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Dubai is considering the privatisation of its most prized assets to raise billions of dollars for debt repayments.

 

"There might be a privatisation plan, which is something we're working on with the government," Mohammed al Shaibani, the director general of the Dubai Ruler's court and the chief executive of the Investment Corporation of Dubai (ICD), said.

 

"Dubai is rich in assets and ... this might be used as a mechanism to reduce some of our debts in the future," said Mr al Shaibani.

 

The remarks came at the first of a series of quarterly updates on the economy of Dubai that aim to increase government openness on its plans after the financial crisis.

 

Mr al Shaibani told the Financial Times recently that there was no need for the government to fully own Emirates Airline, suggesting the company may be one potential candidate for privatisation. Dubai's lucrative ports operations are also said by many analysts to be ripe for a full or partial sell-off.

 

November 27, 2010

 

 

Analysis and Forecast: Increasing Risk


 

The news is the first indication that Dubai now considering its very last remaining option in its attempt to resolve its debt. So far, the government has denied that they would even consider selling assets such as Emirates Airlines or DP World. The fact that they are now acknowledging this to be a possibility is an implicit acknowledgement that all other options have been exhausted, and that Abu Dhabi support is still not forthcoming.

 

It was thought that Abu Dhabi conditioned their support on Dubai giving them Emirates Airlines in return, but Dubai has vehemently opposed giving up part of Emirates, who made almost US $ 1 billion of profit in 2009, and likely to substantially cross this level in 2010. With the recent remarks by the Dubai official, Dubai will be selling much of its assets to pay the debts, which will resolve the medium term problem of paying the debts off, but will even complicate further Dubai’s long-term prospects as it losses further leveraging power.

 

The figure below shows the maturing debt for Dubai World the next several years (in US$ billion), which excludes the emirate’s sovereign debt of US $30 billion.