Dubai's decision to start disbursing a US$10bn (Dh36.7bn) loan from the Central Bank will have a knock-on effect throughout the economy, says Nasser al Shaikh, the director general of the Dubai Department of Finance. "Support is already going into the companies," he said today. "Money will move throughout the supply chain." The loan is part of a wider strategy to offset the impact of the global financial crisis that started hitting the UAE last summer. Mr al Shaikh said the Government was also planning a "comprehensive stimulus package", to be overseen by the Department of Economic Development, aimed at small and medium-sized businesses. "We are doing what needs to be done to safeguard our economy," he said. Dubai has hired NM Rothschild and Sons, an independent merchant bank, to help develop a plan to allocate the funds, the first half of a $20bn borrowing facility from the Central Bank. The property sector has been hit by a slowdown in sales and tight credit markets. Development companies have faced trouble meeting their obligations and have delayed some of their largest projects. Moody's Investors Service said in a report this week that Gulf economies would continue to have problems this year because of slowing population growth and declining property prices. Mr al Shaikh has said previously that the funds would first go to government-related property companies because they had pressing obligations in the market. He said today that most of the funds would be lent under "commercial terms", but he did not rule out other kinds of support such as equity stakes. He said other sectors of the economy were faring surprisingly well. Hotel occupancies dipped in January but had risen again in February as high as 80 per cent. Tourist arrivals had risen by 11 per cent in January over the level of the year-earlier period. Dubai's most immediate challenges are getting cash moving through the system and restoring confidence. But long term, "the fundamentals of Dubai haven't changed", he said. Mr al Shaikh said Dubai's strong infrastructure, its strategic location and the ease of doing business in the emirate were key strengths that would ensure it bounced back. Signs were already emerging that corporate confidence was improving in anticipation of the new government funding. "The expectation is that it will help to improve the working capital of many companies and act as a backstop for their ongoing refinancing programmes," said Sean Gardiner, the head of research at Morgan Stanley in Dubai. "It's sort of a safety net." Despite strong federal support and the active role the emirate was taking in addressing the impact of the crisis, Mr al Shaikh emphasised that the Dubai Government intended to preserve free enterprise in the economy. "The job of the Government is to run government," he said. "It's not to run businesses." * with reporting by Wayne Arnold bhope@thenational.ae
