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Dubai's dubious debts |
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12/2/2008 9:15:02 AM |
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Long thought to be the bastion of liquidity despite global financial turmoil, the Gulf Region may not be as sure a bet as once thought, with questions being raised about the ability of its shining star – Dubai – to fend off the credit crunch in light of its heavy debt obligations.
As is always the case, law firms, it seems, are already catching on to the need to be both more proactive in terms of the funding sources couched for deals and to look outside the innate strengths of the Gulf market – beyond projects and energy & resources to relatively new markets in the Middle East such as TMT, IP and dispute resolution – a move which may in the mid to long term turn out to be critical in more ways than one.
Speaking at the Dubai International Financial Centre Week conference, HE Mohamed Alabbar, a member of the Dubai Executive Council, noted that the emirate’s outstanding sovereign debt totalled US$10bn and its key sovereign assets totalled US$90bn. The latter does not include some infrastructure assets which are still being valued.
Although this is, by all accounts, a comparatively impressive balance sheet, rumours still abound that the government may be forced to sell some assets to meet its debt obligations when the global financial crisis hits full speed in the first and second quarters of next year – a claim denied by Alabbar. “The government has not … and will not sell a thing,” he told the conference.
But just how will this affect things in the emirate and the Gulf, and foreign investment into the region? Pledged FDI is likely to remain high, at least in the short to mid term, but it may be that new and planned FDI commitments into the region will dry up, mirroring a trend that is pulsing through Asia at the moment.
“Because of the credit crunch, deals will slow and projects will be financed less by debt and more by funds and private equity. But hopefully there’s light at the end of the tunnel that isn’t a train,” said Neale Downes, partner at Trowers & Hamlins.
“The amount of transactional work is going down and the amount of competition is up,” says Shibeer Ahmed, a partner at Lovells, whose firm plans to create dispute resolution and real estate practices in the near future.
From all accounts, diversification is a winning strategy in more than one way. It will enable law firms to weather whatever financial clouds are gathering on the horizon and could prove to be the key to survival in an increasingly saturated Gulf legal market.
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Source: Asia.legalbusinessonline.com |
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