Without the support of the government to postpone the payment of debt of Dubai World and Nakheel, Abu Dhabi have yet to save for re-financing in international markets will be more costly or impossible, according to the report.
Products to the high cost of capital, will be with the growth in economic activity, it would be difficult in light of the prevailing global environment, "said Eckart Woertz, economics, program manager, Gulf Research Center, Dubai-based independent research institution, in a report entitled "Implications of Dubai's Debt Troubles '.
Confidence in Abu Dhabi in the ongoing process of restructuring and will come with an increase in compensation, the report said.
While the housing sector still in trouble, and can not fulfill their promises, and Dubai has achieved a critical mass at the center of regional trade can be counted on the force, "said Woertz.
Data on total consolidated debt and government-owned companies has not been published in the report of the Gulf Research Center, said he was relying on estimates, which range between $ 80 and $ 100 billion of debt.
A wide range of estimates reveal a great deal of doubt, in view of Dubai's gross domestic product of $ 82 billion, and religion represents approximately 200 to 100 percent of GDP, depending on the estimate.
Dubai World (DW) total liabilities of $ 59 billion widely mentioned. However, this figure refers to the liabilities, not only religion but also the contractor's invoices or land-grant unpaid, according to Deutsche Bank.
However, without details, dry, and finally specifically that more than 26 billion dollars of debt will be restructured.
With regard to the burden of public debt in Dubai, and two factors of concern: first, the entitlement to unpaid debt is short term. Over the next three years, 50 billion U.S. dollars of debt owed, $ 12 - $ 1 billion in 2010, and a staggering $ 25 billion dollars in 2011 alone.
Dubai will have to refinance their debt at a cost much higher, as markets have reduced the implicit assumption of the government, the report said.
Secondly, there is a large amount of bad debt, which are not backed by assets or the most profitable business models, according to the report. Moody's estimates that bad debt could reach $ 25 billion.
Impact on business in Dubai, and credit risk Apart from the problems in the Deutsche, and markets are wondering if the credit risk can be translated to other companies in Dubai.
Real estate companies were in the heart of the problems and debt and dry they have a greater need for restructuring.
While the Dubai Holding also made a presentation on Dubai's property market, and debt maturity extends to the year 2017, an urgent problem in the least compared to determine the payment schedule in the short term Dubai companies, on average.
However, the default swaps rose to credit (146%) of all entities in Dubai, immediately after the announcement of suspension of dry and should be considered the most vulnerable, due to foreign investments through the use of a subsidiary of Dubai International Capital.
Pressure on the Dubai real estate market will continue, especially in the less attractive, the report said.
Compared with the real estate sector in crisis, and companies with the current cash flow and create a more flexible business models, according to the report.
Real estate bubble in Dubai, which is also unique in the region - began many of the local population to copy, but later, he was lucky to be in late. There is certainly a statement of Gulf investors to invest in Dubai, but the right of the transmission of the debt crisis in Dubai is unlikely, because oil prices were fairly good about $ 75 dollars a barrel.
Dubai International Financial Center may be at a disadvantage. The financial sector is particularly affected by the global crisis, and the image of Dubai as a financial center has severely distorted the debt of a series of dry.
Impact on banks in the UAE is difficult to measure, because most of the exposure is likely to be in the form of bilateral loans that are not public domain.
National Bank of Abu Dhabi (Abu Dhabi National Bank) is the only bank in the UAE has made the official announcement about having a total of $ 5 million to Dubai World.
The role of Abu Dhabi and the increased centralization of the State of United Arab Emirates
Dubai in access to international capital markets has abated, you will have to rely increasingly on Abu Dhabi, in addition to the measures necessary for the restructuring.
Despite its support on several occasions earlier this year, Abu Dhabi, has been unwilling to lend a helping hand to dry and palm, for a moment.
An unnamed official from Abu Dhabi, told Reuters in Abu Dhabi, and Dubai to support "on a case by case basis" and that he will "choose" that the companies are compatible.
Support from Abu Dhabi to Dubai in the current financial crisis is a selective and non-conditional.
Abu Dhabi shows its willingness to practice tough love and restructuring of businesses in Dubai who are currently not possible or not in conformity with the plans of their own development in general and the UAE.
Although still committed to the bailout plan selectivity, which does not seem willing to pay the bill himself. It is ready to accept great risk to the reputation of Dubai UAE as a whole, and left Dubai walk the thin from debt restructuring and default, and make international investors and some of the burden.
Conclusion
The debt situation in Dubai requires a decisive restructuring, particularly in the housing sector in crisis, and the report said the Gulf Research Center.
Compared with other countries in the Middle East, Dubai has a competitive advantage in terms of infrastructure, lifestyle and business facilitation. It also has a role to play successfully as a center for regional trade, provided that they can escape from the abundance of the past.
Oil revenue in Dubai, and the impact of financial crisis, and the financing of development efforts based on more than the United Arab Emirates Abu Dhabi in the past, Woertz said in the report.
Ambitious development goals of the State, and its willingness to play a more visible role in international affairs, and requires a more centralized planning and institutional development.
Instead of seeking to buy stocks is rumored study, Abu Dhabi, perhaps in an attempt to reach a consensus to increase the concentration of responsibilities in the federal financial support for continuing to Dubai and other emirates, the report concluded.
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