTMENT FOR NEA/FO;NEA/ARP/BMASILKO

E.O. 12958: DECL: 7/23/2019
TAGS: EFIN ECON EINV PGOV AE
SUBJECT: DUBAI FINANCE DEPARTMENT LAUNCHES SUPPORT FUND

REF: ABU DHABI 189

DUBAI 00000299 001.2 OF 002


CLASSIFIED BY: Jennifer Gavito, Acting Principal Officer,
Consulate General Dubai, UAE.
REASON: 1.4 (b),(d)

1. (S) Summary. In a rare public acknowledgment that Dubai's
financial crisis lingers on, the Dubai Department of Finance
(DDF) launched on July 22 the "Dubai Financial Support Fund" to
manage the second half of a five-year USD 20 billion Dubai
government bond (reftel). While official government entities
are virtually guaranteed support, the Fund is likely to continue
attempts by the Dubai government to trim the fat off of Dubai
Inc. The Fund is also being painted as a response to complaints
regarding Dubai's lack of transparency in its handling of the
financial crisis. Despite this, it is unlikely the details of
the Fund's activities will ever be made public. End Summary.




2. (S) During a July 22 meeting with Acting Consul General and
EconOff, Dubai Department of Finance Funds Management Director
Marwan Abedin confirmed that Dubai Ruler Mohammed bin Rashid al
Maktoum (MbR) had that day signed a decree establishing a
Financial Support Fund to manage USD 10 billion of a USD 20
billion Dubai government bond (the first USD 10 billion was
subscribed to by the UAE Central Bank). Abedin, who was
responsible for its creation, emphasized several times that the
Support Fund was not a bailout and that, as a separate legal
entity, participants would be responsible for repayment on a
commercial basis (likely at slightly higher than the four
percent rate the first $10 billion bond will pay the Central
Bank).




3. (S) Applications to participate in the fund would be
considered based on the strategic importance of
projects/entities to Dubai's long term viability. Abedin
confirmed that a number of entities had already approached him
to express interest in participating. While he wouldn't provide
names, he noted that official Dubai entities (including the
Dubai Electric and Water Authority, Dubai International Airport,
and the soon-to-open Dubai Metro system) could be expected to

receive funds. By contrast, the parastatals comprising Dubai
Inc. would have no guarantee of support and would be assessed
project-by-project based on their "strategic and pivotal"
importance and commercial viability (Abedin joked that Nakheel's
proposed newest tallest building in the world is not likely to
make the cut). The Department of Finance will analyze
applications for funds and make recommendations to the Supreme
Fiscal Committee, which will oversee the Fund and make all final
decisions on its use. The Committee will be made up of five
members from the public sector, appointed by decree (although
likely not until after Ramadan ends in late September).




4. (S) Abedin was adamant that the Support Fund is not a bailout
and, despite rampant rumors to the contrary, the commercial
terms of the loans (rather than simply a cash transfer) should
help dispel rumors that the Federal Government (i.e. Abu Dhabi)
is buying out Dubai. Diverting only briefly from the unstated
but firm rule against government officials criticizing Dubai
Inc., Abedin conceded, though, that the parastatals "need to
start acting like" the commercial entities they are. (Note:
This comment is significant as it is rumored that a public and
disparaging comment against Nakheel was behind the recent and
surprising firing of Abedin's former boss, Department of Finance
Head Nasser al-Sheikh from all Dubai government positions. End
Note)






5. (S) Although worried about ongoing rumors about the viability
of Dubai as the regional hub for commercial activity, Abedin
noted that its well-developed critical infrastructure (including
security) makes it unlikely Dubai could be seriously challenged
in this regard. Abedin pointed out that the global economic
crisis is not unique to Dubai and repeated the oft-heard refrain
by Dubai officials that this provides an opportunity for a
much-needed "correction" and a chance to get "back to basics."
Abedin acknowledged that the reluctance of Dubai to admit the
depth of the crisis in its early months diminished its
credibility. In fact, the Department of Finance two weeks ago
hired a new Public Relations firm to ensure such a misstep would
be avoided in the future (notably, Abedin did not indicate this
effort would result in financial information being more freely
provided).




6. (S) Comment. The Department of Finance is moving to guarantee

DUBAI 00000299 002.2 OF 002


all strategic government-related entities against insolvency,
with the potential of substantial future funds provided if
needed. Following criticism over the secrecy surrounding how
the first USD 10 billion tranche is being disbursed, this also
seems to be a PR move to provide at least the appearance of
transparency and accountability. Dubai seems to have come
around to the realization that it mishandled the financial
crisis, both publicly and privately, and hopes this high-profile
Support Fund will help to reestablish confidence and credibility
with the business community. End Comment.
GAVITO