Abu Dhabi Bails Out Dubai

Dubai World has been in news for some time now

. Every one was expecting Abu Dhabi to step forward and help Dubai World get out of the recession. It was a difficult decision to make and many were in doubt regarding the ability or willingness of Abu Dhabi to give Dubai World a helping hand. Earlier Dubai World had announced about its inability to pay debts in time and asked for rescheduling. Dubais government showed full confidence in its ability to rebound and stay solid. Although it was difficult to determine when and how will Dubai Worlds crisis see its end. Dubais government announced on 14th December, 2009 that it has been funded by Abu Dhabi for a staggering $10 billion to help meet its financial obligations in time, which were also due on the same day. Out of these $10 billion, $4.1 billion is said to be used in helping the government meet its liabilities against the Islamic bond issued in November 2007. The news was taken as a new ray of hope across the real estate world and for all the UAE economies. The stock exchanges showed a great response to this welcoming news and Dubais main share index went up by 10%, while Abu Dhabis share index recorded a rise of 7%. Dubais government has tried to capitalize on this opportunity and restore the worlds and investors confidence in Dubai and UAE in general.

Chairman of Dubais Fiscal Committee earlier mentioned that We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices." He also announced to implement a new law on bankruptcy saying This law will be available should Dubai World and its subsidiaries be unable to achieve an acceptable restructuring of its remaining obligations. The rest of the amount might go into helping Dubai stabilizing & getting done with its pressing issues like working capital & interest payments. Dubai is said to lack the deep pockets like Abu Dhabi having huge oil reserves. This will hopefully bring Dubai out of troubled territories at least for the time being. Others however see this never ending dilemma as Dubais inability to pay its obligations in time and are dubious about its ability to sustain in a longer run. An expert commented advocated the move saying that I hope this brings assistance to help sort the credit crunch. Many experts see it as a relief, but I think we will have to have a wait and see approach on how things unfold before jumping onto any conclusion. And future course of action must be decided with caution.

by: William

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