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'Equity finance and not debt led to Dubai's growth' |
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11/27/2008 10:24:12 AM |
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Dubai's growth is based on equity and not just debt alone, said David Eldon, Chairman, DIFC Authority during the DIFC Week, brushing aside concerns over the emirate's debt.
Commenting on the misleading information of some rating agencies and Western media, Eldon said: "Dubai does not lack the financial muscle to cover its debt as some rating agencies have said. Moreover, the reality is that the emirate is not built on debt alone. The growth has been lead by equity finance and not debt."
"There is also the need to distinguish between corporate debt and sovereign debt. Unlike the situation in the US or the UK, debt here is channelled in financing infrastructure and public utilities that enhance productivity. Dubai has declared that it can cover its debt for the next seven quarters," he added.
Eldon also touched upon the emirate's underlying strengths that remain intact despite the current economic environment.
"The infrastructure in Dubai is very good, the regulations are sound and there is openness to businesses. The city has strong macro economic fundamentals."
Certain perceptions relating to the Gulf are absolutely baseless, according to Eldon.
"There was a lot of talk when banks here received capital injection and most speculated that this must have been in response to some emergency in the banking sector. However, this was not the reality. The cash stimulus was not needed to rescue any bank. It was a move to ease liquidity.
"It was a pre-emptive step and the government made it clear that it will intervene when necessary to maintain confidence.
"Besides this, we should remember that Dubai is not alone – it has the backing of the UAE, with world's largest SWF and huge oil reserves," he said.
Commenting on the real estate, Eldon said: "We've been seeing a softening in property prices and that may not be a bad thing. The market was over-heated and a correction is a sign of a mature economy."
Eldon said he believes that economies of the Gulf are by and large sound and these markets are destined to outperform emerged markets.
"There is a considerable upside to the downside, at least here in the Gulf. And, in the future we will see capital flowing directly between emerging markets." |
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Source: Business24-7.ae |
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